<PAGE>
[FRONT COVER]
[LOGO] STATE STREET RESEARCH
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
ANNUAL REPORT [ILLUSTRATION]
June 30, 1996
WHAT'S INSIDE
From the Chairman:
Capital Appreciation Fund
approaches a milestone
Portfolio Manager's Review:
Solid performance in an
up and down market
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
For Excellence
in
Shareholder Service
<PAGE>
FROM THE CHAIRMAN
Dear Shareholders:
[PHOTO OF RALPH F. VERNI]
On August 25, 1996, State Street Research Capital Appreciation Fund turns 10
years old. As overseers of the Fund, Fred Kobrick and I see this as a
milestone.
A decade of change
Much has happened over the last 10 years. The Dow Jones Industrial Average
has risen more than 3,000 points. We've seen three presidents in the White
House and a major shift in Congress. We saw "Black Monday" in 1987 and a
record-setting market rally in 1995.
Capital Appreciation Fund has appreciated substantially over this past
decade, as illustrated in the mountain chart below. We take pride in the
Fund's success.
What it means to be 10
Capital Appreciation Fund's 10-year anniversary demonstrates the Fund's
ability to thrive over the long term. With over 7,000 mutual funds to choose
from and only 15% with 10-year track records, we see a decade of consistent
performance and steady growth as setting us apart from the competition. Since
its inception, Capital Appreciation Fund has been managed by Fred Kobrick.
Morningstar recently concluded that less than 6% of portfolio managers have
managed the same fund for 10 years or more, a fact that also sets us apart.
We strive to provide our shareholders with an actively managed, well-
diversified portfolio so that, in turbulent markets as well as calm, you can
have confidence in your investment with us.
A thank you to our shareholders
With the approach of the Fund's tenth anniversary, I'd like to thank all of
our investors for trusting us with their investments. Fred and I hope you
will give us the opportunity to work for you for another ten years.
We understand you have a choice, and we're glad you've chosen State Street
Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
July 31, 1996
(1)+22.97% for Class B shares; +24.28% for Class C shares; +23.03% for Class
D shares.
(2)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
reflects reinvestment of capital gain distributions and income dividends. No
adjustment has been made for income taxes payable by shareholders on income
dividends or capital gain distributions.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Performance for a class includes periods
prior to the adoption of class designations in 1993. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and large institutions. Performance for "B" and "D" shares prior to class
designations in 1993 reflects annual 12b-1 fees of .50% and performance
thereafter reflects annual 12b-1 fees of 1%, which will reduce subsequent
performance.
(4)Performance reflects the maximum 4.5% "A" share front-end, or 5% "B" share
or 1% "D" share contingent deferred, sales charges.
(5)Cumulative total returns are not annualized, nor do they reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout
this shareholder report is dated as
indicated and, because of possible changes
in viewpoint, data, and transactions, should
not be relied upon as being current
thereafter.
Fund Information (all data are for periods ended June 30, 1996)
Total value of $10,000 invested on August 25, 1986(2)
(Class A shares, at maximum applicable sales charge)
[MOUNTAIN CHART]
Plot Points for Mountain Chart
8/86 9550
6/87 12195
6/88 11777
6/89 13896
6/90 16305
6/91 16029
6/92 20362
6/93 27647
6/94 27569
6/95 36544
6/96 45269
[END MOUNTAIN CHART]
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
Life of Fund
(since 5
8/25/86) Years 1 Year
-------- ------------- ------- --------
Class A +16.55% +21.95% +18.30%
-------- ------------ ------ -------
Class B +16.87% +22.43% +17.97%
-------- ------------ ------ -------
Class C +17.25% +23.38% +24.28%
-------- ------------ ------ -------
Class D +16.90% +22.66% +22.03%
Cumulative Total Returns
(do not reflect sales charge)(3,5)
Life of Fund
(since
8/25/86) 5 Years 1 Year
-------- ------------- -------- --------
Class A +374.02% +182.43% +23.87%
-------- ------------ ------- -------
Class B +365.11% +177.11% +22.97%
-------- ------------ ------- -------
Class C +379.90% +185.93% +24.28%
-------- ------------ ------- -------
Class D +366.06% +177.68% +23.03%
Top 5 Equity Industries
(by percentage of net assets)
Retail 19.8%
Hotel and restaurant 12.5%
Computer software and service 12.1%
Business service 7.7%
Recreation 7.6%
Total: 59.7%
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[PHOTO OF FREDERICK R. KOBRICK]
(Caption): Frederick R. Kobrick
Portfolio Manager
The following is a discussion with portfolio manager Fred Kobrick. Fred has
25 years of investment experience and is the lead portfolio manager for the
Equity Group's Aggressive Growth Team.
Q: How did the Fund perform over the past 12 months?
A: We had a solid year. Class A shares of the Fund provided a total return of
+23.87% for the year ended June 30, 1996 (does not reflect sales charge).1
This return was better than the historical average for the Fund and its peer
group, Lipper's Capital Appreciation Funds category. However, over the past
12 months, the Fund slightly underperformed the +23.97% average total return
for the 166 funds in the category.
I should note that these solid returns disguise the ups and downs that
occurred in the market over the past few months, which presented us with a
more challenging investment environment. Capital Appreciation Fund proved to
be a much stronger performer in the second half of the period, beating the
average total return for the Lipper category by more than 2 percentage points
for the six months ended June 30, 1996.
Q: What contributed to Fund performance?
A: Low inflation, strong corporate profits and economic growth helped create
an exceptional environment for stock investors. We did our homework and made
good choices in a number of industry sectors, most notably, retail and
textile/apparel, computer software and service, hotel and restaurant and
recreation, and airline stocks.
Q: What adjustments did you make to the portfolio during the past 12 months?
A: We made a number of changes to the Fund. Last year at this time we had
about 45% of the portfolio in technology stocks spread over a number of
industries. We pared this position down and concentrated our technology
holdings in the area of computer software and service, primarily sticking to
companies offering products to increase productivity, such as Cascade
Communications, a provider of networking software. As of June 30, 1996,
software and service stocks represented 12.1% of the portfolio.
Last year at this time, we had 12.1% of the portfolio invested in retail
stocks. We have added to this, taking a position in well-known apparel
designer Gucci Group and adding to our holdings in Sunglass Hut
International. Retail, as of June 30, 1996, made up 19.8% of the portfolio.
Textile/apparel stocks accounted for another 6% of the portfolio.
Hotel and restaurant stocks are another sector that we have added to over the
past 12 months to the benefit of the portfolio. Reservation service provider
HFS and Trump Hotels & Casino Resorts represent the largest holdings in this
area.
Q: What is your investment strategy going forward considering the market's
behavior so far in 1996?
A: As we've mentioned, the stock market has been up and down in 1996. I think
the corrections we've seen have been beneficial, as they have taken some of
the speculation out of the market and presented us with good buying
opportunities. We'll continue to rely on our fundamental research to help us
uncover companies--small or large--that present a good value or offer strong
growth potential. Bottom-up, company-by-company stock selection has been a
mainstay of our method and will continue to be so.
June 30, 1996
Top 10 Stock Positions
(by percentage of net assets)
1 HFS Hotel reservation service 5.2%
2 Gucci Apparel designer/manufacturer 5.1%
3 Republic Industries Waste management company 4.6%
4 Sunglass Hut Specialty retailer 2.9%
5 Cascade Communications Networking software company 2.7%
6 Newbridge Networks Telecommunications firm 2.4%
7 HBO & Co. Hospital information systems firm 2.3%
8 Fila Apparel designer/manufacturer 2.2%
9 Continental Airlines Airline 2.2%
0 Trump Hotels & Casino Resorts Hotel giant 2.1%
These securities represent an aggregate of 31.7% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
Best and Worst Contributors to Performance
(July 1, 1995 through June 30, 1996)
Best (arrow up)
- -----------------------------------------------------------------------------
HFS
Expansion into real estate markets helped this reservation service provider.
Gucci
Market-share gains boosted the profits of this retail "category killer."
Republic Industries
Waste management company increased profits by consolidating industries.
Worst (arrow down)
- ------------------------------------------------------------------------------
Nokia
Weak earnings reports drove down the stock price of this cellular phone
maker.
Softkey International
Company's aggressive expansion made many investors nervous.
Texas Instruments
Semiconductor manufacturer hurt by weakening demand.
2
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
INVESTMENT PORTFOLIO
June 30, 1996
Value
Shares (Note 1)
------------------------------------------- ------- -------------
COMMON STOCKS 95.4%
Basic Industries 2.1%
Machinery 1.6%
Cincinnati Milacron, Inc. 131,000 $ 3,144,000
UCAR International, Inc.* 204,800 8,524,800
------------
11,668,800
------------
Metal & Mining 0.5%
SGL Carbon AG ADR* 108,000 4,131,000
------------
Total Basic Industries 15,799,800
------------
Consumer Cyclical 53.1%
Airline 5.7%
AMR Corp.* 78,300 7,125,300
Continental Airlines, Inc. Cl. B* 260,400 16,079,700
Delta Air Lines, Inc. 50,700 4,208,100
TransWorld Airlines, Inc. Cv. Pfd.*+ 73,400 3,624,125
UAL Corp.* 214,300 11,518,625
------------
42,555,850
------------
Automotive 1.5%
Autozone, Inc.* 217,700 7,565,075
Danaher Corp. 71,200 3,097,200
Penske Motorsports, Inc.* 15,500 410,750
------------
11,073,025
------------
Hotel & Restaurant 12.5%
Extended Stay America, Inc.* 406,600 12,807,900
HFS, Inc.* 550,700 38,549,000
ITT Corp. 55,900 3,703,375
Lone Star Steakhouse & Saloon, Inc.* 47,100 1,778,025
MGM Grand, Inc.* 79,500 3,170,063
Mirage Resorts, Inc.* 138,400 7,473,600
Planet Hollywood International, Inc. Cl. A* 18,100 488,700
Rainforest Cafe, Inc.* 54,500 2,725,000
Renaissance Hotel Group NV* 63,500 1,365,250
Sun International Hotels Ltd.* 111,100 5,388,350
Trump Hotels & Casino Resorts, Inc.* 540,800 15,412,800
------------
92,862,063
------------
Recreation 7.6%
American Radio Systems Corp.* 172,200 7,404,600
Ascent Entertainment Group, Inc.* 75,700 1,911,425
Chancellor Corp. Cl. A* 43,200 1,350,000
Clear Channel Communications, Inc.* 120,400 9,917,950
Emmis Broadcasting Corp. Cl. A* 39,000 1,950,000
Evergreen Media Corp. Cl. A 281,000 12,012,750
Gemstar International Group Ltd.* 73,600 2,208,000
GTech Holdings Corp.* 92,900 2,752,162
Heftel Broadcasting Corp. Cl. A* 40,200 1,190,925
News Corp. Ltd. ADR 222,000 5,217,000
Recreation (cont'd)
Oakley, Inc.* 214,200 $ 9,746,100
Silver King Communications, Inc.* 24,300 729,000
------------
56,389,912
------------
Retail Trade 19.8%
Ann Taylor Stores Corp.* 337,600 6,836,400
Borders Group, Inc.* 206,000 6,643,500
BT Office Products International, Inc.* 231,900 4,145,213
Corporate Express, Inc.* 356,500 14,260,000
Gucci Group NV* 585,600 37,771,200
Home Depot, Inc.* 140,900 7,608,600
Industrie Natuzzi SPA ADR 97,000 4,971,250
Just For Feet, Inc.* 233,850 12,364,819
Loehmann's, Inc.* 12,700 292,100
Melville Corp. 226,100 9,157,050
Micro Warehouse, Inc.* 77,100 1,542,000
Office Depot, Inc.* 491,700 10,018,387
Price-Costco, Inc.* 226,000 4,887,250
Staples, Inc.* 174,000 3,393,000
Sunglass Hut International, Inc.* 884,100 21,549,937
Western Wireless Corp. Cl. A* 74,300 1,588,163
------------
147,028,869
------------
Textile & Apparel 6.0%
Authentic Fitness Corp. 45,000 838,125
Designer Holdings Ltd.* 20,000 532,500
Fila Holdings SPA ADR* 190,200 16,404,750
Men's Wearhouse, Inc.* 372,950 12,027,637
Nautica Enterprises, Inc.* 130,000 3,737,500
Tommy Hilfiger Corp.* 197,300 10,580,213
------------
44,120,725
------------
Total Consumer Cyclical 394,030,444
------------
Consumer Staple 19.3%
Business Service 7.7%
Apache Medical Systems, Inc.* 55,900 698,750
Fritz Companies, Inc.* 85,000 2,741,250
HBO & Co. 247,000 16,734,250
MetroMail Corp.* 32,600 729,425
Republic Waste Industries, Inc.*++ 420,800 11,782,737
Republic Waste Industries, Inc.* 760,400 22,146,650
U.S. Office Products Co.* 45,500 1,911,000
Xeikon NV ADR* 22,400 254,800
------------
56,998,862
------------
Drug 5.9%
Centocor Corp.* 121,200 3,620,850
Cephalon, Inc.* 147,000 2,903,250
Eli Lilly & Co. 164,300 10,679,500
Entremed, Inc.* 106,600 1,599,000
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
Value
Shares (Note 1)
------------------------------------------- ------- -------------
Drug (cont'd)
Express Scripts, Inc. Cl. A* 42,100 $ 1,936,600
Liposome Company, Inc.* 305,100 5,720,625
Magainin Pharmaceuticals, Inc.* 112,400 1,180,200
Matrix Pharmaceuticals, Inc.* 55,000 990,000
Myriad Genetics, Inc.* 20,300 507,500
Pfizer, Inc. 202,500 14,453,438
------------
43,590,963
------------
Food & Beverage 2.6%
Boston Beer Company, Inc. Cl. A* 5,600 134,400
Boston Chicken, Inc.* 305,900 9,941,750
Pete's Brewing Co.* 11,900 178,500
Starbucks Corp.* 331,800 9,373,350
------------
19,628,000
------------
Hospital Supply 2.2%
Caremark International, Inc.* 94,400 2,383,600
Cardiothoracic Systems, Inc.* 21,400 283,550
Guidant Corp. 73,700 3,629,725
MedPartners/Mullikin, Inc.* 181,800 3,795,075
Medtronic, Inc. 57,700 3,231,200
Neopath, Inc.* 127,500 3,219,375
------------
16,542,525
------------
Personal Care 0.3%
Polymer Group, Inc.* 117,100 2,049,250
------------
Printing & Publishing 0.6%
CKS Group, Inc.* 5,700 183,825
Hollinger International, Inc.* 176,300 2,005,413
The Providence Journal Co. Cl. A* 58,200 894,825
World Color Press, Inc.* 60,400 1,532,650
------------
4,616,713
------------
Total Consumer Staple 143,426,313
------------
Energy 0.4%
Oil 0.2%
Chesapeake Energy Corp.* 16,200 1,455,975
------------
Oil Service 0.2%
Varco International, Inc.* 67,500 1,223,438
------------
Total Energy 2,679,413
------------
Finance 0.8%
Financial Service 0.1%
First USA Paymentech, Inc.* 8,600 344,000
------------
Insurance 0.7%
W.R. Berkley Corp. 34,500 1,440,375
Everest Reinsurance Holdings, Inc. 152,200 3,938,175
------------
5,378,550
------------
Total Finance 5,722,550
------------
Science & Technology 15.2%
Computer Software & Service 12.1%
ADFlex Solutions, Inc.* 41,000 $ 451,000
Ascend Communications, Inc.* 252,500 14,203,125
Cascade Communications Corp.* 293,600 19,964,800
Checkfree Corp.* 20,500 407,438
Checkpoint Software Technologies Ltd.* 36,700 880,800
CompuServe Corp.* 35,400 747,825
Dassault Systemes S.A. ADR* 22,500 697,500
Datastream Systems, Inc.* 86,700 3,056,175
Fore Systems, Inc.* 176,400 6,372,450
Geoworks* 166,200 5,900,100
Madge Networks NV* 20,500 297,250
Microsoft Corp.* 98,000 11,772,250
Open Market, Inc.* 10,600 258,375
Open Text Corp.* 134,600 1,396,475
OpenVision Technologies, Inc.* 27,800 340,550
Parametric Technology Corp.* 168,300 7,300,012
SS&C Technologies, Inc.* 8,600 131,150
Triple P N.V.* 145,600 891,800
Westell Technologies, Inc.* 182,500 7,163,125
Western Digital Corp.* 274,400 7,168,700
Yahoo, Inc.* 7,300 153,300
------------
89,554,200
------------
Electronic Components 1.4%
Affymetrix, Inc.* 6,100 93,025
CHS Electronics, Inc.* 49,700 670,950
Sanmina Holdings, Inc.* 360,300 9,728,100
------------
10,492,075
------------
Electronic Equipment 0.7%
Lucent Technologies, Inc.* 47,000 1,780,125
Octel Communications Corp.* 159,800 3,156,050
Thermo Optek Corp.* 42,200 548,600
------------
5,484,775
------------
Office Equipment 1.0%
Dell Computer Corp.* 80,200 4,080,175
3Com Corp.* 74,000 3,385,500
------------
7,465,675
------------
Total Science & Technology 112,996,725
------------
Utility 4.5%
Telephone 4.5%
ADC Telecommunications, Inc.* 194,100 8,734,500
Brooks Fiber Properties, Inc.* 24,000 792,000
Excel Communications, Inc.* 19,500 526,500
McLeod, Inc.* 47,200 1,132,800
Newbridge Networks Corp.* 270,800 17,737,400
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
Value
Shares (Note 1)
----------------------------------------- ------ -----------
Telephone (cont'd)
Omnipoint Corp.* 88,300 $ 2,301,319
Teleport Communications Group Inc. Cl. A* 93,900 1,796,307
----------
33,020,826
----------
Total Utility 33,020,826
----------
Total Common Stocks (Cost $536,597,165) 707,676,071
----------
Principal Maturity
Amount Date
------------------------------------- ---------- -------- -------------
Commercial Paper 6.2%
American Express Credit Corp., 5.39% 5,043,000 7/3/1996 5,043,000
American General Finance Corp., 5.37% 10,000,000 7/2/1996 10,000,000
Chevron Oil Finance Co., 5.35% 10,000,000 7/3/1996 10,000,000
Ford Motor Credit Co., 5.32% 3,845,000 7/1/1996 3,845,000
General Electric Capital Corp., 5.37% 4,226,000 7/8/1996 4,226,000
Philip Morris Cos., Inc., 5.40% 7,991,600 7/8/1996 7,991,600
Wal-Mart Stores, Inc., 5.30% 4,800,000 7/1/1996 4,800,000
------------
Total Commercial Paper
(Cost $45,905,600) 45,905,600
------------
Total Investments (Cost
$582,502,765)--101.6% 753,581,671
Cash and Other Assets, Less
Liabilities--(1.6%) (11,574,323)
------------
Net Assets--100.0% $742,007,348
============
Federal Income Tax Information:
At June 30, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $582,643,711 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $187,263,790
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value (16,325,830)
------------
$170,937,960
============
*Nonincome-producing securities
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
+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 June 30, 1996 were $3,670,000 and $3,624,125
(0.49% of net assets), respectively.
++Security valued under consistently applied procedures established by the
Trustees. Security restricted as to public resale. At June 30, 1996 there
were no outstanding unrestricted securities of the same class as those
held. The total cost and market value of restricted securities owned at
June 30, 1996 were $8,051,200 and $11,782,737 (1.59% of net assets),
respectively.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
Assets
Investments, at value (Cost $582,502,765) (Note 1) $ 753,581,671
Cash 2,744
Receivable for fund shares sold 784,827
Dividends and interest receivable 134,897
Receivable for securities sold 3,638
Other assets 10,662
------------
754,518,439
Liabilities
Payable for securities purchased 10,869,382
Accrued transfer agent and shareholder services (Note
2) 460,713
Accrued management fee (Note 2) 439,389
Payable for fund shares redeemed 384,775
Accrued distribution and service fees (Note 4) 222,853
Accrued trustees' fees (Note 2) 9,194
Other accrued expenses 124,785
------------
12,511,091
------------
Net Assets $ 742,007,348
============
Net Assets consist of:
Unrealized appreciation of investments $171,078,906
Accumulated net realized gain 15,502,627
Shares of beneficial interest 555,425,815
------------
$ 742,007,348
============
Net Asset Value and redemption price per share of Class
A shares ($395,050,410 / 30,956,126 shares of
beneficial interest) $12.76
============
Maximum Offering Price per share of Class A shares
($12.76 / .955) $13.36
============
Net Asset Value and offering price per share of
Class B shares ($172,213,335 / 13,791,209 shares of
beneficial interest)* $12.49
============
Net Asset Value, offering price and redemption price
per share of Class C shares ($167,623,763 / 12,954,795
shares of beneficial interest) $12.94
============
Net Asset Value and offering price per share of
Class D shares ($7,119,840 / 568,664 shares
of beneficial interest)* $12.52
============
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
For the year ended June 30, 1996
Investment Income
Dividends, net of foreign taxes of $37,170 $ 2,490,531
Interest 1,253,968
-----------
3,744,499
Expenses
Management fee (Note 2) 4,634,817
Transfer agent and shareholder services (Note 2) 1,920,686
Custodian fee 182,610
Reports to shareholders 159,558
Registration fees 95,313
Service fee--Class A (Note 4) 864,450
Distribution and service fees--Class B (Note 4) 1,303,232
Distribution and service fees--Class D (Note 4) 52,599
Trustees' fees (Note 2) 32,189
Audit fee 26,970
Legal fees 5,763
Miscellaneous 26,497
-----------
9,304,684
-----------
Net investment loss (5,560,185)
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments (Notes 1 and 3) 73,266,361
Net unrealized appreciation of investments 61,608,747
-----------
Net gain on investments 134,875,108
-----------
Net increase in net assets resulting from
operations $129,314,923
===========
STATEMENT OF CHANGES IN NET ASSETS
Year ended June 30
----------------------------
1996 1995
----------------------------- ------------ -------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (5,560,185) $ (3,720,060)
Net realized gain on
investments* 73,266,361 12,149,840
Net unrealized appreciation
of investments and foreign
currency 61,608,747 111,117,329
----------- ------------
Net increase resulting from
operations 129,314,923 119,547,109
----------- ------------
Distributions from net realized gains:
Class A (34,354,819) (11,280,742)
Class B (12,773,915) (2,571,808)
Class C (13,218,452) (3,080,510)
Class D (510,505) (112,508)
----------- ------------
(60,857,691) (17,045,568)
----------- ------------
Net increase from fund share
transactions (Note 5) 173,255,282 52,338,022
----------- ------------
Total increase in net assets 241,712,514 154,839,563
Net Assets
Beginning of year 500,294,834 345,455,271
----------- ------------
End of year $ 742,007,348 $500,294,834
=========== ============
* Net realized gain for
Federal income tax purposes
(Note 1) $ 73,389,253 $ 12,055,176
=========== ============
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1
State Street Research Capital Appreciation Fund, formerly MetLife-State
Street Research Capital Appreciation Fund (the "Fund"), is a series of State
Street Research Equity Trust, formerly MetLife-State Street Equity Trust (the
"Trust"), which was organized as a Massachusetts business trust in March,
1986 and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Trust commenced operations
in August, 1986. The Trust consists presently of four separate funds: State
Street Research Capital Appreciation Fund, State Street Research Equity
Investment Fund, State Street Research Equity Income Fund and State Street
Research Global Resources Fund.
The Fund seeks to achieve maximum capital appreciation by investing primarily
in common stocks of emerging growth companies and of companies considered to
be undervalued special situations. Current income is not a consideration in
the selection of investments for the Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Values for listed 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. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Short-term securities
maturing within sixty days are valued at amortized cost. Other securities, if
any, are valued at their fair value as determined in accordance with
established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
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 among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, 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. For the year ended June 30, 1996, the Fund has
designated as long-term 68% of the distributions from net realized gains.
Income dividends and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from
generally accepted accounting principles.
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.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the report period. Actual
results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the year ended June 30, 1996, the fees pursuant to such
agreement amounted to $4,634,817.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are
7
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
participants in sponsored arrangements, employee benefit plans and similar
programs or plans, through or under which shares of the Fund may be
purchased. During the year ended June 30, 1996, the amount of such
shareholder servicing and account maintenance expenses was $664,771.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $32,189 during the year ended June 30, 1996.
Note 3
For the year ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $1,542,111,417 and
$1,459,422,684, respectively.
Note 4
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance or servicing of shareholder
accounts, to reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the year ended June 30, 1996,
fees pursuant to such plan amounted to $864,450, $1,303,232 and $52,599 for
Class A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $206,221 and $1,397,367, respectively, on sales of Class A shares
of the Fund during the year ended June 30, 1996, and that MetLife Securities,
Inc. earned commissions aggregating $1,991,783 on sales of Class B shares,
and that the Distributor collected contingent deferred sales charges of
$378,749 and $1,900 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At June 30, 1996, the Distributor owned 7,172 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------------------------------
1996 1995
-------------------------- ---------------------------
Class A Shares Amount Shares Amount
--------------------------------------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 8,509,488 $ 103,271,609 6,331,406 $ 61,983,784
Issued upon reinvestment of distributions
from net realized gains 3,045,717 33,519,586 1,183,334 10,907,541
Shares repurchased (6,333,177) (77,140,136) (7,177,882) (70,964,079)
---------- ----------- ---------- ------------
Net increase 5,222,028 $ 59,651,059 336,858 $ 1,927,246
========== =========== ========== ============
Class B Shares Amount Shares Amount
--------------------------------------------- ---------- ----------- ---------- ------------
Shares sold 6,634,276 $ 79,295,183 4,108,923 $ 40,145,257
Issued upon reinvestment of distributions
from net realized gains 1,158,748 12,504,495 276,437 2,529,368
Shares repurchased (2,182,710) (26,185,464) (1,642,379) (16,155,301)
---------- ----------- ---------- ------------
Net increase 5,610,314 $ 65,614,214 2,742,981 $ 26,519,324
========== =========== ========== ============
Class C Shares Amount Shares Amount
--------------------------------------------- ---------- ----------- ---------- ------------
Shares sold 6,363,633 $ 78,353,974 4,381,871 $ 43,450,467
Issued upon reinvestment of distributions
from net realized gains 1,187,191 13,211,134 324,761 3,010,459
Shares repurchased (3,763,939) (45,981,872) (2,379,730) (23,674,364)
---------- ----------- ---------- ------------
Net increase 3,786,885 $ 45,583,236 2,326,902 $ 22,786,562
========== =========== ========== ============
Class D Shares Amount Shares Amount
--------------------------------------------- ---------- ----------- ---------- ------------
Shares sold 1,631,034 $ 19,873,515 228,040 $ 2,226,133
Issued upon reinvestment of distributions
from net realized gains 42,662 461,756 11,168 102,407
Shares repurchased (1,461,059) (17,928,498) (125,783) (1,223,650)
---------- ----------- ---------- ------------
Net increase 212,637 $ 2,406,773 113,425 $ 1,104,890
========== =========== ========== ============
</TABLE>
8
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
Year ended June 30
-----------------------------------------------------
1996** 1995** 1994 1993 1992
------------------------------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.52 $ 9.11 $ 10.42 $ 8.33 $ 6.55
Net investment loss* (.10) (.09) (.04) (.05) (.05)
Net realized and unrealized gain
(loss) on investments 2.63 2.95 .09 2.81 1.83
Distributions from net realized
gains (1.29) (.45) (1.36) (.67) --
------- ------- ------- ------- --------
Net asset value, end of year $ 12.76 $ 11.52 $ 9.11 $ 10.42 $ 8.33
======= ======= ======= ======= ========
Total return 23.87%+ 32.56%+ (0.28)%+ 35.78%+ 27.03%+
Net assets at end of year (000s) $395,050 $296,471 $231,356 $183,886 $116,687
Ratio of operating expenses to
average net assets* 1.40% 1.55% 1.50% 1.50% 1.50%
Ratio of net investment loss to
average net assets* (0.79)% (0.87)% (0.81)% (0.63)% (0.71)%
Portfolio turnover rate 279.55% 217.28% 147.73% 135.17% 128.10%
Average commission rate@ $.0266 -- -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
year -- $ .03 $ .02 $ .01 $ .01
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------
June 1, 1993
(Commencement
of
Share Class
Year Ended June 30 Designations)
--------------------------------- to
1996** 1995** 1994 June 30, 1993
------------------------------------ ------ ------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.38 $ 9.05 $ 10.41 $ 10.44
Net investment loss* (.22) (.15) (.06) (.00)
Net realized and unrealized gain
(loss) on investments 2.62 2.93 .06 (.03)
Distributions from net realized
gains (1.29) (.45) (1.36) --
------ ------- ----------- -----------
Net asset value, end of year $ 12.49 $ 11.38 $ 9.05 $ 10.41
====== ======= =========== ============
Total return 22.97%+ 31.86%+ (0.83)%+ (0.29)%+++
Net assets at end of year (000s) $172,213 $93,088 $49,236 $2,790
Ratio of operating expenses to
average net assets* 2.15% 2.15% 2.00% 2.00%++
Ratio of net investment loss to
average net assets* (1.53)% (1.47)% (1.29)% (0.95)%++
Portfolio turnover rate 279.55% 217.28% 147.73% 135.17%
Average commission rate@ $ .0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
year -- $ .02 $ .02 $ .00
</TABLE>
<TABLE>
<CAPTION>
Class C
---------------------------------------------------
Year ended June 30
-----------------------------
June 1, 1993
(Commencement of
Share Class
Designations) to
1996** 1995** 1994 June 30, 1993
--------------------------------- -------- -------- ------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year $ 11.64 $ 9.16 $ 10.42 $ 10.44
Net investment income (loss)* (.08) (.05) (.02) .00
Net realized and unrealized gain
(loss) on investments 2.67 2.98 .12 (.02)
Distributions from net realized
gains (1.29) (.45) (1.36) --
------- ------- ------ -------
Net asset value, end of year $ 12.94 $ 11.64 $ 9.16 $ 10.42
======= ======= ====== =======
Total return 24.28%+ 33.06%+ 0.25%+ (0.19)%+++
Net assets at end of year (000s) $167,624 $106,675 $62,662 $37,826
Ratio of operating expenses to
average net assets* 1.15% 1.15% 1.00% 1.00%++
Ratio of net investment income
(loss) to average net assets* (0.54)% (0.46)% (0.30)% 0.50%++
Portfolio turnover rate 279.55% 217.28% 147.73% 135.17%
Average commission rate@ $ .0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- $ .02 $ .02 $ .00
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------------------
June 1, 1993
(Commencement
of
Share Class
Year Ended June 30 Designations)
--------------------------------- to
1996** 1995** 1994 June 30, 1993
--------------------------------- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year $ 11.41 $ 9.07 $ 10.41 $ 10.44
Net investment income (loss)* (.21) (.15) (.07) (.01)
Net realized and unrealized gain
(loss) on investments 2.61 2.94 .09 (.02)
Distributions from net realized
gains (1.29) (.45) (1.36) --
------ ------- --------- -------
Net asset value, end of year $ 12.52 $ 11.41 $ 9.07 $ 10.41
====== ======= ========= =======
Total return 23.03%+ 31.79%+ (0.61)%+ (0.29)%+++
Net assets at end of year (000s) $ 7,120 $ 4,061 $ 2,201 $ 623
Ratio of operating expenses to
average net assets* 2.15% 2.15% 2.00% 2.00%++
Ratio of net investment income
(loss) to average net assets* (1.54)% (1.47)% (1.29)% (1.10)%++
Portfolio turnover rate 279.55% 217.28% 147.73% 135.17%
Average commission rate@ $ .0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- $ .02 $ .02 $ .00
</TABLE>
** Per-share figures have been calculated using the average shares method.
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower for each of the years in the
four year period ended June 30, 1995 if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@ For the year ended June 30, 1996, the Fund has elected to disclose its
average commission rate per share paid for security trades.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Capital Appreciation Fund
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Capital Appreciation Fund (formerly MetLife-State Street Research Capital
Appreciation Fund) (a series of State Street Research Equity Trust, hereafter
referred to as the "Trust") at June 30, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at June 30, 1996 by correspondence
with the custodian and brokers and the application of alternative procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 9, 1996
10
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Capital Appreciation Fund's performance was driven by a stock-investing
environment that featured low inflation, strong corporate profits and
economic growth. The Fund benefited from holdings in a number of industry
sectors, most notably, retail and textile/apparel, computer software and
service, hotel and restaurant and recreation, and airline stocks. Returns
were good from a historical standpoint, but the Fund underperformed its peer
group over the past year. Capital Appreciation Fund proved to be a stronger
performer in the second half of the period, beating the average total return
for its Lipper category.
Fund management made a number of changes to the Fund, including reducing its
position in technology stocks but concentrating holdings in the area of
computer software and service. As of June 30, 1996, software and service
stocks represented 12.1% of the portfolio.
Capital Appreciation Fund's management added to the Fund's position in retail
stocks. Retail, as of June 30, 1996, made up 19.8% of the portfolio.
Textile/apparel stocks accounted for another 6% of the portfolio.
Fund management also added to the portfolio's hotel and restaurant stocks,
which represented 12.5% of the portfolio as of this writing.
June 30, 1996
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Performance for a class includes periods
prior to the adoption of class designations in 1993. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and large institutions. Performance for "B" and "D" shares prior to class
designations in 1993 reflects annual 12b-1 fees of .50% and performance
thereafter reflects annual 12b-1 fees of 1%, which will reduce subsequent
performance. Performance reflects the maximum 4.5% "A" share front-end, or
5% "B" share or 1% "D" share contingent deferred sales charges. The Standard
& Poor's 500 Composite Index (S&P 500) includes 500 widely traded common
stocks and is a commonly used measure of U.S. stock market performance. The
index is unmanaged and does not take sales charges into consideration. Direct
investment in the index is not possible; results are for illustrative
purposes only.
Change In Value Of $10,000 Based On
The S&P 500 Compared To Change In Value Of $10,000
Invested In Capital Appreciation Fund
Class A Shares
***********[LINE CHARTS]************
Class A Shares
--------------
Average Annual Total Return
--------------------------------
1 Year 5 Years Life of Fund
------- ------- ------------
+18.30% +21.95% +16.55%
-------------------------------
Capital
Appreciation S&P
Fund 500
---- ---
8/86 9550 10000
6/87 12195 12606
6/88 11777 11730
6/89 13896 14135
6/90 16305 16463
6/91 16029 17679
6/92 20362 20048
6/93 27647 22780
6/94 27569 23100
6/95 36544 29112
6/96 45269 36676
======================================
Class B Shares
--------------
Average Annual Total Return
-------------------------------
1 Year 5 Years Life of Fund
------- ------- ------------
+17.97% +22.43% +16.87%
------- ------- ------------
Capital
Appreciation S&P
Fund 500
---- ---
8/86 10000 10000
6/87 12770 12606
6/88 12332 11730
6/89 14562 14135
6/90 17073 16463
6/91 16784 17679
6/92 21321 20048
6/93 28922 22780
6/94 28683 23100
6/95 37822 29112
6/96 46511 36676
======================================
Class C Shares
--------------
Average Annual Total Return
-------------------------------
1 Year 5 Years Life of Fund
------ ------- ------------
+24.28% +23.38% +17.25%
-------------------------------
Capital
Appreciation S&P
Fund 500
---- ---
8/86 10000 10000
6/87 12770 12606
6/88 12332 11730
6/89 14562 14135
6/90 17073 16463
6/91 16784 17679
6/92 21321 20048
6/93 28949 22780
6/94 29021 23100
6/95 38615 29112
6/96 47990 36676
=====================================
Class D Shares
--------------
Average Annual Total Return
-------------------------------
1 Year 5 Years Life of Fund
------ ------- ------------
22.03% +22.66% 16.90%
-------------------------------
Capital
Appreciation S&P
Fund 500
---- ---
8/86 10000 10000
6/87 12770 12606
6/88 12332 11730
6/89 14562 14135
6/90 17073 16463
6/91 16784 17679
6/92 21321 20048
6/93 28922 22780
6/94 28745 23100
6/95 37883 29112
6/96 46606 36676
=====================================
*************************************
11
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Capital
Appreciation Fund ("Fund"), along with shareholders of other series of State
Street Research Equity Trust ("Meeting"), was convened on October 20, 1995,
and continued thereafter. The results of the Meeting are set forth below.
Votes (millions
of shares)
----------------
For Withheld
---- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 29.4 1.9
Robert A. Lawrence 29.4 1.9
Dean O. Morton 29.4 1.9
Thomas L. Phillips 29.4 1.9
Toby Rosenblatt 29.4 1.9
Michael S. Scott Morton 29.4 1.9
Ralph F. Verni 29.4 1.9
Jeptha H. Wade 29.4 1.9
Votes (millions of
shares)
-------------------
For Against Abstain
--- ----- ------
2. The Fund's following investment policies were
reclassified from fundamental to
nonfundamental:
a. The policy regarding investments in
securities of companies with less than three
(3) years' continuous operation; 17.4 2.1 2.8
b. The policy regarding investments in illiquid
securities; 16.7 2.4 3.3
3. The Fund's fundamental policy regarding
investing in commodities and commodity
contracts was amended. 16.9 2.2 3.3
4. The Fund's fundamental policy on lending was
amended to clarify the permissibility of
securities lending. 17.3 1.9 3.2
5. The Master Trust Agreement was amended to
permit the Trustees to recognize, merge or
liquidate a fund without prior shareholder
approval. 21.1 6.4 3.8
6. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting. 22.8 4.5 4.1
12
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH EQUITY TRUST
Fund Information
State Street Research
Capital Appreciation Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust Company
of New York); presently
engaged in private investments
and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the
Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts Institute
of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
13
<PAGE>
[blank page]
<PAGE>
[BACK COVER]
State Street Research Capital Appreciation Fund [POSTAGE PERMIT]
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current
shareholders only. It is not authorized for use as sales material with
prospective investors.
The Dalbar awards recognize quality shareholder service and should
not be considered a rating of fund performance. The survey included
mutual fund complexes that volunteered or were otherwise selected
to participate and was not industry-wide.
CONTROL NUMBER: 3331-960827(0997)SSR-LD
Cover Illustration by Dorothy Cullinan CA-385D-896
<PAGE>
FROM THE CHAIRMAN
[Photo: Ralph F. Verni]
Dear Shareholders:
Over the past 12 months, the markets continued to reward investors. The
environment was extremely favorable: The economy grew at a
faster-than-expected pace, corporate earnings were strong, and
inflation--despite jumps in energy and food prices--was contained. More
recently, we've seen mounting evidence that the economy is picking up speed.
Job growth and sales of homes and autos have picked up, and consumer
confidence is higher.
Stocks
Over the past 12 months, large-company stocks--household names we all
recognize--performed well. The Standard & Poor's 500 Composite Index, which
represents the 500 largest stocks, provided a return of +25.98% for the 12
months ended June 30, 1996.(1) Small-company growth stocks also rewarded
investors, with the Russell 2000 Growth Index up +26.49% for the same
period.(1) A stronger economy is generally considered to be good for the
stock market, as it can result in higher profits for corporations.
Bonds
Bond performance was mixed over the past year. For the 12 months ended June
30, 1996, the Lehman Brothers Government/Corporate Bond Index gained
+4.66%.(1) High-yield bonds performed well in the strengthening economy,
while high-quality bonds remained relatively flat.
Looking Ahead
Our outlook continues to call for moderate economic growth and low
inflation--which should be positive for both stocks and bonds. We don't
believe the economy will start to overheat. In fact, with interest rates
moving higher recently, the economy could begin to slow down again. Although
there could be short-term bumps in the road, as we've seen lately in the
stock and bond markets, the prospects appear favorable for long-term
investors.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
July 31, 1996
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Russell 2000 Growth Index includes 2,000 small-company
stocks and is a commonly used measure of small stock performance. The Lehman
Brothers Government/Corporate Bond Index is a commonly used measure of bond
market performance. The indices are unmanaged and do not take sales charges
into consideration. Direct investment in the indices is not possible; results
are for illustrative purposes only.
(2)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
reflects reinvestment of capital gain distributions and income dividends. No
adjustment has been made for income taxes payable by shareholders on income
dividends or capital gain distributions.
(3)+24.39% for Class B shares; +25.66% for Class C shares; +24.40% for Class
D shares.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Performance for a class includes periods
prior to the adoption of class designations in 1993. "B" and "D" share
performance prior to adoption of multiple class shares reflects annual 12b-1
fees of .50% and performance thereafter reflects annual 12b-1 fees of 1%,
which will reduce subsequent performance.
(5)Performance reflects maximum 4.5% "A" share front-end, or 5% "B" share or
1% "D" share contingent deferred, sales charges. "C" shares, offered without
a sales charge, are available only to certain employee benefit plans and
institutions.
(6)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout this shareholder report is dated
as indicated and, because of possible changes in viewpoint, data and
transactions, should not be relied upon as being current thereafter.
- ----------------------------[Mountain Chart]-----------------------------------
Total value of $10,000 invested on August 25, 1986(2)
(Class A shares, at maximum applicable sales charge)
8/86 9550
6/87 11760
6/88 10952
6/89 12690
6/90 14789
6/91 13887
6/92 16424
6/93 19769
6/94 19953
6/95 23612
6/96 29594
- --------------------------------------------------------------------------------
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(4,5)
Life of Fund
(since 8/25/86) 5 Years 1 Year
- ------- --------------- --------------- ---------------
Class A +11.64%/+11.23% +15.27%/+14.94% +19.69%/+19.24%
- ------- --------------- --------------- ---------------
Class B +11.94%/+11.53% +15.67%/+15.33% +19.39%/+18.91%
- ------- --------------- --------------- ---------------
Class C +12.29%/+11.86% +16.60%/+16.23% +25.66%/+25.18%
- ------- --------------- --------------- ---------------
Class D +11.93%/+11.51% +15.87%/+15.50% +23.40%/+22.93%
- ------- --------------- --------------- ---------------
Cumulative Total Returns
(do not reflect sales charge)(4,6)
Life of Fund
(since 8/25/86) 5 Years 1 Year
- ------- ----------------- ----------------- ---------------
Class A +209.89%/+198.94% +113.10%/+110.04% +25.33%/+24.86%
- ------- ----------------- ----------------- ---------------
Class B +203.96%/+193.23% +109.03%/+106.03% +24.39%/+23.91%
- ------- ----------------- ----------------- ---------------
Class C +213.45%/+201.97% +115.56%/+112.16% +25.66%/+25.18%
- ------- ----------------- ----------------- ---------------
Class D +203.77%/+192.60% +108.90%/+105.58% +24.40%/+23.93%
- ------- ----------------- ----------------- ---------------
Performance results for the Fund are increased by the Distributor's voluntary
reduction of fund fees and expenses related to the Fund. The first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Equity Investment Fund: Quite An Impressive Year
[photo of Peter C. Bennett]
Peter C. Bennett
Portfolio Manager
It's been a great time to be an investor in Equity Investment Fund. The Fund
ended 1995 with the best performance record of all State Street Research
Funds and its second best year ever. Performance continued strong throughout
the first half of 1996, buoyed by moderate economic growth, low interest
rates and low inflation. As of June 30, 1996, Class A shares of the Fund were
up +25.33% for the past 12 months (does not reflect sales charge).(3) Equity
Investment Fund is also ahead of the average return of the 484 funds in its
Lipper Analytical Services' Growth and Income Funds category, which was up
+22.13% (does not include sales charge), for the same time period.
Focus on Technology
Much of the Fund's good performance can be attributed to the technology
sector, specifically computer software companies. We increased our
overweighted position in stocks of large, high-quality networking and
software companies--such as Cisco Systems--because of their strong market
share positions and revenue earnings potential. These stocks also saw good
earnings growth, spurred by the fact that U.S. corporations seek to increase
productivity.
Comeback for Retail
Another area worth mentioning is consumer cyclicals, where we have a strong
emphasis on retail stocks. The retail sector is coming back after a somewhat
prolonged stagnant sales period. We are seeing consumer demand increase as
consumer income slowly begins to rise. We've added to our position in Home
Depot, our sixth largest holding, and are buying values where we see them.
Decreasing Exposure to Utilities
Our most significant underweighted sector is utilities. This sector is made
up of the telephone and electric utility industries which are being
restructured in response to regulatory change. There is a good deal of
uncertainty resulting from this activity and the competitive landscape
remains unclear. For these reasons, we've been hesitant to increase our
investment in this area.
Looking Ahead
We continue to focus on high-quality names for the portfolio, which is a
strategy that has served us well. Even though the market has gone through
some major ups and downs over the past few months, this fund continues to
seek long-term growth.
In addition, you may know that John Wilson joined State Street Research in
July as the new portfolio manager for Equity Investment Fund. The Fund will
celebrate its tenth anniversary in August--a perfect time for a new manager
to take the Fund into its second decade.
June 30, 1996
Top 10 Stock Positions
(by percentage of net assets)
1 Royal Dutch Petroleum Oil company 3.1%
2 Monsanto Chemical company 3.0%
3 General Electric Electronics giant 2.9%
4 Philip Morris Tobacco giant 2.8%
5 PepsiCo Global snack and beverage company 2.6%
6 Home Depot National retailer 2.5%
7 Citicorp Nation's largest bank 2.4%
8 Schlumberger Leading oil service equipment provider 2.3%
9 Cisco Systems Producer of networking products/services 2.3%
10 BankAmerica California based national bank 2.1%
These securities represent an aggregate of 26.0% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities or industries listed in this table
or in the text above.
Top 5 Industries
(by percentage of net assets)
[typeset representation of bar chart]
Chemicals 8.8%
Retail 7.5%
Computer software
and service 7.4%
Oil 5.7%
Hospital supply 5.3%
Total: 34.7%
Best and Worst Contributors to Performance
(July 1, 1995 through June 30, 1996)
Best [arrow pointing up]
Monsanto
Strong earnings growth and new products in agricultural chemicals.
General Electric
High quality and stronger than expected earnings.
Ciba-Geigy
Merger with Sandoz.
Worst [arrow pointing down]
Alcoa
Concerns over weaker than expected prices for aluminum.
Ford
Concerns over outlook for automobile sales.
Toys 'R' Us
Weak environment for retailers and increased competitors.
2
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
INVESTMENT PORTFOLIO
June 30, 1996
Value
Shares (Note 1)
- -------------------------------------- ------ -------------
COMMON STOCKS 95.1%
Basic Industries 16.3%
Chemical 8.8%
Ciba-Geigy AG ADR 38,500 $ 2,343,495
E.I. du Pont de Nemours & Co. 31,200 2,468,700
Monsanto Co. 114,000 3,705,000
Rohm & Haas Co. 38,100 2,390,775
-----------
10,907,970
-----------
Electrical Equipment 2.9%
General Electric Co. 42,000 3,633,000
-----------
Machinery 1.9%
Case Corp. 28,100 1,348,800
Pall Corp. 39,400 950,525
-----------
2,299,325
-----------
Metal & Mining 2.7%
Aluminum Company of America 36,100 2,071,237
Nucor Corp. 25,100 1,270,688
-----------
3,341,925
-----------
Total Basic Industries 20,182,220
-----------
Consumer Cyclical 17.6%
Automotive 4.2%
Ford Motor Co. 68,000 2,201,500
General Motors Corp. 41,900 2,194,513
Magna International, Inc. Cl. A 16,900 777,400
-----------
5,173,413
-----------
Building 1.0%
Owens-Corning Fiberglas Corp.* 29,400 1,264,200
-----------
Hotel & Restaurant 2.0%
Mirage Resorts, Inc.* 46,600 2,516,400
-----------
Recreation 3.2%
Comcast Corp. Cl. A 10,600 194,775
Comcast Corp. Cl. A Special 32,100 593,850
Walt Disney Co. 26,043 1,637,454
Mattel, Inc. 54,288 1,553,994
-----------
3,980,073
-----------
Retail Trade 7.1%
Home Depot, Inc. 57,400 3,099,600
Gucci Group N.V.* 26,900 1,735,050
J.C. Penney Company, Inc. 24,400 1,281,000
Kroger Co.* 35,100 1,386,450
Wal-Mart Stores, Inc. 50,600 1,283,975
-----------
8,786,075
-----------
Total Consumer Cyclical 21,720,161
-----------
Consumer Staple 22.0%
Business Service 2.0%
Interpublic Group of Companies, Inc. 53,800 $ 2,521,875
-----------
Drug 4.5%
American Home Products Corp. 31,600 1,899,950
Eli Lilly & Co. 25,272 1,642,680
Pfizer, Inc. 29,200 2,084,150
-----------
5,626,780
-----------
Food & Beverage 4.6%
Anheuser-Busch, Inc. 33,000 2,475,000
PepsiCo, Inc. 89,200 3,155,450
-----------
5,630,450
-----------
Hospital Supply 5.3%
Baxter International, Inc. 48,000 2,268,000
Columbia/HCA Healthcare Corp.* 26,300 1,403,763
Johnson & Johnson 26,000 1,287,000
United Healthcare Corp. 30,800 1,555,400
-----------
6,514,163
-----------
Personal Care 2.8%
Gillette Co. 20,800 1,297,400
Procter & Gamble Co. 23,400 2,120,625
-----------
3,418,025
-----------
Tobacco 2.8%
Philip Morris Companies, Inc. 33,600 3,494,400
-----------
Total Consumer Staple 27,205,693
-----------
Energy 8.8%
Oil 5.7%
Exxon Corp. 14,300 1,242,313
Royal Dutch Petroleum Co. 24,600 3,782,250
Total S.A. Cl. B ADR 55,129 2,046,664
-----------
7,071,227
-----------
Oil Service 3.1%
Halliburton Co. 16,400 910,200
Schlumberger Ltd. 34,000 2,864,500
-----------
3,774,700
-----------
Total Energy 10,845,927
-----------
Finance 8.1%
Bank 4.4%
BankAmerica Corp. 34,100 2,583,075
Citicorp 35,300 2,916,662
-----------
5,499,737
-----------
The accompanying notes are an integral part of the financial
statements.
3
<PAGE>
Value
Shares (Note 1)
- -------------------------------------- ---- -----------
Financial Service 1.6%
Federal National Mortgage Association 57,900 $ 1,939,650
-----------
Insurance 2.1%
Ace Ltd. 19,100 897,700
American International Group, Inc. 5,650 557,231
Travelers, Inc. 25,050 1,142,906
-----------
2,597,837
-----------
Total Finance 10,037,224
-----------
Science & Technology 18.5%
Aerospace 2.9%
Boeing Co. 21,700 1,890,612
Raytheon Co. 33,000 1,703,625
-----------
3,594,237
-----------
Computer Software & Service 7.4%
Cisco Systems, Inc.* 50,000 2,831,250
Electronic Data Systems Corp. 39,600 2,128,500
First Data Corp. 22,900 1,823,412
Microsoft Corp.* 19,400 2,330,425
-----------
9,113,587
-----------
Electronic Equipment 3.8%
L.M. Ericsson Telephone Co. Cl. B ADR* 96,640 2,077,760
Lucent Technologies, Inc.* 35,300 1,336,987
Perkin-Elmer Corp. 26,800 1,293,100
-----------
4,707,847
-----------
Office Equipment 4.4%
Diebold, Inc. 34,650 1,671,863
Hewlett-Packard Co. 21,700 2,161,862
International Business Machines Corp. 15,800 1,564,200
-----------
5,397,925
-----------
Total Science & Technology 22,813,596
-----------
Utility 3.8%
Electric 0.8%
FPL Group, Inc. 21,800 1,002,800
-----------
Telephone 3.0%
AT&T Corp. 31,700 1,965,400
AirTouch Communications, Inc.* 61,600 1,740,200
-----------
3,705,600
-----------
Total Utility 4,708,400
-----------
Total Common Stocks (Cost $91,187,776) 117,513,221
-----------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------- --------- --------- ------------
CONVERTIBLE BONDS 1.5%
Equitable Company, Inc. Cv.
Sub. Deb., 6.125% $1,191,000 12/15/2024 $ 1,360,718
Price Co. Cv. Sub. Deb., 5.50% 440,000 2/28/2012 457,600
----------
Total Convertible Bonds (Cost $1,648,785) 1,818,318
----------
COMMERCIAL PAPER 4.0%
American Express Credit Corp.,
5.39% 4,433,000 7/01/1996 4,433,000
Associates Corp. of North
America, 5.36% 568,000 7/03/1996 568,000
----------
Total Commercial Paper (Cost $5,001,000) 5,001,000
----------
Total Investments (Cost $97,837,561)--100.6% 124,332,539
Cash and Other Assets, Less Liabilities--(0.6)% (796,002)
----------
Net Assets--100.0% $123,536,537
==========
Federal Income Tax Information:
At June 30, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $97,899,747 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $27,210,854
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (778,062)
-----------
$26,432,792
===========
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Statement of Assets and Liabilities
June 30, 1996
Assets
Investments, at value (Cost $97,837,561) (Note 1) $124,332,539
Cash 6,590
Dividends and interest receivable 162,471
Receivable for securities sold 143,785
Receivable for fund shares sold 53,821
Receivable from Distributor (Note 3) 53,534
Other assets 5,949
-----------
124,758,689
Liabilities
Payable for securities purchased 904,641
Accrued transfer agent and shareholder services (Note
2) 74,434
Payable for fund shares redeemed 73,086
Accrued management fee (Note 2) 62,922
Accrued distribution and service fees (Note 5) 18,129
Accrued trustees' fees (Note 2) 6,027
Dividends payable 2,310
Other accrued expenses 80,603
-----------
1,222,152
-----------
Net Assets $123,536,537
===========
Net Assets consist of:
Undistributed net investment income $ 671,546
Unrealized appreciation of investments 26,494,978
Accumulated net realized gain 7,707,953
Shares of beneficial interest 88,662,060
-----------
$123,536,537
===========
Net Asset Value and redemption price per share of
Class A shares ($39,300,231 / 2,306,216 shares of
beneficial interest) $17.04
======
Maximum Offering Price per share of Class A shares
($17.04 / .955) $17.84
======
Net Asset Value and offering price per share of
Class B shares ($13,128,567 / 777,751 shares of
beneficial interest)* $16.88
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($70,176,849 / 4,121,645
shares of beneficial interest) $17.03
======
Net Asset Value and offering price per share of
Class D shares ($930,890 / 55,166 shares of
beneficial interest)* $16.87
======
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the year ended June 30, 1996
Investment Income
Dividends, net of foreign taxes of $31,052 $ 1,706,929
Interest 426,882
---------
2,133,811
Expenses
Management fee (Note 2) 676,177
Transfer agent and shareholder services (Note 2) 327,103
Custodian fee 95,721
Reports to shareholders 50,968
Registration fees 47,281
Audit fee 28,954
Trustees' fees (Note 2) 15,680
Service fee--Class A (Note 5) 88,133
Distribution and service fees--Class B (Note 5) 89,779
Distribution and service fees--Class D (Note 5) 8,123
Legal fees 4,694
Miscellaneous 13,934
---------
1,446,547
Expenses borne by the Distributor (Note 3) (220,240)
---------
1,226,307
---------
Net investment income 907,504
---------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 10,187,786
Net unrealized appreciation of investments 11,825,753
---------
Net gain on investments 22,013,539
---------
Net increase in net assets resulting from
operations $22,921,043
=========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Statement of Changes in Net Assets
Year ended June 30
---------------------------
1996 1995
- ------------------------------ ----------- ------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 907,504 $ 626,508
Net realized gain on
investments* 10,187,786 1,524,460
Net unrealized appreciation of
investments 11,825,753 11,229,657
--------- ----------
Net increase resulting from
operations 22,921,043 13,380,625
--------- ----------
Dividends from net investment income:
Class A (248,210) (111,024)
Class C (571,956) (535,596)
--------- ----------
(820,166) (646,620)
--------- ----------
Distributions from net realized gains:
Class A (1,371,017) (778,560)
Class B (315,045) (112,505)
Class C (2,286,228) (859,567)
Class D (31,975) (15,072)
--------- ----------
(4,004,265) (1,765,704)
--------- ----------
Net increase from fund share
transactions (Note 6) 17,130,921 9,948,321
--------- ----------
Total increase in net assets 35,227,533 20,916,622
Net Assets
Beginning of year 88,309,004 67,392,382
--------- ----------
End of year (including
undistributed net investment
income of $671,546 and
$135,113, respectively) $123,536,537 $88,309,004
========= ==========
* Net realized gain for
Federal income tax purposes
(Note 1) $ 10,179,814 $ 1,567,315
========= ==========
Notes to Financial Statements
June 30, 1996
Note 1
State Street Research Equity Investment Fund, formerly MetLife-State Street
Research Equity Investment Fund (the "Fund") is a series of State Street
Research Equity Trust, formerly MetLife-State Street Equity Trust (the
"Trust"), which was organized as a Massachusetts business trust in March,
1986 and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Trust commenced operations
in August, 1986. The Trust consists presently of four separate funds: State
Street Research Equity Investment Fund, State Street Research Capital
Appreciation Fund, State Street Research Equity Income Fund and State Street
Research Global Resources Fund.
The Fund seeks to achieve long-term growth of capital and, secondarily,
long-term growth of income by investing primarily in common stocks of
established companies with above-average prospects for growth.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. Investment Valuation
Values for listed 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. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Short-term securities
maturing within sixty days are valued at amortized cost. Other securities, if
any, are valued at their fair value as determined in accordance with
established methods consistently applied.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
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 among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested quarterly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the year ended June 30, 1996, the fees pursuant to such
agreement amounted to $676,177.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1996, the amount of such shareholder servicing and account
maintenance expenses was $191,370.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $15,680 during the year ended June 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended June 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $220,240.
Note 4
For the year ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $60,227,860 and $44,463,543,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance or servicing of shareholder
accounts, to reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the year ended June 30, 1996,
fees pursuant to such plan amounted to $88,133, $89,779 and $8,123 for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $17,387 and $116,451, respectively on sales of Class A shares of
the Fund during the year ended June 30, 1996, and that MetLife Securities,
Inc. earned commissions aggregating $212,434 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $40,509
and $39 on redemptions of Class B and Class D shares, respectively, during
the same period.
7
<PAGE>
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1996,
Metropolitan owned 42,732 Class D shares of the Fund and the Distributor
owned 3,603 Class A shares of the Fund.
Share transactions were as follows:
Year ended June 30
------------------------------------------------------
1996 1995
------------------------- -------------------------
Class A Shares Amount Shares Amount
------------------ ---------- ----------- -------- -------------
Shares sold 405,624 $ 6,395,709 348,182 $ 4,474,313
Issued upon
reinvestment of:
Distributions
from net realized
gains 89,924 1,331,731 60,210 746,003
Dividends from
net investment
income 14,813 236,859 7,369 105,228
Shares repurchased (387,435) (6,071,101) (630,567) (8,019,412)
-------- --------- ------ -----------
Net increase
(decrease) 122,926 $ 1,893,198 (214,806) $ (2,693,868)
======== ========= ====== ===========
Class B Shares Amount Shares Amount
------------------ -------- --------- ------ -----------
Shares sold 440,639 $ 6,927,207 147,104 $ 1,868,350
Issued upon
reinvestment of
distributions
from net realized
gains 20,913 307,750 9,061 111,547
Shares repurchased (102,902) (1,616,965) (63,119) (791,085)
-------- --------- ------ -----------
Net increase 358,650 $ 5,617,992 93,046 $ 1,188,812
======== ========= ====== ===========
Class C Shares Amount Shares Amount
------------------ -------- --------- ------ -----------
Shares sold 1,692,679 $ 26,954,407 1,589,454 $ 20,294,474
Issued upon
reinvestment of:
Distributions
from net realized
gains 154,432 2,286,228 69,042 859,569
Dividends from
net investment
income 36,260 571,723 24,036 342,993
Shares repurchased (1,302,028) (20,281,019) (784,881) (10,102,310)
-------- --------- ------ -----------
Net increase 581,343 $ 9,531,339 897,651 $ 11,394,726
======== ========= ====== ===========
Class D Shares Amount Shares Amount
------------------ -------- --------- ------ -----------
Shares sold 5,582 $ 87,865 5,152 $ 64,522
Issued upon
reinvestment of
distributions
from net realized
gains 2,081 30,561 1,172 14,429
Shares repurchased (1,906) (30,034) (1,525) (20,300)
-------- --------- ------ -----------
Net increase 5,757 $ 88,392 4,799 $ 58,651
======== ========= ====== ===========
8
<PAGE>
Financial Highlights
For a share outstanding throughout each year:
Class A
------------------------------------------------
Year ended June 30
------------------------------------------------
1996** 1995** 1994 1993 1992
-------------------- ------ ------ ------ ------ --------
Net asset value,
beginning of year $14.28 $12.44 $14.52 $13.16 $11.19
Net investment
income (loss)* .12 .08 .01 .04 .05
Net realized and
unrealized gain
(loss) on
investments 3.38 2.14 .18 2.48 1.99
Distributions from
net investment
income (.11) (.05) -- (.04) (.07)
Distributions from
net realized gains (.63) (.33) (2.27) (1.12) --
---- ---- ---- ---- ------
Net asset value, end
of year $17.04 $14.28 $12.44 $14.52 $13.16
==== ==== ==== ==== ======
Total return 25.33%+ 18.34%+ 0.93%+ 20.37%+ 18.27%+
Net assets at end of
year (000s) $39,300 $31,174 $29,821 $26,933 $48,473
Ratio of operating
expenses to
average net
assets* 1.25% 1.42% 1.50% 1.50% 1.50%
Ratio of net
investment income
(loss) to average
net assets* 0.79% 0.64% 0.08% 0.23% 0.43%
Portfolio turnover
rate 44.44% 47.93% 62.93% 92.35% 81.89%
Average commission
rate@ $.0331 -- -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each year
(Note 3). $.03 $.06 $.04 $.02 $.02
Class B
-------------------------------------------
June 1, 1993
(Commencement
of Share
Class
Designations)
Year ended June 30 to
--------------------------
1996** 1995** 1994 June 30, 1993
--------------------------- ------ ------ ------ -------------
Net asset value, beginning
of year $14.16 $12.36 $14.51 $14.78
Net investment income
(loss)* .01 .01 (.02) .00
Net realized and unrealized
gain (loss) on investments 3.34 2.12 .14 (.26)
Distributions from net
investment income -- -- -- (.01)
Distributions from net
realized gains (.63) (.33) (2.27) --
---- ---- ---- -----------
Net asset value, end of
year $16.88 $14.16 $12.36 $14.51
==== ==== ==== ===========
Total return 24.39%+ 17.70%+ 0.37%+ (1.77)%+++
Net assets at end of year
(000s) $13,129 $5,933 $4,029 $663
Ratio of operating expenses
to average net assets* 2.00% 2.00% 2.00% 2.00%++
Ratio of net investment
income (loss) to average
net assets* 0.05% 0.08% (0.39)% 0.03%++
Portfolio turnover rate 44.44% 47.93% 62.93% 92.35%
Average commission rate@ $.0331 -- -- --
*Reflects voluntary
assumption of fees or
expenses per share in each
year (Note 3). $.03 $.06 $.04 $.00
Class C
-------------------------------------------
June 1, 1993
(Commencement
of Share
Class
Designations)
Year ended June 30 to
--------------------------
1996** 1995** 1994 June 30, 1993
--------------------------- ------ ------ ------ -------------
Net asset value, beginning
of year $14.27 $12.48 $14.51 $14.78
Net investment income
(loss)* .17 .14 .07 (.00)
Net realized and unrealized
gain (loss) on investments 3.37 2.15 .17 (.25)
Dividends from net
investment income (.15) (.17) -- (.02)
Distributions from net
realized gains (.63) (.33) (2.27) --
---- ---- ---- -----------
Net asset value, end of
year $17.03 $14.27 $12.48 $14.51
==== ==== ==== ===========
Total return 25.66%+ 18.83%+ 1.41%+ (1.69)%+++
Net assets at end of year
(000s) $70,177 $50,503 $32,991 $18,796
Ratio of operating expenses
to
average net assets* 1.00% 1.00% 1.00% 1.00%++
Ratio of net investment
income (loss) to average
net assets* 1.06% 1.09% 0.59% (0.39)%++
Portfolio turnover rate 44.44% 47.93% 62.93% 92.35%
Average commission rate@ $.0331 -- -- --
*Reflects voluntary
assumption of fees or
expenses per share in each
year (Note 3). $.03 $.06 $.06 $.00
<TABLE>
<CAPTION>
Class D
-------------------------------------------
June 1, 1993
(Commencement
of Share
Class
Designations)
Year ended June 30 to
--------------------------
1996** 1995** 1994 June 30, 1993
- ----------------------------------------- ------ ------ ------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $14.15 $12.36 $14.51 $14.78
Net investment income (loss)* .01 .01 (.05) .00
Net realized and unrealized gain (loss)
on investments 3.34 2.11 .17 (.26)
Dividends from net investment income -- -- -- (.01)
Distributions from net realized gains (.63) (.33) (2.27) --
---- ---- ---- -----------
Net asset value, end of year $16.87 $14.15 $12.36 $14.51
==== ==== ==== ===========
Total return 24.40%+ 17.53%+ 0.45%+ (1.77)%+++
Net assets at end of year (000s) $931 $699 $551 $491
Ratio of operating expenses to
average net assets* 2.00% 2.00% 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* 0.04% 0.08% (0.41)% 0.12%++
Portfolio turnover rate 44.44% 47.93% 62.93% 92.35%
Average commission rate@ $.0331 -- -- --
* Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $.03 $.06 $.06 $.00
</TABLE>
** Per-share figures have been calculated using the average shares method.
++ Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@ For the year ended June 30, 1996, the Fund has elected to disclose its
average commission rate per share paid for security trades.
9
<PAGE>
Report of Independent Accountants
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Equity Investment Fund
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research Equity
Investment Fund (formerly MetLife-State Street Research Equity Investment
Fund) (a series of State Street Research Equity Trust, hereafter referred to
as the "Trust") at June 30, 1996, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
August 9, 1996
10
<PAGE>
Management's Discussion of Fund Performance
It was a good year for Equity Investment Fund. In 1995, the Fund experienced
it's second best year ever. The first half of 1996 has also brought in strong
performance due to moderate economic growth, low interest rates, and low
inflation. As of June 30, 1996, Class A shares of the Fund were up +25.33%
for the past 12 months (does not reflect sales charge). The Lipper Analytical
Services' Growth and Income category finished up +22.13% for the same time
period.
Technology stocks, which were already overweighted in the portfolio, were
added to over the course of the past year. The Fund's good performance can be
attributed to the earnings growth in this area attributed to the push in U.S.
corporations to increase productivity.
The Fund has also been focused on retail stocks in the consumer cyclical
area. These holdings are coming back after a prolonged stagnant sales period.
We've added to our holdings in this area.
The utilities sector in the portfolio has been underweighted due to
uncertainty resulting from mergers
and regulatory approvals among telephone and electric
companies.
In addition, John Wilson joined State Street Research in July as the new
portfolio manager for Equity Investment Fund.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects maximum 4.5% "A" share front-end sales charge or
5% "B" share or 1% "D" share contingent deferred sales charge. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and large institutions. Performance for "B" and "D" shares
prior to class designations in 1993 reflects annual 12b-1 fees of .50% and
performance thereafter reflects annual 12b-1 fees of 1%, which will reduce
subsequent performance.
*************************[LINE CHARTS]***********************
Change in Value of
$10,000 Based on the S&P 500
Compared to Change in Value of $10,000
Invested in the Fund
=============================================================
Class A Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+19.69%/+19.24% +15.27%/+14.94% +11.64%/+11.23%
- -------------------------------------------------------------
Equity
Investment
Fund S&P 500
---- -------
8/25/86 9550 10000
6/30/87 12195 12606
6/30/88 11777 11730
6/30/89 13896 14135
6/30/90 16305 16463
6/30/91 16029 17679
6/30/92 20362 20048
6/30/93 27647 22780
6/30/94 27569 23100
6/30/95 36544 29112
6/30/96 45269 36676
=============================================================
Class B Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+19.39%/+18.91% +15.67%/+15.33% +11.94%/+11.53%
- -------------------------------------------------------------
Equity
Investment
Fund S&P 500
---- -------
8/25/86 10000 10000
6/30/87 12314 12606
6/30/88 11469 11730
6/30/89 13288 14135
6/30/90 15486 16463
6/30/91 14542 17679
6/30/92 17198 20048
6/30/93 20685 22780
6/30/94 20761 23100
6/30/95 24436 29112
6/30/96 30396 36676
=============================================================
Class C Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+25.66%/+25.18% +16.60%/+16.23% +12.29%/+11.86%
- -------------------------------------------------------------
Equity
Investment
Fund S&P 500
---- -------
8/25/86 10000 10000
6/30/87 12314 12606
6/30/88 11469 11730
6/30/89 13288 14135
6/30/90 15486 16463
6/30/91 14542 17679
6/30/92 17198 20048
6/30/93 20701 22780
6/30/94 20992 23100
6/30/95 24945 29112
6/30/96 31345 36676
=============================================================
Class D Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+23.40%/+22.93% +15.87%/+15.50% +11.93%/+11.51%
- -------------------------------------------------------------
Equity
Investment
Fund S&P 500
---- -------
8/25/86 10000 10000
6/30/87 12314 12606
6/30/88 11469 11730
6/30/89 13288 14135
6/30/90 15486 16463
6/30/91 14542 17679
6/30/92 17198 20048
6/30/93 20684 22780
6/30/94 20777 23100
6/30/95 24418 29112
6/30/96 30377 36676
************************************************************
11
<PAGE>
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research Equity
Investment Fund ("Fund"), along with shareholders of other series of State
Street Research Equity Trust ("Meeting"), was convened on October 20, 1995,
and continued thereafter. The results on the proposals are set forth below.
Votes (millions
of shares)
----------------
For Withheld
--- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 29.4 1.9
Robert A. Lawrence 29.4 1.9
Dean O. Morton 29.4 1.9
Thomas L. Phillips 29.4 1.9
Toby Rosenblatt 29.4 1.9
Michael S. Scott Morton 29.4 1.9
Ralph F. Verni 29.4 1.9
Jeptha H. Wade 29.4 1.9
Votes (millions of
shares)
-------------------
For Against Abstain
--- ------- ------
2. The Fund's following investment policies were
reclassified from fundamental to nonfundamental:
a. The policy regarding investments in securities
of companies with less than three (3) years'
continuous operation; 2.5 0.6 0.3
b. The policy regarding investments in illiquid
securities. 2.5 0.6 0.3
3. The Fund's fundamental policy regarding investing
in commodities and commodity contracts was
amended. 2.4 0.6 0.4
4. The Fund's fundamental policy on lending was
amended to clarify the permissibility of
securities lending. 2.3 0.3 0.5
5. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate a
fund without prior shareholder approval. 21.1 6.4 3.8
6. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting. 22.8 4.5 4.1
12
<PAGE>
Fund Information, Officers and Trustees of
State Street Research Equity Trust
Fund Information
State Street Research
Equity Investment Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
13
<PAGE>
[Back Cover]
State Street Research Equity Investment Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3329-960826 (0997)SSR-LD
Cover Illustration by Dorothy Cullinan EIV-382D-896
<PAGE>
[Front Cover]
[State Street Research logo]
State Street Research
Equity Investment Fund
Annual Report
June 30, 1996
[drawing of person climbing mountain toward the stars]
What's Inside
Investment Update:
Favorable markets
reward investors
Portfolio Manager's Review
Quite an impressive year
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
----------------------------[Dalbar Award seal:] ----------------------------
Quality
Tested Service
1995
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Service
-----------------------------------------------------------------------------
<PAGE>
[FRONT COVER]
Equity
State Street Research Income
Equity Income Fund Turns 10
See Page 2
Seeking high current income, and
secondarily, long-term capital growth
Annual Report
June 30, 1996 [Photo/illustration]
What's Inside
- ----[Dalbar Award seal:] ---
Chairman's Message: 2
Quality Equity Income Fund Turns 10!
Tested Service
1995 Portfolio Manager's Review: 3
Consistent performance
Dalbar using a value-based
Honors Commitment To: approach
Investors
Fund Information: 3
For Excellence Facts and figures
in
Shareholder Service Portfolio Holdings 6
and Financial Statements
- ----------------------------
Glossary 18
<PAGE>
EQUITY INCOME FUND
FUND PERFORMANCE
CUMULATIVE RETURNS FOR THE YEAR ENDED JUNE 30, 1996
Equity Income Fund (Class A)(1) +22.41%
Lipper Equity Income Funds' Average(2) +22.09%
S&P 500(2) +25.98%
SEC AVERAGE ANNUAL
COMPOUND RATES OF RETURN
(at maximum applicable sales charge)1,3
Life of Fund
(since 8/25/86) 5 years 1 year
Class A +10.44% +14.64% +16.90%
Class B +10.78% +15.04% +16.60%
Class C +11.14% +15.99% +22.82%
Class D +10.78% +15.26% +20.68%
- ---------------------[GRAPHIC -- MOUNTAIN CHART]-----------------------------
INVESTMENT GROWTH SINCE 1986
Total value of $10,000 invested on August 25, 1986(4)
(Class A shares, at maximum applicable sales charge)
8/86 10000
6/87 10832
6/88 10569
6/89 12351
6/90 13768
6/91 12903
6/92 14814
6/93 18037
6/94 18815
6/95 21850
6/96 26748
- -------------------------[END MOUNTAIN CHART]-----------------------------------
Please note that the discussion throughout this shareholder report is dated
as indicated and, because of possible changes in viewpoint, data and
transactions, should not be relied upon as being current thereafter.
(1)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Cumulative returns for the year ended
June 30, 1996, were 21.60% for Class B, 22.82% for Class C and 21.68% for
Class D. Cumulative returns do not reflect sales charges.
(2)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged. Direct investment in the index is not
possible; results are for illustrative purposes only. Lipper Equity Income
Fund category average does not reflect sales charge.
(3)Performance for a class includes periods prior to the adoption of class
designations in 1993. Performance reflects a maximum 4.5% "A" share front-end
sales charge or 5% "B" share or 1% "D" share contingent deferred sales
charge. "C" shares, offered without a sales charge, are available only to
certain employee benefit plans and large institutions. Performance for "B"
and "D" shares prior to class designations in 1993 reflects annual 12b-1 fees
of .50% and performance thereafter reflects annual 12b-1 fees of 1%, which
will reduce subsequent performance.
(4)Investment result is based on a $10,000 investment in Class A shares at
the maximum sales charge of 4.5% with reinvestment of capital gain
distributions and income dividends. No adjustment has been made for income
taxes payable by shareholders on income dividends or capital gain
distributions.
1 June 1996
<PAGE>
Chairman's Message
Equity Income Fund Turns 10
By Ralph F. Verni, Chairman
[PHOTO OF RALPH VERNI AND BART GEER]
(Caption)
Ralph Verni and Bart Geer, Portfolio Manager for Equity Income Fund
On August 25, 1996, State Street Research Equity
Income Fund turned 10-years old. Bart and I see
this as a milestone, for our shareholders as well
as the Fund.
Much has happened over the last 10 years. We've seen three presidents in the
White House, and a major shift in Congress. We've seen "Black Monday" in 1987
and a record-setting bull market in 1995.
Equity Income Fund has grown steadily over this past decade, as illustrated
by the chart on the left. We take pride in the Fund's success, and thank you
for investing your money with us.
What It Means To Be 10
Equity Income Fund's 10-year anniversary demonstrates the Fund's ability to
thrive over the long term. While there are over 7,000 mutual funds in
existence today, only 15% can boast of a 10-year track record. We see a
decade of consistent performance and steady growth as setting us apart from
the competition. We strive to provide you with a well-balanced portfolio in
the hopes that, no matter what the market may do, you can have confidence in
your investment with us.
Of the 144 equity income funds available, only 25 funds have been around for 10
years or more. We see this as a challenge, and hope to further excel within this
elite group of funds.
How We're Celebrating
In this spirit, we hope you'll find your Equity Income Fund annual report
easier to read and understand. Included is a glossary and explanations of
market indexes we frequently use in measuring our performance.
This is an ideal time to thank you for trusting us with your investments. We
understand you have a choice, and we're glad you've chosen State Street
Research.
/s/ Ralph F. Vernni
2 June 1996
<PAGE>
Portfolio Manager's Review
State Street Research
Equity Income Fund
Consistent Performance Using A Value-Based Approach
By Bart Geer, Portfolio Manager
[PHOTO OF BART GEER]
"My team and I position the Fund for
where we see the market going, not where
it is today."
Over the past year, the Equity Income Fund team produced above-average
returns. The volatility of the Fund has been relatively low compared to the
stock market as a whole. We often use a value-based approach to buying
securities and look for special situations. In other words, we shop for
bargains. We look closely at companies, seeking good value at reasonable
prices. We share ideas, question each other thoroughly, and challenge every
theory.
Overall Performance
My team and I position the Fund for where we see the market going, not where
it is today. The Fund had a good year, with Class A shares bringing in a
total return for the 12 months ended June 30, 1996, of +22.41% (does not
reflect sales charge). That compares favorably to the +22.09% average total
return in Lipper Analytical Services' Equity Income Funds category for the
same time period (does not reflect sales charge).
Stocks performed well over the course of the year. In the first quarter of
1996, we repositioned the Fund to defend against a possible weakening in the
economy. We looked for stocks of companies we believed were likely to remain
profitable through changing economic conditions. We also bought a large
percentage of convertible preferred stocks.
3 June 1996
<PAGE>
In broad terms, these are considered less risky than shares of common stock,
but also have the potential to provide a greater return than the average
share of preferred stock. They are great diversifiers for the portfolio as we
cautiously prepare for future markets.
Bonds, which account for 14% of the portfolio, performed well during the
first two quarters of the fiscal year, with prices rising and yields
declining. Their third quarter performance hurt us, but then in the fourth
quarter, the high-yield bonds in the portfolio outperformed the stocks.
Despite this volatility, we believe bonds are a stabilizer for the portfolio.
This year, bond holdings decreased portfolio volatility and boosted the
portfolio yield.
[PHOTO OF COMPUTER CHIP]
Activity In The Portfolio
We look for companies in sectors that seem capable of doing well in a
changing economy. We look for companies whose performance is not so closely
linked to the markets, but which also offer good value.
We reduced our holdings in the basic industries sector, specifically in
chemicals where we sold off Agrium and Cytec. We added incrementally to the
financial sector, including Mid Ocean and Fleet Financial. We increased the
Fund's holdings within the consumer staple sector by adding to our Coca-Cola
Enterprises holdings and buying stock in companies such as Whitman and ADT.
ADT is the largest single player in the home alarm systems industry, with
room to expand marketshare through acquisition. These positives are
independent of the economy, which made ADT exactly the kind of holding we
were looking to establish. We remain confident that ADT has the potential to
sustain this trend.
We also increased the Fund's investment in the consumer cyclical sector but
kept it underweighted compared to other equity income mutual funds. We've
been cautious as companies struggle somewhat for better returns. Exide, a
manufacturer of starting and ignition batteries, caught my eye because of a
series of European acquisitions which almost doubled its size. Unfortunately,
the price of lead, the major raw material Exide uses in its manufacturing,
has increased. Despite this, we remain cautiously optimistic about Exide.
Where Do We Go From Here?
Our goal is to structure a portfolio that performs well compared to the
market in good and bad environments. Over the next year, we plan to continue
with our cautious approach and try to position the Fund defensively, without
sacrificing total returns.
4 June 1996
<PAGE>
Equity Income Fund
--------------------------------[PIE CHART]-----------------------------------
Asset Allocation
Common Stocks 69%
Bonds 14%
Convertibles 8%
Preferred Stocks & Other 8%
Cash 1%
- --------------------------------------------------------------------------------
Top 10 Holdings
(by percentage of net assets)
1 Coca-Cola Enterprises
Largest Coca-Cola bottler 3.6%
2 Mid Ocean
Reinsurance company 2.8%
3 ENSERCH
Natural gas company 2.5%
4 Atlantic Richfield
Chemical company 2.4%
5 ADT
Security services provider 2.2%
6 Tosco
Petroleum products manufacturer 2.1%
7 Fleet Financial Group
Commercial banking 1.9%
8 Cooper Industries
Electric manufacturer 1.9%
9 Southern New England Telecom
Telecommunications services company 1.9%
10 Whitman
Consumer products firm 1.9%
These securities represent an aggregate of 23.2% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
- --------------------------------------------------------------------------------
Best & Worst Contributors
To Performance
(July 1, 1995 through June 30, 1996)
Best
Computervision
Robust profit gains for software company.
Granite Broadcasting
Positive performance for this regional TV network.
Coca-Cola Enterprises
Strong profit gains and a recent acquisition for the bottler.
Worst
Exide
Main raw material used by manufacturer--lead--
experienced a dramatic price increase.
Woolworth
Disappointing results for discount retailer.
Digital Equipment
Weaker than expected earnings for data processing equipment manufacturer.
5 June 1996
<PAGE>
Investment Portfolio
The Investment Portfolio is a detailed list of the securities owned by the
Fund. The Portfolio lists the number of shares and the market value of each
security issue and the percentage invested in each classification. Common
stocks are listed first, and broken down by industry, then sub-industry; then
preferred stocks, bonds and commercial paper follow.
Value
Shares (Note 1)
COMMON STOCKS 69.1%
Basic Industries 10.7%
CHEMICAL 4.0%
IMC Global, Inc. 16,700 $ 628,338
Mallinckrodt Group, Inc. 16,100 625,887
Mississippi Chemical Corp.* 45,000 900,000
Potash Corp. of Saskatchewan, Inc. 8,000 530,000
Rohm & Haas Co. 27,100 1,700,525
------------
4,384,750
------------
DIVERSIFIED 1.7%
Johnson Controls, Inc. 8,700 604,650
Mark IV Industries, Inc. 21,000 475,125
Teledyne, Inc. 23,000 830,875
------------
1,910,650
------------
MACHINERY 3.6%
Briggs & Stratton Corp. 17,000 699,125
Cooper Industries, Inc. 127,000 2,127,250
Sundstrand Corp. 32,000 1,172,000
------------
3,998,375
------------
METAL & MINING 1.4%
Alumax, Inc.* 50,000 1,518,750
------------
Total Basic Industries 11,812,525
------------
Consumer Cyclical 12.9%
AUTOMOTIVE 3.2%
Exide Corp. 50,000 1,212,500
Federal Mogul Corp. 47,600 874,650
Ford Motor Co. 29,200 945,350
General Motors Corp. 9,000 471,375
------------
3,503,875
------------
BUILDING 1.6%
LaFarge Corp. 90,000 1,822,500
------------
HOTEL & RESTAURANT 0.0%
Motels of America, Inc.+* 500 40,000
------------
RETAIL TRADE 8.1%
Federated Department Stores, Inc.* 24,000 819,000
Home Shopping Network, Inc.* 144,200 1,730,400
Intimate Brands, Inc. Cl. A 81,000 1,852,875
Kroger Co.* 25,000 987,500
Thrifty Payless Holdings, Inc. Cl. B* 120,000 2,070,000
Vons Companies, Inc.* 40,000 1,495,000
------------
8,954,775
------------
Total Consumer Cyclical 14,321,150
------------
Consumer Staple 10.8%
BUSINESS SERVICE 3.3%
ADT Ltd.* 130,000 $ 2,453,750
Anacomp, Inc.* 10,282 108,604
Moore Corp. Ltd. 46,900 885,238
PageMart Nationwide, Inc.+* 1,750 18,375
Vestar/LPA Investment Corp.+* 3,125 37,500
Viatel, Inc.+* 27,075 108,300
------------
3,611,767
------------
FOOD & BEVERAGE 5.5%
Coca-Cola Enterprises, Inc. 114,000 3,947,250
Whitman Corp. 86,000 2,074,750
------------
6,022,000
------------
HOSPITAL SUPPLY 1.1%
Baxter International, Inc. 26,000 1,228,500
------------
PRINTING & PUBLISHING 0.9%
Hollinger International, Inc. Cl. A* 93,000 1,057,875
------------
Total Consumer Staple 11,920,142
------------
Energy 8.9%
OIL 7.5%
Amerada Hess Corp. 8,300 445,088
Atlantic Richfield Co. 9,200 1,090,200
Oryx Energy Co. 78,400 1,274,000
Repsol S.A. ADR 39,300 1,365,675
Total S.A. ADR 48,900 1,815,413
Tosco Corp. 46,000 2,311,500
------------
8,301,876
------------
OIL SERVICE 1.4%
Baker Hughes, Inc. 13,000 427,375
Mapco, Inc. 20,000 1,127,500
------------
1,554,875
------------
Total Energy 9,856,751
------------
Finance 11.3%
BANK 4.0%
Bank of New York, Inc. 25,000 1,281,250
Chase Manhattan Corp.* 4,160 293,800
Fleet Financial Group, Inc. 49,100 2,135,850
Mellon Bank Corp. 11,000 627,000
South Trust Corp. 4,000 112,500
------------
4,450,400
------------
6 June 1996
<PAGE>
INVESTMENT PORTFOLIO (cont'd)
Value
Shares (Note 1)
FINANCIAL SERVICE 1.2%
Federal National Mortgage Association 40,800 $ 1,366,800
------------
INSURANCE 6.1%
Ace, Ltd. 38,100 1,790,700
AMBAC, Inc. 15,000 781,875
Mid Ocean Ltd. 74,700 3,062,700
PMI Group, Inc. 25,000 1,062,500
------------
6,697,775
------------
Total Finance 12,514,975
------------
Science & Technology 7.4%
AEROSPACE 2.1%
Boeing Co. 19,500 1,698,938
Sequa Corp. Cl. A* 15,000 646,875
------------
2,345,813
------------
COMPUTER SOFTWARE & SERVICE 3.1%
Computervision Corp.* 140,700 1,407,000
Western Digital Corp.* 78,600 2,053,425
------------
3,460,425
------------
ELECTRONIC COMPONENTS 1.1%
AMP, Inc. 15,000 601,875
Thomas & Betts Corp. 16,000 600,000
------------
1,201,875
------------
OFFICE EQUIPMENT 1.1%
Digital Equipment Corp.* 10,000 450,000
Quantum Corp.* 50,000 725,000
------------
1,175,000
------------
Total Science & Technology 8,183,113
------------
Utility 7.1%
ELECTRIC 2.3%
Allegheny Power Systems, Inc. 30,000 926,250
American Electric Power, Inc. 38,000 1,619,750
------------
2,546,000
------------
NATURAL GAS 2.9%
ENSERCH Corp. 125,000 2,718,750
TransTexas Gas Corp.* 48,000 456,000
------------
3,174,750
------------
TELEPHONE 1.9%
Southern New England Telecom Corp. 50,000 2,100,000
------------
Total Utility 7,820,750
------------
Total Common Stocks (Cost $65,562,135) 76,429,406
------------
PREFERRED STOCKS & OTHER 8.4%
Atlantic Richfield Co. Exch. Notes 110,000 $ 2,681,250
Boomtown, Inc. Wts.* 250 13
Crown Packaging Holdings Ltd. Wts.*+ 2,000 250
Gentra, Inc. Series G. Pfd.* 65,000 785,542
Gentra, Inc. Series Q Pfd.* 45,000 395,518
Heartland Wireless Communications, Inc. Wts.* 1,500 11,250
Intelcom Group, Inc. Pfd.#+ 500 517,500
K-III Communications Corp. Series B Exch.
Pfd.# 5,448 539,352
K-III Communications Corp.
Series C Pfd.+* 5,000 495,000
La Petite Holdings Co. Cum. Exch. Pfd.* 45,000 1,417,500
PageMart, Inc. Wts.*+ 3,450 20,700
SDW Holdings Corp. Wts.*+ 27,000 81,000
S.D. Warren Co. Series B Sr. Exch. Pfd.# 27,000 945,000
Sheffield Steel Corp. Wts.* 2,500 3,750
Supermarkets General Holding Corp. Exch.
Pfd.# 55,000 1,416,250
Wireless One, Inc. Wts.* 1,500 12,000
------------
Total Preferred Stocks & Other (Cost $8,836,046) 9,321,875
------------
CONVERTIBLE PREFERRED STOCKS 5.7%
Granite Broadcasting Corp. Cum. Cv. Exch.
Pfd.# 25,000 1,671,484
Salomon, Inc. Cv. Pfd.* 45,000 1,248,750
Station Casinos, Inc. Cv. Pfd.* 30,000 1,725,000
Tyco Toys, Inc. Series C Cv. Pfd.* 300,000 1,687,500
------------
Total Convertible Preferred Stocks
(Cost $4,955,625) 6,332,734
------------
Principal Maturity
Amount Date
CONVERTIBLE BONDS 1.7%
Crown Resources Corp. Cv. Sub.
Deb., 5.75% $600,000 8/27/2001 483,000
Rohr, Inc. Cv. Sub. Note, 7.75% 500,000 5/15/2004 1,000,000
Winstar Communications, Inc.,
Sr. Sub. Cv. Note, 14.00% 650,000 10/15/2005 442,000
-----------
Total Convertible Bonds (Cost $1,373,459) 1,925,000
-----------
7 June 1996
<PAGE>
INVESTMENT PORTFOLIO (cont'd)
Principal Maturity Value
Amount Date (Note 1)
NON-CONVERTIBLE BONDS 14.0%
Anacomp, Inc. Sr. Sub.
Note, 13.00% $ 177,000 6/04/2002 $169,920
Argosy Gaming Co. First
Mortgage Note, 13.25%+ 500,000 6/01/2004 506,250
Bayou Steel Corp. First
Mortgage Note, 10.25% 150,000 3/01/2001 138,000
Belle Casinos, Inc.
First Mortgage Notes,
12.00%+@ 175,000 10/15/2000 66,500
Carrols Merger Corp. Sr.
Notes, 11.50% 250,000 8/15/2003 252,500
Celcaribe S.A. Units,
0.00% to
3/14/98, 13.50% from
3/15/98 to maturity+ 43,000 3/15/2004 442,900
CHC Helicopter Corp. Sr.
Sub. Notes, 11.50% 442,000 7/15/2002 417,690
Clearnet Communications,
Inc. Units, 0.00% to
12/14/2000, 14.75% from
12/15/2000 to maturity 10,000 12/15/2005 613,750
Crown Packaging Holdings
Ltd. Sr. Sub. Notes,
0.00% to 10/31/2000,
12.25% from 11/1/2000
to maturity 2,000,000 11/01/2003 760,000
Dial Call
Communications, Inc.
Sr. Disc. Notes, 0.00%
to 4/14/99, 12.25% from
4/15/99 to maturity 1,000,000 4/15/2004 640,000
Echostar Communications
Satellite Broadcast Co.
Sr. Sec. Disc. Note,
0.00% to 3/14/2000,
13.125% from 3/15/2000
to maturity+ 500,000 3/15/2004 312,500
Finlay Enterprises, Inc.
Sr. Disc. Deb., 0.00%
to 4/30/98, 12.00% from
5/1/98 to maturity 250,000 5/01/2005 200,313
Haynes International,
Inc. Sr. Sec. Notes,
11.25% 800,000 6/15/1998 808,000
Heartland Wireless
Communications, Inc.
Units, 13.00% $ 250,000 4/15/2003 $273,125
Jitney-Jungle Stores of
America, Inc. Sr. Note,
12.00% 250,000 3/01/2006 254,375
La Petite Holdings Co.
Sr. Sec. Notes, 9.625% 500,000 8/01/2001 460,000
Motels of America, Inc.
Sr. Sub. Notes, 12.00% 500,000 4/15/2004 485,000
NS Group, Inc. Units,
13.50% 250,000 7/15/2003 242,500
Norcal Waste Systems,
Inc. Sr. Sub. Note,
12.75% to 11/14/96,
13.00% from 11/15/96 to
5/14/97, 13.25% from
5/15/97 to 11/14/97,
13.50% from 11/15/97 to
maturity+ 250,000 11/15/2005 260,000
Packaging Resources,
Inc. Sr. Note, 11.625%+ 250,000 5/01/2003 253,750
PageMart, Inc. Sr. Disc.
Notes, 0.00% to
10/31/98, 12.25% from
11/1/98 to maturity 750,000 11/01/2003 570,000
PageMart Nationwide,
Inc. Sr. Disc. Exch.
Notes, 0.00% to
1/31/2000, 15.00% from
2/1/2000 to maturity 500,000 2/01/2005 331,250
Park Newspapers, Inc.
Sr. Note, 11.875%+ 750,000 5/15/2004 757,500
Penn Traffic Co. Sr.
Notes, 8.625% 250,000 12/15/2003 208,750
J.M. Peters, Inc. Sr.
Notes, 12.75% 250,000 5/01/2002 232,500
Plastic Specialties and
Technologies, Inc. Sr.
Note, 11.25% 500,000 12/01/2003 480,000
Presidio Oil Co. Sr.
Sub. Gas Indexed Notes,
13.30%@ 400,000 7/15/2002 297,000
Presidio Oil Co. Sr.
Sec. Notes, 11.50%@ 650,000 9/15/2000 653,250
Ralphs Grocery Co. Sr.
Note, 10.45% 500,000 6/15/2004 490,000
Renco Metals, Inc. Sr.
Note, 11.50% 500,000 7/01/2003 500,000
8 June 1996
<PAGE>
INVESTMENT PORTFOLIO (cont'd)
Seven-Up/RC Bottling Co.
of Southern California,
Inc., 11.50%@ $ 250,000 8/01/1999 $ 168,750
Sheffield Steel Corp.
First Mortgage Note,
12.00% 500,000 11/01/2001 435,000
Spanish Broadcasting
Systems, Inc. Sr. Note,
7.50% 500,000 6/15/2002 500,312
Star Markets Co. Sr.
Sub. Note, 13.00% 250,000 11/01/2004 260,000
TransTexas Gas Corp. Sr.
Notes, 11.50% 500,000 6/15/2002 497,500
U.S.A. Mobile
Communications, Inc.
Sr. Notes, 14.00% 250,000 11/01/2004 285,000
Viatel, Inc. Sr. Disc.
Note, 0.00% to
1/14/2000, 15.00% from
1/15/2000 to maturity 750,000 1/15/2005 420,000
Winstar Communications,
Inc. Units, 0.00% to
10/14/2000, 14.00% from
10/15/2000 to maturity 550,000 10/15/2005 302,500
Wireless One, Inc. Sr.
Disc. Note, 13.00% 500,000 10/15/2003 521,250
---------------
Total Non-Convertible Bonds (Cost $15,612,552) 15,467,635
---------------
COMMERCIAL PAPER 1.9%
American Express Credit
Corp., 5.32% 465,000 7/01/1996 465,000
American Express Credit
Corp., 5.39% 1,445,000 7/03/1996 1,445,000
Household Finance Corp.,
5.25% 146,000 7/01/1996 146,000
---------------
Total Commercial Paper (Cost $2,056,000) 2,056,000
---------------
Total Investments (Cost $98,395,817)--100.8% 111,532,650
Cash and Other Assets, Less Liabilities--(0.8)% (841,758)
---------------
Net Assets--100.0% $110,690,892
===============
Federal Income Tax Information:
At June 30, 1996, the net unrealized
appreciation of investments based on cost for
Federal income tax purposes of $98,469,592
was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost $15,519,830
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value (2,456,772)
-----------
$13,063,058
===========
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
# Payments of income may be made in cash or in the form of additional
securities.
+ 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 June 30, 1996 was $3,894,287 and $3,918,025 (3.54%
of net assets), respectively.
@ Security is in default.
9 June 1996
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
The Statement of Assets and Liabilities is the Fund's balance sheet. Assets
are anything of value owned by the Fund; liabilities are claims against the
assets of the Fund. The Net Asset Value is the market value of each Fund
share.
ASSETS
Investments, at value (Cost $98,395,817) (Note 1) $111,532,650
Cash 278
Dividends and interest receivable 385,595
Receivable for securities sold 332,500
Receivable for fund shares sold 216,558
Receivable from Distributor (Note 3) 61,743
Other assets 6,491
------------
112,535,815
LIABILITIES
Payable for securities purchased 1,468,875
Accrued transfer agent and shareholder services
(Note 2) 83,831
Payable for fund shares redeemed 76,187
Accrued management fee (Note 2) 56,011
Dividends payable 36,200
Accrued distribution and service fees (Note 5) 30,251
Accrued trustees' fees (Note 2) 5,713
Other accrued expenses 87,855
------------
1,844,923
------------
NET ASSETS $110,690,892
============
Net Assets consist of:
Distribution in excess of net investment income $ (73,770)
Unrealized appreciation of investments 13,136,833
Accumulated net realized gain 15,197,104
Shares of beneficial interest 82,430,725
------------
$110,690,892
============
Net Asset Value and redemption price per share of
Class A shares ($44,463,886 / 3,209,801 shares of
beneficial interest) $13.85
=====
Maximum Offering Price per share of Class A shares
($13.85 / .955) $14.50
=====
Net Asset Value and offering price per share of
Class B shares ($25,543,231 / 1,848,643 shares of
beneficial interest)* $13.82
=====
Net Asset Value, offering price and redemption
price per share of Class C shares ($39,297,798 /
2,838,175 shares of beneficial interest) $13.85
=====
Net Asset Value and offering price per share of
Class D shares ($1,385,977 / 100,310 shares of
beneficial interest)* $13.82
=====
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement Of Operations
For the year ended June 30, 1996
The Statement of Operations is the Fund's income statement and shows the
income earned from its investments and its operating costs. It concludes with
the net gains (losses are shown in parentheses) for the period stated.
INVESTMENT INCOME
Dividends, net of foreign taxes of $2,910 $ 1,760,884
Interest, net of foreign taxes of $2,344 1,273,213
----------
3,034,097
EXPENSES
Management fee (Note 2) 649,578
Transfer agent and shareholder services (Note 2) 333,433
Custodian fee 133,408
Reports to shareholders 51,906
Audit fee 28,752
Registration fees 28,005
Trustees' fees (Note 2) 17,085
Service fee--Class A (Note 5) 100,997
Distribution and service fees--Class B (Note 5) 201,739
Distribution and service fees--Class D (Note 5) 12,176
Legal fees 7,508
Miscellaneous 17,634
----------
1,582,221
Expenses borne by the Distributor (Note 3) (267,958)
----------
1,314,263
----------
Net investment income 1,719,834
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) 15,234,292
Net unrealized appreciation of investments 2,941,031
----------
Net gain on investments 18,175,323
----------
Net increase in net assets resulting from
operations $19,895,157
==========
The accompanying notes are an integral part of the financial statements.
10 June 1996
<PAGE>
Financial Statements
Statement Of Changes In Net Assets
The Statement of Changes in Net Assets summarizes on a comparative basis
changes in net assets resulting from operations, distributions to
shareholders, and capital share transactions.
Year ended June 30
----------------------------
1996 1995
------------------------------ ------------ -------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 1,719,834 $ 2,054,937
Net realized gain on
investments* 15,234,292 1,155,735
Net unrealized appreciation of
investments 2,941,031 9,032,370
----------- ------------
Net increase resulting from
operations 19,895,157 12,243,042
----------- ------------
Dividends from net investment income:
Class A (882,400) (984,856)
Class B (304,585) (285,324)
Class C (914,329) (808,655)
Class D (17,808) (28,201)
----------- ------------
(2,119,122) (2,107,036)
----------- ------------
Distributions from net realized gains:
Class A (492,304) (2,006,103)
Class B (223,972) (563,723)
Class C (472,914) (1,043,962)
Class D (18,976) (63,626)
----------- ------------
(1,208,166) (3,677,414)
----------- ------------
Net increase from fund share
transactions (Note 6) 4,473,009 10,409,654
----------- ------------
Total increase in net assets 21,040,878 16,868,246
NET ASSETS
Beginning of year 89,650,014 72,781,768
----------- ------------
End of year (including
(overdistributed)
undistributed net investment
income of ($73,770) and
$322,548, respectively) $110,690,892 $ 89,650,014
=========== ============
* Net realized gain for
Federal income tax purposes
(Note 1) $ 15,256,123 $ 1,208,383
=========== ============
Notes to Financial Statements
June 30, 1996
NOTE 1
State Street Research Equity Income Fund, formerly MetLife-State Street
Research Equity Income Fund (the "Fund") is a series of State Street Research
Equity Trust, formerly MetLife-State Street Equity Trust (the "Trust"), which
was organized as a Massachusetts business trust in March, 1986 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Trust commenced operations in
August, 1986. The Trust consists presently of four separate funds: State
Street Research Equity Income Fund, State Street Research Capital
Appreciation Fund, State Street Research Equity Investment Fund and State
Street Research Global Resources Fund.
The Fund seeks to provide a high level of current income and, secondarily,
long-term growth of capital by investing primarily in common stocks offering
above-average dividend yields and in securities convertible into common
stocks. The Fund seeks to provide a higher income yield than that of the
Standard & Poor's 500 Stock Index. The Fund has authority to invest from time
to time in lower rated fixed income securities.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
The accompanying notes are an integral part of the financial statements.
11 June 1996
<PAGE>
FINANCIAL STATEMENTS
A. Investment Valuation
Values for listed 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. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Fixed income securities
are valued by a pricing service, approved by the Trustees, 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 accordance with established methods
consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. Discount on debt obligations is amortized under the
effective yield method. Certain preferred securities held by the Fund pay
dividends in the form of additional securities (payment-in-kind securities).
Dividend income on payment-in-kind preferred securities is recorded at the
market value of securities received. Differences between the market value of
securities received and the corresponding amounts of income accrued are
recorded as adjustments to income. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated among all funds in
the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations. For the year ended June 30, 1996, the Fund has designated as
long-term 100% of the distributions from net realized gains.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the year ended June 30, 1996, the fees pursuant to such
agreement amounted to $649,578.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1996, the amount of such shareholder servicing and account
maintenance expenses was $174,457.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $17,085 during the year ended June 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended June 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $267,958.
NOTE 4
For the year ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $111,585,734 and
$109,813,058, respectively.
12 June 1996
<PAGE>
FINANCIAL STATEMENTS
NOTE 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance or servicing of shareholder
accounts, to reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the year ended June 30, 1996,
fees pursuant to such plan amounted to $100,997, $201,739 and $12,176 for
Class A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $20,463 and $106,688, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1996, and that MetLife Securities,
Inc. earned commissions aggregating $174,802 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $65,434
and $39 on redemptions of Class B and Class D shares, respectively, during
the same period.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1996, the
Distributor owned 3,614 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
----------------------------------------------------
1996 1995
---------------------- ---------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------ ------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 499,172 $ 6,447,619 398,649 $ 4,285,947
Issued upon reinvestment of:
Distributions from net realized gains 37,754 461,359 179,249 1,907,857
Dividends from net investment income 61,647 800,177 82,151 897,184
Shares repurchased (578,171) (7,338,450) (1,195,595) (12,867,093)
----- ----------- ---------- ------------
Net increase (decrease) 20,402 $ 370,705 (535,546) $ (5,776,105)
===== =========== ========== ============
Class B Shares Amount Shares Amount
- ------------------------------------------ ----- ----------- ---------- ------------
Shares sold
670,304 $ 8,719,427 532,548 $ 5,717,454
Issued upon reinvestment of:
Distributions from net realized gains 17,255 210,166 48,954 520,771
Dividends from net investment income 20,749 269,362 23,498 257,756
Shares repurchased
(241,006) (3,101,383) (213,874) (2,294,678)
----- ----------- ---------- ------------
Net increase 467,302 $ 6,097,572 391,126 $ 4,201,303
===== =========== ========== ============
Class C Shares Amount Shares Amount
- ------------------------------------------ ----- ----------- ---------- ------------
Shares sold 887,078 $ 11,446,658 1,452,407 $ 15,677,247
Issued upon reinvestment of:
Distributions from net realized gains 38,732 472,914 98,117 1,043,974
Dividends from net investment income 70,662 914,329 73,413 806,458
Shares repurchased (1,135,981) (14,666,301) (512,040) (5,526,511)
----- ----------- ---------- ------------
Net increase (decrease) (139,509) $ (1,832,400) 1,111,897 $ 12,001,168
===== =========== ========== ============
Class D Shares Amount Shares Amount
- ------------------------------------------ ----- ----------- ---------- ------------
Shares sold 46,515 $ 607,680 24,855 $ 265,512
Issued upon reinvestment of:
Distributions from net realized gains 1,480 18,010 5,541 58,959
Dividends from net investment income 861 11,171 1,154 12,472
Shares repurchased
(65,543) (799,729) (32,405) (353,655)
----- ----------- ---------- ------------
Net decrease $
(16,687) $ (162,868) (855) (16,712)
===== =========== ========== ============
</TABLE>
13 June 1996
<PAGE>
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
Financial Highlights presents selected per share data, ratios and
supplemental data. The per share data demonstrates on a comparative basis how
the net asset value per share was affected by several factors during each
period.
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
------------------------------------------------
Year ended June 30
------------------------------------------------
1996** 1995** 1994 1993 1992
------------------------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.70 $10.87 $10.79 $ 9.19 $ 7,33
Net investment income* .23 .28 .24 .44 .39
Net realized and unrealized gain
(loss) on investments 2.36 1.37 .25 1.52 .83
Dividends from net investment income (.28) (.28) (.26) (.36) (.36)
Distributions from net realized
gains (.16) (.54) (.15) -- --
------ ------ ------ ------ -------
Net asset value, end of year $ 13.85 $11.70 $10.87 $10.79 $ 9.19
====== ====== ====== ====== =======
Total return 22.41%+ 16.12%+ 4.30%+ 21.64%+ 14.81%+
Net assets at end of year (000s) $44,464 $37,327 $40,484 $28,995 $51,585
Ratio of operating expenses to
average net assets* 1.25% 1.42% 1.50% 1.50% 1.50%
Ratio of net investment income to
average net assets* 1.78% 2.55% 2.42% 3.76% 4.27%
Portfolio turnover rate 111.13% 67.50% 73.96% 80.42% 102.39%
Average commission rate@ $ .0140 -- -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $ .03 $ .05 $ .05 $ .01 $ .01
</TABLE>
<TABLE>
<CAPTION>
Class B
--------------------------------------
Year ended June 30
--------------------------------------
1996** 1995** 1994 1993***
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.68 $ 10.86 $ 10.79 $ 10.81
Net investment income* .13 .21 .21 .02
Net realized and unrealized gain
(loss) on investments 2.36 1.38 .21 (.02)
Dividends from net investment income (.19) (.23) (.20) (.02)
Distributions from net realized
gains (.16) (.54) (.15) --
------ ------ ------ -------
Net asset value, end of year $13.82 $11.68 $10.86 $10.79
====== ====== ====== =======
Total return + 21.60%+ 15.43%+ 3.79%+ 0.05%+++
Net assets at end of year (000s) $25,543 $16,130 $10,752 $ 1,060
Ratio of operating expenses to
average net assets* 2.00% 2.00% 2.00% 2.00%++
Ratio of net investment income to
average net assets* 1.05% 1.95% 1.80% 1.53%++
Portfolio turnover rate 111.13% 67.50% 73.96% 80.42%
Average commission rate@ $ .0140 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $ .03 $ .05 $ .07 $ .00
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------------------- -------------------------------------
Year ended June 30 Year ended June 30
------------------------------------- -------------------------------------
1996** 1995** 1994 1993*** 1996** 1995** 1994 1993***
------------------------------------ ------- ------- ------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.70 $10.86 $10.79 $10.81 $ 11.67 $10.86 $ 10.79 $ 10.81
Net investment income* .26 .32 .33 .03 .13 .22 .21 .02
Net realized and unrealized gain
(loss) on investments 2.36 1.39 .21 (.02) 2.37 1.36 .21 (.02)
Dividends from net investment income (.31) (.33) (.32) (.03) (.19) (.23) (.20) (.02)
Distributions from net realized
gains (.16) (.54) (.15) -- (.16) (.54) (.15) --
------ ------ ------ ------ ------ ------ ----- -------
Net asset value, end of year $13.85 $11.70 $10.86 $10.79 $ 13.82 $11.67 $10.86 $10.79
====== ====== ====== ====== ====== ====== ===== =======
Total return 22.82%+ 16.64%+ 4.84%+ 0.14%+++ 21.68%+ 15.33%+ 3.78%+ 0.04%+++
Net assets at end of year (000s) $39,298 $34,827 $20,266 $15,988 $1,386 $1,366 $1,280 $628
Ratio of operating expenses to
average net assets* 1.00% 1.00% 1.00% 1.00%++ 2.00% 2.00% 2.00% 2.00%++
Ratio of net investment income to
average net assets* 2.03% 2.93% 2.92% 1.65%++ 1.03% 1.96% 1.88% 1.49%++
Portfolio turnover rate 111.13% 67.50% 73.96% 80.42% 111.13% 67.50% 73.96% 80.42%
Average commission rate@ $ .0140 -- -- -- $ .0140 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $ .03 $ .05 $ .06 $ .00 $ .03 $ .05 $ .06 $ .00
</TABLE>
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30, 1993.
++ Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@ For the year ended June 30, 1996, the Fund has elected to disclose its
average commission rate per share paid for security trades.
14 June 1996
<PAGE>
Report Of Independent Accountants
To the Trustees of State Street Research Equity Trust
and the Shareholders of
State Street Research Equity Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research Equity
Income Fund (formerly MetLife-State Street Research Equity Income Fund) (a
series of State Street Research Equity Trust, hereafter referred to as the
"Trust"), at June 30, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 9, 1996
15 June 1996
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Equity Income Fund outperformed the average for Lipper Analytical Services'
equity income fund category for the 12 months ended June 30, 1996 (does not
reflect sales charge).
The Fund's portfolio is diversified into dividend-paying common stocks, and
corporate and convertible bonds, which can also provide more income. Stocks,
which represented 69% of the portfolio, are selected on a value basis.
The Fund began to take a defensive position in early 1996 in preparation for
a weakening economy. Cyclical stocks were downweighted along with chemical
and retail holdings. Financial and consumer non-durable stocks experienced
heightened exposure in the portfolio.
Overall, Equity Income Fund was able to participate in the upside of the
market without experiencing too much of the downside. This was largely due to
the stabilizing effect of the bonds in the portfolio.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects maximum 4.5% "A" share front-end sales charge or
5% "B" share or 1% "D" share contingent deferred sales charge. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and large institutions. Performance for "B" and "D" shares
prior to class designations in 1993 reflects annual 12b-1 fees of .50% and
performance thereafter reflects annual 12b-1 fees of 1%, which will reduce
future performance.
*********************************[Line Charts]*********************************
Change in Value of $10,000
Based on the S&P 500 Compared
to Change in Value of $10,000
Invested in the Fund
=============================================================
Class A Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+16.90% +14.64% +10.44%
- -------------------------------------------------------------
Equity
Income
Fund S&P 500
---- -------
1986 10000 10000
1987 10832 12605
1988 10569 11730
1989 12351 14135
1990 13768 16462
1991 12903 17678
1992 14814 20048
1993 18037 22779
1994 18815 23099
1995 21850 29112
1996 26748 36676
=============================================================
Class B Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+16.60% +15.04% +10.78%
- -------------------------------------------------------------
Equity
Income
Fund S&P 500
---- -------
1986 10000 10000
1987 11342 12605
1988 11074 11730
1989 12954 14135
1990 14443 16462
1991 13528 17678
1992 15533 20048
1993 18896 22779
1994 19611 23099
1995 22637 29112
1996 27526 36676
=============================================================
Class C Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+22.82% +15.99% +11.14%
- -------------------------------------------------------------
Equity
Income
Fund S&P 500
---- -------
1986 10000 10000
1987 11342 12605
1988 11074 11730
1989 12954 14135
1990 14443 16462
1991 13528 17678
1992 15533 20048
1993 18913 22779
1994 19827 23099
1995 23126 29112
1996 28404 36676
=============================================================
Class D Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+20.68% +15.26% +10.78%
- -------------------------------------------------------------
Equity
Income
Fund S&P 500
---- -------
1986 10000 10000
1987 11342 12605
1988 11074 11730
1989 12954 14135
1990 14443 16462
1991 13528 17678
1992 15533 20048
1993 18895 22779
1994 19609 23099
1995 22615 29112
1996 27520 36676
******************************************************************************
16 June 1996
<PAGE>
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Equity
Income Fund ("Fund"), along with shareholders of other series of State Street
Research Equity Trust ("Meeting"), was convened on October 20, 1995, and
continued thereafter. The results on the proposals are set forth below.
Votes (millions
of shares)
----------------
For Withheld
---- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 29.4 1.9
Robert A. Lawrence 29.4 1.9
Dean O. Morton 29.4 1.9
Thomas L. Phillips 29.4 1.9
Toby Rosenblatt 29.4 1.9
Michael S. Scott Morton 29.4 1.9
Ralph F. Verni 29.4 1.9
Jeptha H. Wade 29.4 1.9
Votes (millions of
shares)
-------------------------
For Against Abstain
---- ------- --------
2. The Fund's following investment
policies were reclassified from
fundamental to nonfundamental:
a. The policy regarding investments
in securities of companies with
less than three (3) years'
continuous operation; 2.8 0.9 0.5
b. The policy regarding investments
in illiquid securities. 3.2 1.0 0.3
3. The Fund's fundamental policy
regarding investing in commodities
and commodity contracts was amended. 3.2 1.0 0.3
4. The Fund's fundamental policy on
lending was amended to clarify the
permissibility of securities lending. 3.3 0.4 0.5
5. The Master Trust Agreement was
amended to permit the Trustees to
reorganize, merge or liquidate a fund
without prior shareholder approval. 21.1 6.4 3.8
6. The Master Trust Agreement was
amended to eliminate specified time
permitted between the record date and
any shareholders meeting. 22.8 4.5 4.1
17 June 1996
<PAGE>
Glossary
Following is a brief glossary of terms frequently used in the investment
industry.
Total Return: Expressed as a percentage; the annual gain (+) or loss (-)
on an investment assuming all distributions (such as capital gains and
dividends) are reinvested.
Open- vs. Closed-End Funds: Mutual funds are generally referred to as open-end
investment companies. This means that the fund will redeem (buy back) its
unlimited number of shares on investor demand. A closed-end fund issues a
limited number of shares which trade in the markets after they are issued. The
value of these funds' shares depends on market supply and demand.
Convertible Bond: A bond which has the potential to be turned into the stock
of the issuing company. The date of conversion, and the number of shares of
stock the bond can be converted into, are generally set at the time of purchase.
Since a convertible bond can be issued at a lower initial interest rate, the
bond's price is less sensitive to interest rate fluctuations.
Preferred vs. Common Stock: Preferred stock has a fixed dividend, where common
stock does not. Shareholders of preferred stock are paid their dividends before
common stock shareholders. However, the dividend on preferred stock is fixed and
does not usually rise if the company is doing well. This makes preferred stock
slightly more risk-averse than common stock, but it also limits the rewards for
investors. If the company fails and has money to pay back shareholders, holders
of preferred shares are in line before those holding common.
- --------------------------------------------------------------------------------
Below are three commonly used benchmarks in the mutual fund industry.
Individual mutual funds use these as points of reference against which to
measure their own performance over time.
Lipper Analytical Services' Averages: Based in New York; provides daily
performance indexes for nine categories of mutual funds. An individual mutual
fund's performance numbers can be compared to the performance of the index for
its fund category.
S&P 500 Index: The Standard and Poor's 500 Index is a broad-based measure of
stock market performance using 500 widely-held stocks. These include 400
industrial companies, 20 transportation companies, 40 utilities and 40 financial
companies. The S&P 500 is considered a good benchmark for large-stock investors.
Dow Jones Industrial Average: "The Dow" is calculated using the stock prices
of 30 major industrial companies. It is the best known and most widely-used
barometer of the stock market.
18 June 1996
<PAGE>
[BACK COVER]
[BULK RATE
STATE STREET RESEARCH EQUITY INCOME FUND U.S. POSTAGE
ONE FINANCIAL CENTER O BOSTON, MA 02111 PAID
Brockton, MA
Permit No. 6500]
TRUSTEES
Ralph F. Verni
Chairman of the Board
Edward M. Lamont
Robert A. Lawrence
Dean O. Morton
Thomas L. Phillips
Toby Rosenblatt
Michael S. Scott Morton
Jeptha H. Wade
OFFICERS
Ralph F. Verni
Chairman of the Board, President
and Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and Assistant
General Counsel
Amy L. Simmons
Assistant Secretary
FUND INFORMATION
State Street Research
Equity Income Fund
One Financial Center o Boston, MA 02111
INVESTMENT ADVISER
State Street Research &
Management Company
One Financial Center o Boston, MA 02111
DISTRIBUTOR
State Street Research
Investment Services, Inc.
One Financial Center o Boston, MA 02111
SHAREHOLDER SERVICES
State Street Research Shareholder Services
P.O. Box 8408 o Boston, MA 02266-8408
1-800-562-0032
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street o Boston, MA 02110
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place o Boston, MA 02109
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street o Boston, MA 02110
[LOGO] STATE STREET RESEARCH
1-800-562-0032
State Street Research
Shareholders Services
P.O. Box 8408
Boston, MA 02266-8408
The Dalbar awards recognize quality shareholder service and should
not be considered a rating of fund performance. The survey included
mutual fund complexes that volunteered or were otherwise selected
to participate and was not industry-wide.
This report is prepared for the general information of current
shareholders only. It is not authorized for use as sales material with
prospective investors.
Control Number: 3325-960826(0997)SSR-LD EIN-383D-896
<PAGE>
Dear Shareholder:
[Photo: Ralph F. Verni]
Over the past 12 months, the markets continued to reward investors. The
environment was extremely favorable: The economy grew at a
faster-than-expected pace, corporate earnings were strong, and
inflation--despite jumps in energy and food prices--was contained. More
recently, we've seen mounting evidence that the economy is picking up speed.
Job growth and sales of homes and autos have picked up, and consumer
confidence is higher.
Stocks
Over the past 12 months, large-company stocks--household names we all
recognize--performed well. The Standard & Poor's 500 Composite Index, which
represents the 500 largest stocks, provided a return of +25.98% for the 12
months ended June 30, 1996.1 Small-company growth stocks also rewarded
investors, with the Russell 2000 Growth Index up 26.49% for the same period.1
A stronger economy is generally considered to be good for the stock market,
as it can result in higher profits for corporations.
Bonds
Bond performance was mixed over the past year. For the 12 months ended June
30, 1996, the Lehman Brothers Government/Corporate Bond Index gained +4.66%.1
High-yield bonds performed well in the strengthening economy, while
high-quality bonds remained relatively flat.
Looking Ahead
Our outlook continues to call for moderate economic growth and low
inflation--which should be positive for both stocks and bonds. We don't
believe the economy will start to overheat. In fact, with interest rates
moving higher recently, the economy could begin to slow down again. Although
there could be short-term bumps in the road, as we've seen lately in the
stock and bond markets, the prospects appear favorable for long-term
investors.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
July 31, 1996
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Russell 2000 Growth Index includes 2,000 small-company
stocks and is a commonly used measure of small-stock performance. The Lehman
Brothers Government/ Corporate Bond Index is a commonly used measure of bond
market performance. The indices are unmanaged and do not take sales charges
into consideration. Direct investment in the indices is not possible; results
are for illustrative purposes only.
(2)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
reflects reinvestment of capital gain distributions and income dividends. No
adjustment has been made for income taxes payable by shareholders on income
dividends or capital gain distributions.
(3)+42.31% for Class B shares; +43.77% for Class C shares; +42.26% for Class
D shares.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or
less than their original cost. All returns assume reinvestment of capital
gain distributions and income dividends. Performance for a class includes
periods prior to the adoption of class designations in 1993. "B" and "D"
share performance prior to adoption of multiple class shares reflects annual
12b-1 fees of .50% and performance thereafter reflects annual 12b-1 fees of
1%, which will reduce subsequent performance.
(5)Performance reflects maximum 4.5% "A" share front-end, or 5% "B" share or
1% "D" share contingent deferred, sales charges. "C" shares, offered without
a sales charge, are available only to certain employee benefit plans and
institutions.
(6)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout
this shareholder report is dated as indi-
cated and, because of possible changes in
viewpoint, data and transactions should not
be relied upon as being current thereafter.
Fund Information (all data are for periods ended June 30, 1996)
- -----------------------------[Mountain chart]----------------------------------
Total value of $10,000 invested on March 2, 1990(2)
(Class A shares, at maximum applicable sales charge)
3/90 9550
6/90 8982
6/91 7340
6/92 6454
6/93 10873
6/94 9529
6/95 9787
6/96 14036
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)4,5
- --------------------------------------------------------------------------------
Life of Fund
(since 3/2/90) 5 Years 1 Year
- -------- --------------- --------------- ----------------
Class A +5.50%/+4.89% +12.80%/+12.07% +36.97%/+36.08%
- -------- --------------- --------------- ----------------
Class B +5.95%/+5.31% +13.18%/+12.38% +37.31%/+36.37%
- -------- --------------- --------------- ----------------
Class C +6.46%/+5.81% +14.10%/+13.31% +43.77%/+42.94%
- -------- --------------- --------------- ----------------
Class D +5.94%/+5.30% +13.40%/+12.62% +41.26%/+40.32%
Cumulative Total Returns
(do not reflect sales charge)4,6
Life of Fund
(since 3/2/90) 5 Years 1 Year
- -------- --------------- --------------- ----------------
Class A +46.97%/+41.71% +91.23%/+85.09% +43.42%/+42.49%
- -------- --------------- --------------- ----------------
Class B +44.27%/+38.76% +87.72%/+81.24% +42.31%/+41.37%
- -------- --------------- --------------- ----------------
Class C +48.66%/+43.02% +93.42%/+86.80% +43.77%/+42.94%
- -------- --------------- --------------- ----------------
Class D +44.11%/+38.71% +87.50%/+81.18% +42.26%/+41.32%
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. This first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
<PAGE>
Portfolio Manager's Review
Global Resources Fund: A Year Full of Energy
[Photo: Daniel J. Rice III]
Daniel J. Rice III
Portfolio Manager
What a year it's been for Global Resources Fund. As I stated last June, the
Fund was beginning to enjoy a better performance due to rising oil prices. We
also believed natural gas prices would begin to improve. Well, I'm happy to
say that our strategy has paid off. As of June 30, 1996, Class A shares of
the Fund were up 43.42% for the past 12 months (does not reflect sales
charge).3 Compared to a 25.26% showing by the Lipper Analytical Services'
Natural Resources Funds category over the same time period (does not reflect
sales charge), Global Resources Fund has done extremely well.
Outperformance from Oil and Natural Gas
Much of the Fund's good performance can be attributed to the fact that the
portfolio invests in companies with operations directly related to rising oil
and gas prices. Exploration and production companies, and oil services stocks
account for almost 80% of the Fund's portfolio, so we've definitely been able
to participate in the profits from rising oil and gas prices. By the way,
many of the companies in the oil category have gas exploration programs,
which, too, will be affected by the supply and demand for gas. The portfolio
has been buoyed by our overweight in oil services--26% of the portfolio--and
this sector is experiencing its first material price increase in 15 years.
Some segments of oil service have seen prices jump 300% in the last 12
months. The process that our energy team--led by me and team analyst Tom
Moore--believes in goes back to our fundamental research. Tom and I find
securities that have prospects for future growth, and when the time is right,
they'll pay off well. That's the case with this sector.
Rising Natural Gas Prices
Almost as exciting as the oil services market is the natural gas story. This
sector was rather weak during early 1995. However, an early,
colder-than-normal winter in '95-'96 ate up existing gas inventories, causing
gas prices to rise. With gas storage levels at all-time lows, there is a need
for increased production throughout the summer in order to meet demand for
the upcoming winter. The industry will be hard-pressed to accomplish
deliverability in time and, thus, the natural gas market is highly vulnerable
to much higher prices.
Looking Ahead
Should this coming winter prove to be as severe as last winter, energy prices
will rise, which bodes well for the Fund. However, we are ready to adjust the
portfolio accordingly should the future for oil and gas prices change.
Continued instability in the Middle East could have an effect on oil prices.
The Fund is invested in companies involved in metals and other natural
resources that can act as a hedge against inflation. On the whole, Global
Resources Fund has had a great year and we will continue to invest in
securities that we believe offer the best chances for long-term growth.
June 30, 1996
Top 10 Stock Positions
(by percentage of net assets)
1 Ranger Oil Oil and gas exploration firm 4.8%
2 Global Natural Resources Oil and gas exploration firm 4.8%
3 Apache Oil and gas exploration firm 4.5%
4 Atwood Oceanics Oil service company 4.1%
5 Nuevo Energy Oil and gas exploration firm 4.1%
6 TransTexas Gas Oil and gas exploration firm 3.2%
7 Tom Brown Oil and gas exploration firm 3.1%
8 Ensco International Oil service company 2.7%
9 Crystal Oil Natural gas company 2.5%
0 COHO Resources Oil and gas exploration firm 2.5%
These securities represent an aggregate of 36.3% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
Best and Worst Contributors to Performance
(July 1, 1995 through June 30, 1996)
Best [arrow pointing up]
- ------------------------
Phoenix Resource Companies
Benefited from a successful merger.
Ensco International
Completed a successful takeover.
Nowsco Well Services
Benefited from a successful merger.
Worst [arrow pointing down]
- ---------------------------
TransTexas Gas
Hurt by disappointing exploration results.
Tatham Offshore
Hurt by disappointing exploration results.
Summit Resources
Hurt by disappointing exploration results.
2
<PAGE>
Investment Portfolio
June 30, 1996
Value
Shares (Note 1)
- ----------------------------------------- ------ ------------
EQUITY SECURITIES 99.2%
Basic Industries 15.9%
Metal & Mining 14.4%
Aber Resources, Ltd.* 30,000 $395,625
Aluminum Company of America 10,000 573,750
AUR Resources, Inc.* 50,000 357,064
Bema Gold Corp.* 120,000 465,000
Campbell Resources, Inc.* 250,000 312,500
Crown Resources Corp.* 120,000 630,000
DeBeers Consolidated Mines Ltd. ADR 5,000 168,750
Dia Met Minerals Ltd. CI. A* 5,000 77,089
Dia Met Minerals Ltd. CI. B* 20,000 325,936
Homestake Mining Co. 30,000 513,750
Lihir Gold Ltd. ADR* 20,000 640,000
Newmont Mining Corp. 5,000 246,875
Pegasus Gold, Inc.* 25,000 306,250
RMI Titanium Co.* 25,000 587,500
Royal Oak Mines Ltd.* 130,000 479,375
Santa Fe Pacific Gold Corp.* 50,000 706,250
South Pacific Resources, Inc.* 50,000 228,887
Southernera Resources Ltd.* 55,500 284,553
TVX Gold, Inc.* 30,000 217,500
Vaal Reefs Exploration & Mining Ltd. ADR 40,000 320,000
----------
7,836,654
----------
Railroad 1.5%
OMI Corp. 93,800 809,025
----------
Total Basic Industries 8,645,679
----------
Energy 78.7%
Oil 52.5%
Abacan Resource Corp.* 232,400 969,544
Apache Corp. 75,025 2,466,447
Arakis Energy Corp.* 65,000 304,687
Barrett Resources Corp.* 15,700 467,075
Barrington Petroleum Ltd.* 89,400 281,565
Basin Exploration, Inc.* 100,000 650,000
Benton Oil & Gas Co.* 13,000 286,000
Tom Brown, Inc.* 98,000 1,678,250
CS Resources Ltd.* 75,000 598,770
Cabot Oil & Gas Corp. 16,500 286,687
Callon Petroleum Co.* 10,000 125,000
Canadian Conquest Exploration, Inc.* 165,000 157,113
Canadian 88 Energy Corp.* 72,200 169,752
COHO Resources, Inc.* 200,000 1,375,000
Crystal Oil Corp.* 41,600 1,388,400
Flores & Rucks, Inc.* 30,000 1,035,000
Oil (cont'd)
Forcenergy Gas Explorations, Inc.* 16,700 $315,213
Garnet Resources Corp.* 34,500 21,563
Global Natural Resources, Inc.* 160,000 2,620,000
Intensity Resources, Ltd.* 200,000 380,869
Mercantile International Petroleum, Inc.* 90,000 117,000
Morgan Hydrocarbons, Inc.* 250,000 741,595
New Cache Petroleum Ltd.* 80,000 392,588
Nuevo Energy Co.* 69,100 2,228,475
Oil Search Ltd.* 795,500 793,937
Optima Petroleum Corp.* 46,700 163,450
Plains Resources, Inc.* 103,700 1,348,100
Ranger Oil Ltd.* 357,300 2,635,087
Rutherford-Moran Oil Corp.* 15,300 372,937
Southwestern Energy Co. 53,700 758,513
Stampeder Exploration Ltd.* 115,400 435,296
Swift Energy Co.* 44,200 795,600
Tarragon Oil & Gas Ltd.* 65,652 639,546
Triton Energy Ltd. CI. A 2,700 131,287
Ulster Petroleum Ltd.* 137,500 946,678
Clayton Williams Energy, Inc.* 55,330 546,384
----------
28,623,408
----------
Oil Service 26.2%
Atwood Oceanics, Inc.* 50,000 2,237,500
Cliffs Drilling Co.* 6,200 210,800
Dawson Production Services, Inc.* 20,000 230,000
Dreco Energy Services Ltd.* 16,000 440,000
Energy Ventures, Inc.* 41,800 1,358,500
Ensco International, Inc.* 44,975 1,461,688
Falcon Drilling, Inc.* 6,700 181,737
GeoScience Corp.* 21,700 303,800
Global Industries, Ltd.* 30,000 892,500
Grant Geophysical, Inc.* 55,400 200,825
Landmark Graphics Corp.* 35,500 683,375
Marine Drilling Companies, Inc.* 75,000 759,375
J. Ray McDermott S.A.* 11,100 277,500
Noble Drilling Corp.* 81,300 1,128,037
Oceaneering International, Inc.* 66,600 1,007,325
Patterson Energy, Inc.* 50,000 775,000
Rowan Companies, Inc.* 59,900 883,525
Solid State Geophysical, Inc. 50,000 61,891
TMBR/Sharp Drilling, Inc.* 55,900 436,719
Tucker Drilling, Inc.* 10,700 123,050
Unit Corp.* 100,000 662,500
----------
14,315,647
----------
Total Energy 42,939,055
----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Value
Shares (Note 1)
- ----------------------------------------- ------ ------------
Utility 4.6%
Natural Gas 4.6%
KCS Energy, Inc. 27,400 $787,750
TransTexas Gas Corp.* 183,100 1,739,450
----------
2,527,200
----------
Total Utility 2,527,200
----------
Total Equity Securities (Cost $40,008,671) 54,111,934
----------
Principal Maturity
Amount Date
- ----------------------------- ------- ------ -----------
SHORT-TERM OBLIGATIONS 1.7%
American Express Credit
Corp., 5.39% $258,000 7/2/96 258,000
Ford Motor Credit Co., 5.32% 688,000 7/1/96 688,000
---------
Total Short-Term Obligations (Cost $946,000) 946,000
Total Investments (Cost $40,954,671)--100.9% 55,057,934
Cash and Other Assets, Less Liabilities--(0.9%) (499,958)
---------
Net Assets--100.0% $54,557,976
=========
Federal Income Tax Information:
At June 30, 1996, the net unrealized
appreciation of investments based on
cost for Federal income tax purposes
of $41,059,795 was as follows:
Aggregate gross unrealized appreciation
for all investments in which there is
an excess of value over tax cost $15,951,902
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over value (1,953,763)
----------
$13,998,139
==========
*Nonincome-producing securities
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
Diversification of Equity Securities at June 30, 1996 (as a percentage of
net assets) was United States 69.5%, Canada 27.0%, Australia 2.6%, and South
Africa 0.9%.
Statement of Assets and Liabilities
Assets
Investments, at value (Cost $40,954,671) (Note 1) $55,057,934
Cash 361
Receivable for fund shares sold 94,542
Receivable from Distributor (Note 3) 14,315
Dividends and interest receivable 5,877
Other assets 13,132
----------
55,186,161
Liabilities
Payable for securities purchased 305,513
Payable for fund shares redeemed 103,947
Accrued transfer agent and shareholder services
(Note 2) 70,605
Accrued management fee (Note 2) 31,294
Accrued distribution and service fees (Note 5) 19,689
Accrued trustees' fees (Note 2) 5,401
Other accrued expenses 91,736
----------
628,185
----------
Net Assets $54,557,976
==========
Net Assets consist of:
Unrealized appreciation of investments $14,103,263
Accumulated net realized loss (45,924)
Shares of beneficial interest 40,500,637
----------
$54,557,976
==========
Net Asset Value and redemption price per share of
Class A shares ($30,943,486 / 1,774,718 shares of
beneficial interest) $17.44
=====
Maximum Offering Price per share of Class A shares
($17.44 / .955) $18.26
=====
Net Asset Value and offering price per share of
Class B shares ($12,828,020 / 749,379 shares of
beneficial interest)* $17.12
=====
Net Asset Value, offering price and redemption price
per share of Class C shares ($5,632,072 / 319,218
shares of beneficial interest) $17.64
=====
Net Asset Value and offering price per share of
Class D shares ($5,154,398 / 301,437 shares
of beneficial interest)* $17.10
=====
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Statement of Operations
For the year ended June 30, 1996
Investment Income
Dividends, net of foreign taxes of $5,638 $73,874
Interest 44,605
---------
118,479
Expenses
Management fee (Note 2) 307,977
Transfer agent and shareholder services (Note 2) 195,177
Custodian fee 93,275
Reports to shareholders 63,580
Service fee--Class A (Note 5) 63,664
Distribution and service fees--Class B (Note 5) 84,275
Distribution and service fees--Class D (Note 5) 34,350
Audit fee 31,172
Trustees' fees (Note 2) 17,419
Legal fees 17,130
Registration fees 14,410
Miscellaneous 12,847
---------
935,276
Expenses borne by the Distributor (Note 3) (137,050)
---------
798,226
---------
Net investment loss (679,747)
---------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 4,871,429
Net unrealized appreciation of investments 11,106,956
---------
Net gain on investments 15,978,385
---------
Net increase in net assets resulting from
operations $15,298,638
=========
Statement of Changes in Net Assets
Year ended June 30
--------------------------
1996 1995
- ----------------------------- ---------- ------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss $(679,747) $(579,458)
Net realized gain (loss) on
investments* 4,871,429 (1,268,036)
Net unrealized appreciation
of investments 11,106,956 2,488,313
-------- ----------
Net increase resulting from
operations 15,298,638 640,819
-------- ----------
Net increase (decrease) from
fund share transactions
(Note 7) 900,350 (2,185,277)
-------- ----------
Total increase (decrease) in
net assets 16,198,988 (1,544,458)
Net Assets
Beginning of year 38,358,988 39,903,446
-------- ----------
End of year $54,557,976 $38,358,988
======== ==========
* Net realized gain (loss)
for Federal income tax
purposes (Note 1) $4,268,846 $(1,203,874)
======== ==========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Notes to Financial Statements
June 30, 1996
Note 1
State Street Research Global Resources Fund (the "Fund"), is a series of
State Street Research Equity Trust, formerly MetLife-State Street Equity
Trust (the "Trust"), which was organized as a Massachusetts business trust in
March, 1986 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations in March, 1990. The Trust presently consists of four separate
funds: State Street Research Global Resources Fund, State Street Research
Capital Appreciation Fund, State Street Research Equity Income Fund and State
Street Research Equity Investment Fund.
The investment objective of the Fund is to provide long-term growth of
capital. In seeking to achieve its investment objective, the Fund invests
primarily in equity securities of domestic and foreign companies in the
energy and natural resources industries.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, relating specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Values for listed 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. In the absence of recorded sales and for those
over-the-counter securities not quoted on the
NASDAQ system, valuations are at the mean of the closing bid and asked
quotations. Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments. 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 accordance with established
methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Investment 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 among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested semiannually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gains distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
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, 1994
through June 30, 1995, the Fund incurred net capital losses of $629,914 and
has deferred and treated such losses as arising in the fiscal year ending
June 30, 1996.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
6
<PAGE>
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the year ended June 30, 1996, the fees pursuant to such
agreement amounted to $307,977.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1996, the amount of such shareholder servicing and account
maintenance expenses was $57,801.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $17,419 during the year ended June 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended June 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $137,050.
Note 4
For the year ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $38,367,138 and $38,055,500,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance or servicing of shareholder
accounts, to reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the year ended June 30, 1996,
fees pursuant to such plan amounted to $63,664, $84,275 and $34,350 for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $20,357 and $24,162, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1996, and that MetLife Securities,
Inc. earned commissions aggregating $35,318 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $45,288
and $100 on redemptions of Class B and Class D shares, respectively, during
the same period.
Note 6
Under normal market conditions the Fund invests not less than 65% of its
total assets in equity securities of domestic and foreign companies in the
energy and natural resources industries. Also, the Fund may invest up to 35%
of its total assets in the securities of issuers in industries that are not
related to the energy or natural resources industries. Accordingly, the
Fund's investments will fluctuate in response to a variety of economic,
political and other factors peculiar to the energy industries and may
fluctuate more widely than a portfolio that invests in a broader range of
industries.
7
<PAGE>
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1996,
Metropolitan owned 37,442 Class C shares and the Distributor owned one Class
A share of the Fund.
Share transactions were as follows:
Year ended June 30
--------------------------------------------------------
1996 1995
------------------------- ---------------------------
Class A Shares Amount Shares Amount
Shares sold 723,940 $10,571,034 2,514,296 $28,346,425
Shares repurchased (1,062,091) (14,571,296) (2,992,842) (33,679,131)
-------- --------- -------- -----------
Net decrease (338,151) $(4,000,262) (478,546) $(5,332,706)
======== ========= ======== ===========
Class B Shares Amount Shares Amount
- ------------------ -------- --------- -------- -----------
Shares sold 438,451 $6,509,210 314,583 $3,497,941
Shares repurchased (273,265) (3,881,920) (267,978) (3,006,916)
-------- --------- -------- -----------
Net increase 165,186 $2,627,290 46,605 $491,025
======== ========= ======== ===========
Class C Shares Amount Shares Amount
- ------------------ -------- --------- -------- -----------
Shares sold 354,475 $5,359,929 280,275 $3,409,713
Shares repurchased (303,110) (4,509,482) (93,086) (1,092,177)
-------- --------- -------- -----------
Net increase 51,365 $850,447 187,189 $2,317,536
======== ========= ======== ===========
Class D Shares Amount Shares Amount
- ------------------ -------- --------- -------- -----------
Shares sold 210,219 $2,813,802 108,958 $1,239,952
Shares repurchased (104,262) (1,390,927) (77,489) (901,084)
-------- --------- -------- -----------
Net increase 105,957 $1,422,875 31,469 $338,868
======== ========= ======== ===========
8
<PAGE>
Financial Highlights
For a share outstanding throughout each year.
Class A
----------------------------------------------------
Year ended June 30
----------------------------------------------------
1996** 1995** 1994** 1993 1992
------ ------ -------- ------ ----------
Net asset value,
beginning
of year $12.16 $11.84 $13.51 $8.02 $9.12
Net investment loss* (.20) (.16) (.17) (.13) (.12)
Net realized and
unrealized gain
(loss) on
investments 5.48 .48 (1.50) 5.62 (.98)
------ ------ -------- ------ ----------
Net asset value, end
of year $17.44 $12.16 $11.84 $13.51 $8.02
====== ====== ======== ====== ==========
Total return 43.42%+ 2.70%+ (12.36)%+ 68.45%+ (12.06)%+
Net assets at end of
year (000s) $30,943 $25,692 $30,679 $33,513 $19,227
Ratio of operating
expenses to
average net
assets* 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net
investment loss to
average net assets (1.47)% (1.41)% (1.46)% (1.44)% (1.16)%
Portfolio turnover
rate 92.33% 62.94% 30.98% 61.00% 47.09%
Average commission
rate@ $.0237 -- -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each year
(Note 3). $.05 $.09 $.11 $.03 $.05
Class B
---------------------------------------------
June 1, 1993
(Commencement
of Share
Year ended June 30 Class
Designations)
to
---------------------------- June 30, 1993
1996** 1995** 1994**
------ ------ --------
Net asset value,
beginning
of year $12.03 $11.78 $13.51 $12.99
Net investment loss* (.30) (.23) (.23) (.02)
Net realized and
unrealized gain
(loss) on
investments 5.39 .48 (1.50) .54
---- ---- ------ -----------
Net asset value, end
of year $17.12 $12.03 $11.78 $13.51
==== ==== ====== ===========
Total return 42.31%+ 2.12%+ (12.81)%+ 4.00%+++
Net assets at end of
year (000s) $12,828 $7,030 $6,333 $1,048
Ratio of operating
expenses to
average net
assets* 2.50% 2.33% 2.25% 2.25%++
Ratio of net
investment loss to
average net assets (2.20)% (1.98)% (1.93)% (1.98)%++
Portfolio turnover
rate 92.33% 62.94% 30.98% 61.00%
Average commission
rate@ $.0237 -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each year
(Note 3). $.04 $.09 $.14 $.00
Class C
---------------------------------------------
June 1, 1993
(Commencement
of Share
Year ended June 30 Class
Designations)
to
---------------------------- June 30, 1993
1996** 1995** 1994**
-------------------- ------ ------ --------
Net asset value,
beginning of year $12.27 $11.90 $13.52 $12.99
Net investment loss* (.17) (.11) (.15) (.00)
Net realized and
unrealized gain
(loss) on
investments 5.54 .48 (1.47) .53
------ ------ -------- -------------
Net asset value, end
of year $17.64 $12.27 $11.90 $13.52
====== ====== ======== =============
Total return 43.77%+ 3.11%+ (11.98)%+ 4.08%+++
Net assets at end of
year (000s) $5,632 $3,288 $960 $146
Ratio of operating
expenses to
average net
assets* 1.50% 1.33% 1.25% 1.25%++
Ratio of net
investment loss to
average net
assets* (1.20)% (1.01)% (0.95)% (1.05)%++
Portfolio turnover
rate 92.33% 62.94% 30.98% 61.00%
Average commission
rate@ $.0237 -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each year
(Note 3). $.05 $.08 $.16 $.00
Class D
---------------------------------------------
June 1, 1993
(Commencement
of Share
Year ended June 30 Class
Designations)
to
---------------------------- June 30, 1993
1996** 1995** 1994**
-------------------- ------ ------ --------
Net asset value,
beginning of year $12.02 $11.77 $13.51 $12.99
Net investment loss* (.30) (.23) (.23) (.02)
Net realized and
unrealized gain
(loss) on
investments 5.38 .48 (1.51) .54
---- ---- ------ -----------
Net asset value, end
of year $17.10 $12.02 $11.77 $13.51
==== ==== ====== ===========
Total return 42.26%+ 2.12%+ (12.88)%+ 4.00%+++
Net assets at end of
year (000s) $5,154 $2,350 $1,931 $588
Ratio of operating
expenses to
average net
assets* 2.50% 2.33% 2.25% 2.25%++
Ratio of net
investment loss to
average net
assets* (2.20)% (1.99)% (1.94)% (2.00)%++
Portfolio turnover
rate 92.33% 62.94% 30.98% 61.00%
Average commission
rate@ $.0237 -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each year
(Note 3). $.05 $.09 $.13 $.00
** Per share figures have been calculated using the average shares method.
++ Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@ For the year ended June 30, 1996, the Fund has elected to disclose its
average commission rate per share paid for security trades.
9
<PAGE>
Report of Independent Accountants
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Global Resources Fund
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research Global
Resources Fund (a series of State Street Research Equity Trust, hereafter
referred to as the "Trust") at June 30, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at June 30, 1996 by correspondence
with the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 9, 1996
10
<PAGE>
Management's Discussion of Fund Performance
Global Resources Fund performed well in 1995 due to improvement in both oil
and natural gas prices. As of June 30, 1996, Class A shares of the Fund were
up +43.42% for the past 12 months (does not reflect sales charge). The Lipper
Natural Resources Fund category was up +25.26%.
Rising oil and gas prices were the main source of the Fund's above-average
performance. Exploration and production companies, and oil service stocks,
which account for approximately 80% of the portfolio, benefited from an
increase in profits.
The natural gas sector started 1995 off weak. The harsh winter of '95-'96
used up existing gas inventories as well as much of the gas in storage,
causing price increases. Production of gas this summer has stepped up in
preparation for the upcoming winter. However, the likelihood of the gas being
delivered on time is low, leaving gas vulnerable to continued higher prices.
The Fund has increased holdings in this area.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects maximum 4.5% "A" share front-end sales charge or
5% "B" share or 1% "D" share contingent deferred sales charges. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and large institutions. Performance for "B" and "D" shares
prior to class designations in 1993 reflects annual 12b-1 fees of .50% and
performance thereafter reflects annual 12b-1 fees of 1%, which will reduce
subsequent performance. Performance results for the Fund are increased by the
Distributor's voluntary reduction of Fund fees and expenses. The first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
*************************[LINE CHARTS]***********************
Change in Value of $10,000 Based on
the S&P 500 Compared to Change in Value
of $10,000 Invested in the Fund
=============================================================
Class A Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+36.97%/+36.08% +12.80%/+12.07% +5.50%/+4.89%
- -------------------------------------------------------------
Global
Resources
Fund S&P 500
---------- -------
3/02/90 9550 10000
6/30/90 8982 10913
6/30/91 7339 11720
6/30/92 6454 13290
6/30/93 10872 15101
6/30/94 9528 15313
6/30/95 9786 19299
6/30/96 14036 24313
=============================================================
Class B Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+37.31%/+36.37% +13.18%/+12.38% +5.95%/+5.31%
- -------------------------------------------------------------
Global
Resources
Fund S&P 500
---------- -------
3/02/90 10000 10000
6/30/90 9405 10913
6/30/91 7685 11720
6/30/92 6758 13290
6/30/93 11385 15101
6/30/94 9927 15313
6/30/95 10137 19299
6/30/96 14427 24313
=============================================================
Class C Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+43.77%/+42.94% +14.10%/+13.31% +6.46%/+5.81%
- -------------------------------------------------------------
Global
Resources
Fund S&P 500
---------- -------
3/02/90 10000 10000
6/30/90 9405 10913
6/30/91 7685 11720
6/30/92 6758 13290
6/30/93 11393 15101
6/30/94 10028 15313
6/30/95 10340 19299
6/30/96 14866 24313
=============================================================
Class D Shares
- -------------------------------------------------------------
Average Annual Total Return
1 Year 5 Years Life of Fund
+41.26%/+40.32% +13.40%/+12.62% +5.94%/+5.30%
- -------------------------------------------------------------
Global
Resources
Fund S&P 500
---------- -------
3/02/90 10000 10000
6/30/90 9405 10913
6/30/91 7685 11720
6/30/92 6758 13290
6/30/93 11385 15101
6/30/94 9918 15313
6/30/95 10129 19299
6/30/96 14411 24313
************************************************************
11
<PAGE>
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research Global
Resources Fund ("Fund"), along with shareholders of other series of State
Street Research Equity Trust ("Meeting"), was convened on October 20, 1995,
and continued thereafter. The results of the Meeting are set forth below.
Votes (millions
of shares)
----------------
For Withheld
--- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 29.4 1.9
Robert A. Lawrence 29.4 1.9
Dean O. Morton 29.4 1.9
Thomas L. Phillips 29.4 1.9
Toby Rosenblatt 29.4 1.9
Michael S. Scott Morton 29.4 1.9
Ralph F. Verni 29.4 1.9
Jeptha H. Wade 29.4 1.9
Votes (millions of
shares)
-------------------
For Against Abstain
--- ------ ------
2. The Fund's policy regarding investments in
securities of companies with less than three (3)
years' continuous operation was reclassified from
fundamental to nonfundamental 1.3 0.2 0.1
3. The Fund's fundamental policy regarding investing
in commodities and commodity contracts was
amended. 1.3 0.1 0.1
4. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate a
fund without prior shareholder approval. 21.1 6.4 3.8
5. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholder meeting. 22.8 4.5 4.1
12
<PAGE>
Fund Information, Officers and Trustees of State Street Research Equity Trust
Fund Information
State Street Research
Global Resources Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02110
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust Company of New York);
presently engaged in private investments
and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board
and Chief Executive Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of Management,
Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
13
<PAGE>
[Back Cover]
State Street Research Global Resources Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3328-960823(0997)SSR-LD
Cover Illustration by Dorothy Cullinan EG-384D-896
<PAGE>
[Front Cover]
[State Street Research logo]
State Street Research
Global Resources Fund
Annual Report
June 30, 1996
What's Inside
From the Chairman
Favorable markets
reward investors
Portfolio Manager's Review
A year full of energy
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
----------------------------[Dalbar Award seal:] ----------------------------
Quality
Tested Service
1995
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Service
-----------------------------------------------------------------------------
