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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
----------------------------------------------
State Street Research Income Trust
------------------------------------------------------------------------
(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)
Terrence J. Cullen, Senior Vice President and Counsel
State Street Research & Management Company
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
------------------
Date of fiscal year end: 3/31/04
-----------------
Date of reporting period: 4/1/03 - 3/31/04
----------------------------
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 Annual Report is attached.
[STATE STREET RESEARCH LOGO]
Asset Allocation Fund
March 31, 2004
Annual Report to Shareholders
Table of Contents
3 Performance Discussion
6 Portfolio Holdings
19 Financial Statements
24 Financial Highlights
26 Independent Auditors'
Report
27 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
From war jitters to investor enthusiasm, from sluggish recovery to robust
growth--the ground covered by both the financial markets and the U.S.
economy over the past twelve months was nothing short of remarkable.
At the beginning of the 12-month reporting period, economic growth was
sluggish, manufacturing activity was declining, unemployment was edging
higher and war was underway. However, the clouds of uncertainty began to
lift as economic growth picked up and consumer confidence strengthened. A
combination of accelerated tax cuts, tax rebates and the lowest mortgage
rates in a generation fueled higher disposable income for most working
Americans. The housing market was strong, and consumer spending continued
to rise. Better yet, business spending began to recover after a long
period of stagnation. Corporate profits staged a solid rebound, making it
easier for companies to increase outlays, especially on information
technology and electronic equipment.
The economic news was less upbeat as the first quarter of 2004 began.
Durable goods orders declined and the number of new jobs added to the
labor market in January and February fell short of expectations. However,
a strong March jobs report put the economic recovery on solid ground on
all fronts. The period ended with the expectation that the Federal
Reserve Board would likely raise short-term interest rates sooner rather
than later in the year.
Stock and Bond Markets Moved Higher
Stocks staged an impressive rally early in the period, with the riskiest
sectors of the stock market leading the way--technology, small-caps and
companies that had been beaten down in the previous bear market. However,
index returns for the period masked the sideways movement that developed
in the final months of the period as investors grew more cautious about
interest rates and corporate profit comparisons going forward.
Confidence in the economy also translated into gains for high-yield bonds
that were in line with the stock market. However, high-yield bonds
underperformed government bonds late in the period as interest rates came
down. Both investment-grade corporate and government bonds earned solid
but modest returns for the year. The municipal market was a standout
among investment-grade sectors, but mortgage bonds lagged as more
homeowners took advantage of low rates and refinanced their mortgages.
Looking Ahead
The recent bear and bull cycles serve as a reminder that markets can be
unpredictable, which underscores the importance of having an asset
allocation plan in place. If you have a plan in place, stay with it,
invest regularly and talk to your investment professional before you make
a significant move outside your plan.
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
March 31, 2004
2
PERFORMANCE
Discussion as of March 31, 2004
How State Street Research Asset Allocation Fund Performed
State Street Research Asset Allocation Fund returned 32.94% for the 12-month
period ended March 31, 2004.(1) That was higher than the return of the Lipper
Flexible Portfolio Funds Average, which was 26.44% over the same period.(2) The
fund also outperformed the S&P 500/Lehman Brothers Blended Index, which returned
22.60%.(2) Our decision to emphasize stocks over bonds accounted for the fund's
out performance relative to its peers.
Reasons for the Fund's Performance
Following three years of negative stock market returns, encouraging signs of
economic recovery bolstered the returns on both stocks and bonds for the
period. In this environment, our emphasis on equities, which ranged from
60%-65% during the period, was a positive factor for performance. In addition,
our allocation decisions within both equity and fixed income segments of the
portfolio, coupled with strong stock selection, added to the fund's return.
Within equities, the fund's exposure to small-cap growth, international and
energy stocks made the largest contribution to return. Small-cap stocks
performed exceptionally well as the economy strengthened, and our stock
selection proved very beneficial. Nonetheless, we modestly decreased our
exposure to small-cap growth because we believed the stocks became increasingly
expensive relative to their earning power as the year progressed. Although we
kept the fund's bond allocation below its neutral weight, our overall bond
portfolio performance exceeded that of the Lehman Brothers Aggregate Bond
Index. Our investments in High-Yield and Emerging Markets bonds boosted
returns, while high-grade holdings marginally underperformed their benchmark.
Looking Ahead
At the end of the period, the fund had 65% of its assets invested in stocks and
35% in bonds, reflecting our expectation for strong corporate earnings growth.
We have started to increase our exposure to large-cap growth stocks because we
believe that they are attractively valued relative to value stocks. We are
maintaining an above-average exposure to international equities, especially in
Japan in light of the improving economic conditions and business prospects. On
the fixed income side, we have trimmed our High-Yield position, as many issues
appear fully valued. However, we saw weakness in Emerging Markets debt as an
opportunity to bolster our exposure to that group during the first two months
of the year.
A Word about Risk
When investing in stocks, the fund may experience sudden or unpredictable drops
in value and periods of lackluster performance. When investing in bonds, the
fund takes on the risks of bond investing, including the tendency for bond
prices to fall when interest rates rise. Investments in foreign derivative
securities are subject to economic and currency risk. The fund may not
correctly anticipate the relative performance of different asset categories
over specific time periods.
Top 5 Equity Industries
- --------------------------------------------------------------------------------
% of Fund Net Assets
1 Drugs & Biotechnology 4.5%
---------------------------------------------------
2 Miscellaneous Financial 4.0%
---------------------------------------------------
3 Banks & Savings & Loans 3.0%
---------------------------------------------------
4 Retail 2.6%
---------------------------------------------------
5 Electronics: Semiconductors/
Components 2.4%
---------------------------------------------------
Total 16.5%
Performance: Class A
- --------------------------------------------------------------------------------
Fund average annual total return as of 3/31/04(3)
(does not reflect sales charge)
1 Year 5 Years 10 Years
32.94% 6.85% 9.64%
Fund average annual total return as of 3/31/04(3,4)
(at maximum applicable sales charge)
1 Year 5 Years 10 Years
25.30% 5.59% 8.99%
S&P 500/Lehman Blended Index as of 3/31/04(2)
1 Year 5 Years 10 Years
22.60% 2.53% 10.36%
S&P 500 Index as of 3/31/04(2)
1 Year 5 Years 10 Years
35.10% -1.20% 11.68%
See pages 4 and 5 for additional performance data for Class A shares and for
performance data on other share classes.
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.
(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 to competing funds. The S&P 500/Lehman Blended
Index is an index created by State Street Research. This blended 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 and Poor's 500 Composite Stock Price Index") is
an 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.
(3) Keep in mind that the performance data quoted represents past performance
and is no guarantee of future results. Current performance may be lower or
higher than the performance data quoted herein. For the most recent
month-end performance results, visit our website at www.ssrfunds.com. 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.
(4) Performance reflects a maximum 5.75% Class A share front-end sales charge.
State Street Research Asset Allocation Fund 3
PERFORMANCE
Discussion as of March 31, 2004
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is not a guarantee of future results, long-term returns
can serve as an important context for evaluating recent performance. There are
three ways of measuring long-term performance: cumulative total returns,
average annual total returns and the change in dollar value over time of a
given investment. Information about these measures follows, while the share
class boxes contain the results of these measures for each share class.
Cumulative Total Return
Represents the total percentage you would have earned or lost if you had
invested a lump sum in the fund and left it there until the end of the period
indicated.
Average Annual Total Return
Represents the rate you would have had to earn during each year of a given time
period in order to end up with the fund's actual cumulative return for those
years. In reality, of course, fund performance varies from year to year. Because
of this, a fund's actual performance for a given year may be higher or lower
than an average annual performance figure.
$10,000 Over Ten Years
Similar to cumulative total return, but uses dollars rather than percentages,
and assumes that the lump sum you invested was $10,000 (less the applicable
maximum sales charge, if any) and compares fund performance to the performance
of a market index.
Class A
1 Year 5 Years 10 Years
- -----------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 32.94% 39.25% 150.94%
- -----------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 25.30% 31.24% 136.51%
- -----------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 25.30% 5.59% 8.99%
- -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[PLOT POINTS FOR LINE CHART]
S&P 500/
Class A S&P 500 Index Lehman Blended Index
"94" 9425 10000 10000
"95" 9568 11554 11129
"96" 11726 15259 13711
"97" 13190 18284 15603
"98" 17097 27053 20713
"99" 16985 32055 23649
"00" 19851 37802 26382
"01" 19909 29610 23983
"02" 21531 29681 24627
"03" 17791 22335 21856
"04" 23651 30175 26795
Class B(1)
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 32.03% 34.36% 133.40%
- -------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 27.03% 32.36% 133.40%
- -------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 27.03% 5.77% 8.85%
- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[PLOT POINTS FOR LINE CHART]
S&P 500/
Class B(1) S&P 500 Index Lehman Blended Index
"94" 10000 10000 10000
"95" 10082 11554 11129
"96" 12247 15259 13711
"97" 13687 18284 15603
"98" 17591 27053 20713
"99" 17371 32055 23649
"00" 20139 37802 26382
"01" 20069 29610 23983
"02" 21533 29681 24627
"03" 17677 22335 21856
"04" 23340 30175 26795
When investing in stocks, the fund may experience sudden or unpredictable drops
in value and periods of lackluster performance. When investing in bonds, the
fund takes on the risks of bond investing, including the tendency for bond
prices to fall when interest rates rise. Investments in foreign derivative
securities are subject to economic and currency risk. The fund may not
correctly anticipate the relative performance of different asset categories
over specific time periods.
Keep in mind that the performance data quoted represents past performance and
is no guarantee of future results. Current performance may be lower or higher
than the performance data quoted herein. For the most recent month-end
performance results, visit www.ssrfunds.com. 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.
4
- --------------------------------------------------------------------------------
Class B (only available through exchanges from another Class B account)
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 34.53% 38.47% 140.39%
- ------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 29.53% 36.47% 140.39%
- ------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 29.53% 6.42% 9.17%
- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[PLOT POINTS FOR LINE CHART]
S&P 500/
Class B S&P 500 Index Lehman Blended Index
"94" 10000 10000 10000
"95" 10083 11554 11129
"96" 12247 15259 13711
"97" 13687 18284 15603
"98" 17591 27053 20713
"99" 17361 32055 23649
"00" 20135 37802 26382
"01" 20052 29610 23983
"02" 21569 29681 24627
"03" 17869 22335 21856
"04" 24039 30175 26795
- --------------------------------------------------------------------------------
Class C
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 32.14% 34.39% 133.27%
- ------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 31.14% 34.39% 133.27%
- ------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 31.14% 6.09% 8.84%
- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[PLOT POINTS FOR LINE CHART]
Class C S&P 500 Index Lehman & S&P Split 60/40
"94" 10000 10000 10000
"95" 10082 11554 11129
"96" 12254 15259 13711
"97" 13680 18284 15603
"98" 17590 27053 20713
"99" 17358 32055 23649
"00" 20122 37802 26382
"01" 20053 29610 23983
"02" 21518 29681 24627
"03" 17654 22335 21856
"04" 23327 30175 26795
- --------------------------------------------------------------------------------
Class S
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 33.46% 41.37% 157.59%
- ------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 33.46% 41.37% 157.59%
- ------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 33.46% 7.17% 9.92%
- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[PLOT POINTS FOR LINE CHART]
Class S S&P 500 Index Lehman & S&P Split 60/40
"94" 10000 10000 10000
"95" 10177 11554 11129
"96" 12487 15259 13711
"97" 14082 18284 15603
"98" 18297 27053 20713
"99" 18221 32055 23649
"00" 21350 37802 26382
"01" 21470 29610 23983
"02" 23289 29681 24627
"03" 19301 22335 21856
"04" 25759 30175 26795
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. 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, returns would have
been lower. Class S shares, offered without sales charge, are available through
certain retirement plans and special programs.
The S&P 500/Lehman Blended Index is an index created by State Street Research.
This blended 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 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.
State Street Research Asset Allocation Fund 5
PORTFOLIO
Holdings
March 31, 2004
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Equity Securities 55.3%
Automobiles & Transportation 1.1%
Air Transport 0.1%
Expeditors International of
Washington Inc. ........................................................ 13,300 $ 525,217
------------
Automotive Parts 0.3%
Dana Corp. ............................................................... 33,900 673,254
Navistar International Corp.* ............................................ 21,800 999,530
------------
1,672,784
------------
Automobiles 0.1%
General Motors Corp. ..................................................... 18,500 871,350
------------
Miscellaneous Transportation 0.2%
Stolt Nielsen SA* ........................................................ 13,000 176,260
Frontline Ltd.* .......................................................... 12,400 357,740
OMI Corp.* ............................................................... 50,000 572,000
------------
1,106,000
------------
Railroads 0.1%
Burlington Northern Santa Fe Corp. ....................................... 19,000 598,500
------------
Truckers 0.3%
CNF Transportation Inc. .................................................. 35,140 1,180,704
Yellow Roadway Corp.* .................................................... 32,100 1,080,807
------------
2,261,511
------------
Total Automobiles & Transportation ............................................................. 7,035,362
------------
Consumer Discretionary 11.7%
Advertising Agencies 0.1%
Interpublic Group of Companies Inc.* ..................................... 39,400 605,972
------------
Athletic Footwear 0.2%
Nike Inc. Cl. B .......................................................... 16,400 1,277,068
------------
Casinos/Gambling, Hotel/Motel 1.1%
Boyd Gaming Corp. ........................................................ 37,700 862,953
Caesars Entertainment Inc. ............................................... 96,700 1,260,968
International Game Technology Inc. ....................................... 60,600 2,724,576
Mandalay Resort Group Inc.* .............................................. 13,500 773,010
Pinnacle Entertainment Inc.* ............................................. 43,700 603,060
Station Casinos Inc.* .................................................... 15,000 662,550
WMS Industries Inc.* ..................................................... 13,000 403,000
------------
7,290,117
------------
Commercial Services 1.4%
Ask Jeeves Inc.* ......................................................... 28,800 1,029,024
Cendant Corp.* ........................................................... 85,200 2,078,028
InterActiveCorp* ......................................................... 52,469 1,657,496
Manpower Inc. ............................................................ 29,500 1,371,750
Protection One Inc. Wts. (acquired
7/10/95, Cost $2,827)*++@ .............................................. 800 8
Tech Data Corp.* ......................................................... 23,100 945,714
Viad Corp. ............................................................... 45,400 1,097,318
Waste Management Inc. .................................................... 35,400 1,068,372
------------
9,247,710
------------
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Communications, Media & Entertainment 1.6%
Alliance Gaming Corp.* ................................................... 69,527 $ 2,233,903
DirecTV Group Inc.* ...................................................... 76,974 1,183,860
Liberty Media Corp.* ..................................................... 126,800 1,388,460
Univision Communications Inc. Cl. A* ..................................... 41,030 1,354,400
Viacom Inc. Cl. B* ....................................................... 10,100 396,021
Walt Disney Co. .......................................................... 157,000 3,923,430
------------
10,480,074
------------
Consumer Electronics 0.7%
Harman International Inc. ................................................ 23,300 1,854,680
Yahoo! Inc.* ............................................................. 52,950 2,572,841
------------
4,427,521
------------
Consumer Products 0.3%
International Flavors &
Fragrances Inc. ........................................................ 18,600 660,300
Kimberly-Clark Corp. ..................................................... 19,900 1,255,690
------------
1,915,990
------------
Consumer Services 1.2%
Career Education Corp.* .................................................. 68,900 3,902,496
Corinthian Colleges Inc.* ................................................ 50,600 1,672,836
Prime Succession Holdings Inc.
(acquired 10/7/98 through
11/20/01, Cost $90,398)*++@ ............................................ 13,332 133
Skillsoft plc ADR* ....................................................... 59,300 764,970
Sylvan Learning Systems Inc.* ............................................ 45,100 1,583,461
------------
7,923,896
------------
Household Furnishings 0.6%
Kirklands Inc.* .......................................................... 32,300 527,459
Newell Rubbermaid Inc. ................................................... 95,800 2,222,560
Stanley Works Inc. ....................................................... 24,500 1,045,660
------------
3,795,679
------------
Printing & Publishing 0.6%
News Corp. Ltd. ADR ...................................................... 59,200 2,130,016
Reader's Digest Association Inc. Cl. A ................................... 57,600 811,008
RR Donnelley & Sons Co. .................................................. 42,700 1,291,675
Sullivan Holdings Inc. (acquired
5/14/93, Cost $216,706)*++@............................................. 149 74,088
------------
4,306,787
------------
Restaurants 0.8%
Darden Restaurants Inc. .................................................. 45,300 1,122,987
Krispy Kreme Doughnuts Inc.* ............................................. 17,700 607,818
McDonald's Corp. ......................................................... 59,000 1,685,630
P.F. Chang's China Bistro Inc.* .......................................... 14,400 724,464
Starbucks Corp.* ......................................................... 22,000 830,500
------------
4,971,399
------------
Retail 2.6%
Abercrombie & Fitch Co. .................................................. 20,700 700,488
AutoZone Inc.* ........................................................... 22,500 1,934,325
Bed Bath & Beyond Inc.* .................................................. 41,400 1,728,864
Blockbuster Inc. ......................................................... 58,200 1,018,500
Dollar General Corp. ..................................................... 39,600 760,320
Federated Department Stores Inc. ......................................... 24,800 1,340,440
Gap Inc. ................................................................. 42,900 940,368
Home Depot Inc. .......................................................... 34,100 1,273,976
Limited Inc. ............................................................. 77,000 1,540,000
Lowes Companies Inc. ..................................................... 26,340 1,478,464
Nordstrom Inc. ........................................................... 29,300 1,169,070
Staples Inc.* ............................................................ 40,300 1,023,217
Target Corp. ............................................................. 45,700 2,058,328
------------
16,966,360
------------
6 The notes are an integral part of the financial statements.
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Textile Apparel Manufacturers 0.1%
Coach Inc.* ............................................................. 22,360 $ 916,536
------------
Toys 0.4%
Mattel Inc. ............................................................. 115,900 2,137,196
Toys "R" Us Inc.* ....................................................... 46,000 772,800
------------
2,909,996
------------
Total Consumer Discretionary .................................................................. 77,035,105
------------
Consumer Staples 2.0%
Beverages 0.3%
Coca-Cola Co. ........................................................... 43,700 2,198,110
------------
Drug & Grocery Store Chains 0.4%
CVS Corp. ............................................................... 32,300 1,140,190
Kroger Co.* ............................................................. 87,300 1,452,672
Pathmark Stores Inc.* ................................................... 2,667 21,283
------------
2,614,145
------------
Foods 0.2%
Aurora Foods Inc.* ...................................................... 6,199 56
General Mills Inc. ...................................................... 14,600 681,528
Sara Lee Corp. .......................................................... 41,600 909,376
------------
1,590,960
------------
Household Products 0.8%
Clorox Co. .............................................................. 53,900 2,636,249
Procter & Gamble Co. .................................................... 26,740 2,804,491
------------
5,440,740
------------
Tobacco 0.3%
Altria Group Inc. ....................................................... 18,700 1,018,215
R.J. Reynolds Tobacco Co. ............................................... 11,600 701,800
------------
1,720,015
------------
Total Consumer Staples ........................................................................ 13,563,970
------------
Financial Services 9.9%
Banks & Savings & Loan 3.0%
Aon Corp. ............................................................... 95,700 2,670,987
Bank of America Corp. ................................................... 22,300 1,805,854
Bank of New York Co. Inc. ............................................... 48,500 1,527,750
Charter One Financial Inc. .............................................. 36,900 1,304,784
Comerica Inc. ........................................................... 24,700 1,341,704
East West Bancorp Inc. .................................................. 13,100 733,600
FleetBoston Financial Corp. ............................................. 36,500 1,638,850
KeyCorp ................................................................. 46,300 1,402,427
Mercantile Bankshares Corp. ............................................. 27,800 1,194,566
National City Corp. ..................................................... 25,600 910,848
New York Community Bancorp Inc. ......................................... 20,665 708,408
PNC Financial Corp. ..................................................... 17,500 969,850
Southwest Bancorp of Texas Inc. ......................................... 11,300 426,349
Texas Capital Bancshares Inc.* .......................................... 35,600 577,432
Union Planters Corp. .................................................... 38,800 1,158,180
US BanCorp. ............................................................. 60,700 1,678,355
------------
20,049,944
------------
Insurance 1.6%
American International Group Inc. ....................................... 57,600 4,109,760
Assurant Inc.* .......................................................... 46,800 1,177,020
Bristol West Holdings Inc.* ............................................. 23,300 475,320
Hartford Financial Services
Group Inc. ............................................................ 22,300 1,420,510
UNUM Provident Corp. .................................................... 32,700 478,401
XL Capital Ltd. ......................................................... 38,300 2,912,332
------------
10,573,343
------------
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------------
Miscellaneous Financial 4.0%
Ambac Financial Group Inc. .............................................. 19,050 $ 1,405,509
American Express Co. .................................................... 37,040 1,920,524
Capital One Financial Corp. ............................................. 5,200 392,236
CapitalSource Inc.* ..................................................... 43,800 983,310
CIT Group Inc. .......................................................... 38,300 1,457,315
Citigroup Inc. .......................................................... 114,620 5,925,854
Federal National Mortgage Assoc. ........................................ 21,900 1,628,265
H&R Block Inc. .......................................................... 18,600 949,158
MBNA Corp. .............................................................. 127,500 3,522,825
MGIC Investment Corp. ................................................... 20,400 1,310,292
Nelnet Inc.* ............................................................ 32,700 830,580
Providian Financial Corp.* .............................................. 68,300 894,730
Radian Group Inc. ....................................................... 23,400 996,840
SLM Corp. ............................................................... 38,100 1,594,485
Willis Group Holdings Ltd. .............................................. 25,300 941,160
------------
24,753,083
------------
Real Estate Investment Trusts 0.1%
Boston Properties Inc. .................................................. 16,300 885,253
------------
Securities Brokerage & Services 1.2%
Ameritrade Holding Corp. ................................................ 75,300 1,159,620
Edwards AG Inc. ......................................................... 33,200 1,298,784
Goldman Sachs Group Inc. ................................................ 16,300 1,700,905
Janus Capital Group Inc. ................................................ 66,100 1,082,718
J.P. Morgan Chase & Co. ................................................. 31,300 1,313,035
Knight Trading Group Inc.* .............................................. 66,300 839,358
Morgan Stanley Inc. ..................................................... 29,800 1,707,540
------------
7,394,420
------------
Total Financial Services ...................................................................... 65,363,583
------------
Health Care 6.5%
Drugs & Biotechnology 4.5%
Alkermes Inc.* .......................................................... 38,100 609,219
Allergan Inc. ........................................................... 9,500 799,520
Amgen Inc.* ............................................................. 25,740 1,497,296
Baxter International Inc. ............................................... 43,400 1,340,626
Biogen Idec Inc.* ....................................................... 22,600 1,256,560
Bristol-Myers Squibb Co. ................................................ 35,400 857,742
Charles River Laboratories
International Inc.* ................................................... 26,200 1,122,670
Chiron Corp.* ........................................................... 20,400 897,804
Dyax Corp.* ............................................................. 48,700 501,123
Elan Corp. plc* ADR ..................................................... 39,000 804,180
Eon Labs Inc.* .......................................................... 4,800 321,984
Eyetech Pharmaceuticals Inc.* ........................................... 17,100 567,720
Forest Laboratories Inc.* ............................................... 16,580 1,187,459
Genentech, Inc.* ........................................................ 10,700 1,132,274
Gilead Sciences, Inc.* .................................................. 8,600 479,622
Johnson & Johnson Ltd. .................................................. 23,740 1,204,093
Medicines Co.* .......................................................... 18,500 595,885
MedImmune Inc.* ......................................................... 47,600 1,098,608
MGI PHARMA Inc.* ........................................................ 9,400 575,844
Millennium Pharmaceuticals Inc.* ........................................ 51,600 872,040
Millipore Corp.* ........................................................ 11,100 570,318
Nektar Therapeutics Inc.* ............................................... 54,810 1,182,800
Novartis AG ADR ......................................................... 48,630 2,071,638
Pfizer Inc. ............................................................. 200,382 7,023,389
Schering-Plough Inc. .................................................... 47,900 776,938
Wyeth Inc. .............................................................. 15,400 578,270
------------
29,925,622
------------
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 7
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------------
Health Care Facilities 0.7%
HCA Inc. ................................................................ 30,300 $ 1,230,786
Laboratory Corp. of America Holdings* 28,100 1,102,925
Psychiatric Solutions Inc.* ............................................. 32,700 613,125
United Surgical Partners International Inc.* ............................ 37,800 1,282,932
------------
4,229,768
------------
Health Care Services 0.6%
Amedisys Inc.* .......................................................... 21,400 525,798
Amerigroup Corp.* ....................................................... 20,700 945,990
Cerner Corp.* ........................................................... 25,900 1,170,421
Molina Healthcare Inc.* ................................................. 15,900 466,188
Universal Health Services Inc. .......................................... 22,200 1,022,754
------------
4,131,151
------------
Hospital Supply 0.7%
Guidant Corp. ........................................................... 17,300 1,096,301
Medtronic Inc. .......................................................... 31,570 1,507,468
Respironics Inc.* ....................................................... 10,500 567,210
St. Jude Medical Inc.* .................................................. 7,800 562,380
Zoll Medical Corp.* ..................................................... 15,700 627,686
------------
4,361,045
------------
Total Health Care ............................................................................. 42,647,586
------------
Integrated Oils 1.2%
Integrated Domestic 0.5%
Amerada Hess Corp. ...................................................... 31,700 2,069,376
Unocal Corp. ............................................................ 37,200 1,386,816
------------
3,456,192
------------
Integrated International 0.7%
BP plc ADR .............................................................. 18,000 921,600
ChevronTexaco Corp. ..................................................... 15,900 1,395,702
Exxon Mobil Corp. ....................................................... 52,800 2,195,952
------------
4,513,254
------------
Total Integrated Oils ......................................................................... 7,969,446
------------
Materials & Processing 2.8%
Agriculture 0.2%
Monsanto Co. ............................................................ 36,300 1,331,121
------------
Building & Construction 0.1%
Trex Inc.* .............................................................. 16,400 559,404
Waxman Industries Inc. Wts.
(acquired 8/12/94, Cost $0)*++@........................................ 29,500 4,425
------------
563,829
------------
Chemicals 0.6%
Air Products & Chemicals Inc. ........................................... 24,700 1,237,964
E.I. du Pont de Nemours & Co. ........................................... 36,300 1,532,586
Reunion Industries Inc.* ................................................ 595 214
Sherwin Williams Co. .................................................... 39,500 1,517,985
------------
4,288,749
------------
Containers & Packaging 0.4%
Pactiv Corp.* ........................................................... 62,100 1,381,725
Smurfit-Stone Container Corp.* .......................................... 85,100 1,496,909
------------
2,878,634
------------
Diversified Manufacturing 0.1%
American Standard Companies Inc.* ....................................... 3,500 398,125
------------
Gold & Precious Metals 0.3%
Novagold Resources Inc.* ................................................ 100,000 501,469
Coeur d'Alene Mines Corp.* .............................................. 40,000 280,000
Crystallex International Corp.*++ ....................................... 300,000 921,000
------------
1,702,469
------------
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & Processing 0.4%
Alcoa Inc. .............................................................. 14,300 $ 496,067
Maverick Tube Corp.* .................................................... 42,600 1,003,230
Timken Co. .............................................................. 47,900 1,112,717
------------
2,612,014
------------
Office Supplies 0.2%
Avery Dennison Corp. .................................................... 17,300 1,076,233
------------
Paper & Forest Products 0.5%
Bowater Inc. ............................................................ 18,200 794,066
International Paper Co. ................................................. 35,200 1,487,552
MeadWestvaco Corp. ...................................................... 41,400 1,171,206
------------
3,452,824
------------
Total Materials & Processing ................................................................ 18,303,998
------------
Non-U.S. Equities 1.1%
Baytex Energy Trust ..................................................... 54,300 466,263
C1 Energy Ltd* .......................................................... 85,733 123,023
Canico Resource Corp.* .................................................. 50,000 488,494
Crew Energy Inc. ........................................................ 37,166 129,641
Defiant Energy Corp.* ................................................... 11,700 38,400
Endev Energy Inc. ....................................................... 187,100 294,185
Esprit Exploration Ltd. ................................................. 176,700 352,011
Galleon Energy Inc.*++@ ................................................. 10,000 41,675
Impact Energy Inc.* ..................................................... 52,500 64,916
Meridian Energy Corp.*++@ ............................................... 37,000 71,450
Mustang Resources Inc.* ................................................. 12,700 49,437
Mustang Resources Inc.*++@ .............................................. 9,600 33,633
NAV Energy Trust ........................................................ 73,333 601,712
Niko Resources Ltd. ..................................................... 13,500 334,885
Oilexco Inc.* ........................................................... 62,300 111,271
Oilexco Inc. Wts.* ...................................................... 9,725 12,276
Olympia Energy Inc. ..................................................... 180,500 399,534
Penn West Petroleum Ltd.* ............................................... 22,600 1,057,421
Progess Energy Ltd. ..................................................... 53,300 580,131
Purcell Energy Inc. ..................................................... 68,773 124,407
Purcell Energy Inc. Wts.* ............................................... 68,773 20,997
Starpoint Energy Ltd.* .................................................. 14,300 48,025
Sunridge Gold Corp.* .................................................... 2,300 4,283
Westport Innovations Inc.* .............................................. 63,200 106,608
Tullow Oil plc .......................................................... 97,735 155,593
Axis Capital Holdings Ltd. .............................................. 41,840 1,236,372
Fording Canadian Coal Trust ............................................. 3,500 141,225
Southwestern Resources Corp.* ........................................... 15,000 426,478
Thunder Energy Inc.* .................................................... 8,500 48,204
------------
Total Non-U.S. Equities ....................................................................... 7,562,550
------------
Diversified Manufacturing 1.9%
Multi-Sector 1.9%
FMC Corp.* .............................................................. 27,000 1,156,140
General Electric Co. .................................................... 106,820 3,260,146
Hillenbrand Industries Inc. ............................................. 15,400 1,045,506
Honeywell International Inc. ............................................ 46,000 1,557,100
ITT Industries Inc. ..................................................... 14,000 1,068,620
Textron Inc. ............................................................ 15,100 802,565
Tyco International Ltd. ................................................. 121,800 3,489,570
------------
Total Diversified Manufacturing ............................................................... 12,379,647
------------
8 The notes are an integral part of the financial statements.
Issuer Shares Value
- ----------------------------------------------------------------------------------------------------------------
Other Energy 5.3%
Gas Pipelines 0.2%
EOG Resources Inc. ...................................................... 24,000 $ 1,101,360
------------
Miscellaneous Energy 1.8%
Arch Coal Inc. .......................................................... 80,200 2,517,478
Consol Energy Inc. I*++ ................................................. 35,200 943,360
Consol Energy Inc. II++ ................................................. 147,000 3,939,600
Massey Energy Corp.* .................................................... 69,900 1,542,693
Peabody Energy Corp. .................................................... 34,400 1,599,944
Penn Virginia Corp. ..................................................... 23,000 1,393,800
------------
11,936,875
------------
Offshore Drilling 0.4%
Transocean Inc. ......................................................... 98,200 2,738,798
------------
Oil & Gas Producers 1.6%
Fairborne Energy Ltd.*++@ ............................................... 1,800 11,129
Rio Alto Resources International Inc.* .................................. 39,800 33,416
Anadarko Petroleum Corp. ................................................ 27,800 1,441,708
Burlington Resources Inc. ............................................... 29,900 1,902,537
Clayton Williams Energy Inc.* ........................................... 35,000 1,214,500
Denbury Resources Inc.* ................................................. 14,400 242,784
Devon Energy Corp. ...................................................... 1 58
Energy Partners Ltd. .................................................... 47,500 634,125
Matador Resources Co.*++@ ............................................... 895 8,950
Newfield Exploration Co.* ............................................... 73,400 3,518,062
PetroKazakhstan Inc.* ................................................... 22,800 642,276
Pioneer Drilling Co.*++@ ................................................ 8,600 45,752
Plains Exploration & Production Co.* .................................... 48,000 894,720
Remington Oil Gas Corp.* ................................................ 7,200 142,200
Treasure Islands Royalty Trust* ......................................... 300,000 117,000
------------
10,849,217
------------
Oil Well Equipment & Services 1.3%
BJ Services Co.* ........................................................ 14,900 644,723
Cal Dive International Inc.* ............................................ 28,600 738,738
Global Industries Inc.* ................................................. 50,000 292,500
Grey Wolf Inc.* ......................................................... 38,900 161,046
Halliburton Co. ......................................................... 31,800 966,402
Hanover Compressor Co.* ................................................. 43,600 527,124
MarkWest Hydrocarbon Inc.* .............................................. 9,300 115,692
Nabors Industries Ltd.* ................................................. 36,700 1,679,025
NewPark Resources Inc.* ................................................. 259,600 1,349,920
Patterson UTI Energy Inc.* .............................................. 31,600 1,118,956
W-H Energy Services Inc.* ............................................... 50,500 730,735
------------
8,324,861
------------
Total Other Energy ............................................................................ 34,951,111
------------
Producer Durables 2.6%
Aerospace 0.6%
Alliant Technology Systems Inc.* ........................................ 21,300 1,158,720
Boeing Co. .............................................................. 32,000 1,314,240
Ladish Inc.* ............................................................ 15,095 132,534
Lockheed Martin Corp. ................................................... 9,300 424,452
United Technologies Corp. ............................................... 10,000 863,000
------------
3,892,946
------------
Electrical Equipment & Components 0.2%
Cooper Industries Ltd. .................................................. 10,500 600,390
MKS Instruments Inc.* ................................................... 22,800 547,428
------------
1,147,818
------------
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Industrial Products 0.6%
American Power Conversion Corp. ......................................... 102,600 $ 2,360,826
Asyst Technologies Inc.* ................................................ 96,100 790,903
ESCO Technologies Inc.* ................................................. 18,020 831,082
------------
3,982,811
------------
Machinery 0.3%
AGCO Corp.* ............................................................. 52,800 1,093,488
Helix Technology Corp. .................................................. 48,200 1,168,850
------------
2,262,338
------------
Miscellaneous Equipment 0.4%
Grainger Inc. ........................................................... 20,900 1,003,200
Pentair Inc. ............................................................ 26,600 1,569,400
------------
2,572,600
------------
Office Furniture & Business Equipment 0.1%
Hon Industries Inc. ..................................................... 10,400 386,464
------------
Production Technology Equipment 0.4%
August Technology Corp.* ................................................ 32,400 486,000
Lam Research Corp. * .................................................... 87,200 2,198,312
Phase Metrics Inc. (acquired 1/23/98
through 11/15/00, cost
$651,892)*++@ ......................................................... 50,574 14,161
------------
2,698,473
------------
Total Producer Durables ....................................................................... 16,943,450
------------
Technology 7.0%
Communications Technology 1.9%
Anaren Microwave Inc.* .................................................. 48,000 757,440
Avocent Corp.* .......................................................... 11,500 423,085
Cisco Systems Inc.* ..................................................... 174,420 4,102,358
Juniper Networks Inc.* .................................................. 46,500 1,209,465
Motorola Inc. ........................................................... 52,700 927,520
NCR Corp.* .............................................................. 33,300 1,467,198
QUALCOMM Inc. ........................................................... 35,000 2,324,700
REMEC Inc.* ............................................................. 134,700 1,023,720
------------
12,235,486
------------
Computer Software 1.4%
eCollege Inc.* .......................................................... 43,000 897,840
Embarcadero Technologies Inc.* .......................................... 38,700 496,908
Loudeye Corp.*++@ ....................................................... 131,000 208,552
Loudeye Technologies Inc.* .............................................. 60,500 111,320
Microsoft Corp. ......................................................... 138,820 3,466,335
Quest Software Inc.* .................................................... 31,400 513,390
Red Hat Inc.* ........................................................... 28,900 660,654
SAP AG ADR .............................................................. 54,290 2,134,140
Siebel Systems Inc.* .................................................... 56,700 652,617
------------
9,141,756
------------
Computer Technology 0.7%
Carrier Access Corp.* ................................................... 55,800 680,760
Dell Inc.* .............................................................. 23,330 784,355
Epicor Software Corp.* .................................................. 78,600 1,043,022
Hewlett-Packard Co. ..................................................... 28,800 657,792
Sandisk Corp.* .......................................................... 22,500 638,325
Sun Microsystems Inc.* .................................................. 210,100 874,016
------------
4,678,270
------------
Electronics 0.6%
Aeroflex Inc.* .......................................................... 81,800 1,101,028
Flextronics International Ltd.* ......................................... 60,300 1,038,366
Kemet Corp.* ............................................................ 49,100 704,094
Raytheon Co. ............................................................ 43,100 1,350,754
------------
4,194,242
------------
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 9
Issuer Shares Value
- ----------------------------------------------------------------------------------------------------
Electronics: Semiconductors/Components 2.4%
Cypress Semiconductor Corp.* ............................................ 191,700 $ 3,924,099
Fairchild Semiconductor
International Inc.* ................................................... 51,600 1,239,948
Integrated Silicon Solution Inc.* ....................................... 54,700 970,378
Intel Corp. ............................................................. 138,930 3,778,896
Linear Technology Corp. ................................................. 65,400 2,421,108
ON Semiconductor Corp.* ................................................. 117,500 885,950
PMC Sierra Inc.* ........................................................ 47,300 802,681
Sigmatel Inc.* .......................................................... 38,900 873,305
Texas Instruments Inc. .................................................. 35,400 1,034,388
------------
15,930,753
------------
Total Technology .................................................................... 46,180,507
------------
Utilities 2.2%
Cable Television & Radio 0.2%
Comcast Corp.* .......................................................... 36,400 1,014,832
------------
Electrical 0.8%
Constellation Energy Group Inc. ......................................... 21,600 862,920
Pepco Holdings Inc. ..................................................... 49,400 1,009,736
PPL Corp. ............................................................... 72,000 3,283,200
------------
5,155,856
------------
Gas Distribution 0.5%
Keyspan Corp. ........................................................... 33,800 1,291,836
Sempra Energy Co. ....................................................... 54,500 1,733,100
Western Gas Resources Inc. .............................................. 5,000 254,250
------------
3,279,186
------------
Telecommunications 0.7%
Centurytel Inc. ......................................................... 32,200 885,178
Nextel Communications Inc. Cl. A* ....................................... 3,098 76,613
SBC Communications Inc. ................................................. 70,500 1,730,070
Verizon Communications Inc. ............................................. 46,400 1,695,456
Western Wireless Corp.* ................................................. 17,200 401,964
------------
4,789,281
------------
Total Utilities ..................................................................... 14,239,155
------------
Total Equity Securities (Cost $309,699,372) ......................................... 364,175,470
------------
Maturity Principal
Date Amount
- --------------------------------------------------------------------------------
Fixed Income Securities 40.7%
U.S. Treasury 5.0%
U.S. Treasury Bond, 7.25% ...... 5/15/2016 $ 1,425,000 1,839,809
U.S. Treasury Bond, 8.875% ..... 2/15/2019 2,075,000 3,075,052
U.S. Treasury Bond, 6.25% ...... 8/15/2023 1,825,000 2,169,967
U.S. Treasury Bond, 6.25%**..... 5/15/2030 2,550,000 3,078,628
U.S. Treasury Note, 7.00% ...... 7/15/2006 8,250,000 9,228,401
U.S. Treasury Note, 5.625% ..... 5/15/2008 1,800,000 2,022,046
U.S. Treasury Note, 6.50% ...... 2/15/2010 3,100,000 3,675,196
U.S. Treasury Note, 5.00% ...... 8/15/2011 500,000 550,957
U.S. Treasury Note, 4.00% ...... 11/15/2012 6,525,000 6,691,185
U.S. Treasury Note, 4.25% ...... 11/15/2013 875,000 905,112
---------
33,236,353
----------
U.S. Agency Mortgage 7.9%
Federal Home Loan Mortgage
Corp., 8.50% ................. 7/01/2009 32 33
Federal Home Loan Mortgage
Corp., 4.00% ................. 3/15/2010 225,000 231,766
Federal Home Loan Mortgage
Corp., 3.75% ................. 3/15/2011 700,000 717,594
Federal Home Loan Mortgage
Corp., 4.00% ................. 7/15/2014 625,000 641,746
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
U.S. Agency Mortgage (Continued)
Federal National Mortgage
Association, 0.54%** ........... 11/25/2012 $ 6,872,931 $ 270,233
Federal National Mortgage
Association, 3.50% ............. 4/25/2007 750,000 766,875
Federal National Mortgage
Association, 8.00% ............. 4/01/2008 33,067 35,191
Federal National Mortgage
Association, 8.00% ............. 6/01/2008 43,258 46,037
Federal National Mortgage
Association, 8.50% ............. 2/01/2009 42,131 45,165
Federal National Mortgage
Association, 7.00% ............. 8/01/2014 246,538 263,862
Federal National Mortgage
Association, 7.00% ............. 9/01/2014 369,854 395,865
Federal National Mortgage
Association, 6.00% ............. 5/01/2017 559,569 589,785
Federal National Mortgage
Association, 7.50% ............. 10/01/2025 10 11
Federal National Mortgage
Association, 7.50% ............. 7/01/2029 354,018 380,051
Federal National Mortgage
Association, 6.50% ............. 12/01/2029 576,320 606,800
Federal National Mortgage
Association, 7.50% ............. 1/01/2031 1,002,603 1,075,052
Federal National Mortgage
Association, 6.00% ............. 4/15/2034 1,700,000 1,769,063
Federal National Mortgage
Association, 4.50% ............. 4/25/2009 1,500,000 1,544,073
Federal National Mortgage
Association, 6.50% ............. 5/01/2029 308,318 324,421
Federal National Mortgage
Association TBA, 4.00% ......... 4/20/2019 775,000 768,946
Federal National Mortgage
Association TBA, 4.50% ......... 4/20/2019 2,550,000 2,581,079
Federal National Mortgage
Association TBA, 5.00% ......... 4/20/2019 4,100,000 4,214,029
Federal National Mortgage
Association TBA, 5.50% ......... 4/20/2019 1,375,000 1,432,148
Federal National Mortgage
Association TBA, 6.00% ......... 4/20/2019 2,550,000 2,683,875
Federal National Mortgage
Association TBA, 6.50% ......... 4/20/2019 1,450,000 1,541,531
Federal National Mortgage
Association TBA, 5.50% ......... 5/18/2019 1,400,000 1,455,563
Federal National Mortgage
Association TBA, 5.00% ......... 4/15/2034 6,850,000 6,879,969
Federal National Mortgage
Association TBA, 5.50% ......... 4/15/2034 4,700,000 4,814,563
Federal National Mortgage
Association TBA, 6.50% ......... 4/15/2034 2,450,000 2,573,264
Federal National Mortgage
Association TBA, 7.00% ......... 4/15/2034 1,175,000 1,246,969
Federal National Mortgage
Association TBA, 5.50% ......... 6/14/2034 3,825,000 3,895,525
Government National Mortgage
Association, 6.50% ............. 2/15/2009 89,427 95,510
Government National Mortgage
Association, 6.50% ............. 6/15/2009 34,306 36,644
Government National Mortgage
Association, 6.50% ............. 7/15/2009 195,012 208,245
Government National Mortgage
Association, 7.50% ............. 11/15/2010 10,562 11,371
10 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- -----------------------------------------------------------------------------------------
U.S. Agency Mortgage (Continued)
Government National Mortgage
Association, 7.50% ............ 12/15/2010 $ 104,111 $ 112,094
Government National Mortgage
Association, 7.00% ............ 1/15/2025 154,463 165,770
Government National Mortgage
Association, 6.50% ............ 11/15/2028 667,321 705,783
Government National Mortgage
Association, 7.00% ............ 11/15/2028 298,090 318,105
Government National Mortgage
Association, 7.00% ............ 11/15/2028 21,500 22,952
Government National Mortgage
Association, 6.00% ............ 9/20/2033 492,238 513,634
Government National Mortgage
Association, 5.00% ............ 10/20/2033 2,037,308 2,051,691
Government National Mortgage
Association, 6.00% ............ 10/20/2033 784,017 820,803
Government National Mortgage
Association, 6.00% ............ 11/20/2033 1,038,580 1,083,723
Government National Mortgage
Association, 6.00% ............ 2/20/2034 796,179 830,773
Government National Mortgage
Association TBA, 5.50% ........ 4/22/2034 2,975,000 3,059,603
------------
53,827,785
------------
Finance/Mortgage 13.0%
ACE Securities Corp. Note
1999-LB2 Cl. M2, 2.34% ........ 8/25/2030 118,838 119,047
AIG Sunamerica Global
Financing Sr. Note, 6.90%+..... 3/15/2032 175,000 205,825
Allstate Financial Global
Funding LLC Note, 2.50%+ ...... 6/20/2008 325,000 318,307
AmeriCredit Automobile
Recreation Trust 2002-D
A4, 3.40% ..................... 4/13/2009 350,000 358,756
Artesia Mortgage Securities Inc.
Note 1998-C1, 6.78%+ .......... 6/25/2030 150,000 167,025
Bank of America Corp. Sub.
Note, 7.40% ................... 1/15/2011 450,000 540,148
Bank of America Institutional
Bond, 8.07%+ .................. 12/31/2026 225,000 259,902
Bank One Issuance Trust Note
2002-C3, 3.76% ................ 8/15/2008 300,000 307,663
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A1, 6.08% ............ 2/15/2035 1,078,346 1,176,327
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A1, 5.92% ............ 10/15/2036 248,023 274,191
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A2, 7.08% ............ 7/15/2031 250,000 291,434
Bear Stearns Commerical
Mortgage Securities Inc.
Note Cl. A2, 7.32% ............ 10/15/2032 475,000 565,179
Capital Auto Receivables Trust
Note, 4.16% ................... 7/16/2007 300,000 307,684
Caterpillar Financial Asset
Trust Note 2001-A
Cl. A3, 4.85% ................. 4/25/2007 129,895 130,830
Centex Home Equity Loan
Trust Note 2003-B
Cl. M3, 4.19% ................. 6/25/2033 475,000 501,174
Maturity Principal
Date Amount Value
- ------------------------------------------------------------------------------------------
Chase Commercial Mortgage
Securities Corp. Note
1998-2 Cl. A2, 6.39% .......... 11/18/2030 $ 300,000 $ 338,849
Chase Funding NIM Trust
Note, 5.00%+ .................. 1/27/2035 199,108 198,869
Chase Funding NIM Trust
Note, 3.75%+ .................. 3/27/2035 186,800 186,501
Chase Manhattan Auto Owner
Trust Note 2001-B Cl. A4,
3.80% ......................... 5/15/2008 125,000 127,529
Chase Manhattan Auto Owner
Trust Note 2002-A, 4.17% ...... 9/15/2008 726,882 744,403
Chase Manhattan Auto Owner
Trust Note 2002-A 3.49% ....... 3/15/2006 118,509 119,225
Chase Manhattan Auto Owner
Trust Note 2003-B, 2.43% ...... 2/16/2010 1,500,000 1,509,818
CIT Group Inc. Note, 4.125%...... 2/21/2006 275,000 285,677
Citibank Credit Card Issuance
Trust Note 2000
Cl. C1, 7.45% ................. 9/15/2007 150,000 161,886
Citibank Credit Card Issuance
Trust Note 2001
Cl. A8, 4.10% ................. 12/07/2006 275,000 280,300
Citibank Credit Card Issuance
Trust Note 2001
Cl. B2, 1.58% ................. 12/10/2008 500,000 504,026
Citibank Credit Card Issuance
Trust Note 2001
Cl. C3, 6.65% ................. 5/15/2008 575,000 624,312
Citigroup Inc. Sub.
Note, 7.25% ................... 10/01/2010 800,000 952,770
Commercial Mortgage
Acceptance Corp. Note
1998-C2 Cl. C, 6.49% .......... 9/15/2030 275,000 309,561
Commercial Mortgage
Acceptance Corp. Note
1998-C2 Cl. F, 5.44%+ ......... 9/15/2030 950,000 868,504
Countrywide Asset-Backed
Securities, Inc. Note 2002-A
Cl. M2, 2.24% ................. 12/25/2031 75,000 75,301
Countrywide Asset-Backed
Securities, Inc. Note 2002-BC1
Cl. M2, 3.09% ................. 9/25/2032 300,000 309,447
Countrywide Asset-Backed
Securities, Inc. Note 2003-1
Cl. B, 4.59% .................. 11/25/2031 250,000 259,587
Countrywide Asset-Backed
Securities, Inc. Note 2003-2
Cl. M2, 2.74% ................. 3/26/2033 875,000 894,577
Countrywide Asset-Backed
Securities, Inc. Note 2003-3
Cl. 2A1, 1.21% ................ 5/25/2018 130,435 130,439
Countrywide Asset-Backed
Securities, Inc. Note 2003-3
Cl. M6, 3.99% ................. 7/25/2032 1,500,000 1,579,645
Countrywide Asset-Backed
Securities, Inc. Note 2003-4
Cl. A1, 1.22% ................. 10/25/2019 551,831 551,951
Countrywide Asset-Backed
Securities, Inc. Note 2003-4
Cl. M3, 2.84% ................. 6/25/2033 650,000 662,210
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 11
Maturity Principal
Date Amount Value
- ------------------------------------------------------------------------------------------
Finance/Mortgage (Continued)
Countrywide Home Loan Inc.
Note, 6.21% ................... 9/19/2031 $ 685,384 $ 689,524
Countrywide Home Loan Inc.
Note, 4.82% ................... 9/19/2032 114,213 117,396
Countrywide Home Loan Inc.
Note, 4.04% ................... 6/25/2033 892,408 892,799
Countrywide Home Loan Inc.
Note, 4.66% ................... 2/19/2034 249,042 252,260
Crestar Capital Trust
Note, 8.16% ................... 12/15/2026 175,000 206,235
Delta Airlines Inc. Note,
MBIA Insured, 6.42% ........... 7/02/2012 200,000 215,441
Distribution Financial
Services Note 2001-1
Cl. A3, 4.74% ................. 5/15/2013 9,716 9,727
Distribution Financial
Services Note 2001-1
Cl. A4, 5.67% ................. 1/17/2017 150,000 154,678
DLJ Commercial Mortgage
Corp. Note 1999-CG1
Cl. A1B, 6.46% ................ 3/10/2032 150,000 169,837
DLJ Commerical Mortgage
Corp. Note 1998-CG1
Cl. A1A, 6.11% ................ 6/10/2031 116,239 118,978
EOP Operating LP
Note, 6.80% ................... 1/15/2009 775,000 886,992
ERAC USA Finance Co.
Note, 8.25%+ .................. 5/01/2005 450,000 479,538
ERAC USA Finance Co.
Note, 6.625%+ ................. 5/15/2006 225,000 244,283
ERP Operating LP
Note, 6.63% ................... 4/13/2005 600,000 630,180
First National Bank Sub.
Note, 7.375% .................. 9/15/2006 125,000 140,953
First Union Capital Bond, 7.94% 1/15/2027 150,000 175,837
First Union Lehman Brothers,
Series 1998-C2
Cl. A1, 6.28% ................. 11/18/2035 136,899 142,907
Fleet Commercial Loan Note
2002-1 Cl. C1, 3.22%+ ......... 11/16/2009 750,000 751,192
Fleet Commercial Loan Note
2002-1A Cl. B1, 2.02%+ ........ 11/16/2009 475,000 475,385
Ford Credit Auto Owner Trust
Note 2002-A Cl. A4, 4.36% 9/15/2006 275,000 283,391
Ford Credit Auto Owner Trust
Note 2002-A Cl. B, 4.79% ...... 11/15/2006 525,000 545,033
Ford Credit Auto Owner Trust
Note 2003-A Cl. B2, 1.50% 8/15/2007 325,000 326,930
Ford Credit Auto Owner Trust
Note 2003-B Cl. C, 4.18% ...... 1/15/2008 75,000 76,335
General Electric Business Loan
Trust Note, 1.52%+ ............ 4/15/2031 355,120 355,787
General Electric Business Loan
Trust Note, 2.39%+ ............ 4/15/2031 141,986 141,986
General Electric Business Loan
Trust Note, 2.09%+ ............ 11/15/2031 1,178,157 1,174,144
General Electric Capital Corp.
Global Note, 6.75% ............ 3/15/2032 150,000 173,275
General Electric Capital Corp.
Note, 6.125% .................. 2/22/2011 975,000 1,100,219
General Motors Acceptance
Corp. Note, 7.25% ............. 3/02/2011 650,000 721,356
Maturity Principal
Date Amount Value
- ------------------------------------------------------------------------------------------
General Motors Acceptance
Corp. Note, 8.00% ............. 11/01/2031 $ 400,000 $ 442,742
GGP Mall Properties Trust
Note 2001 Cl. C2, 5.56% ....... 11/15/2011 503,809 538,242
GGP Mall Properties Trust
Note 2001 Cl. C3, 2.39%+ 2/15/2014 115,600 116,596
Goldman Sachs Group Inc.
Note, 6.875% .................. 1/15/2011 625,000 726,174
Grace Church Card Funding
plc Note, 2.02% ............... 8/15/2008 750,000 750,585
Granite Mortgage Trust
Note, 2.01% ................... 3/20/2044 500,000 500,000
GSR Mortgage Loan
Trust Note 2002-9
Cl. B2, 5.26% ................. 10/25/2032 165,763 170,340
Hedged Mutual Fund Fee Trust
Note 2003-1 Cl. 2, 5.22%+ ..... 11/30/2010 158,685 158,685
HFG HealthCo. LLC Note
2002-1A Cl. B, 2.42%+ ......... 6/05/2007 125,000 124,460
HFG Healthco. LLC Note
2002-1A Cl. A, 2.22%+ ......... 6/05/2007 200,000 197,542
Holmes Financing Series
Note Cl. C, 2.57% ............. 7/15/2040 180,000 180,000
Holmes Financing Series
Note Cl. M, 1.87% ............. 7/15/2040 150,000 150,000
Holmes Financing Series
Note Cl. C, 1.73% ............. 7/15/2040 250,000 250,000
Household Finance Corp.
Note, 6.375% .................. 10/15/2011 225,000 255,118
Household Finance Corp.
Note, 6.375% .................. 11/27/2012 1,050,000 1,188,159
IMPAC Commercial Mortgage
Trust Note 2002-3
Cl. B1, 3.29% ................. 6/25/2032 283,357 284,972
IMPAC Commercial Mortgage
Trust Note 2002-4
Cl. M1, 5.58% ................. 11/25/2032 78,800 81,505
IMPAC Commercial Mortgage
Trust Note 2002-5
Cl. A1, 1.46% ................. 7/25/2032 166,620 167,079
IMPAC Commercial Mortgage
Trust Note 2002-8
Cl. A, 1.55% .................. 3/25/2033 102,936 103,487
IMPAC Commercial Mortgage
Trust Note 2003-5
Cl. M1, 1.84% ................. 8/25/2033 229,222 231,012
IMPAC Commerical Mortgage
Trust Note 2003-7
Cl. M, 2.74% .................. 8/25/2033 135,812 138,100
IMPAC Commerical Mortgage
Trust Note 2004-1
Cl. M, 2.29% .................. 3/25/2034 295,524 296,086
IMPAC Commerical Mortgage
Trust Note 2001-3
Cl. A1, 1.46% ................. 10/25/2031 63,592 63,726
iStar Asset Receivables
Trust Note 2002-1A
Cl. D, 1.94%+ ................. 5/28/2020 225,000 230,324
J.P. Morgan Capital Trust
Bond, 7.54% ................... 1/15/2027 175,000 195,174
J.P. Morgan Chase & Co.
Note, 6.75% ................... 2/01/2011 575,000 670,491
12 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- -----------------------------------------------------------------------------------------
Finance/Mortgage (Continued)
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. A1, 6.18% ...... 10/15/2035 $ 130,474 $ 141,005
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1997 Cl. C5, 7.24% ...... 9/15/2029 1,600,000 1,860,323
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. A2, 6.90%+...... 2/15/2032 725,000 839,829
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. A2, 6.51% ...... 10/15/2035 600,000 679,103
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. D, 6.90%+....... 2/15/2032 125,000 145,081
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 2003 Cl. D, 2.29%+....... 2/17/2015 126,200 126,608
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 2003 Cl. F, 3.04%+ ...... 2/17/2015 126,200 126,504
John Hancock Global Funding
Note, 7.90%+ ................. 7/02/2010 525,000 638,630
Knollwood CDO Ltd.
Note, 4.32%+ ................. 1/10/2039 225,000 225,000
Lehman Brothers Commercial
Conduit Mortgage
Trust Note 2001-C7
Cl. A4, 5.93% ................ 12/15/2025 825,000 919,795
Lehman Brothers Commercial
Conduit Mortgage
Trust Note 1997-LL1
Cl. A1, 6.79% ................ 10/12/2034 108,584 109,475
Lehman Brothers Commercial
Conduit Mortgage Trust
Note 1998-C4-A1, 6.21%........ 10/15/2035 160,000 179,177
Lehman Brothers Commercial
Conduit Mortgage Trust
Note 2001-WM-A1,
6.155%+ ...................... 7/14/2016 909,691 997,085
Lehman Brothers Commerical
Conduit Mortgage Trust
Note 2001-C7 Cl. A3,
5.64% ........................ 12/15/2025 887,300 965,264
Lehman Brothers Holdings Inc.
Note, 6.25% .................. 5/15/2006 200,000 217,662
Long Beach Mortgage Loan
Trust Note, 2.19% ............ 2/25/2034 475,000 472,662
Manufacturers & Traders Trust
Co. Note, 3.85%++ ............ 4/01/2008 225,000 227,230
Massachusetts Mutual Life
Insurance Co. Note,
5.625%+ ...................... 5/15/2033 425,000 428,933
MBNA Corp. Senior Medium
Term Note, 5.625% ............ 11/30/2007 525,000 569,686
MBNA Credit Card Master
Trust Note Series 2001
Cl. C, 2.31% ................. 6/15/2009 475,000 483,813
MBNA Credit Card Master
Trust Note Series 2001
Cl. C3, 6.55% ................ 12/15/2008 350,000 379,691
Maturity Principal
Date Amount Value
- -----------------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
Note, 4.00% .................. 11/15/2007 $ 125,000 $ 130,093
Merrill Lynch & Co. Inc.
Note, 3.70% .................. 4/21/2008 175,000 178,785
Morgan Stanley Capital Inc.
Note, 4.75% .................. 4/01/2014 750,000 737,701
Morgan Stanley Capital Inc.
Note, 7.22%+ ................. 7/15/2029 660,614 737,727
Morgan Stanley Capital Inc.
Note, 5.91% .................. 11/15/2031 321,218 343,081
Morgan Stanley Capital Inc.
Note, 6.21% .................. 11/15/2031 475,000 532,427
Morgan Stanley Dean Witter
Inc. 2001 Cl. C, 7.00% ....... 2/15/2033 125,000 145,794
Morgan Stanley Dean Witter
Inc. 2002 Cl. A1, 5.38% ...... 1/15/2039 879,138 950,124
NationsLink Funding Corp.
Note 1998 Cl. A2, 6.48% ...... 8/20/2030 225,000 254,253
NationsLink Funding Corp.
Note 1998 Cl. B, 6.80% ....... 8/20/2030 125,000 142,657
NationsLink Funding Corp.
Note 1998 Cl. E, 7.12% ....... 8/20/2030 975,000 1,085,208
NationsLink Funding Corp.
Note 1999 Cl. D, 7.50% ....... 6/20/2031 175,000 203,985
Nissan Auto Receivables
Owners Trust Note, 2.23% ..... 3/15/2007 1,250,000 1,261,406
Nomura Asset Securities Corp.
Note, 6.00%+ ................. 3/15/2030 1,000,000 978,445
Nomura Asset Securities Corp.
Note, 6.59% .................. 3/15/2030 875,000 992,714
Northwest Airlines Inc. Note
2001-1 Cl. G, 8.07% .......... 10/01/2019 290,954 324,459
Option One Mortgage
Loan Trust Note 2003-5
Cl. M4, 3.99% ................ 8/25/2033 125,000 129,127
Option One Mortgage
Loan Trust Note 2002-6
Cl. M1, 1.84% ................ 11/25/2032 150,000 151,267
Option One Mortgage
Loan Trust Note 2002-6
Cl. M2, 2.79% ................ 11/25/2032 350,000 355,741
Option One Mortgage
Loan Trust Note 2003-1
Cl. M2, 3.04% ................ 2/25/2033 150,000 153,365
Option One Mortgage
Loan Trust Note 2003-2
Cl. M2, 2.79% ................ 4/25/2033 150,000 153,649
Option One Mortgage
Loan Trust Note 2003-3
Cl. M2, 2.69% ................ 6/25/2033 375,000 383,051
Option One Mortgage
Loan Trust Note 2003-4
Cl. A2, 1.41% ................ 4/25/2033 254,885 255,450
Option One Mortgage
Loan Trust Note 2003-4
Cl. M2, 2.74% ................ 7/25/2033 350,000 357,478
PNC Mortgage Acceptance
Corp. Note 2000
Cl. A1, 7.05% ................ 10/12/2033 372,071 413,215
PNC Mortgage Acceptance
Corp. Note 2002
Cl. C2, 7.30% ................ 10/12/2033 840,000 993,971
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 13
Maturity Principal
Date Amount Value
- -----------------------------------------------------------------------------------------
Finance/Mortgage (Continued)
PSE&G Transitions Funding
LLC Note Cl. A3, 5.98% ....... 6/15/2008 $ 600,000 $ 642,590
PSE&G Transitions Funding
LLC Note Cl. A2, 5.74% ....... 3/15/2007 104,034 106,800
Residential Asset Security
Mortgage Corp.
Note, 1.25% .................. 2/25/2021 1,092,993 1,093,411
Residential Asset Security
Mortgage Corp.
Note, 1.24% .................. 10/25/2021 55,699 55,703
Residential Asset Security
Mortgage Corp.
Note, 4.99% .................. 2/25/2027 768,906 772,445
Residential Asset Security
Mortgage Corp.
Note, 1.34% .................. 7/25/2032 262,854 262,967
Residential Asset Security
Mortgage Corp.
Note, 2.84% .................. 1/25/2033 625,000 636,231
Residential Asset Security
Mortgage Corp.
Note, 2.84% .................. 4/25/2033 425,000 434,073
Residential Asset Security
Mortgage Corp.
Note, 5.50% .................. 4/25/2033 425,000 430,355
Residential Asset Security
Mortgage Corp.
Note, 2.44% .................. 12/25/2033 1,000,000 1,008,483
Residential Asset Security
Mortgage Corp.
Note, 2.29% .................. 1/25/2034 1,250,000 1,259,430
Residential Asset Security
Mortgage Corp.
Note, 2.89% .................. 4/25/2034 400,000 400,000
Russell Corp. Note, 9.25% ...... 5/01/2010 1,000,000 1,062,500
Safeco Capital Trust
Note, 8.07% .................. 7/15/2037 425,000 487,892
Salomon Brothers Mortgage
Trust Note 2001
Cl. A2, 6.13% ................ 2/18/2034 175,000 190,750
Simon Property Group LP
Note, 7.375% ................. 1/20/2006 400,000 438,400
Structured Asset Investment
Loan Trust Note, 1.19% ....... 4/25/2033 75,447 75,440
Structured Asset Investment
Loan Trust Note, 3.04% ....... 4/25/2033 150,000 152,491
Structured Asset Investment
Loan Trust Note, 1.22% ....... 7/25/2033 843,916 843,794
Structured Asset Securities
Corp. Note, 3.14% ............ 1/25/2032 750,000 753,986
Structured Asset Securities
Corp. Note, 6.73% ............ 1/25/2032 101,821 106,548
Structured Asset Securities
Corp. Note, 2.19% ............ 6/25/2032 575,000 576,764
Structured Asset Securities
Corp. Note, 2.24% ............ 7/25/2032 525,000 527,024
Structured Asset Securities
Corp. Note, 2.29% ............ 7/25/2032 250,000 251,370
Structured Asset Securities
Corp. Note, 1.30% ............ 11/25/2032 70,218 70,244
Structured Asset Securities
Corp. Note, 1.52% ............ 1/25/2033 161,219 161,677
Maturity Principal
Date Amount Value
- -----------------------------------------------------------------------------------------
Structured Asset Securities
Corp. Note, 5.51% ............ 2/25/2033 $ 224,182 $ 232,639
Structured Asset Securities
Corp. Note, 3.04% ............ 4/25/2033 350,000 355,438
Union Planters Bank
Note, 5.125% ................. 6/15/2007 150,000 163,220
Union Planters Bank
Note, 4.375% ................. 12/01/2010 225,000 229,860
USA Education Note, 5.625%...... 4/10/2007 250,000 273,483
Vornado Realty Trust Sr.
Note, 5.625% ................. 6/15/2007 650,000 708,469
Wachovia Bank Commercial
Mortgage Trust Note, 2.99% 6/15/2035 1,141,163 1,115,284
Wachovia Bank Commerical
Mortgage Trust
Note, 1.00%+ ................. 3/15/2014 250,000 250,000
Wachovia Bank Commerical
Mortgage Trust
Note, 1.44%+ ................. 3/15/2015 1,500,000 1,500,388
Washington Mutual Inc.
Note, 4.13% .................. 3/25/2033 300,000 301,959
Washington Mutual Inc.
Note, 3.93% .................. 4/25/2033 300,000 304,726
Washington Mutual Inc.
Note, 3.42% .................. 5/25/2033 850,000 853,222
Washington Mutual Inc.
Note, 3.70% .................. 6/25/2033 850,000 859,106
Washington Mutual Inc.
Note, 4.25% .................. 8/25/2033 399,259 392,432
Washington Mutual Inc.
Note, 3.99% .................. 10/25/2033 1,350,000 1,358,030
Washington Mutual Inc.
Note, 4.55% .................. 3/25/2034 1,249,000 1,256,511
Wells Fargo Bank N. A. Sub
Note, 6.45% .................. 2/01/2011 375,000 431,245
Western Massachusetts
Electrical Co. Note 2001-1
Cl. A, 6.53% ................. 6/01/2015 1,260,464 1,428,841
Whole Auto Loan Trust Note
2002-1 Cl. A2, 1.88% ......... 6/15/2005 87,137 87,245
WMC Finance Co.
Note, 11.75%+ ................ 12/15/2008 500,000 535,000
------------
85,578,271
------------
Foreign 0.1%
Pemex Project Funding Master
Trust Note, 7.375% ........... 12/15/2014 200,000 222,500
Petronas Capital Ltd.
Note, 7.875%+ ................ 5/22/2022 200,000 239,560
------------
462,060
------------
Foreign Government 4.0%
Canadian Dollar
Canada Government, 3.50% ....... 6/01/2005 1,000,000 775,675
Euro
Republic of Germany, 5.00% ..... 8/19/2005 600,000 767,051
Japanese Yen
Japan Government
Note, 0.10% .................. 10/20/2005 120,000,000 1,152,404
Banque Centrale De Tunisie
Note, 7.375% ................. 4/25/2012 100,000 116,250
Corporacion Andina
deFomento Note, 6.875% ....... 3/15/2012 125,000 143,508
14 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- -------------------------------------------------------------------------------------------
Foreign Government (Continued)
Corporacion Nacional
DelCobre Note, 5.50%+ ........... 10/15/2013 $ 225,000 $ 237,068
Export-Import Bank of Korea
Note, 5.25%+ .................... 2/10/2014 250,000 258,869
Korea Development Bank
Note, 3.875% .................... 3/02/2009 150,000 151,191
Malaysia Government
Bond, 7.50% ..................... 7/15/2011 175,000 210,368
Petroleos Mexicanos
Note, 6.50%# .................... 2/01/2005 425,000 441,575
Republic of Argentina, 1.23%#...... 8/03/2012 4,925,000 3,302,213
Republic of Brazil, 8.00% ......... 4/15/2014 2,339,679 2,281,187
Republic of Chile, 5.625% ......... 7/23/2007 425,000 461,168
Republic of Ecuador,
7.00%+# ......................... 8/15/2030 3,125,000 2,765,625
Republic of Peru, 5.00% ........... 9/06/2004 1,547,000 1,430,975
Republic of Philippines,
8.375% .......................... 3/12/2009 1,500,000 1,578,750
Republic of South Africa,
9.125% .......................... 5/19/2009 425,000 523,281
Republic of Turkey, 9.50% ......... 1/15/2014 800,000 944,000
Republic of Ukraine, 7.65%+ ....... 6/11/2013 1,600,000 1,668,000
Republic of Uruguay, 7.50% ........ 3/15/2015 1,700,000 1,466,250
Republic of Venezuela,
10.75%+ ......................... 9/19/2013 1,650,000 1,724,250
Russian Federation, 8.25%+ ........ 3/31/2010 925,000 1,049,875
State of Qatar Bond, 9.75%+........ 6/15/2030 125,000 180,000
United Mexican States,
6.625% .......................... 3/03/2015 325,000 353,925
United Mexican States, 8.00%....... 9/24/2022 200,000 231,000
United Mexican States, 8.30%....... 8/15/2031 175,000 205,625
------------
24,420,083
------------
Corporate 10.4%
AES Corp. Note, 8.75%+ ............ 5/15/2013 200,000 220,000
AES Eastern Energy L.P.
Note, 9.00% ..................... 1/02/2017 536,499 614,291
Allbritton Communications Co.
Note, 7.75% ..................... 12/15/2012 500,000 518,750
American Achievement Corp.
Note, 8.25%+ .................... 4/01/2012 300,000 308,250
American Tower Corp.
Note, 7.25%+ .................... 12/01/2011 750,000 766,875
ArvinMeritor Inc. Note, 8.75% ..... 3/01/2012 250,000 278,125
Associated Materials Inc.
Note, 9.75% ..................... 4/15/2012 450,000 501,750
Associated Materials Inc.
Note, 11.25%+ ................... 3/01/2014 525,000 318,937
AT&T Broadband Corp.
Note, 9.455% .................... 11/15/2022 725,000 983,657
AT&T Wireless Services Inc.
Sr. Note, 8.75% ................. 3/01/2031 225,000 291,826
Availl Inc. Note, 7.625% .......... 7/01/2011 300,000 321,000
BAE Systems Holdings Inc.
Note, 6.66%+ .................... 9/15/2013 795,522 893,562
Boeing Co. Note, 8.75% ............ 8/15/2021 175,000 232,624
Bombardier Capital Inc.
Note, 6.125%+ ................... 6/29/2006 300,000 320,446
Boston Edison Co.
Note, 4.875% .................... 10/15/2012 250,000 259,611
British Telecommunications PLC
Note, 8.875% .................... 12/15/2030 225,000 300,202
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------------------
Corporate (Continued)
Burlington Resources Finance
Co. Note, 7.20% ................. 8/15/2031 $ 200,000 $ 238,155
BWAY Corp. Note, 10.00% ........... 10/15/2010 500,000 535,000
California Steel Industries Inc.
Note, 6.125%+ ................... 3/15/2014 500,000 503,750
Cargill Inc. Note, 3.625%+ ........ 3/04/2009 225,000 226,457
Cargill Inc. Note, 4.375%+ ........ 6/01/2013 225,000 220,581
Case New Holland Inc. Sr.
Note, 9.25%+ .................... 8/01/2011 500,000 565,000
Charter Communication
Holding LLC Note, 8.625% ........ 4/01/2009 150,000 123,750
Charter Communication
Holding LLC Note, 10.25%+ ....... 9/15/2010 300,000 309,000
Chumash Casino & Resort
Enterprise Sr. Note, 9.00% ...... 7/15/2010 700,000 773,500
Cinemark Inc. Note, 1.00%+......... 3/15/2014 475,000 296,875
Comcast Corp. Note, 7.05% ......... 3/15/2033 300,000 333,348
Concentra Operating Corp.
Note, 9.50% ..................... 8/15/2010 375,000 416,250
Continental Airlines Inc.
Note, 7.37% ..................... 12/15/2015 192,779 169,246
Continental Airlines Inc.
Note, 7.875% .................... 7/02/2018 500,000 497,970
Continental Airlines Inc.
Note, 6.70% ..................... 12/15/2022 718,351 707,036
Cox Communications Inc.
Note, 3.875% .................... 10/01/2008 125,000 126,775
Cox Communications Inc.
Note, 4.625% .................... 6/01/2013 250,000 244,061
Crown Castle International
Corp. Note, 7.50% ............... 12/01/2013 600,000 589,500
CSC Holdings Inc.
Note, 7.625% .................... 4/01/2011 600,000 633,000
CSK Auto Corp. Note, 7.00%+........ 1/15/2014 500,000 502,500
DaimlerChrysler Corp.
Note, 8.50% ..................... 1/18/2031 350,000 430,428
Deutsche Telekom AG Global
Note, 9.25% ..................... 6/01/2032 275,000 390,471
Dex Media Inc. Note, 0.00%+........ 11/15/2013 600,000 384,000
Dimon Inc. Note, 7.75% ............ 6/01/2013 675,000 671,625
DTE Energy Co. Note, 6.45% ........ 6/01/2006 350,000 378,100
Dynegy Holdings Inc.
Note, 6.875% .................... 4/01/2011 600,000 522,000
Eagle Picher Inc. Note, 9.75%...... 9/01/2013 500,000 547,500
Earle M. Jorgensen Co.
Note, 9.75% ..................... 6/01/2012 750,000 843,750
Eircom Funding Inc.
Note, 8.25% ..................... 8/15/2013 600,000 669,000
El Paso Production Holding
Co. Note, 7.75% ................. 6/01/2013 250,000 231,875
Encore Acquisition Co.
Note, 6.25%+ .................... 4/15/2014 150,000 150,000
Energy Partners Ltd.
Note, 8.75% ..................... 8/01/2010 600,000 642,000
Entergy Gulf States Inc.
Note, 3.60% ..................... 6/01/2008 300,000 299,304
Evergreen Resources Inc.
Note, 5.875%+ ................... 3/15/2012 75,000 75,750
EXCO Resources Inc.
Note, 7.25%+ .................... 1/15/2011 600,000 619,500
Federated Department Stores
Inc. Note, 8.50% ................ 6/01/2010 325,000 401,565
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 15
Maturity Principal
Date Amount Value
- -------------------------------------------------------------------------------------------
Corporate (Continued)
FFCA Secured Lending Corp.
Note, 6.94% .................... 9/18/2025 $ 100,000 $ 104,127
Ford Motor Co. Note, 7.45% ....... 7/16/2031 475,000 474,370
Ford Motor Credit Co.
Note, 7.375% ................... 10/28/2009 1,325,000 1,454,378
Friendly Ice Cream Corp.
Note, 8.375%+ .................. 6/15/2012 150,000 154,500
General Electric Co.
Note, 5.00% .................... 2/01/2013 750,000 785,308
General Motors Corp.
Note, 8.25% .................... 7/15/2023 500,000 558,103
Georgia Power Co.
Note, 4.875% ................... 7/15/2007 525,000 561,336
Grief Brothers Corp.
Note, 8.875% ................... 8/01/2012 650,000 708,500
Halliburton Co. Note, 5.50%+...... 10/15/2010 275,000 291,263
Hanover Compressor Co.
Note, 8.625% ................... 12/15/2010 200,000 215,000
Hanover Equipment Trust
Note, 0.00% .................... 3/31/2007 750,000 577,500
Hewlett Packard Co.
Note, 3.625% ................... 3/15/2008 475,000 485,504
Hexcel Corp. Note, 9.875% ........ 10/01/2008 500,000 556,250
Hines Nurseries Inc.
Note, 10.25% ................... 10/01/2011 250,000 277,500
Host Marriott LP Note, 7.125%..... 11/01/2013 450,000 466,875
Huntsman ICI Chemicals LLC
Note, 10.125% .................. 7/01/2009 750,000 763,125
Hutchison Whampoa Inc.
Note, 6.25%+ ................... 1/24/2014 325,000 337,187
IASIS Healthcare Corp. Sr.
Sub. Note, 8.50% ............... 10/15/2009 400,000 428,000
Indiana Michigan Power Co.
Note, 6.125% ................... 12/15/2006 325,000 354,510
Insight Midwest Note, 9.75% ...... 10/01/2009 325,000 338,813
InterLine Brands Inc.
Note, 11.50% ................... 5/15/2011 400,000 432,000
International Lease Finance
Corp. Note, 5.75% .............. 2/15/2007 525,000 573,402
International Paper Co.
Note, 6.75% .................... 9/01/2011 775,000 881,314
IPSCO Inc. Note, 8.75% ........... 6/01/2013 750,000 853,125
ISP Chemco Inc.
Note, 10.25% ................... 7/01/2011 725,000 821,062
Ispat Inland ULC Note, 9.75%+..... 4/01/2014 300,000 312,000
John Q. Hammons
Note, 8.875% ................... 5/15/2012 600,000 667,500
Jostens Inc. Note, 10.25%+ ....... 12/01/2013 500,000 327,500
Joy Global Inc. Sr. Sub.
Note, 8.75% .................... 3/15/2012 600,000 675,000
Kern River Funding Corp.
Note, 4.89%+ ................... 4/30/2018 265,046 270,755
Kroger Co. Sr. Sub.
Note, 7.80% .................... 8/15/2007 775,000 894,752
Loral Corp. Note, 7.00% .......... 9/15/2023 150,000 171,389
Lyondell Chemical Co. Sr.
Note, 10.50% ................... 6/01/2013 500,000 527,500
Mail-Well Corp.
Note, 7.875%+ .................. 12/01/2013 475,000 448,875
Massey Energy Co.
Note, 6.63% .................... 11/15/2010 400,000 407,000
Maturity Principal
Date Amount Value
- -------------------------------------------------------------------------------------------
Merisant Co. Sr. Sub.
Note, 9.50%+ ................... 7/15/2013 $ 400,000 $ 394,000
Millar Western Forest Products
Ltd. Note, 7.75%+ .............. 11/15/2013 200,000 212,500
Nalco Co. Note, 8.875%+ .......... 11/15/2013 400,000 417,000
Nash Finch Co. Note, 8.50%........ 5/01/2008 500,000 492,500
Newark Group Inc.
Note, 9.75%+ ................... 3/15/2014 300,000 295,500
Newmont Mining Corp.
Note, 8.63% .................... 5/15/2011 250,000 314,138
News America Inc. Sr.
Note, 6.625% ................... 1/09/2008 450,000 505,895
Nextel Communications Inc.
Sr. Note, 7.375% ............... 8/01/2015 550,000 595,375
Nortek Holdings Inc.
Note, 1.00%+ ................... 5/15/2011 575,000 437,000
NRG Energy Inc. Note, 8.00%+ ..... 12/15/2013 575,000 593,688
O'Charley's Inc. Note, 9.00%+..... 11/01/2013 500,000 522,500
OMI Corp. Note, 7.63% ............ 12/01/2013 750,000 778,125
Perry Ellis International Inc.
Note, 8.875% ................... 9/15/2013 750,000 780,000
Phillips Van Heusen Corp.
Note, 7.25%+ ................... 2/15/2011 375,000 388,125
Ply Gem Industries Inc.
Note, 9.00%+ ................... 2/15/2012 300,000 301,500
Prime Succession Holdings Inc.
Sr. Sub. Note (acquired
10/07/98 through
11/10/98, cost $54,231)
14.25%++@ ...................... 8/29/2009 11,259 1
Progress Energy Inc. Sr.
Note, 7.10% .................... 3/01/2011 300,000 347,017
Pulte Homes Inc. Note, 6.38%...... 5/15/2033 250,000 249,158
Qwest Capital Funding Inc.
Note, 7.25% .................... 2/15/2011 300,000 258,000
Qwest Communications
International Inc.
Note, 7.25%+ ................... 2/15/2011 300,000 285,750
Reliant Resources Inc.
Note, 9.25% .................... 7/15/2010 250,000 271,250
Rite Aid Corp. Note, 8.13% ....... 5/01/2010 750,000 802,500
Rogers Wireless Inc.
Note, 9.625% ................... 5/01/2011 550,000 673,062
Sealy Mattress Co.
Note, 8.25%+ ................... 6/15/2014 450,000 450,000
Sinclair Broadcast Group Inc.
Sr. Sub. Note, 8.75% ........... 12/15/2011 600,000 664,500
Solo Cup Co. Note, 8.50%+ ........ 2/15/2014 175,000 181,344
Sprint Capital Corp.
Note, 8.75% .................... 3/15/2032 325,000 410,767
Standard Commercial Corp.
Note, 8.00%+ ................... 4/15/2012 275,000 285,313
Stena AB Note, 9.625% ............ 12/01/2012 400,000 454,000
Stena AB Note, 7.50% ............. 11/01/2013 100,000 104,500
TD Funding Corp. Note, 8.38% 7/15/2011 300,000 318,000
Technical Olympic USA Inc.
Note, 9.00% .................... 7/01/2010 750,000 815,625
Tekni-Plex Inc. Sr. Sub.
Note, 12.75% ................... 6/15/2010 300,000 314,250
Tekni-Plex Inc. Note, 8.75%+ ..... 11/15/2013 500,000 497,500
Telecom De Puerto Rico Senior
Note, 6.65% .................... 5/15/2006 450,000 487,535
16 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Corporate (Continued)
YvkTelecom Italia SPA
Note, 5.25%+ .................. 11/15/2013 $ 350,000 $ 360,933
Telefonos De Mexico SA
Note, 4.50%+ .................. 11/19/2008 150,000 153,015
Tenet Healthcare Corp.
Note, 6.38% ................... 12/01/2011 300,000 259,500
Terex Corp. Sr. Sub.
Note, 9.25% ................... 7/15/2011 425,000 476,000
Thomson Corp. Sr.
Note, 5.75% ................... 2/01/2008 250,000 274,347
Time Warner Entertainment
Co. Note, 8.375% .............. 3/15/2023 300,000 374,183
Time Warner Inc. Note, 9.15% 2/01/2023 400,000 524,746
TriMas Corp. Note, 9.875% ....... 6/15/2012 1,225,000 1,335,250
Trinity Industries Inc.
Note, 6.50%+ .................. 3/15/2014 450,000 450,000
TRW Automotive Inc.
Note, 9.38% ................... 2/15/2013 758,000 871,700
U.S. Concrete Inc.
Note, 8.375%+ ................. 4/01/2014 150,000 153,000
UAP Holding Corp.
Note, 0.00%+ .................. 7/15/2012 500,000 335,000
United Agri Products Inc.
Note, 8.25%+ .................. 12/15/2011 600,000 629,250
United Auto Group Inc.
Note, 9.625% .................. 3/15/2012 575,000 641,125
United Components Inc.
Note, 9.375% .................. 6/15/2013 500,000 540,000
United Rentals Inc.
Note, 6.50%+ .................. 2/15/2012 250,000 248,750
United States Steel Corp.
Note, 9.75% ................... 5/15/2010 631,000 719,340
UnitedHealth Group Inc.
Note, 7.50% ................... 11/15/2005 175,000 190,558
Verizon Global Funding Corp.
Note, 7.75% ................... 12/01/2030 525,000 637,761
Videotron Ltee Note, 6.875% ..... 1/15/2014 250,000 261,250
Vitro SA Note, 11.75%+ .......... 11/01/2013 500,000 475,000
Warnaco Inc. Note, 8.875% ....... 6/15/2013 850,000 915,875
Western Wireless Corp.
Note, 9.25% ................... 7/15/2013 775,000 796,312
Westport Resources Corp.
Note, 8.25% ................... 11/01/2011 325,000 361,563
Weyerhaeuser Co.
Note, 7.375% .................. 3/15/2032 275,000 315,637
Williams Scotsman
Inc. 9.875% ................... 6/01/2007 600,000 600,000
Young Broadcasting Inc.
Note, 8.75%+ .................. 1/15/2014 500,000 515,000
------------
68,866,862
------------
Total Fixed Income Securities (Cost $260,091,420) ............ 266,391,414
------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Short-Term Investments 11.1%
State Street Navigator Securities Lending
Prime Portfolio .............................. 73,332,702 $ 73,332,702
------------
Total Short-Term Investments (Cost $73,332,702) ............... 73,332,702
------------
Principal
Amount
- --------------------------------------------------------------------------------
Commercial Paper 10.0%
American Express Credit
Corp., 0.97% ..................... 4/02/2004 $ 2,710,000 2,709,927
American Express Credit
Corp., 0.97% ..................... 4/06/2004 4,086,000 4,085,449
American Express Credit
Corp., 1.00% ..................... 4/15/2004 9,445,000 9,441,327
Caterpillar Financial Services
NV, 1.00% ........................ 4/20/2004 3,296,000 3,294,260
Citicorp. 1.02% .................... 4/12/2004 12,364,000 12,360,147
E.I. du Pont de Nemours &
Co., 1.00% ....................... 4/08/2004 10,000,000 9,998,056
General Electric Capital
Corp., 1.03% ..................... 4/08/2004 2,955,000 2,954,408
General Electric Capital
Corp., 1.00% ..................... 4/22/2004 6,000,000 5,996,500
General Electric Capital
Corp., 1.02% ..................... 5/18/2004 2,004,000 2,001,332
Morgan Stanley & Co., 1.02% 4/01/2004 8,206,000 8,206,000
U.S. Treasury Bill 0.93%** ......... 6/10/2004 5,000,000 4,990,958
----------
Total Commercial Paper (Cost $66,038,364) ........................ 66,038,364
----------
% of
Net Assets
- --------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $709,033,780).................. 117.1% 769,937,950
Cash and Other Assets, Less Liabilities ......... (17.1%) (110,563,631)
----- ------------
Net Assets ...................................... 100.0% $659,374,319
===== ============
Federal Income Tax Information
At March 31, 2004, the net unrealized appreciation
of investments based on cost for federal income tax
purposes of $712,114,509 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $64,133,087
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (6,309,646)
-----------
$57,823,441
===========
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 17
* 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, 2004.
@ Security valued under consistently applied procedures established by the
Trustees.
++ Security restricted as to public resale. The total cost and market value of
restricted securities owned at March 31, 2004, were $6,592,328 and
$6,545,146 (0.99% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule
144A securities owned at March 31, 2004, were $38,852,019 and $39,712,563
(6.02% 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 March 31, 2004 are as follows:
Unrealized
Number of Notional Expiration Appreciation
Type Contracts Amount Currency Month (Depreciation)
- ----------------------------------------------------------------------------------------------------------------
DJ Euro Stoxx 50 Index Long 874 24,017,520 EUR June 2004 $ 32,285
Topix Index Long 302 3,562,090,000 JPY June 2004 1,893,552
2-Year US Treasury Notes Long 18 3,873,094 USD June 2004 19,086
5-Year US Treasury Notes Short (106) (12,037,625) USD June 2004 (170,216)
10-Year US Treasury Notes Short (11) (1,269,469) USD June 2004 (8,958)
30-Year US Treasury Bond Short (5) (570,313) USD June 2004 (10,911)
----------
$1,754,838
==========
Forward currency exchange contracts outstanding at March 31, 2004 are as
follows:
Unrealized
Contract Appreciation Delivery
Transaction Total Value Price (Depreciation) Date
- -------------------------------------------------------------------------------------------------------------------
Buy Swiss Franc, Sell U.S. dollars 5,550,000 CHF 1.27240 CHF $ 22,158 05/12/04
Buy Euro, Sell U.S. dollars 15,200,000 EUR 0.80749 EUR (159,975) 05/12/04
Buy Pound Sterling, Sell U.S. dollars 8,000,000 GBP 0.54741 GBP 54,494 05/12/04
Buy Yen, Sell U.S. dollars 2,490,000,000 JPY 110.92000 JPY 1,483,295 05/12/04
----------
$1,399,972
==========
Options open at March 31, 2004 are as follows:
Number of Expiration
Type Contracts Premium Month Value
- --------------------------------------------------------------------------------------------------
10-Year U.S. Treasury Futures Call (207) $ (264,236) May 2004 $ (320,204)
10-Year U.S. Treasury Futures Put (207) (287,400) May 2004 (236,108)
---------- ----------
$ (551,636) $ (556,312)
========== ==========
18 The notes are an integral part of the financial statements.
FINANCIAL
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
March 31, 2004
Assets
Investments, at value (Cost $709,033,780) (Note 1) ........... $769,937,950
Cash ......................................................... 799,688
Receivable for securities sold ............................... 15,742,391
Interest and dividends receivable ............................ 3,058,652
Receivable for open forward contracts ........................ 1,559,947
Receivable for fund shares sold .............................. 1,211,124
Receivable for variation margin .............................. 20,195
Other assets ................................................. 7,131
------------
792,337,078
------------
Liabilities
Payable for collateral received on securities loaned ......... 73,332,702
Payable for securities purchased ............................. 56,794,977
Payable for fund shares redeemed ............................. 567,074
Options written at fair value (premium $551,636).............. 556,312
Accrued transfer agent and shareholder services .............. 434,338
Accrued management fee ....................................... 406,537
Accrued distribution and service fees ........................ 233,832
Payable for open forward contracts ........................... 159,975
Dividends payable ............................................ 158,808
Accrued trustees' fees ....................................... 9,166
Accrued administration fee ................................... 5,777
Payable for foreign tax withheld ............................. 3,911
Other accrued expenses ....................................... 299,350
------------
132,962,759
------------
Net Assets ................................................... $659,374,319
============
Net Assets consist of:
Undistributed net investment Income .......................... $ 4,682,594
Unrealized appreciation of investments ....................... 60,904,170
Unrealized appreciation of futures contracts and options 1,750,162
Unrealized appreciation of forward contracts ................. 1,399,972
Accumulated net realized gain ................................ 4,482,737
Paid-in capital .............................................. 586,154,684
------------
$659,374,319
============
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 [divided by] Number of Shares = NAV
A $357,099,511 33,326,748 $10.72*
B(1) $133,083,247 12,482,001 $10.66**
B $104,939,875 9,735,240 $10.78**
C $ 42,262,311 3,942,467 $10.72**
S $ 21,989,375 2,051,058 $10.72
* Maximum offering price per share = $11.37 ($10.72 [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 year ended March 31, 2004
Investment Income
Interest (Note 1) ............................................ $ 12,691,159
Dividends, net of foreign taxes of 34,449 (Note 1) ........... 3,653,548
------------
16,344,707
------------
Expenses
Management fee (Note 2) ...................................... 4,250,653
Transfer agent and shareholder services (Note 2) ............. 1,635,024
Distribution and service fees - Class A (Note 4) ............. 912,649
Distribution and service fees - Class B(1) (Note 4) .......... 1,044,063
Distribution and service fees - Class C (Note 4) ............. 281,786
Custodian fee ................................................ 297,244
Administration fee (Note 2) .................................. 91,363
Registration fees ............................................ 70,638
Audit fee .................................................... 43,920
Trustees' fees (Note 2) ...................................... 34,381
Reports to shareholders ...................................... 31,999
Legal fees ................................................... 21,027
Miscellaneous ................................................ 41,452
------------
8,756,199
Fees paid indirectly (Note 2) ................................ (13,712)
------------
8,742,487
------------
7,602,220
Reimbursement of distribution fees (Note 4) .................. 913,939
------------
Net investment income ........................................ 8,516,159
------------
Realized and Unrealized Gain on
Investments, Foreign Currency, Forward
Contracts, Futures Contracts and Options
Net realized gain on investments (Notes 1 and 3) ............. 69,639,801
Net realized gain on foreign currency and
forward contracts (Note 1) ................................. 2,718,953
Net realized gain on futures contracts and
options (Note 1) ........................................... 16,303,324
------------
Total net realized gain .................................. 88,662,078
------------
Change in unrealized appreciation of investments ............. 59,825,383
Change in unrealized appreciation of foreign currency
and forward contracts ...................................... 1,399,093
Change in unrealized appreciation of
futures contracts and options .............................. (36,831)
------------
Total change in unrealized appreciation .................. 61,187,645
------------
Net gain on investments, foreign currency, forward
contracts and futures contracts and options ................ 149,849,723
------------
Net increase in net assets resulting from operations ......... $158,365,882
============
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 19
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Years ended March 31
----------------------------
2004 2003*
----------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment income .................. $ 8,516,159 $ 10,660,222
Net realized gain (loss)
on investments, foreign
currency, forward contracts,
future contracts and options ......... 88,662,078 (73,727,227)
Change in unrealized
appreciation (depreciation)
of investments, foreign
currency, forward contracts,
and futures contracts and
options .............................. 61,187,645 (53,715,304)
------------ ------------
Net increase (decrease) in net
assets resulting from operations 158,365,882 (116,782,309)
------------ ------------
Dividends from net investment
income:
Class A .............................. (4,754,062) (6,789,088)
Class B(1) ........................... (865,650) (1,337,209)
Class B .............................. (2,034,133) (4,016,663)
Class C .............................. (237,660) (300,754)
Class S .............................. (378,790) (588,253)
------------ ------------
(8,270,295) (13,031,967)
------------ ------------
Distributions 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) .......... 30,609,858 (63,585,266)
------------ ------------
Total increase (decrease) in
net assets ........................... 180,705,445 (196,303,297)
Net Assets
Beginning of year ...................... 478,668,874 674,972,171
------------ ------------
End of year (including
undistributed net investment
income of $4,682,594 and
$563,297 respectively) ............... $659,374,319 $478,668,874
============ ============
*Audited by other auditors
Notes to Financial Statements
- --------------------------------------------------------------------------------
March 31, 2004
Note 1
State Street Research Asset Allocation Fund is a series of State Street
Research Income Trust (the "Trust"), which is organized as a Massachusetts
business trust, and is registered under the Investment Company Act of 1940, as
amended, 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 of 1.00% 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.
Currently, the annual service and distribution fees paid by Class B shares have
been voluntarily reduced to 0.00%. Class B shares automatically convert into
Class A shares at the end of eight years. Class B shares are subject to a
contingent deferred sales charge on certain redemptions made within five years
of purchase. Class C shares are subject to a contingent deferred sales charge
of 1.00% on any shares redeemed within one year of their purchase, and also pay
annual service and distribution fees of 1.00%. Class S shares are only offered
through certain retirement accounts, advisory accounts of State Street Research
& Management Company (the "Adviser"), an 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. 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.
20 The notes are an integral part of the financial statements.
Notes (continued)
- --------------------------------------------------------------------------------
B. Forward Contracts and Foreign Currencies
The fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange contract
is an obligation by the fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date of
the contract. Forward foreign currency exchange contracts establish an exchange
rate at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of foreign currencies relative to the U.S. dollar. The aggregate
principal amount of forward currency exchange contracts is recorded in the
fund's accounts. All commitments are marked-to-market at the applicable
transaction rates resulting in unrealized gains or losses. The fund records
realized gains or losses at the time the forward contracts are extinguished by
entry into a closing contract or by delivery of the currency. Neither spot
transactions nor forward currency exchange contracts eliminate fluctuations in
the prices of the fund's portfolio securities or in foreign exchange rates, or
prevent loss if the price of these securities should decline.
C. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
D. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of the
fund. Interest income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date. All discounts/premiums are accreted/amortized. Certain
fixed income and equity 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.
E. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations. The fund has designated $8,270,295 as ordinary income dividends
and $0 as long-term capital gains distributions.
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 wash sale deferrals.
The fund hereby designates the maximum amount allowable of its net taxable
income as qualified dividend income as provided in the Jobs and Growth Tax
Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099
for the calendar year 2004.
F. Federal Income Taxes
No provision for federal income taxes is necessary because the fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 2002,
through March 31, 2003, the fund incurred net capital losses of $23,618,297 and
has deferred and treated such losses as arising in the fiscal year ended March
31, 2004.
To the extent book/tax differences are permanent in nature, such amounts are
reclassified within the capital accounts based on federal tax basis treatment.
The fund reclassified for book purposes amounts arising from permanent book/tax
differences primarily relating to premium amortization, foreign currency
reclasses and gains/losses on paydowns. At March 31, 2004, the components of
distributable earnings on a tax basis differ from the amounts reflected in the
Statement of Assets and Liabilities by temporary book/tax differences largely
arising from wash sales, premium amortization and mark to market adjustments.
At March 31, 2004, the tax basis distributable earnings were $6,369,868 in
undistributed ordinary income and $7,259,714 in undistributed long-term gains.
G. 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.
H. Securities Lending
The fund may seek additional income by lending portfolio securities to
qualified institutions. The fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the fund will bear the
loss. At March 31, 2004, the value of the securities loaned and the value of
collateral were $71,783,324 and $73,332,702 (consisting entirely of cash
collateral invested in State Street Navigator Securities Lending Prime
Portfolio), respectively. During the year ended March 31, 2004, income from
securities lending amounted to $80,851 and is included in interest income.
I. Futures
The fund may enter into futures contracts as a hedge against unfavorable market
conditions and to enhance income. The fund will not purchase any futures
contract if, after such purchase, more than one-third of net assets would be
represented by long future contracts. The fund will limit its risks by entering
into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the fund deposits with the selling
broker sufficient cash or U.S. government securities to meet the minimum
"initial margin" requirements. Thereafter, the fund receives from or pays to
the broker cash or U.S. government securities equal to the daily fluctuation in
value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
has 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.
State Street Research Asset Allocation Fund 21
J. Options
The Fund may use options to hedge against changes in values of securities the
Portfolio owns or expects to purchase. Writing puts or buying calls tends to
increase the fund's exposure to the underlying instrument and writing calls or
buying puts tends to decrease the fund's exposure to the underlying instrument,
or hedge other fund investments.
For options purchased to hedge the fund's investments, the potential risk to
the fund is that the change in value of options contracts may correspond to the
change in value of the hedged instruments. In addition, losses may arise from
changes in the value of the underlying instruments, if there is an illiquid
secondary market, or if the counter party is unable to perform. The maximum
loss for purchased options is limited to the premium initially paid for the
option. For options written by the fund, the maximum loss is not limited to the
premium initially received for the option.
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 year ended March 31, 2004, the fees pursuant to such
agreement amounted to $4,250,653.
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 year ended March 31, 2004, the amount of such expenses
allocated to the fund was $486,398.
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 year ended March 31, 2004, the
fund's transfer agent fees were reduced by $13,712 under these arrangements.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$34,381 during the year ended March 31, 2004.
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 the State Street
Research funds. During the year ended March 31, 2004, the amount of such
expenses was $91,363.
Note 3
For the year ended March 31, 2004, purchases and sales of securities, exclusive
of short-term obligations, aggregated $1,247,963,017, and $1,175,355,094,
respectively.
Note 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the plans, the fund pays annual service
fees to the Distributor at a rate of 0.25% of average daily net assets for
Class A, Class B(1), Class B and Class C shares. In addition, the fund pays
annual distribution fees of 0.05% of average daily net assets for Class A
shares and 0.75% of average daily net assets for Class B(1), Class B 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 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 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.
For Class B(1), the payments compensate the distributor for services and
expenditures incurred under the plan, and none of the payments are returnable
to the fund. During the year ended March 31, 2004, the Distributor reimbursed a
total of $913,939 to Class B shares of the fund reflecting the estimated excess
of payments received over costs incurred under the plan. This amount is shown
as "Reimbursement of distribution fees" in the Statement of Operations. For the
year ended March 31, 2004, fees pursuant to such plans amounted to $912,649,
$1,044,063, and $281,786 for Class A, Class B(1) and Class C shares,
respectively. As of March 31, 2004, there were $3,041,677 and $1,993,750 for
Class A and Class C shares, respectively, of unreimbursed distribution and
shareholder servicing related expenses to be carried forward to future plan
years.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$798,708 and $3,832,949, respectively, on sales of Class A shares of the fund
during the year ended March 31, 2004, and that MetLife Securities, Inc. earned
commissions aggregating $4,417,603 and $78,969 on sales of Class B(1) and Class
C shares, respectively, and the Distributor collected contingent deferred sales
charges aggregating $268,859, $15,762 and $3,002 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.
22
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:
Years ended March 31
-------------------------------------------------------------------
2004 2003*
-------------------------------------------------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 9,195,420 $ 89,241,391 13,698,027 $ 120,685,041
Issued upon reinvestment of:
Dividends from net investment income 462,905 4,546,908 760,698 6,481,424
Distribution from capital gains -- -- 138,092 1,393,351
Shares redeemed (7,153,346) (67,864,926) (15,235,996) (131,032,179)
------------- ------------- ------------ --------------
Net increase (decrease) 2,504,979 $ 25,923,373 (639,179) $ (2,472,363)
============= ============= ============ ==============
Class B(1) Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 4,525,455 $ 43,919,902 3,869,074 $ 34,466,893
Issued upon reinvestment of:
Dividend from net investment income 84,483 817,086 146,627 1,239,834
Distribution from capital gains -- -- 36,414 364,865
Shares redeemed (1,463,343) (14,138,963) (2,753,502) (23,597,915)
---------- ------------- ---------- -------------
Net increase 3,146,595 $ 30,598,025 1,298,613 $ 12,473,677
========== ============= ========== =============
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 519,032 $ 5,085,516 671,930 $ 6,012,035
Issued upon reinvestment of:
Dividends from net investment income 202,616 1,974,376 449,530 3,836,167
Distribution from capital gains -- -- 89,082 897,062
Shares redeemed (4,901,897) (47,731,472) (10,190,441) (90,058,853)
---------- ------------- ----------- -------------
Net decrease (4,180,249) $ (40,671,580) (8,979,899) $ (79,313,589)
========== ============= =========== =============
Class C Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 1,980,006 $19,760,160 1,391,469 $12,262,877
Issued upon reinvestment of:
Dividends from net investment income 23,301 225,953 29,150 245,390
Distribution from capital gains -- -- 5,719 57,645
Shares redeemed (392,657) (3,818,212) (391,907) (3,315,267)
---------- ------------ ---------- ------------
Net increase 1,610,650 $16,167,901 1,034,431 $ 9,250,645
========== ============ ========== ============
Class S Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 290,764 $ 2,764,953 404,618 $ 3,606,996
Issued upon reinvestment of:
Dividends from net investment income 38,395 376,594 68,505 584,868
Distribution from capital gains -- -- 11,603 117,077
Shares redeemed (476,957) (4,549,408) (917,086) (7,832,577)
---------- ------------ ---------- ------------
Net decrease (147,798) $ (1,407,861) (432,360) $ (3,523,636)
========== ============ ========== ============
*Audited by other auditors
State Street Research Asset Allocation Fund 23
FINANCIAL
Highlights
For a share outstanding throughout each year:
Class A
----------------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------------
2004(a) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 8.18 10.19 10.10 11.69 10.40
------- ------- ------- ------- -------
Net investment income ($) 0.14 0.17 0.20 0.28 0.24
Net realized and unrealized gain (loss) on investments ($) 2.55 (1.93) 0.60 (0.29) 1.48
------- ------- ------- ------- -------
Total from investment operations ($) 2.69 (1.76) 0.80 (0.01) 1.72
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.15) (0.21) (0.22) (0.22) (0.22)
Distributions from capital gains ($) -- (0.04) (0.49) (1.36) (0.21)
------- ------- ------- ------- -------
Total distributions ($) (0.15) (0.25) (0.71) (1.58) (0.43)
------- ------- ------- ------- -------
Net asset value, end of year ($) 10.72 8.18 10.19 10.10 11.69
======= ======= ======= ======= =======
Total return (%)(b) 32.94 (17.37) 8.15 0.29 16.88
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 357,100 252,069 320,614 272,813 304,400
Expense ratio (%) 1.45 1.43 1.41 1.46 1.30
Expense ratio after expense reductions (%) 1.45 1.42 1.40 1.44 1.29
Ratio of net investment income to average net assets (%) 1.43 1.92 1.95 2.61 2.23
Portfolio turnover rate (%) 215.62 180.68 185.79 180.98 122.57
Class B(1)
----------------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------------
2004(a) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 8.14 10.13 10.05 11.63 10.36
------- ------- ------- ------- -------
Net investment income ($) 0.07 0.11 0.12 0.19 0.17
Net realized and unrealized gain (loss) on investments ($) 2.53 (1.91) 0.60 (0.27) 1.45
------- ------- ------- ------- -------
Total from investment operations ($) 2.60 (1.80) 0.72 (0.08) 1.62
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.08) (0.15) (0.15) (0.14) (0.14)
Distributions from capital gains ($) -- (0.04) (0.49) (1.36) (0.21)
------- ------- ------- ------- -------
Total distributions ($) (0.08) (0.19) (0.64) (1.50) (0.35)
------- ------- ------- ------- -------
Net asset value, end of year ($) 10.66 8.14 10.13 10.05 11.63
======= ======= ======= ======= =======
Total return (%)(b) 32.03 (17.91) 7.30 (0.35) 15.93
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 133,083 75,963 81,440 56,543 36,045
Expense ratio (%) 2.15 2.13 2.11 2.19 2.05
Expense ratio after expense reductions (%) 2.15 2.12 2.10 2.17 2.04
Ratio of net investment income to average net assets (%) 0.72 1.22 1.25 1.86 1.48
Portfolio turnover rate (%) 215.62 180.68 185.79 180.98 122.57
Class B
----------------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------------
2004(a) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 8.16 10.17 10.07 11.65 10.36
------- ------- ------- ------- -------
Net investment income ($) 0.24 0.20 0.14 0.20 0.16
Net realized and unrealized gain (loss) on investments ($) 2.56 (1.93) 0.60 (0.29) 1.47
------- ------- ------- ------- -------
Total from investment operations ($) 2.80 (1.73) 0.74 (0.09) 1.63
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.18) (0.24) (0.15) (0.13) (0.13)
Distributions from capital gains ($) -- (0.04) (0.49) (1.36) (0.21)
------- ------- ------- ------- -------
Total distributions ($) (0.18) (0.28) (0.64) (1.49) (0.34)
------- ------- ------- ------- -------
Net asset value, end of year ($) 10.78 8.16 10.17 10.07 11.65
======= ======= ======= ======= =======
Total return (%)(b) 34.53 (17.15) 7.56 (0.41) 15.98
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 104,939 113,566 232,871 288,061 338,838
Expense ratio (%) 1.15 1.13 1.94 2.19 2.05
Expense ratio after expense reductions (%) 1.15 1.12 1.93 2.17 2.04
Ratio of net investment income to average net assets (%) 2.55 2.20 1.38 1.89 1.48
Portfolio turnover rate (%) 215.62 180.68 185.79 180.98 122.57
24
Class C
----------------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------------
2004(a) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 8.18 10.19 10.10 11.67 10.38
------- ------- ------- ------- -------
Net investment income ($) 0.07 0.11 0.13 0.20 0.16
Net realized and unrealized gain (loss) on investments ($) 2.55 (1.93) 0.59 (0.28) 1.47
------- ------- ------- ------- -------
Total from investment operations ($) 2.62 (1.82) 0.72 (0.08) 1.63
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.08) (0.15) (0.14) (0.13) (0.13)
Distributions from capital gains ($) -- (0.04) (0.49) (1.36) (0.21)
------- ------- ------- ------- -------
Total distributions ($) (0.08) (0.19) (0.63) (1.49) (0.34)
------- ------- ------- ------- -------
Net asset value, end of year ($) 10.72 8.18 10.19 10.10 11.67
======= ======= ======= ======= =======
Total return (%)(b) 32.14 (17.96) 7.31 (0.35) 15.93
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 42,262 19,079 13,226 12,687 17,093
Expense ratio (%) 2.15 2.13 2.11 2.19 2.05
Expense ratio after expense reductions (%) 2.15 2.12 2.10 2.17 2.04
Ratio of net investment income to average net assets (%) 0.72 1.21 1.26 1.89 1.47
Portfolio turnover rate (%) 215.62 180.68 185.79 180.98 122.57
Class S
----------------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------------
2004(a) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 8.18 10.19 10.10 11.69 10.40
------- ------- ------- ------- -------
Net investment income ($) 0.17 0.20 0.23 0.30 0.29
Net realized and unrealized gain (loss) on investments ($) 2.55 (1.93) 0.60 (0.29) 1.46
------- ------- ------- ------- -------
Total from investment operations ($) 2.72 (1.73) 0.83 0.01 1.75
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.18) (0.24) (0.25) (0.24) (0.25)
Distributions from capital gains ($) -- (0.04) (0.49) (1.36) (0.21)
------- ------- ------- ------- -------
Total distributions ($) (0.18) (0.28) (0.74) (1.60) (0.46)
------- ------- ------- ------- -------
Net asset value, end of year ($) 10.72 8.18 10.19 10.10 11.69
======= ======= ======= ======= =======
Total return (%)(b) 33.46 (17.12) 8.47 0.56 17.17
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 21,989 17,992 26,821 26,917 23,316
Expense ratio (%) 1.15 1.13 1.11 1.19 1.05
Expense ratio after expense reductions (%) 1.15 1.12 1.10 1.17 1.04
Ratio of net investment income to average net assets (%) 1.74 2.21 2.27 2.85 2.62
Portfolio turnover rate (%) 215.62 180.68 185.79 180.98 122.57
(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) 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 gain per
share by $0.01, and decrease the ratio of net investment income to average
net assets by 0.13%. The statement of changes and financial highlights for
the periods prior to April 1, 2001, have not been restated for this change
in policy.
(d) Audited by other auditors
(e) During the year ended March 31, 2004, the Distributor reimbursed Class B
shares of the Fund the estimated excess of payments received over costs
incurred under the 12B-1 plan. The effect of this reimbursement was to
increase net investment income per share $0.7, increase the total return
0.80% and increase the ratio of net investment income to average net
assets 0.80%.
State Street Research Asset Allocation Fund 25
INDEPENDENT AUDITORS'
Report
To the Board of Trustees and Shareholders
of State Street Research Asset Allocation Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio holdings, of State Street Research Asset Allocation Fund (the
"Fund"), a series of State Street Research Income Trust, as of March 31, 2004,
and the related statement of operations, the statement of changes in net assets,
and the financial highlights for the year ended March 31, 2004. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended March 31, 2003, and the financial highlights
for each of the years in the four-year period ended March 31, 2003, were audited
by other auditors whose report dated May 9, 2003, expressed an unqualified
opinion on such statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of March 31, 2004, the results of its operations, the changes in its net
assets, and the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 19, 2004
26
TRUSTEES AND OFFICERS
State Street Research Income Trust
Number of Funds
Name, Position(s) Term of Office in Fund Complex Other
Address Held with and Length of Principal Occupations Overseen by Directorships Held
and Age(a) Fund Time Served(b) During Past 5 Years Trustee/Officer(c) by Trustee/Officer
====================================================================================================================================
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of 19 Avaya Corp.
(58) 1999 the Board, Chief Executive
Officer and President,
PictureTel Corporation (video
conferencing systems)
- ------------------------------------------------------------------------------------------------------------------------------------
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 The First Marblehead Corp.
(62) 2004 PricewaterhouseCoopers LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Steve A. Garban Trustee Since Retired; formerly Senior Vice 53 Metropolitan Series Fund,
(66) 1997 President for Finance and Inc.; and Metropolitan
Operations and Treasurer, The Series Fund II
Pennsylvania State University
- ------------------------------------------------------------------------------------------------------------------------------------
Susan M. Phillips Trustee Since Dean, School of Business and 19 The Kroger Co.
(59) 1999 Public Management, 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 53 A.P. Pharma, Inc.;
(65) 1993 Investments Ltd. Metropolitan Series Fund,
(investments); President, Inc.; and Metropolitan
Pacific Four Investments Series Fund II
(investments); formerly
President, The Glen Ellen
Company (private investment
firm)
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Trustee Since Jay W. Forrester Professor of 53 Metropolitan Series Fund,
Scott Morton (66) 1987 Management, Sloan School of Inc.; and Metropolitan
Management, Massachusetts Series Fund II
Institute of Technology
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, 19 None
(58) 2000 President and Chief 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 6 None
(47) President 2001 Street Research & Management
Company; formerly Vice
President, State Street
Research & Management Company
- ------------------------------------------------------------------------------------------------------------------------------------
C. Kim Goodwin Vice Since Managing Director and Chief 18 None
(45) President 2002 Investment Officer - 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 19 None
(49) President 2001 Financial Officer and 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 9 None
(46) President 2003 Investment Officer - 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 8 None
Westvold (43) President 2003 Street Research & Management
Company; formerly Senior Vice
President, State Street
Research & Management Company
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas A. Romich Treasurer Since Senior Vice President and 19 None
(47) 2001 Treasurer of State Street
Research & Management Company;
formerly Vice President and
Assistant Treasurer, State
Street Research & Management
Company
- ------------------------------------------------------------------------------------------------------------------------------------
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. and Metropolitan Series Fund II.
The primary adviser to Metropolitan Series Fund, Inc. and Metropolitan
Series Fund II is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(+) 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.
27
--------------
[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
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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.
- --------------------------------------------------------------------------------
Investors should carefully consider the fund's investment objective, risks,
charges and expenses before investing. The fund's prospectus contains more
complete information on these and other matters. A prospectus for Asset
Allocation Fund is available through your financial professional, by calling
toll-free 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at
www.ssrfunds.com. Please read the prospectus carefully before investing.
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.
[LOGO] [LOGO]
for Excellence in for Excellence in Service
Shareholder Communications
This report must be accompanied or preceded by a current prospectus. When used
as sales material after June 30, 2004, this report must be accompanied by a
current Quarterly Performance Update.
"State Street Research Proxy Voting Policies and Procedures"--which describes
how we vote proxies relating to portfolio securities--is available upon request,
free of charge, by calling the State Street Research Service Center toll-free at
1-87-SSR-FUNDS (1-877-773-8637) or by accessing the U.S. Securities and Exchange
Commission website at www.sec.gov.
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)2004 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp0505)SSR-LD AA-3720-0504
<Page>
[BACKGROUND GRAPHIC]
[STATE STREET LOGO]
[PHOTO]
High Income Fund
March 31, 2004
Annual Report to Shareholders
Table of Contents
3 Performance Discussion
6 Portfolio Holdings
10 Financial Statements
15 Financial Highlights
17 Independent Auditors'
Report
18 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
From war jitters to investor enthusiasm, from sluggish recovery to robust
growth--the ground covered by both the financial markets and the U.S.
economy over the past twelve months was nothing short of remarkable.
At the beginning of the 12-month reporting period, economic growth was
sluggish, manufacturing activity was declining, unemployment was edging
higher and war was underway. However, the clouds of uncertainty began to
lift as economic growth picked up and consumer confidence strengthened. A
combination of accelerated tax cuts, tax rebates and the lowest mortgage
rates in a generation fueled higher disposable income for most working
Americans. The housing market was strong, and consumer spending continued
to rise. Better yet, business spending began to recover after a long
period of stagnation. Corporate profits staged a solid rebound, making it
easier for companies to increase outlays, especially on information
technology and electronic equipment.
The economic news was less upbeat as the first quarter of 2004 began.
Durable goods orders declined and the number of new jobs added to the
labor market in January and February fell short of expectations. However,
a strong March jobs report put the economic recovery on solid ground on
all fronts. The period ended with the expectation that the Federal
Reserve Board would likely raise short-term interest rates sooner rather
than later in the year.
Stock and Bond Markets Moved Higher
Stocks staged an impressive rally early in the period, with the riskiest
sectors of the stock market leading the way--technology, small-caps and
companies that had been beaten down in the previous bear market. However,
index returns for the period masked the sideways movement that developed
in the final months of the period as investors grew more cautious about
interest rates and corporate profit comparisons going forward.
Confidence in the economy also translated into gains for high-yield bonds
that were in line with the stock market. However, high-yield bonds
underperformed government bonds late in the period as interest rates came
down. Both investment-grade corporate and government bonds earned solid
but modest returns for the year. The municipal market was a standout
among investment-grade sectors, but mortgage bonds lagged as more
homeowners took advantage of low rates and refinanced their mortgages.
Looking Ahead
The recent bear and bull cycles serve as a reminder that markets can be
unpredictable, which underscores the importance of having an asset
allocation plan in place. If you have a plan in place, stay with it,
invest regularly and talk to your investment professional before you make
a significant move outside your plan.
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
March 31, 2004
2
- --------------
PERFORMANCE
- --------------
Discussion as of March 31, 2004
How State Street Research High Income Fund Performed
State Street Research High Income Fund returned 16.42% for the 12-month period
ended March 31, 2004(1). That was lower than the return of both the CSFB Global
High Yield II Index, which was 22.86%, and the Lipper High Current Yield Funds
Average, which was 19.71% over the same period.(2)
Reasons for the Fund's Performance
The fund generated a double-digit return as the high-yield market responded
favorably to a strong economy, rallying stock markets and improving business
prospects. However, our general investment approach, which is to emphasize
higher-quality issues, cost us several percentage points in return during the
period as lower-rated CCC and distressed securities gained the most. Our
decision to underweight BB-rated issues, which lagged both CCC- and B-rated
issues, benefited return, but not enough to compensate for the fund's light
exposure to CCC-rated debt. The fund's overweight in B-rated issues also added
to return.
Looking Ahead
If the U.S. economy continues to strengthen, we believe that the high-yield
market may continue to enjoy additional upside potential, bolstered in the near
term by favorable corporate earnings. We also expect default rates to decline
to below 3% by year end. However, high-yield securities are expensive, and the
sector has major downside exposure to rising interest rates. In this
environment, we believe that our emphasis on higher-quality securities will be
rewarded, and we continue to favor B-rated issues because they offer the most
compelling risk-return tradeoff. The fund is overweight in the Chemicals,
Transportation and Consumer Products sectors and underweight in Utilities and
Telecommunications.
A Word about Risk
The major risks of junk bond investing include the tendency for prices to fall
when the economy is sluggish or overall corporate earnings are weak.
High-yield, high-risk debt securities reflect a greater possibility that
adverse changes in an issuer's business or financial condition, or in general
economic conditions, may impair the issuer's ability to pay principal and
interest on the securities. The value of any bonds held by the fund is likely
to decline when interest rates rise; this risk is greater for bonds with longer
maturities.
Quality Distribution (Unaudited)
- -------------------------------------------------
% of Fund
Net Assets
BB 28%
- -------------------------------------------------
B 60%
- -------------------------------------------------
CCC 10%
- -------------------------------------------------
Cash 2%
- -------------------------------------------------
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 7.5%
- -------------------------------------------------
Manufacturing 7.5%
- -------------------------------------------------
Consumer Products 6.7%
- -------------------------------------------------
Paper & Packaging 4.9%
- -------------------------------------------------
Foreign Government 4.7%
- -------------------------------------------------
Total 31.3%
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: Class A
- -------------------------------------------------
Fund average annual total return as of 3/31/04(3)
(does not reflect sales charge)
1 Year 5 Years 10 Years
16.42% -0.82% 3.60%
- -------------------------------------------------
Fund average annual total return as of 3/31/04(3,4)
(at maximum applicable sales charge)
1 Year 5 Years 10 Years
11.18% -1.73% 3.12%
- -------------------------------------------------
CSFB Global High Yield II Index as of 3/31/04(2)
1 Year 5 Years 10 Years
22.86% 6.58% 7.90%
- -------------------------------------------------
See pages 4 and 5 for additional performance data for Class A shares and for
performance data on other share classes.
(1) Class A shares; does not reflect sales charge.
(2) 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. The
Lipper High Current Yield Funds Average shows the performance of a category
of mutual funds with similar goals. The Lipper average shows you how well
the fund has done compared to competing funds.
(3) Keep in mind that the performance data quoted represents past performance
and is no guarantee of future results. Current performance may be lower or
higher than the performance data quoted herein. For the most recent
month-end performance results, visit our website at www.ssrfunds.com. 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.
(4) Performance reflects a maximum 4.50% Class A front-end sales charge.
State Street Research High Income Fund 3
- -------------
PERFORMANCE
- -------------
Discussion as of March 31, 2004
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is not a guarantee of future results, long-term returns
can serve as an important context for evaluating recent performance. There are
three ways of measuring long-term performance: cumulative total returns,
average annual total returns and the change in dollar value over time of a
given investment. Information about these measures follows, while the share
class boxes contain the results of these measures for each share class.
Cumulative Total Return
Represents the total percentage you would have earned or lost if you had
invested a lump sum in the fund and left it there until the end of the period
indicated.
Average Annual Total Return
Represents the rate you would have had to earn during each year of a given time
period in order to end up with the fund's actual cumulative return for those
years. In reality, of course, fund performance varies from year to year.
Because of this, a fund's actual performance for a given year may be higher or
lower than an average annual performance figure.
$10,000 Over Ten Years
Similar to cumulative total return, but uses dollars rather than percentages,
and assumes that the lump sum you invested was $10,000 (less the applicable
maximum sales charge, if any) and compares fund performance to the performance
of a market index.
- --------------------------------------------------------------------------------------------------------------------------
$10,000 Over 10 Years
Class A (reflects maximum applicable sales charge)
1 Year 5 Years 10 Years [DATA BELOW IS REPRESENTED BY A LINE CHART
- ----------------------------------------------------------------------- IN THE ORIGINAL REPORT]
Cumulative Total Return
(does not reflect sales charge) 16.42% -4.06% 42.38% CSFB Global High
- ----------------------------------------------------------------------- Class A Yield II Index
Cumulative Total Return 94 9425 10000
(at maximum applicable sales charge) 11.18% -8.37% 35.98% 95 9595 10562
- ----------------------------------------------------------------------- 96 10827 12196
Average Annual Total Return 97 11943 13610
(at maximum applicable sales charge) 11.18% -1.73% 3.12% 98 14448 15672
- ----------------------------------------------------------------------- 99 13987 15558
00 13757 15543
01 10522 15659
02 10872 16193
03 11527 17410
04 13598 21391
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
$10,000 Over 10 Years
Class B(1) (reflects maximum applicable sales charge)
1 Year 5 Years 10 Years [DATA BELOW IS REPRESENTED BY A LINE CHART
- ----------------------------------------------------------------------- IN THE ORIGINAL REPORT]
Cumulative Total Return
(does not reflect sales charge) 15.47% -7.57% 31.98% CSFB Global High
- ----------------------------------------------------------------------- Class B1 Yield II Index
Cumulative Total Return 94 10000 10000
(at maximum applicable sales charge) 10.47% -8.80% 31.98% 95 10089 10562
- ----------------------------------------------------------------------- 96 11306 12196
Average Annual Total Return 97 12363 13610
(at maximum applicable sales charge) 10.47% -1.83% 2.81% 98 14838 15672
99 14278 15558
00 13912 15543
01 10569 15659
02 10849 16193
03 11430 17410
04 13198 21391
- --------------------------------------------------------------------------------------------------------------------------
The major risks of junk bond investing include the tendency for prices to fall
when the economy is sluggish or overall corporate earnings are weak.
High-yield, high-risk debt securities reflect a greater possibility that
adverse changes in an issuer's business or financial condition, or in general
economic conditions, may impair the issuer's ability to pay principal and
interest on the securities. The value of bonds held by the fund is likely to
decline when interest rates rise; this risk is greater for bonds with longer
maturities.
Keep in mind that the performance data quoted represents past performance and
is no guarantee of future results. Current performance may be lower or higher
than the performance data quoted herein. For the most recent month-end
performance results, visit our website at www.ssrfunds.com. 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.
4
- --------------------------------------------------------------------------------------------------------------------------
$10,000 Over 10 Years
Class B (only available through exchanges from another Class B account) (reflects maximum applicable sales charge)
1 Year 5 Years 10 Years [DATA BELOW IS REPRESENTED BY A LINE CHART
- ----------------------------------------------------------------------- IN THE ORIGINAL REPORT]
Cumulative Total Return
(does not reflect sales charge) 15.78% -7.10% 32.64% CSFB Global High
- ----------------------------------------------------------------------- Class B Yield II Index
Cumulative Total Return 94 10000 10000
(at maximum applicable sales charge) 10.78% -8.34% 32.64% 95 10089 10562
- ----------------------------------------------------------------------- 96 11306 12196
Average Annual Total Return 97 12363 13610
(at maximum applicable sales charge) 10.78% -1.73% 2.86% 98 14838 15672
99 14278 15558
00 13938 15543
01 10596 15659
02 10876 16193
03 11456 17410
04 13264 21391
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
$10,000 Over 10 Years
Class C (reflects maximum applicable sales charge)
1 Year 5 Years 10 Years [DATA BELOW IS REPRESENTED BY A LINE CHART
- ----------------------------------------------------------------------- IN THE ORIGINAL REPORT]
Cumulative Total Return
(does not reflect sales charge) 15.73% -7.34% 32.44% CSFB Global High
- ----------------------------------------------------------------------- Class A Yield II Index
Cumulative Total Return 94 10000 10000
(at maximum applicable sales charge) 14.73% -7.34% 32.44% 95 10088 10562
- ----------------------------------------------------------------------- 96 11303 12196
Average Annual Total Return 97 12379 13610
(at maximum applicable sales charge) 14.73% -1.51% 2.85% 98 14853 15672
99 14294 15558
00 13927 15543
01 10587 15659
02 10865 16193
03 11444 17410
04 13245 21391
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
$10,000 Over 10 Years
Class S (reflects maximum applicable sales charge)
1 Year 5 Years 10 Years [DATA BELOW IS REPRESENTED BY A LINE CHART
- ----------------------------------------------------------------------- IN THE ORIGINAL REPORT]
Cumulative Total Return
(does not reflect sales charge) 16.61% -2.72% 45.75% CSFB Global High
- ----------------------------------------------------------------------- Class A Yield II Index
Cumulative Total Return 94 10000 10000
(at maximum applicable sales charge) 16.61% -2.72% 45.75% 95 10173 10562
- ----------------------------------------------------------------------- 96 11515 12196
Average Annual Total Return 97 12738 13610
(at maximum applicable sales charge) 16.61% -0.55% 3.84% 98 15441 15672
99 14982 15558
00 14771 15543
01 11365 15659
02 11747 16193
03 12499 17410
04 14575 21391
- --------------------------------------------------------------------------------------------------------------------------
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(1) 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. Class S shares offered
without sales charge are available through certain retirement plans and special
programs.
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.
State Street Research High Income Fund 5
- -------------
PORTFOLIO
- -------------
Holdings
March 31, 2004
Principal Maturity
Amount Date Value
---------- ---------- ------------
Bonds 98.1%
Aerospace/Defense 3.1%
Availl Inc. Sr. Note, 7.625% ..... $2,350,000 7/01/2011 $ 2,514,500
DRS Technologies Inc. Sr. Sub.
Note, 6.875% ................... 3,350,000 11/01/2013 3,484,000
Hexcel Corp. Sr. Note, 9.875%..... 1,750,000 10/01/2008 1,946,875
Transdigm Inc. Sr. Note,
8.375% ......................... 2,400,000 7/15/2011 2,544,000
------------
10,489,375
------------
Airlines 1.7%
Continental Airlines Inc. Note,
7.37% .......................... 1,349,450 12/15/2015 1,184,724
Continental Airlines Inc. Note,
7.875% ......................... 1,750,000 7/02/2018 1,742,895
Friendly's Ice Cream Corp.
Note, 8.375%+ .................. 850,000 6/15/2012 875,500
O'Charleys Inc. Sr. Sub. Note,
9.00%+ ......................... 1,750,000 11/01/2013 1,828,750
------------
5,631,869
------------
Cable 2.4%
Charter Communications
Holdings, Inc. Note,
10.25%+ ........................ 1,750,000 9/15/2010 1,802,500
Charter Communications
Holdings, Inc. Sr. Note,
8.625% ......................... 875,000 4/01/2009 721,875
CSC Holdings Inc. Sr. Note,
7.625% ......................... 1,750,000 4/01/2011 1,846,250
Insight Midwest
Communications Inc. Sr.
Note, 9.75% .................... 1,750,000 10/01/2009 1,824,375
Videotron Inc. Sr. Note,
6.875% ......................... 1,750,000 1/15/2014 1,828,750
------------
8,023,750
------------
Casino 2.4%
Chumash Casino & Resort
Enterprise Inc. Note, 9.00%..... 1,475,000 7/15/2010 1,629,875
River Rock Entertainment Inc.
Sr. Note, 9.75%+ ............... 775,000 11/01/2011 837,000
Station Casinos Inc. Sr. Sub.
Note, 6.50%+ ................... 1,575,000 2/01/2014 1,588,781
Venetian Casino Resort LLC
Note, 11.00% ................... 3,600,000 6/15/2010 4,140,000
------------
8,195,656
------------
Chemicals 7.5%
Equistar Chemical Co. Note,
10.125% ........................ 1,500,000 9/01/2008 1,612,500
Georgia Gulf Corp. Sr. Note,
7.125%+ ........................ 500,000 12/15/2013 531,250
Hercules Inc. Sr. Sub. Note,
6.75%+ ......................... 1,425,000 10/15/2029 1,425,000
Principal Maturity
Amount Date Value
---------- ---------- ------------
Chemicals (Continued)
Huntsman Advanced Materials
LLC Sr. Note, 11.00%+ .......... $1,175,000 7/15/2010 $ 1,327,750
Huntsman ICI Chemicals LLC
Sr. Sub Note, 10.125% .......... 2,475,000 7/01/2009 2,518,312
ISP Chemco Inc. Sr. Sub. Note,
10.25% ......................... 4,000,000 7/01/2011 4,530,000
ISP Holdings Inc. Sr. Note,
10.625% ........................ 1,700,000 12/15/2009 1,887,000
Lyondell Chemicals Co.
Sr. Note, 10.50% ............... 2,350,000 6/01/2013 2,479,250
MacDermid Inc. Sr. Sub. Note,
9.125% ......................... 1,925,000 7/15/2011 2,170,437
Nalco Co. Sr. Note, 7.75%+ ....... 1,400,000 11/15/2011 1,463,000
Nalco Co. Sr. Sub. Note,
8.875%+ ........................ 1,400,000 11/15/2013 1,459,500
UAP Holding Corp. Sr. Note,
0.00%+ ......................... 3,000,000 7/15/2012 2,010,000
United Agricultural Products
Inc. Sr. Note, 8.25%+ .......... 2,050,000 12/15/2011 2,149,938
------------
25,563,937
------------
Consumer Products 6.7%
American Achievement Corp.
Sr. Sub. Note, 8.25%+ .......... 1,700,000 4/01/2012 1,746,750
Hines Nurseries Inc. Sr. Note,
10.25% ......................... 650,000 10/01/2011 721,500
Jostens Holding Corp. Note,
0.00%+ ......................... 1,350,000 12/01/2008 884,250
Perry Ellis International Inc.
Note, 8.875% ................... 1,750,000 9/15/2013 1,820,000
Rayovac Corp. Sr. Sub.
Note, 8.50% .................... 3,225,000 10/01/2013 3,474,938
Russell Corp. Sr. Note, 9.25%..... 3,800,000 5/01/2010 4,037,500
Sealy Mattress Co. Sr. Sub.
Note, 8.25%+ ................... 2,550,000 6/15/2014 2,550,000
Solo Cup Co. Sr. Sub.
Note, 8.50%+ ................... 1,125,000 2/15/2014 1,165,781
Tempur-Pedic Inc. Sr. Sub.
Note, 10.25%+ .................. 1,365,000 8/15/2010 1,569,750
Warnaco Inc. Sr. Note,
8.875% ......................... 4,425,000 6/15/2013 4,767,937
------------
22,738,406
------------
Diversified Media 1.1%
Cinemark Inc. Sr. Note,
0.00%+ ......................... 2,725,000 3/15/2014 1,703,125
Dex Media Inc. Note, 0.00%*+...... 2,950,000 11/15/2013 1,888,000
------------
3,591,125
------------
Energy 3.8%
Dynegy Holdings Inc. Sr. Note,
6.875% ......................... 4,275,000 4/01/2011 3,719,250
Hanover Compressor Co. Note,
8.625%* ........................ 675,000 12/15/2010 725,625
Hanover Equipment Trust Note,
0.00% .......................... 2,425,000 3/31/2007 1,867,250
Petrobras International Co.
Note, 9.125% ................... 3,000,000 7/02/2013 3,180,000
Southern Star Cent Corp.
Sr. Note, 8.50% ................ 1,050,000 8/01/2010 1,160,250
Suburban Propane Partners LP
Sr. Note, 6.875%+ .............. 1,175,000 12/15/2013 1,222,000
Westport Resources Corp.
Note, 8.25% .................... 1,025,000 11/01/2011 1,140,312
------------
13,014,687
------------
6 The notes are an integral part of the financial statements.
Principal Maturity
Amount Date Value
---------- ---------- ------------
Exploration & Production 3.6%
Chesapeake Energy Corp.
Sr. Note, 6.875%+ ...............$2,000,000 1/15/2016 $ 2,100,000
Chesapeake Energy Corp.
Sr. Note, 6.875% ................ 1,736,000 1/15/2016 1,822,800
El Paso Production Holding Co.
Sr. Note, 7.75% ................. 1,675,000 6/01/2013 1,553,562
Encore Acquisition Co. Sr. Sub.
Note, 6.25%+ .................... 1,000,000 4/15/2014 1,000,000
Energy Partners Ltd. Sr. Note,
8.75% ........................... 1,650,000 8/01/2010 1,765,500
Evergreen Resources Inc.
Sr. Sub. Note, 5.875%+ .......... 425,000 3/15/2012 429,250
Exco Resources Inc. Note,
7.25%+ .......................... 3,500,000 1/15/2011 3,613,750
------------
12,284,862
------------
Financial 4.2%
Commercial Mortgage
Acceptance Corp. Note
1998-C1 Note, 6.23%+ ............ 3,200,000 7/15/2031 2,857,920
Commercial Mortgage
Acceptance Corp. Note
1998-C2 Note, 5.44%+ ............ 4,050,000 9/15/2030 3,702,570
Dollar Financial Group Inc.
Sr. Note, 9.75% ................. 1,405,000 11/15/2011 1,524,425
Nomura Asset Securities Corp.
Note, 6.00%+ .................... 1,000,000 3/15/2030 978,445
Trac-X North American High
Yield Index, 8.00%+ ............. 5,000,000 3/25/2009 5,018,750
------------
14,082,110
------------
Food & Beverage 3.3%
Del Monte Foods Co. Sr. Sub.
Note, 9.25% ..................... 1,750,000 5/15/2011 1,968,750
Dimon Inc. Sr. Note, 7.75% ........ 2,250,000 6/01/2013 2,238,750
Merisant Co. Sr. Sub. Note,
9.50%+ .......................... 1,400,000 7/15/2013 1,379,000
Standard Commercial Corp.
Sr. Note, 8.00%+ ................ 3,625,000 4/15/2012 3,760,938
WMC Financial Co. Sr. Note,
11.75%+ ......................... 1,750,000 12/15/2008 1,872,500
------------
11,219,938
------------
Foreign Government 4.7%
Republic of Argentina, 1.234%#..... 4,050,000 8/03/2012 2,715,525
Republic of Brazil, 8.00% ......... 3,324,807 4/15/2014 3,241,687
Republic of Ecuador, 7.00%+ ....... 3,075,000 8/14/2004 2,721,375
Republic of Turkey, 9.50% ......... 750,000 1/15/2014 885,000
Republic of Uruguay, 7.50% ........ 2,250,000 3/15/2015 1,940,625
Republic of Venezuela, 10.75% +. 4,125,000 9/19/2013 4,310,625
------------
15,814,837
------------
Health Care 3.4%
Concentra Operating Corp.
Sr. Sub. Note, 9.50% ............ 2,350,000 8/15/2010 2,608,500
IASIS Healthcare Corp.
Sr. Note, 8.50% ................. 1,400,000 10/15/2009 1,498,000
Kinetic Concepts Inc. Note,
7.375%+ ......................... 1,268,000 5/15/2013 1,363,100
MedQuest Inc. Note, 11.875%........ 2,250,000 8/15/2012 2,565,000
Senior Housing Properties Trust
Note, 8.625% .................... 1,825,000 1/15/2012 2,071,375
Tenet Healthcare Corp. Note,
6.375% .......................... 1,750,000 12/01/2011 1,513,750
------------
11,619,725
------------
Principal Maturity
Amount Date Value
---------- ---------- ------------
Homebuilders 3.3%
Associated Materials Inc. Note,
11.25%+ .........................$2,975,000 3/01/2014 $ 1,807,312
Associated Materials Inc. Note,
9.75% ........................... 475,000 4/15/2012 529,625
Nortek Holdings Inc. Sr. Note,
0.00%+ .......................... 3,075,000 5/15/2011 2,337,000
PolyGem Industries Inc. Sr. Sub.
Note, 9.00%+ .................... 1,750,000 2/15/2012 1,758,750
Technical Olympic USA Inc.
Note, 7.50%+ .................... 2,025,000 3/15/2011 2,022,469
Technical Olympic USA Inc.
Note, 9.00% ..................... 1,750,000 7/01/2010 1,903,125
U.S. Concrete Inc. Sr. Sub.
Note, 8.375%+ ................... 850,000 4/01/2014 867,000
------------
11,225,281
------------
Hotels & Lodging 2.9%
Host Marriott LP Sr. Note,
7.125% .......................... 1,500,000 11/01/2013 1,556,250
John Q. Hammons Hotels Inc.
Note, 8.875% .................... 3,500,000 5/15/2012 3,893,750
Royal Caribbean Cruises Ltd.
Note, 8.00% ..................... 3,775,000 5/15/2010 4,265,750
------------
9,715,750
------------
Manufacturing 7.5%
EaglePicher Inc. Sr. Note, 9.75%... 1,750,000 9/01/2013 1,916,250
Joy Global Inc. Sr. Sub. Note,
8.75% ........................... 3,150,000 3/15/2012 3,543,750
Mail-Well Corp. Sr. Sub. Note,
7.875%+ ......................... 3,500,000 12/01/2013 3,307,500
Norcross Safety Products LLC
Sr. Sub. Note, 9.875% ........... 1,750,000 8/15/2011 1,903,125
Terex Corp. Note Sr. Sub.
Note, 9.25% ..................... 3,875,000 7/15/2011 4,340,000
TriMas Corp. Note Sr. Sub
Note, 9.875% .................... 5,025,000 6/15/2012 5,477,250
Trinity Industries Inc. Sr. Note,
6.50%+ .......................... 3,100,000 3/15/2014 3,100,000
United Components Inc.
Sr. Sub. Note, 9.375% ........... 1,750,000 6/15/2013 1,890,000
------------
25,477,875
------------
Media 3.0%
Allbritton Communications Co.
Note, 7.75% ..................... 2,225,000 12/15/2012 2,308,437
Dex Media West LLC Sr. Sub.
Note, 9.875%+ ................... 2,250,000 8/15/2013 2,497,500
Sinclair Broadcast Group Inc.
Note, 8.75% ..................... 1,325,000 12/15/2011 1,467,438
Sinclair Broadcast Group Inc.
Note, 8.00% ..................... 2,075,000 3/15/2012 2,248,781
Young Broadcasting Inc. Note,
8.75%+ .......................... 1,700,000 1/15/2014 1,751,000
------------
10,273,156
------------
Metals 1.8%
California Steel Industries Inc.
Sr. Note, 6.125%+ ............... 3,500,000 3/15/2014 3,526,250
Century Aluminum Co. Note,
11.75% .......................... 1,250,000 4/15/2008 1,400,000
Massey Energy Co. Sr.
Note, 6.625% .................... 1,025,000 11/15/2010 1,042,938
------------
5,969,188
------------
The notes are an integral part of the financial statements.
State Street Research High Income Fund 7
Portfolio Holdings (cont'd)
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
---------- ---------- ------------
Mobile Communications 4.4%
American Towers Inc. Sr. Sub.
Note, 7.25%+ ....................$3,600,000 12/01/2011 $ 3,681,000
Crown Castle International
Corp. Sr. Note, 7.50% ........... 5,250,000 12/01/2013 5,158,125
Nextel Communications Inc.
Sr. Note, 7.375% ................ 3,075,000 8/01/2015 3,328,687
Rogers Wireless Inc. Sr. Note,
6.375%+ ......................... 600,000 3/01/2014 609,750
Rogers Wireless Inc. Sr. Note,
9.625% .......................... 1,750,000 5/01/2011 2,141,563
------------
14,919,125
------------
Paper & Packaging 4.9%
BWAY Corp. Sr. Sub. Note,
10.00% .......................... 1,075,000 10/15/2010 1,150,250
Greif Brothers Corp. Note,
8.875% .......................... 1,600,000 8/01/2012 1,744,000
Millar Western Forest Products
Ltd. Sr. Note, 7.75%+ ........... 675,000 11/15/2013 717,188
Newark Group Inc. Sr. Sub.
Note, 9.75%+ .................... 1,700,000 3/15/2014 1,674,500
Owens Brockway Glass Inc.
Sr. Note, 8.25% ................. 2,025,000 5/15/2013 2,085,750
Owens Brockway Glass Note,
8.875% .......................... 2,100,000 2/15/2009 2,268,000
Tekni-Plex Inc. Sr. Note,
8.75%+ .......................... 1,700,000 11/15/2013 1,691,500
Tekni-Plex Inc. Sr. Sub. Note,
12.75% .......................... 1,025,000 6/15/2010 1,073,687
United States Can Corp.
Sr. Note, 10.875% ............... 2,200,000 7/15/2010 2,321,000
Vitro SA Sr. Note, 11.75%+ ........ 1,800,000 11/01/2013 1,710,000
------------
16,435,875
------------
Restaurants 0.1%
Couche Tard LP Sr. Note,
7.50%+ .......................... 325,000 12/15/2013 347,750
------------
Retail 2.4%
CSK Auto Inc. Sr. Note,
7.00%+ .......................... 1,750,000 1/15/2014 1,758,750
Phillips Van Heusen Corp.
Sr. Note, 7.25%+ ................ 1,725,000 2/15/2011 1,785,375
Saks Inc. Note, 7.00%+ ............ 2,849,000 12/01/2013 2,991,450
United Auto Group Inc. Note,
9.625% .......................... 1,425,000 3/15/2012 1,588,875
------------
8,124,450
------------
Services 4.2%
Alderwoods Group Inc.
Sr. Note, 12.25% ................ 5,950,000 1/02/2009 6,664,000
Interline Brands Inc. Note,
11.50% .......................... 1,400,000 5/15/2011 1,512,000
Prime Succession Holdings Inc.
Sr. Sub. Note (acquired
10/7/98 and 5/6/03, cost
$1,140,606), 14.25%+@............ 225,183 8/29/2009 23
United Rentals North American
Inc. Sr. Note, 6.50%+ ........... 2,500,000 2/15/2012 2,487,500
Williams Scotsman Inc. Note,
9.875% .......................... 3,500,000 6/01/2007 3,500,000
------------
14,163,523
------------
Principal Maturity
Amount Date Value
---------- ---------- ------------
Steel 3.4%
Earle M. Jorgensen Co. Note,
9.75% ...........................$2,200,000 6/01/2012 $ 2,475,000
IPSCO Inc. Sr. Note, 8.75% ........ 2,350,000 6/01/2013 2,673,125
Ispat Inland Corp. Sr. Note,
9.75%+ .......................... 1,700,000 4/01/2014 1,768,000
United States Steel LLC Note,
10.75% .......................... 1,154,000 8/01/2008 1,344,410
United States Steel LLC Sr.
Note, 9.75% ..................... 2,944,000 5/15/2010 3,356,160
------------
11,616,695
------------
Supermarkets/Drug 2.2%
Nash Finch Co. Sr. Sub.
Note, 8.50% ..................... 1,700,000 5/01/2008 1,674,500
Rite Aid Corp. Sr. Note,
8.125% .......................... 1,750,000 5/01/2010 1,872,500
Stater Brothers Holdings Inc.
Sr. Note, 10.75% ................ 3,575,000 8/15/2006 3,753,750
------------
7,300,750
------------
Telecommunications 2.8%
Eircom Funding Corp. Sr. Sub.
Note, 8.25% ..................... 2,650,000 8/15/2013 2,954,750
Millicom International Cellular
Inc. Sr. Note, 10.00%+ .......... 850,000 12/01/2013 884,000
Qwest Capital Funding Inc.
Note, 7.25% ..................... 1,750,000 2/15/2011 1,505,000
Qwest Communications
International Inc. Note,
7.25%+ .......................... 1,800,000 2/15/2011 1,714,500
Western Wireless Corp.
Sr. Note, 9.25% ................. 2,375,000 7/15/2013 2,440,313
------------
9,498,563
------------
Transportation 4.5%
ArvinMeritor Inc. Note, 8.75%...... 825,000 3/01/2012 917,812
OMI Corp. Note, 7.625% ............ 5,100,000 12/01/2013 5,291,250
Stena AB Note, 9.625% ............. 2,100,000 12/01/2012 2,383,500
Stena Corp. Note, 7.50% ........... 375,000 11/01/2013 391,875
Tenneco Automotive Inc.
Sr. Note, 10.25% ................ 1,900,000 7/15/2013 2,185,000
TRW Automotive Inc. Sr. Sub.
Note, 9.375% .................... 1,762,000 2/15/2013 2,026,300
TRW Automotive Inc. Sr. Sub.
Note, 11.00% .................... 1,674,000 2/15/2013 2,000,430
------------
15,196,167
------------
Utility 2.8%
AES Corp. Note, 9.00% ............. 2,487,405 1/02/2017 2,848,079
AES Corp. Note, 8.75%+ ............ 1,200,000 5/15/2013 1,320,000
NRG Energy Inc. Sr. Note,
8.00%+ .......................... 3,125,000 12/15/2013 3,226,562
Reliant Resources Inc. Sr. Note,
9.25% ........................... 1,900,000 7/15/2010 2,061,500
------------
9,456,141
------------
Total Bonds (Cost $315,009,383)........................................... $331,990,566
------------
8 The notes are an integral part of the financial statements.
Shares Value
---------- ------------
Common Stocks & Other 0.3%
North Atlantic Trading Inc. Wts.
(acquired 6/18/97 through 9/11/97,
cost $198,500)*++@ ...................... 170 $ 2
Aurora Foods Inc. Com* .................... 334 3
eSpire Communications Inc. Wts.
(acquired 1/5/96, cost
$427,500)*++@............................ 9,500 95
Freedom Pay Inc. Com. (acquired
3/29/00, cost $50,875)*++@............... 3,145,340 31,453
Ladish Inc. Com.* ......................... 50,946 447,306
Micadant PLC Com. (acquired 7/1/01,
cost $0)*@............................... 492,397 9,062
Phase Metrics Inc. Cl. A Com.
(acquired 1/23/98 through 6/9/98,
cost $11,424,092)*++@.................... 842,908 236,014
Prime Succession Holdings Inc. Com.
(acquired 10/7/98 thru 11/20/01,
cost $1,809,483)*++@ .................... 266,679 2,667
Primus Telecommunications Group
Wts. (acquired 7/30/97,
cost $78,890)*++@ ....................... 7,000 700
Protection One Inc. Wts.
(acquired 5/10/95 and 7/10/95,
cost $36,503)*++@ ....................... 10,400 104
Reunion Industries Inc. Com* .............. 8,341 3,003
Waxman Industries Inc. Wts.
(acquired 8/12/94, cost $0)*++@ ......... 236,000 35,400
------------
Total Common Stocks & Other (Cost $14,065,746)............ 765,809
------------
Short-Term Investments 13.6%
State Street Navigator Securities
Lending Prime Portfolio ................. 46,101,533 46,101,533
------------
Total Short-Term Investments (Cost $46,101,533) .......... 46,101,533
------------
Principal Maturity
Amount Date Value
---------- ---------- -------------
Commercial Paper 0.7%
Morgan Stanley Dean Witter &
Co., 1.050% .................................... $2,413,000 4/01/2004 $ 2,413,000
-------------
Total Commercial Paper (Cost $2,413,000)..................................... 2,413,000
-------------
Total Investments (Cost $377,589,662) - 112.7%............................... 381,270,908
Cash and Other Assets, Less Liabilities - (12.7%) ........................... (42,859,383)
-------------
Net Assets - 100.0% ......................................................... $338,411,525
=============
KEY TO SYMBOLS
* Non-income-producing securities.
@ Security valued under consistently applied procedures established by the
Trustees.
++ Security restricted as to public resale. At March 31, 2004, there were no
outstanding unrestricted securities of the same class as those held. The
total cost and market value of restricted securities owned at March 31,
2004 were $13,399,843 and $306,435 (0.09% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule
144A securities owned at March 31, 2004, were $111,561,798 and $116,479,477
(34.4% 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%.
Federal Income Tax Information
At March 31, 2004, the net unrealized appreciation
of investments based on cost for federal income tax
purposes of $377,737,955 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 20,004,274
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (16,471,321)
-------------
$ 3,532,953
=============
The notes are an integral part of the financial statements.
State Street Research High Income Fund 9
- ------------
FINANCIAL
- ------------
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
March 31, 2004
Assets
Investments, at value (Cost $377,589,662) (Note 1) ........... $381,270,908
Receivable for securities sold ............................... 8,994,983
Interest receivable .......................................... 6,342,945
Receivable for fund shares sold .............................. 138,804
Other assets ................................................. 43,374
------------
396,791,014
------------
Liabilities
Payable for collateral received on securities loaned ......... 46,101,533
Payable for securities purchased ............................. 10,348,719
Dividends payable ............................................ 655,430
Payable for fund shares redeemed ............................. 522,955
Accrued transfer agent and shareholder services .............. 298,657
Accrued management fee ....................................... 170,285
Accrued distribution and service fees ........................ 78,014
Accrued trustees' fees ....................................... 10,747
Accrued administration fee ................................... 7,364
Payable to custodian ......................................... 4,211
Other accrued expenses ....................................... 181,574
------------
58,379,489
------------
Net Assets ................................................... $338,411,525
============
Net Assets consist of:
Undistributed net investment income ........................ $ 874,484
Unrealized appreciation of investments ..................... 3,681,246
Accumulated net realized loss .............................. (455,702,500)
Paid-in capital ............................................ 789,558,295
------------
$338,411,525
============
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 $234,343,151 66,909,663 $3.50*
B(1) $ 40,911,060 11,823,239 $3.46**
B $ 46,365,170 13,322,627 $3.48**
C $ 11,598,455 3,334,933 $3.48**
S $ 5,193,689 1,499,572 $3.46
* Maximum offering price per share = $3.66 ($3.50 [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 year ended March 31, 2004
Investment Income
Interest (net of foreign taxes of $1,831) (Note 1) ........... $30,001,753
-----------
Expenses
Management fee (Note 2) ...................................... 2,131,982
Transfer agent and shareholder services (Note 2) ............. 987,634
Distribution and service fees -- Class A (Note 4) ............ 712,487
Distribution and service fees -- Class B(1) (Note 4) ......... 398,550
Distribution and service fees -- Class B (Note 4) ............ 554,551
Distribution and service fees -- Class C (Note 4) ............ 122,604
Custodian fee ................................................ 162,655
Administration fee (Note 2) .................................. 92,598
Reports to shareholders ...................................... 87,249
Registration fees ............................................ 64,782
Audit fee .................................................... 39,048
Trustees' fees (Note 2) ...................................... 27,846
Legal fees ................................................... 4,498
Miscellaneous ................................................ 60,213
-----------
5,446,697
Fees paid indirectly (Note 2) ................................ (7,840)
-----------
5,438,857
-----------
24,562,896
Reimbursement of distribution fees (Note 4) .................. 66,321
-----------
Net investment income ........................................ 24,629,217
-----------
Realized and Unrealized Gain on
Investments
Net increase from payment by affiliate (Note 2) .............. 9,052
Net realized gain on investments ............................. 7,641,051
Change in unrealized appreciation of investments ............. 21,979,994
-----------
Net gain on investments ...................................... 29,630,097
-----------
Net increase in net assets resulting from operations ......... $54,259,314
===========
10 The notes are an integral part of the financial statements.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Years ended March 31
--------------------------------
2004 2003*
--------------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment income ....................... $ 24,629,217 $ 23,159,505
Net increase from payment by affiliate 9,052 --
Net realized gain (loss) on investments 7,641,051 (10,892,198)
Change in unrealized appreciation
of investments ............................ 21,979,994 5,438,809
------------ ------------
Net increase in net assets resulting
from operations ........................... 54,259,314 17,706,116
------------ ------------
Dividends from net investment income:
Class A ................................... (17,101,624) (16,818,674)
Class B(1) ................................ (2,637,145) (1,761,228)
Class B ................................... (3,772,753) (4,555,287)
Class C ................................... (804,787) (649,537)
Class S ................................... (651,507) (369,268)
------------ ------------
(24,967,816) (24,153,994)
------------ ------------
Net increase (decrease) from fund
share transactions (Note 6) ............... (54,115,623) 42,793,371
------------ ------------
Total increase (decrease) in net assets ..... (24,824,125) 36,345,493
Net Assets
Beginning of year ........................... 363,235,650 326,890,157
------------ ------------
End of year (including undistributed
net investment income of $874,484
and $199,862 respectively) ................ $338,411,525 $363,235,650
============ ============
* Audited by other auditors
Notes to Financial Statements
- --------------------------------------------------------------------------------
March 31, 2004
Note 1
State Street Research High Income Fund is a series of State Street Research
Income Trust (the "Trust"), which is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended 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 that 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(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. From April 1, 2003 to March 18, 2004, Class B
shares paid annual service and distribution fees of 1.00%. Effective March 19,
2004, the annual service and distribution fees paid by Class B shares were
voluntarily reduced to 0.00%. Class B shares automatically convert into Class A
shares at the end of eight years. 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
The notes are an integral part of the financial statements.
State Street Research High Income Fund 11
Notes (continued)
- --------------------------------------------------------------------------------
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.
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. As part of the custodian contract
between the custodian bank and the fund, the custodian bank has a lien on the
securities of the fund to the extent permitted by the fund's investment
restriction to cover any advances made by the custodian bank for the settlement
of securities purchased by the fund. At March 31, 2004, the payable to the
custodian bank of $4,211 represents the amount due for cash advance for the
settlement of a security purchased.
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. For the year ended March 31, 2004, the fund has designated
$24,967,816 as ordinary income dividends, and $0 as long-term capital gains
distributions.
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, 2004, the fund had a net capital loss carryforward of $455,595,025
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $3,347,001, $43,790,700, $69,423,365, $274,585,781 and
$64,448,178 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, $11,304,243 and $949,368, 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 $114,958 and
has deferred and treated such losses as arising in the fiscal year ended March
31, 2004.
To the extent book/tax differences are permanent in nature, such amounts are
reclassified within the capital accounts based on federal tax basis treatment.
The fund reclassified for book purposes amounts arising from permanent book/tax
differences primarily relating to premium amortization and maturity of defaulted
bonds. At March 31, 2004, components of distributable earnings on a tax basis
differ from the amounts reflected in the Statement of Assets and Liabilities by
temporary book/tax differences largely arising from wash sales, capital loss
carryforwards and premium amortization. At March 31, 2004, the tax basis
distributable earnings were $1,570,732 in undistributed ordinary income and $0
in undistributed long- term gains.
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 March 31, 2004, the value of the securities loaned and the value of
collateral were $44,727,640 and $46,101,533, respectively. During the year
ended March 31, 2004, income from securities lending amounted to $76,377 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 year ended March 31, 2004, the fees pursuant to such
agreement amounted to $2,131,982.
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 year ended March 31, 2004, the amount of such expenses
allocated to the fund was $356,193.
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 year ended March 31, 2004, the
fund's transfer agent fees were reduced by $7,840 under these arrangements.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$27,846 during the year ended March 31, 2004.
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 year ended March 31, 2004, the amount of such
expenses was $92,598.
On February 19, 2004, the Distributor entered into an agreement with the NASD
resolving all outstanding issues relating to an investigation by the NASD of
the Distributor's email retention practices and supervision of trading activity
in shares of the State Street Research funds. The Distributor, without
admitting or denying the allegations or the findings set forth in the
agreement, and solely for the purposes of the settlement, agreed to the entry
of certain findings by the NASD relating to the Distributor's compliance with
document retention requirements and the Distributor's supervision of
enforcement of shareholder exchange limitations set forth in the funds'
prospectuses. The agreement contains no allegations or findings of fraudulent
conduct by the Distributor. As part of this agreement the Distributor made a
payment to the Fund to compensate the Fund for losses relating to the exchange
of fund shares beyond the annual limit set forth in the Fund's prospectus. The
payment was allocated among the fund's share classes as follows: $6,087 to
Class A; $1,118 to Class B(1); $1,311 to Class B; $319 to Class C; and $217 to
Class S. These amounts are shown in the total amount of $9,052 as "Net increase
from payment by affiliate" in the Statement of Operations.
12
Note 3
For the year ended March 31, 2004, purchases and sales of securities, exclusive
of short-term obligations and U.S. government obligations, aggregated
$419,215,441 and $456,791,862, 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) and Class C shares. From April 1, 2003 to March 18, 2004, the fund
paid annual service and distribution fees of 1.00% of average daily net assets
for Class B shares. Effective March 19, 2004, the annual service and
distribution fees paid by Class B shares were voluntarily waived to 0.00%. The
fund expects this waiver to continue, although there is no guarantee that it
will. 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 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. 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. During the year ended March 31, 2004,
the Distributor reimbursed a total of $66,321 to Class B shares of the fund
reflecting the estimated excess of payments received over costs incurred under
the plan. This amount is shown as "Reimbursement of distribution fees" in the
Statement of Operations. For the year ended March 31, 2004, fees pursuant to
such plans amounted to $712,487, $398,550, $554,551 and $122,604 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 March 31, 2004, there were $2,923,614 and $2,408,194 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
$551,270 and $1,261,133, respectively, on sales of Class A shares of the fund
during the year ended March 31, 2004, and that MetLife Securities, Inc., earned
commissions aggregating $805,597 and $62,785 on sales of Class B(1) and Class C
shares, respectively, and the Distributor collected contingent deferred sales
charges aggregating $157,852, $12,549 and $381 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.
State Street Research High Income Fund 13
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:
Years ended March 31
----------------------------------------------------------------
2004 2003*
----------------------------------------------------------------
Class A Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold 67,387,812 $ 224,854,937 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 3,676,087 12,483,631 3,516,042 11,158,479
Shares redeemed (79,294,980) (265,525,730) (51,768,395) (164,212,893)
----------- ------------- ----------- -------------
Net increase (decrease) (8,231,081) $ (28,187,162) 9,739,157 $ 30,505,222
=========== ============= =========== =============
Class B(1) Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold 3,170,427 $ 10,621,570 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 538,601 1,757,195 331,552 1,042,352
Shares redeemed (3,025,254) (10,165,178) (2,411,666) (8,501,187)
----------- ------------- ----------- -------------
Net increase 683,774 $ 2,213,587 3,902,788 $ 11,403,623
=========== ============= =========== =============
Class B Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold 539,828 $ 1,808,194 771,634 $ 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 669,357 2,255,751 782,596 2,467,980
Shares redeemed (7,898,226) (26,666,918) (8,603,561) (26,369,187)
----------- ------------- ----------- -------------
Net decrease (6,689,041) $ (22,602,973) (2,497,594) $ (7,018,190)
=========== ============= =========== =============
Class C Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold 1,299,737 $ 4,322,789 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 118,552 400,008 89,096 280,839
Shares redeemed (1,823,813) (6,108,148) (1,115,064) (3,372,980)
----------- ------------- ----------- -------------
Net increase (decrease) (405,524) $ (1,385,351) 1,123,166 $ 3,682,638
=========== ============= =========== =============
Class S Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold 4,344,157 $ 14,346,842 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 176,312 592,285 102,798 323,540
Shares redeemed (5,717,809) (19,092,851) (3,894,087) (12,758,568)
---------- -------------- ---------- -------------
Net increase (decrease) (1,197,340) $ (4,153,724) 1,500,096 $ 4,220,078
========== ============== ========== =============
* Audited by other auditors
14
- -------------
FINANCIAL
- -------------
Highlights
For a share outstanding throughout each year:
Class A
--------------------------------------------------------------------
Years ended March 31
--------------------------------------------------------------------
2004(a)(e) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 3.23 3.31 3.48 5.05 5.65
------ ----- ----- ------ -----
Net investment income ($) 0.24 0.25 0.23 0.43 0.52
Net realized and unrealized gain (loss) on investments ($) 0.28 (0.07) (0.12) (1.57) (0.60)
------ ----- ----- ------ -----
Total from investment operations ($) 0.52 0.18 0.11 (1.14) (0.08)
------ ----- ----- ------ -----
Dividends from net investment income ($) (0.25) (0.26) (0.28) (0.43) (0.52)
------ ----- ----- ------ -----
Total distributions ($) (0.25) (0.26) (0.28) (0.43) (0.52)
------ ----- ----- ------ -----
Net asset value, end of year ($) 3.50 3.23 3.31 3.48 5.05
====== ===== ===== ====== =====
Total return (%)(b) 16.42 6.02 3.33 (23.51) (1.65)
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 234,343 242,824 216,612 257,702 501,042
Expense ratio (%) 1.33 1.48 1.48 1.30 1.12
Expense ratio after expense reductions (%) 1.33 1.47 1.47 1.29 1.11
Ratio of net investment income to average net assets (%) 7.12 7.92 6.83 10.15 9.50
Portfolio turnover rate (%) 121.54 98.71 80.07 52.96 50.49
Class B(1)
--------------------------------------------------------------------
Years ended March 31
--------------------------------------------------------------------
2004(a)(e) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 3.20 3.28 3.45 5.01 5.62
------ ----- ----- ----- -----
Net investment income ($) 0.22 0.22 0.20 0.40 0.47
Net realized and unrealized gain (loss) on investments ($) 0.26 (0.06) (0.12) (1.55) (0.60)
------ ----- ----- ----- -----
Total from investment operations ($) 0.48 0.16 0.08 (1.15) (0.13)
------ ----- ----- ----- -----
Dividends from net investment income ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ----- -----
Total distributions ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ----- -----
Net asset value, end of year ($) 3.46 3.20 3.28 3.45 5.01
====== ===== ===== ===== =====
Total return (%)(b) 15.47 5.36 2.65 24.03 (2.57)
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 40,911 35,593 23,728 24,472 36,038
Expense ratio (%) 2.03 2.18 2.18 2.00 1.87
Expense ratio after expense reductions (%) 2.03 2.17 2.17 1.99 1.86
Ratio of net investment income to average net assets (%) 6.41 7.21 6.13 9.62 8.76
Portfolio turnover rate (%) 121.54 98.71 80.07 52.96 50.49
Class B
-----------------------------------------------------------------------
Years ended March 31
-----------------------------------------------------------------------
2004(a)(e)(f) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 3.21 3.29 3.46 5.02 5.62
------ ----- ----- ------ -----
Net investment income ($) 0.22 0.23 0.20 0.40 0.47
Net realized and unrealized gain (loss) on investments ($) 0.27 (0.07) (0.12) (1.55) (0.59)
------ ----- ----- ------ -----
Total from investment operations ($) 0.49 0.16 0.08 (1.15) (0.12)
------ ----- ----- ------ -----
Dividends from net investment income ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ------ -----
Total distributions ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ------ -----
Net asset value, end of year ($) 3.48 3.21 3.29 3.46 5.02
====== ===== ===== ====== =====
Total return (%)(b) 15.78 5.33 2.64 (23.98) (2.38)
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 46,365 64,182 74,004 109,691 230,786
Expense ratio (%) 2.03 2.18 2.18 2.00 1.87
Expense ratio after expense reductions (%) 2.03 2.17 2.17 1.99 1.86
Ratio of net investment income to average net assets (%) 6.57 7.23 6.14 9.41 8.76
Portfolio turnover rate (%) 121.54 98.71 80.07 52.96 50.49
State Street Research High Income Fund 15
FINANCIAL
Highlights
Class C
--------------------------------------------------------------------
Years ended March 31
--------------------------------------------------------------------
2004(a)(e) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 3.21 3.29 3.46 5.02 5.63
------ ----- ----- ------ -----
Net investment income ($) 0.22 0.23 0.20 0.40 0.48
Net realized and unrealized gain (loss) on investments ($) 0.27 (0.07) (0.12) (1.55) (0.61)
------ ----- ----- ------ -----
Total from investment operations ($) 0.49 0.16 0.08 (1.15) (0.13)
------ ----- ----- ------ -----
Dividends from net investment income ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ------ -----
Total distributions ($) (0.22) (0.24) (0.25) (0.41) (0.48)
------ ----- ----- ------ -----
Net asset value, end of year ($) 3.48 3.21 3.29 3.46 5.02
====== ===== ===== ====== =====
Total return (%)(b) 15.73 5.33 2.63 (23.98) (2.57)
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 11,598 12,008 8,616 11,896 26,154
Expense ratio (%) 2.03 2.18 2.18 2.00 1.87
Expense ratio after expense reductions (%) 2.03 2.17 2.17 1.99 1.86
Ratio of net investment income to average net assets (%) 6.42 7.21 6.16 9.40 8.77
Portfolio turnover rate (%) 121.54 98.71 80.07 52.96 50.49
Class S
--------------------------------------------------------------------
Years ended March 31
--------------------------------------------------------------------
2004(a)(e) 2003(a)(d) 2002(a)(c)(d) 2001(a)(d) 2000(a)(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 3.20 3.28 3.46 5.01 5.61
------ ----- ----- ------ -----
Net investment income ($) 0.25 0.25 0.24 0.41 0.53
Net realized and unrealized gain (loss) on investments ($) 0.27 (0.06) (0.13) (1.51) (0.60)
------ ----- ----- ------ -----
Total from investment operations ($) 0.52 0.19 0.11 (1.10) (0.07)
------ ----- ----- ------ -----
Dividends from net investment income ($) (0.26) (0.27) (0.29) (0.45) (0.53)
------ ----- ----- ------ -----
Total distributions ($) (0.26) (0.27) (0.29) (0.45) (0.53)
------ ----- ----- ------ -----
Net asset value, end of year ($) 3.46 3.20 3.28 3.46 5.01
====== ===== ===== ====== =====
Total return (%)(b) 16.61 6.40 3.36 (23.06) (1.41)
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 5,194 8,628 3,930 3,438 45,737
Expense ratio (%) 1.03 1.18 1.18 1.00 0.87
Expense ratio after expense reductions (%) 1.03 1.17 1.17 0.99 0.86
Ratio of net investment income to average net assets (%) 7.43 7.92 7.20 10.40 9.81
Portfolio turnover rate (%) 121.54 98.71 80.07 52.96 50.49
(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) Effective April 1, 2001, the fund has adopted the provisions of 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.
(d) Audited by other auditors
(e) During the year ended March 31, 2004, the Distributor made restitution
payments to the fund as part of a settlement with NASD. These payments had
no effect on net investment income per share, total return and the ratio of
net investment income to average net assets.
(f) During the year ended March 31, 2004, the Distributor reimbursed Class B
shares of the Fund the estimated excess of payments received over costs
incurred under the 12b-1 plan. The effect of this reimbursement was to
increase net investment income per share $0.00, increase the total return
0.00% and increase the ratio of net investment income to average net assets
0.12%.
16
- ------------------------
INDEPENDENT AUDITORS'
- ------------------------
Report
To the Board of Trustees and Shareholders
of State Street Research High Income Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio holdings, of State Street Research High Income Fund (the "Fund"),
a series of State Street Research Income Trust, as of March 31, 2004, and the
related statement of operations, the statement of changes in net assets, and
the financial highlights for the year ended March 31, 2004. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of
changes in net assets for the year ended March 31, 2003, and the financial
highlights for each of the years in the four-year period ended March 31, 2003,
were audited by other auditors whose report dated May 9, 2003, expressed an
unqualified opinion on such statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of March 31, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of March 31, 2004, the results of its operations, the changes in its
net assets, and the financial highlights for the year then ended, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 19, 2004
State Street Research High Income Fund 17
- --------------------------
TRUSTEES AND OFFICERS
- --------------------------
State Street Research Income Trust
Number of Funds
Name, Position(s) Term of Office in Fund Complex Other
Address Held with and Length of Principal Occupations Overseen by Directorships Held
and Age(a) Fund Time Served(b) During Past 5 Years Trustee/Officer(c) by Trustee/Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the 19 Avaya Corp.
(58) 1999 Board, Chief Executive Officer and
President, PictureTel Corporation
(video conferencing systems)
- ------------------------------------------------------------------------------------------------------------------------------------
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 The First
(62) 2004 PricewaterhouseCoopers LLP Marblehead Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Steve A. Garban Trustee Since Retired; formerly Senior Vice 53 Metropolitan Series
(66) 1997 President for Finance and Fund, Inc.; and
Operations and Treasurer, The Metropolitan Series
Pennsylvania State University Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co.
(59) 1999 Management, 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 53 A.P. Pharma, Inc.;
(65) 1993 Ltd. (investments); President, Metropolitan Series
Pacific Four Investments Fund, Inc.; and
(investments); formerly President, Metropolitan Series
The Glen Ellen Company (private Fund II
investment firm)
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Trustee Since Jay W. Forrester Professor of 53 Metropolitan Series
Scott Morton (66) 1987 Management, Sloan School of Fund, Inc.; and
Management, Massachusetts Institute Metropolitan Series
of Technology Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President 19 None
(58) 2000 and Chief 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 6 None
(47) President 2001 Street Research & Management
Company; formerly Vice President,
State Street Research & Management
Company
- ------------------------------------------------------------------------------------------------------------------------------------
C. Kim Goodwin Vice Since Managing Director and Chief 18 None
(45) President 2002 Investment Officer - 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 19 None
(49) President 2001 Officer and 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 9 None
(46) President 2003 Investment Officer - 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 8 None
Westvold (43) President 2003 Research & Management Company;
formerly Senior Vice President,
State Street Research & Management
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer 19 None
(47) 2001 of State Street Research &
Management Company; formerly Vice
President and Assistant Treasurer,
State Street Research & Management
Company
- ------------------------------------------------------------------------------------------------------------------------------------
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. and Metropolitan Series Fund II.
The primary adviser to Metropolitan Series Fund, Inc. and Metropolitan
Series Fund II is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(+) 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.
18
----------------
[LOGO STATE STREET RESEARCH] | PRSRT STD |
One Financial Center | U.S. POSTAGE |
Boston, MA 02111-2690 | PAID |
| PERMIT #6 |
| HUDSON, MA |
----------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
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exchanges and account information
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E-mail info@ssrfunds.com option, we will send these materials to you
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first from the Service Center by calling 1-877-773-8637) Call a service center representative at
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Mail State Street Research Service Center Monday through Friday, 8am-6pm
P.O. Box 8408, Boston, MA 02266-8408 eastern time, to learn more.
- ---------------------------------------------------------------------------------------------------------------------------------
Investors should carefully consider the fund's investment objective, risks,
charges and expenses before investing. The fund's prospectus contains more
complete information on these and other matters. A prospectus for High
Income Fund is available through your financial professional, by calling toll-
free 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at
www.ssrfunds.com. Please read the prospectus carefully before investing.
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This report must be accompanied or preceded by a current prospectus. When used
as sales material after June 30, 2004, this report must be accompanied by a
current Quarterly Performance Update.
"State Street Research Proxy Voting Policies and Procedures"--which describes
how we vote proxies relating to portfolio securities--is available upon request,
free of charge, by calling the State Street Research Service Center toll-free
at 1-87-SSR-FUNDS (1-877-773-8637) or by accessing the U.S. Securities and
Exchange Commission website at www.sec.gov.
The DALBAR awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industrywide.
Member NASD, SIPC
(C)2004 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROLNUMBER:(exp0505)SSR-LD HI-1758-0504
<Page>
FORM N-CSR(2 OF 3)
ITEM 2: CODE OF ETHICS
(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: AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board of Trustees has determined that Steve A. Garban,
a member of the Registrant's Board of Trustees 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
<Table>
<Caption>
(a) Audit Fees
Fiscal year ended March 31, 2003* $82,000
Fiscal year ended March 31, 2004 $59,500
(b) Audit-Related Fees - Represents fees for assurance and related services
related to the audit of the registrant's financial statements.
Fiscal year ended March 31, 2003* $0
Fiscal year ended March 31, 2004 $0
(c) Tax Fees - Represents fees for professional services rendered by the
principal accountant for tax compliance, tax provision review, and the
Fiscal year ended March 31, 2003* $9,800
Fiscal year ended March 31, 2004 $9,900
(d) All other fees - Represents fees paid to Deloitte & Touche LLP to provide a
special review of late trading, market timing and related issues concerning
the Registrant
Fiscal year ended March 31, 2003* $0
Fiscal year ended March 31, 2004 $28,000
</Table>
The Registrant's independent accountants, Deloitte & Touche LLP, and their
predecessor, PricewaterhouseCoopers LLP, did not bill fees for
audit-related, tax, or other non-audit services that required pre-approval by
the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X during the Registrant's last two fiscal years.
(e)(1) The Audit Committee has determined that all work performed for the
Registrant by Deloitte & Touche LLP will be pre-approved by the full Audit
Committee and, therefore, has not adopted pre-approval procedures.
(2) None.
(f) Not applicable.
(g) Non-Audit Fees - Represents fees for audit-related, tax and other
non-audit services rendered by the principal accountant to the Registrant,
the Registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the Registrant.
Fiscal Year Ended March 31, 2003* - $ 9,800
Fiscal Year Ended March 31, 2004 - $ 83,900
(h) The Audit Committee of the Registrant has considered whether the
non-audit services that were rendered by the Registrant's principal
accountant to the Registrant's investment adviser (not including any
subadviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Registrant and
that were not pre-approved by the Audit Committee are compatible with
maintaining the principal accountant's independence.
* The fees reported for the fiscal year ended March 31, 2003 were
attributable to services provided by other accountants.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS
The Governance Committee will consider nominees recommended by
shareholders. Shareholders may submit recommendations to the
attention of the Secretary of the Trust, State Street Research
& Management Company, One Financial Center, 30th Floor, Boston
MA 02111.
ITEM 10: CONTROLS AND PROCEDURES
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date
of this report, that the Registrant's disclosure controls and procedures
are reasonably designed to ensure that information required to be
disclosed by the Registrant on Form N-CSR is recorded, processed,
summarized and reported within the required time periods and that
information required to be disclosed by the Registrant in the reports
that it files or submits on Form N-CSR is accumulated and communicated
to the Registrant's management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the Registrant's internal control over financial
reporting during the Registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
internal control over financial reporting.
ITEM 11: 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 May 28, 2004
------------------------------------------------------
<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 May 28, 2004
------------------------
By: /s/ Douglas A. Romich
------------------------------------------------------
Douglas A. Romich, Treasurer
Principal Financial Officer
Date May 28, 2004
------------------------