[front cover]
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND
ANNUAL REPORT
June 30, 1997
WHAT'S INSIDE
Complete Portfolio Holdings
and Financial Statements
[DALBAR box logo]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1996
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
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INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1997
Value
Shares (Note 1)
----------- ---------------
COMMON STOCKS 97.3%
Basic Industries 0.4%
Metal & Mining 0.4%
Chicago Bridge & Iron Co.* .............. 137,900 $ 3,051,038
---------------
Total Basic Industries 3,051,038
---------------
Consumer Cyclical 25.7%
Airline 3.6%
Continental Airlines Inc. Cl. B* ......... 330,500 11,546,844
Ryanair Holdings PLC ADR* ............... 15,600 423,150
US Airways Group Inc.* .................. 350,400 12,264,000
---------------
24,233,994
---------------
Automotive 1.7%
Budget Group Inc. Cl. A* ................. 221,100 7,627,950
Danaher Corp. ........................... 71,200 3,617,850
---------------
11,245,800
---------------
Hotel & Restaurant 7.2%
Apple South Inc. ........................ 171,900 2,621,475
Extended Stay America Inc.* ............. 568,300 8,950,725
Four Seasons Hotels Inc. ................. 31,600 936,150
HFS Inc.* ................................ 471,200 27,329,600
Interstate Hotels Co.* ................... 172,800 5,086,800
Trump Hotels & Casino Resorts Inc.* ...... 352,600 3,790,450
---------------
48,715,200
---------------
Recreation 4.8%
Action Performance Companies Inc.* ...... 141,200 3,424,100
Ascent Entertainment Group Inc.* ........ 121,200 1,105,950
Clear Channel Communications Inc.* ....... 84,400 5,190,600
Evergreen Media Corp. Cl A* .............. 90,700 4,047,487
Florida Panthers Holdings Inc. Cl. A* .... 33,300 807,525
Oakley Inc.* ............................. 535,500 7,530,469
Ticketmaster Group Inc.* ................ 160,100 2,661,663
Westinghouse Electric Corp. .............. 327,500 7,573,437
---------------
32,341,231
---------------
Retail Trade 5.5%
Abercrombie & Fitch Co. Cl. A* .......... 41,600 769,600
Borders Group Inc.* ..................... 412,000 9,939,500
Eagle Hardware & Garden, Inc. ............ 27,400 626,775
Gucci Group NV* .......................... 30,800 1,982,750
Jones Apparel Group Inc.* ................ 241,000 11,507,750
Just For Feet Inc.* ..................... 22,000 383,625
Linens 'n Things Inc.* ................... 163,200 4,834,800
Proffitts Inc. ........................... 77,500 3,400,312
RDO Equipment Co. Cl. A* ................ 45,100 1,009,113
Sunglass Hut International Inc.* ......... 398,800 2,517,425
---------------
36,971,650
---------------
Value
Shares (Note 1)
----------- ---------------
Textile & Apparel 2.9%
Men's Wearhouse, Inc.* ................... 279,750 $ 8,812,125
Nautica Enterprises Inc.* ................ 259,100 6,849,956
Timberland Co. Cl. A* .................... 59,500 3,837,750
-----------
19,499,831
-----------
Total Consumer Cyclical .................. 173,007,706
-----------
Consumer Staple 27.3%
Business Service 13.5%
Aris Corp.* .............................. 10,200 223,125
Aspect Telecommunications Corp.* ......... 52,300 1,163,675
Caribiner International Inc.* ............ 378,400 12,345,300
Cognos Inc.* ............................. 223,100 6,943,987
Creative Technology Ltd.* ................ 469,300 7,978,100
HBO & Co. ................................ 96,700 6,660,212
Maximus Inc.* ............................ 13,500 241,313
Outdoor Systems Inc.* .................... 115,150 4,404,488
Republic Industries Inc.* ................ 820,200 20,402,475
Snyder Communications Inc.* .............. 207,000 5,576,062
U.S. Office Products Co.* ................ 639,400 19,541,662
Universal Outdoor Holdings Inc.* ......... 146,300 5,102,213
-----------
90,582,612
-----------
Drug 4.4%
Cephalon Inc.* ........................... 154,700 1,779,050
Eli Lilly & Co. .......................... 59,300 6,482,231
Entremed Inc.* ........................... 35,100 421,200
Ligand Pharmaceuticals Inc. Cl. B* ....... 69,600 896,100
Pfizer Inc. .............................. 84,400 10,085,800
Vertex Pharmaceuticals Inc.* ............. 161,800 6,188,850
Warner-Lambert Co. ....................... 28,400 3,528,700
-----------
29,381,931
-----------
Food & Beverage 0.7%
Peapod Inc.* ............................. 98,300 1,105,875
Starbucks Corp.* ......................... 92,100 3,586,144
-----------
4,692,019
-----------
Hospital Supply 3.2%
Aetna Inc. ............................... 59,100 6,050,362
Boston Scientific Corp.* ................. 117,600 7,225,050
Trigon Healthcare Inc.* .................. 239,200 5,800,600
Wellpoint Health Networks Inc. Cl. A* .... 48,300 2,215,763
-----------
21,291,775
-----------
Personal Care 3.6%
Avon Products Inc. ....................... 106,900 7,543,131
Colgate-Palmolive Co. .................... 104,800 6,838,200
Gillette Co. ............................. 107,600 10,195,100
-----------
24,576,431
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
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- --------------------------------------------------------------------------------
Value
Shares (Note 1)
----------- ---------------
Printing & Publishing 0.9%
Big Flower Press Holdings Inc.* .......... 159,800 $ 3,315,850
Journal Register Co.* .................... 145,000 2,881,875
-----------
6,197,725
-----------
Tobacco 1.0%
Philip Morris Companies, Inc. ............ 153,300 6,802,688
-----------
Total Consumer Staple .................... 183,525,181
-----------
Energy 3.5%
Oil 0.7%
Chesapeake Energy Corp.* ................. 54,900 538,706
ENI SPA ADR .............................. 68,000 3,842,000
-----------
4,380,706
-----------
Oil Service 2.8%
Diamond Offshore Drilling Inc.* .......... 44,400 3,468,750
Ensco International Inc.* ................ 62,100 3,275,775
Newpark Resources Inc.* .................. 55,800 1,883,250
Schlumberger Ltd. ........................ 54,400 6,800,000
Varco International Inc.* ................ 45,800 1,477,050
Weatherford Enterra Inc.* ................ 59,000 2,271,500
-----------
19,176,325
-----------
Total Energy ............................. 23,557,031
-----------
Finance 12.4%
Bank 7.1%
Bank United Corp. Cl. A* ................. 114,900 4,366,200
BankAmerica Corp. ........................ 131,700 8,502,881
Chase Manhattan Corp. .................... 103,300 10,026,556
Citicorp ................................. 115,800 13,961,137
H.F. Ahmanson & Co. ...................... 83,600 3,594,800
NationsBank Corp. ........................ 75,000 4,837,500
Unibanco Holdings SA GDR* ................ 71,500 2,654,438
-----------
47,943,512
-----------
Financial Service 1.2%
Merrill Lynch & Company Inc. ............. 124,700 7,435,238
Quinenco SA ADR* ......................... 36,200 669,700
-----------
8,104,938
-----------
Insurance 4.1%
Ace Ltd. ................................. 69,400 5,126,925
Allstate Corp. ........................... 33,700 2,460,100
ARM Financial Group, Inc. Cl. A* ......... 20,900 418,000
Hartford Financial Services Group, Inc.* . 67,100 5,552,525
Provident Companies, Inc. ................ 80,700 4,317,450
Travelers Group Inc. ..................... 147,100 9,276,494
-----------
27,151,494
-----------
Total Finance ............................ 83,199,944
-----------
Value
Shares (Note 1)
----------- ---------------
Science & Technology 27.6%
Aerospace 0.9%
Boeing Co. ............................... 118,100 $ 6,266,681
-----------
Computer Software & Service 9.0%
America Online Inc.* ..................... 166,700 9,272,687
Computer Associates International Inc. ... 79,500 4,427,156
EMC Corp.* ............................... 97,200 3,790,800
Geoworks* ................................ 144,300 838,744
Informix Corp.* .......................... 149,000 1,341,000
McAfee Associates Inc.* .................. 143,100 9,033,187
Microsoft Corp.* ......................... 53,900 6,811,613
Oracle Systems Corp.* .................... 136,400 6,871,150
P-COM, Inc.* ............................. 120,200 3,966,600
Westell Technologies, Inc. Cl. A* ........ 281,900 7,047,500
Xilinx Inc.* ............................. 151,100 7,413,344
-----------
60,813,781
-----------
Electronic Components 7.0%
Altera Corp.* ............................ 209,900 10,599,950
CHS Electronics Inc.* .................... 170,400 4,515,600
Intel Corp. .............................. 22,400 3,176,600
Kulicke & Soffa Industries Inc.* ......... 187,300 6,081,397
Lattice Semiconductor Corp.* ............. 59,300 3,350,450
LSI Logic Corp.* ......................... 97,600 3,123,200
RF Micro Devices Inc.* ................... 12,100 231,413
Sanmina Corp.* ........................... 201,100 12,769,850
Texas Instruments Inc. ................... 39,600 3,328,875
-----------
47,177,335
-----------
Electronic Equipment 8.8%
Advanced Fibre Communications, Inc.* ..... 185,600 11,205,600
Applied Materials Inc.* .................. 101,800 7,208,712
ASM Lithography Holdings NV* ............. 70,100 4,100,850
KLA-Tencor Corp.* ........................ 67,200 3,276,000
MAS Technology Ltd. ADR* ................. 9,800 145,775
Motorola Inc. ............................ 139,900 10,632,400
Qwest Communications International Inc.* . 44,900 1,223,525
Tellabs Inc.* ............................ 121,300 6,777,638
Teradyne Inc.* ........................... 161,400 6,334,950
Thermo Electron Corp.* ................... 234,600 7,976,400
-----------
58,881,850
-----------
Office Equipment 1.9%
Dell Computer Corp.* ..................... 36,500 4,286,469
Sun Microsystems Inc.* ................... 229,600 8,545,425
-----------
12,831,894
-----------
Total Science & Technology ............... 185,971,541
-----------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
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INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
----------- ---------------
Utility 0.4%
Natural Gas 0.4%
Calpine Corp.* ........................... 149,100 $ 2,832,900
-----------
Total Utility ............................ 2,832,900
-----------
Total Common Stocks (Cost $559,858,655) .. 655,145,341
-----------
Principal Maturity
Amount Date
----------- --------- -------------
SHORT-TERM OBLIGATIONS 1.8%
Beneficial Corp., 5.53% ..... $3,962,000 7/03/1997 3,962,000
General Electric Capital
Corp., 5.62% ............. 7,907,000 7/07/1997 7,907,000
-------------
Total Short-Term Obligations (Cost $11,869,000) ........ 11,869,000
-------------
Total Investments (Cost $571,727,655)--99.1% ........... 667,014,341
Cash and Other Assets, Less Liabilities--0.9% .......... 6,134,562
-------------
Net Assets--100.0% ..................................... $673,148,903
=============
Federal Income Tax Information:
At June 30, 1997, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$573,392,696 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
value over tax cost .................................. $111,586,850
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value ...................................... (17,965,205)
-------------
$ 93,621,645
=============
- ---------------------------------------------------------------------
* Nonincome-producing securities
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------
June 30, 1997
Assets
Investments, at value (Cost $571,727,655) (Note 1) ..... $667,014,341
Cash ................................................... 80,346
Receivable for securities sold ......................... 26,594,524
Receivable for fund shares sold ........................ 607,832
Dividends and interest receivable ...................... 52,325
Other assets ........................................... 43,798
------------
694,393,166
Liabilities
Payable for securities purchased ....................... 18,102,418
Payable for fund shares redeemed ....................... 1,512,337
Accrued transfer agent and shareholder services (Note 2) 793,322
Accrued management fee (Note 2) ........................ 415,367
Accrued distribution and service fees (Note 4) ......... 228,424
Accrued trustees' fee (Note 2) ......................... 13,788
Other accrued expenses ................................. 178,607
------------
21,244,263
------------
Net Assets ............................................. $673,148,903
============
Net Assets consist of:
Unrealized appreciation of investments ................ $ 95,286,686
Accumulated net realized gain ......................... 11,169,720
Shares of beneficial interest ......................... 566,692,497
------------
$673,148,903
============
Net Asset Value and redemption price per share of Class
A shares ($347,190,187 [divided by] 30,700,529 shares
of beneficial interest) .............................. $11.31
======
Maximum Offering Price per share of Class A shares
($11.31 [divided by] .955) ........................... $11.84
======
Net Asset Value and offering price per share of
Class B shares ($181,087,690 [divided by] 16,506,933
shares of beneficial interest)* ...................... $10.97
======
Net Asset Value, offering price and redemption price per
share of Class C shares ($140,088,595 [divided by]
12,178,456 shares of beneficial interest) ............ $11.50
======
Net Asset Value and offering price per share of
Class D shares ($4,782,431 [divided by] 434,491 shares
of beneficial interest)* ............................. $11.01
======
- --------------------------------------------------------------------------------
* 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.
3
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
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STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------
For the year ended June 30, 1997
Investment Income
Dividends, net of foreign taxes of $53,328 ............. $ 2,632,244
Interest ............................................... 1,867,547
------------
4,499,791
Expenses
Management fee (Note 2) ................................ 5,270,641
Transfer agent and shareholder services (Note 2) ....... 2,274,089
Reports to shareholders ................................ 348,734
Custodian fee .......................................... 202,650
Registration fees ...................................... 93,157
Service fee-Class A (Note 4) ........................... 918,738
Distribution and service fees-Class B (Note 4) ......... 1,760,120
Distribution and service fees-Class D (Note 4) ......... 54,084
Trustees' fees (Note 2) ................................ 28,894
Audit fee .............................................. 27,959
Legal fees ............................................. 14,390
Miscellaneous .......................................... 35,932
------------
11,029,388
------------
Net investment loss .................................... (6,529,597)
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments (Notes 1 and 3) ....... 28,591,212
Net unrealized depreciation of investments ............. (75,792,220)
------------
Net loss on investments ................................ (47,201,008)
------------
Net decrease in net assets resulting from operations ... $(53,730,605)
============
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------
Year ended June 30
-------------------------------
1997 1996
- ------------------------------------ --------------- ---------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss .................. $(6,529,597) $(5,560,185)
Net realized gain on investments ..... 28,591,212 73,266,361
Net unrealized appreciation
(depreciation) of investments ...... (75,792,220) 61,608,747
----------- -----------
Net increase (decrease) resulting
from operations .................... (53,730,605) 129,314,923
----------- -----------
Distributions from net realized gains:
Class A ............................. (17,442,180) (34,354,819)
Class B ............................. (8,308,403) (12,773,915)
Class C ............................. (7,364,058) (13,218,452)
Class D ............................. (258,802) (510,505)
----------- -----------
(33,373,443) (60,857,691)
----------- -----------
Net increase from fund share
transactions (Note 6) .............. 18,245,603 173,255,282
----------- -----------
Total increase (decrease) in net
assets ............................. (68,858,445) 241,712,514
Net Assets
Beginning of year .................... 742,007,348 500,294,834
------------ ------------
End of year .......................... $673,148,903 $742,007,348
============ ============
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
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NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
June 30, 1997
Note 1
State Street Research Capital Appreciation Fund (the "Fund"), is a series of
State Street Research 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 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 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, 1997, the fees pursuant to such
agreement amounted to $5,270,641.
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, 1997, the amount of such shareholder servicing and account
maintenance expenses was $760,654.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $28,894 during the year ended June 30, 1997.
5
<PAGE>
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND
Note 3
For the year ended June 30, 1997, purchases and sales of securities,
exclusive of short-term obligations, aggregated $1,917,507,987 and
$1,922,939,677, 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, 1997,
fees pursuant to such plan amounted to $918,738, $1,760,120 and $54,084 for
Class A, Class B and Class D shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $138,394 and $907,088, respectively, on sales of Class A shares
of the Fund during the year ended June 30, 1997 and that MetLife Securities,
Inc. earned commissions aggregating $1,510,618 on sales of Class B shares,
and that the Distributor collected contingent deferred sales charges of
$565,871 and $3,287 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 5
At a meeting held on July 18, 1997, the shareholders approved a merger of the
Fund into State Street Research Capital Fund (the "Acquiring Fund"). The
closing date for the merger will be on or about August 15, 1997. The
acquisition will be accounted for as a tax-free exchange of the Fund's net
assets for shares of the Acquiring Fund.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------------------------------------
1997 1996
------------------------------- ------------------------------
Class A Shares Amount Shares Amount
- --------------------------------- -------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 7,134,506 $ 82,074,654 8,509,488 $103,271,609
Issued upon reinvestment of
distributions from net realized
gains 1,495,279 16,997,660 3,045,717 33,519,586
Shares repurchased (8,885,382) (101,196,142) (6,333,177) (77,140,136)
-------------- ---------------- -------------- ---------------
Net increase (decrease) (255,597) $ (2,123,828) 5,222,028 $ 59,651,059
============== ================ ============== ===============
Class B Shares Amount Shares Amount
- --------------------------------- -------------- ---------------- -------------- ---------------
Shares sold 5,302,671 $ 59,428,358 6,634,276 $ 79,295,183
Issued upon reinvestment of
distributions from net realized
gains 735,944 8,157,377 1,158,748 12,504,495
Shares repurchased (3,322,891) (37,073,409) (2,182,710) (26,185,464)
-------------- ---------------- -------------- ---------------
Net increase 2,715,724 $ 30,512,326 5,610,314 $ 65,614,214
============== ================ ============== ===============
Class C Shares Amount Shares Amount
- --------------------------------- -------------- ---------------- -------------- ---------------
Shares sold 5,500,499 $ 64,164,867 6,363,633 $ 78,353,974
Issued upon reinvestment of
distributions from net realized
gains 637,741 7,358,494 1,187,191 13,211,134
Shares repurchased (6,914,579) (80,089,184) (3,763,939) (45,981,872)
-------------- ---------------- -------------- ---------------
Net increase (decrease) (776,339) $ (8,565,823) 3,786,885 $ 45,583,236
============== ================ ============== ===============
Class D Shares Amount Shares Amount
- --------------------------------- -------------- ---------------- -------------- ---------------
Shares sold 583,946 $ 6,426,678 1,631,034 $ 19,873,515
Issued upon reinvestment of
distributions from net realized
gains 21,991 244,613 42,662 461,756
Shares repurchased (740,110) (8,248,363) (1,461,059) (17,928,498)
-------------- ---------------- -------------- ---------------
Net increase (decrease) (134,173) $ (1,577,072) 212,637 $ 2,406,773
============== ================ ============== ===============
</TABLE>
6
<PAGE>
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Year ended June 30
-----------------------------------------------------------
1997** 1996** 1995** 1994 1993
--------------------------------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.76 $11.52 $ 9.11 $10.42 $ 8.33
------ ------ ------ ------ ------
Net investment loss* (0.09) (0.10) (0.09) (0.04) (0.05)
Net realized and unrealized gain
(loss) on investments (0.81) 2.63 2.95 0.09 2.81
------ ------ ------ ------ ------
Total from investment operations (0.90) 2.53 2.86 0.05 2.76
------ ------ ------ ------ ------
Distributions from net realized
gains (0.55) (1.29) (0.45) (1.36) (0.67)
------ ------ ------ ------ ------
Total distributions (0.55) (1.29) (0.45) (1.36) (0.67)
------ ------ ------ ------ ------
Net asset value, end of year $11.31 $12.76 $11.52 $ 9.11 $10.42
======= ====== ====== ====== ======
Total return (7.12)%+ 23.87%+ 32.56%+ (0.28)%+ 35.78%+
Net assets at end of year (000s) $347,190 $395,050 $296,471 $231,356 $183,886
Ratio of operating expenses to
average net assets* 1.43% 1.40% 1.55% 1.50% 1.50%
Ratio of net investment loss to
average net assets* (0.79)% (0.79)% (0.87)% (0.81)% (0.63)%
Portfolio turnover rate 282.63% 279.55% 217.28% 147.73% 135.17%
Average commission rate @ $0.0568 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- -- $0.03 $0.02 $0.01
Class B
-----------------------------------------------------------
Year ended June 30
-----------------------------------------------------------
1997** 1996** 1995** 1994 1993***
--------------------------------------------- ----------- ----------- ----------- ------------
Net asset value, beginning of year $12.49 $11.38 $ 9.05 $10.41 $10.44
------ ------ ------ ------ ------
Net investment loss* (0.17) (0.22) (0.15) (0.06) (0.00)
Net realized and unrealized gain
(loss) on investments (0.80) 2.62 2.93 0.06 (0.03)
------ ------ ------ ------ ------
Total from investment operations (0.97) 2.40 2.78 0.00 (0.03)
------ ------ ------ ------ ------
Distributions from net realized
gains (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Total distributions (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Net asset value, end of year $10.97 $12.49 $11.38 $ 9.05 $10.41
======= ====== ====== ====== ======
Total return (7.86)%+ 22.97%+ 31.86%+ (0.83)%+ (0.29)%+++
Net assets at end of year (000s) $181,088 $172,213 $93,088 $49,236 $2,790
Ratio of operating expenses to
average net assets* 2.18% 2.15% 2.15% 2.00% 2.00%++
Ratio of net investment loss to
average net assets* (1.54)% (1.53)% (1.47)% (1.29)% (0.95)%++
Portfolio turnover rate 282.63% 279.55% 217.28% 147.73% 135.17%
Average commission rate @ $0.0568 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- -- $0.02 $0.02 $0.00
</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 for each of the years in the
three 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 for the period June 1, 1993 (commencement of
share class designations) to June 30, 1993 if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
@ Average commission rate per share paid for security trades beginning with
the fiscal year ended June 30, 1996.
7
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET RESEARCH CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------
Year ended June 30
-----------------------------------------------------------
1997** 1996** 1995** 1994 1993***
--------------------------------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.94 $11.64 $ 9.16 $10.42 $10.44
------ ------ ------ ------ ------
Net investment loss* (0.06) (0.08) (0.05) (0.02) (0.00)
Net realized and unrealized gain
(loss) on investments (0.83) 2.67 2.98 0.12 (0.02)
------ ------ ------ ------ ------
Total from investment operations (0.89) 2.59 2.93 0.10 (0.02)
------ ------ ------ ------ ------
Distributions from net realized
gains (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Total distributions (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Net asset value, end of year $11.50 $12.94 $11.64 $ 9.16 $10.42
====== ====== ====== ====== ======
Total return (6.85)%+ 24.28%+ 33.06%+ 0.25%+ (0.19)%+++
Net assets at end of year (000s) $140,089 $167,624 $106,675 $62,662 $37,826
Ratio of operating expenses to
average net assets* 1.18% 1.15% 1.15% 1.00% 1.00%++
Ratio of net investment loss to
average net assets* (0.54)% (0.54)% (0.46)% (0.30)% 0.50%++
Portfolio turnover rate 282.63% 279.55% 217.28% 147.73% 135.17%
Average commission rate @ $0.0568 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- -- $0.02 $0.02 $0.00
Class D
-----------------------------------------------------------
Year ended June 30
-----------------------------------------------------------
1997** 1996** 1995** 1994 1993***
--------------------------------------------- ----------- ----------- ----------- ------------
Net asset value, beginning of year $12.52 $11.41 $ 9.07 $10.41 $10.44
------ ------ ------ ------ ------
Net investment loss* (0.17) (0.21) (0.15) (0.07) (0.01)
Net realized and unrealized gain
(loss) on investments (0.79) 2.61 2.94 0.09 (0.02)
------ ------ ------ ------ ------
Total from investment operations (0.96) 2.40 2.79 0.02 (0.03)
------ ------ ------ ------ ------
Distributions from net realized
gains (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Total distributions (0.55) (1.29) (0.45) (1.36) --
------ ------ ------ ------ ------
Net asset value, end of year $11.01 $12.52 $11.41 $ 9.07 $10.41
====== ====== ====== ====== ======
Total return (7.76)%+ 23.03%+ 31.79%+ (0.61)%+ (0.29)%+++
Net assets at end of year (000s) $4,782 $7,120 $4,061 $2,201 $623
Ratio of operating expenses to
average net assets* 2.18% 2.15% 2.15% 2.00% 2.00%++
Ratio of net investment loss to
average net assets* (1.53)% (1.54)% (1.47)% (1.29)% (1.10)%++
Portfolio turnover rate 282.63% 279.55% 217.28% 147.73% 135.17%
Average commission rate @ $0.0568 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in
each year -- -- $0.02 $0.02 $0.00
</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 for each of the years in the
three 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 for the period June 1, 1993 (commencement of
share class designations) to June 30, 1993 if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
@ Average commission rate per share paid for security trades beginning with
the fiscal year ended June 30, 1996.
8
<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 (a series of State Street Research Equity Trust,
hereafter referred to as the "Trust") at June 30, 1997, 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, 1997 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.
As more fully explained in Note 5, the shareholders of the Fund have approved
the acquisition of the Fund's assets and liabilities by State Street Research
Capital Fund on or about August 15, 1997.
Price Waterhouse LLP
Boston, Massachusetts
August 8, 1997
9
<PAGE>
[back cover]
State Street Research Capital Appreciation Fund
One Financial Center
Boston, MA 02111
[indicia]
Bulk Rate
U.S. Postage
PAID
Randolph, 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.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 4107-970828(0998)SSR-LD CA-385D-897IBS
<PAGE>
[front cover]
STATE STREET RESEARCH
EQUITY INCOME FUND
ANNUAL REPORT
June 30, 1997
WHAT'S INSIDE
From the Chairman:
An exciting year
to be an investor
Portfolio Manager's Review:
Our flexible, value-based
strategy rewarded generously
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR box logo]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1996
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
FROM THE CHAIRMAN
[Photo: Ralph F. Verni]
Dear Shareholders:
The past 12 months have been exciting and rewarding ones for
investors. Stocks and bonds both benefited from slow-but-steady
growth in the U.S. economy and low inflation. Capital spending
was strong, consumer demand heightened, and wages began to
accelerate with tight labor markets. With unemployment below 5%
and housing activity up, consumers are about as confident in the
American economy now as they have ever been.
Stocks
Corporate earnings flourished in this economic environment, providing a strong
catalyst for stock market growth. The Dow Jones Industrial Average(1) topped
7000 in February, promptly corrected, and then resumed its upward trajectory to
close at 7672.79 on June 30, 1997, resulting in a +38.54% gain for 12 month
period. In fact, the second quarter of 1997 represented one of the best in
history--the major indices posted gains in excess of +17%.
Large company stocks captured the majority of the gains during the bulk of the
fiscal year, while smaller capitalization companies, mid-caps, and cyclical
stocks participated more broadly in the final three months. High levels of
corporate profitability and free cash flow, benign monetary policies that have
kept inflation in check, and a generally strong competitive position in world
markets have helped drive this growth. Clearly, it was an excellent year to be
invested in stocks.
Bonds
The Lehman Brothers Aggregate Bond Index, a common benchmark of overall bond
performance, gained +8.15% for the year.(1) All fixed-income sectors benefited
from the absence of inflation pressure. The resulting rally drove down the
yield of the benchmark 30-year Treasury bond below 7% in the fourth quarter.
While higher quality issues were in great demand, some yield-seekers sought out
lower-rated bonds, which often participate along with a climbing stock market.
What's Ahead
While the overall environment for stocks is positive, inflated prices can make
it somewhat more difficult to assess opportunities. Stocks could become even
more overvalued as the bull market continues. For this reason, we anticipate
the gains ahead to be relatively modest. And although future corrections are
always inevitable, it should be noted that the markets do not typically move on
the basis of valuations alone. Continued slow economic growth and low inflation
will help keep the stock and bond markets healthy.
Thank you for putting your trust in the State Street Research family of mutual
funds.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1997
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) The Dow Jones Industrial Average includes 30 widely traded common stocks and
is a commonly used measure of stock performance. The Lehman Brothers Aggregate
Bond Index is a commonly used measure of bond market performance. The indices
are unmanaged and do not take transaction 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)+26.45% for Class B shares; +27.75% for Class C shares; +26.42% 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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance.
(5)Performance reflects maximum 4.5% "A" share front-end sales charge, or 5% "B"
share or 1% "D" share contingent deferred, sales charges, where applicable. "C"
shares, offered without a sales charge, are available only to certain employee
benefit plans and large institutions.
(6)Cumulative total returns are not annualized and do not reflect sales charges,
which, if reflected, would reduce performance.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended June 30, 1997)
- --------------------------------------------------------------------------------
Total value of $10,000 invested on June 30, 19872
(Class A shares, at maximum applicable sales charge)
6/87 $ 9550
6/88 9318
6/89 10889
6/90 12139
6/91 11376
6/92 13061
6/93 15902
6/94 16588
6/95 19264
6/96 23582
6/97 30005
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(4,5)
- -----------------------------------------------------------------
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- -----------------------------------------------------------------
Class A +11.86% +11.52% +17.06% +21.72%
- -----------------------------------------------------------------
Class B +12.14% +11.87% +17.30% +21.45%
- -----------------------------------------------------------------
Class C +12.57% +12.33% +18.49% +27.75%
- -----------------------------------------------------------------
Class D +12.14% +11.86% +17.50% +25.42%
- -----------------------------------------------------------------
Cumulative Total Returns
(do not reflect sales charge)(4,6)
- -----------------------------------------------------------------
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- -----------------------------------------------------------------
Class A +256.48% +214.28% +130.18% +27.45%
- -----------------------------------------------------------------
Class B +247.04% +205.96% +124.09% +26.45%
- -----------------------------------------------------------------
Class C +261.77% +218.95% +133.60% +27.75%
- -----------------------------------------------------------------
Class D +246.87% +205.81% +123.98% +26.42%
- -----------------------------------------------------------------
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Equity Income Fund: Our Strategy Rewarded Generously
[Photo: Bart Geer]
Bart Geer
Portfolio Manager
The following is a discussion with Bart Geer, portfolio
manager of State Street Research Equity Income Fund.
Q: How did the Fund perform last year?
A: We are pleased to report that Class A shares of the
Fund returned +27.45% to investors for the 12 months ended
June 30, 1997 (without sales charge).(3) This performance
surpassed, by a narrow margin, the average of the 170
Equity Income Fund classes tracked by Lipper Analytical Services, not including
sales charges. Most of the funds in the Lipper grouping focus on large
capitalization stocks, whereas Equity Income Fund currently has more mid-cap
exposure. However, the Fund competed very well in a market that favored
large-cap stocks for most of the year.
Q: Did you alter the portfolio's equity strategy during the year?
A: We try to identify good companies in strong industries with management teams
who align their interests with shareholders, but are undervalued because
they're performing at less than peak levels. We buy them when we believe they
can improve their operations or benefit from dynamics in their respective
industries. The current focus on the mid-cap universe offers many such
opportunities for capital appreciation. So even though larger-caps were
appreciating faster, because the market has favored size and liquidity over the
last year, we saw no need to change our course.
Q: What other factors have made mid-cap stocks attractive?
A: Large corporations with huge free cash flows have been looking to spend
money by acquiring other companies. Logically, it is more economical and
expedient to buy out one mid-cap company than, for example, five small ones.
Our portfolio has benefitted from mergers, although we experienced fewer
mergers this year than the year before. We expect industry merger activity to
remain high.
Q: How did the Fund's high-yield bonds perform?
A: Lower-rated, high-yield bonds were weak 6 months ago but bounced back by
fiscal year-end. A very low default rate over the period and a high rate of new
issuance helped fuel the growth of that sector. The portfolio had approximately
12% of net assets in high-yield bonds on June 30, 1997, down from 14% a year
ago. This allocation is not lower because we trimmed our bond exposure, but due
to the fact that total return performance from high-yield bonds was less than
the stock gains in the portfolio.
Q: What industry sectors did you add to or trim?
A: We added small increments to a few industries, such as printing and
publishing, and gaming. We took advantage of some very good values in health
care issues throughout the year. The chemicals industry remains our largest
with 11% of assets.
Q: What's ahead for Equity Income Fund?
A: Investors find in one well diversified portfolio the opportunity to have
capital appreciation potential with a reasonable yield. We've structured the
portfolio with approximately 71% common stocks, 12% convertible stocks, 12%
high-yield bonds and 5% cash. We will continue to use our expertise in
high-yield bonds and convertible securities to add flexibility in the
management of the Fund. While there may be short-term disappointments ahead
from our high-yield bond allocation, our bond strategy may dampen portfolio
volatility. Finally, we will continue our commitment to mid-cap companies,
which represent some of the best values in the stock market today.
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
1 Hollinger International Newspaper publishing 2.9%
2 Thiokol Propulsion systems 2.6%
3 Mid Ocean Reinsurance company 2.2%
4 Quantum Information storage company 2.2%
5 Valassis Communications Newspaper promotions 2.2%
6 Cabot Chemical company 2.1%
7 Canadian National Railway Railway company 2.1%
8 Exide Battery company 2.0%
9 BOC Chemical company 2.0%
10 Atlantic Richfield Oil company 2.0%
These securities represent an aggregate of 22.3% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities or industries listed in this table
or in the text above.
Top 5 Industries
(by percentage of net assets)
Chemical 10.9%
Printing & Publishing 6.2%
Oil 5.8%
Insurance 5.5%
Hospital Supply 5.0%
Total: 33.4%
Best and Worst Contributors to Performance
(July 1, 1996 through June 30, 1997)
Best [Arrow up]
- -----------------------------------------------------------------
Coca-Cola Enterprises
Benefited from low raw materials, acquisitions, and good operating results.
Western Digital
Good demand, excellent manufacturing execution, and new product introductions.
Canadian National Railway
Massive cost reductions and improved Canadian economy.
Worst [Arrow down]
- -----------------------------------------------------------------
Komag
Primary customer lost market share.
Seagull Energy
Fell on weakness in commodity prices and a management change.
Station Casinos
Weak results at Kansas City facility and negative investor sentiment about
overbuilding.
2
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1997
Value
Shares (Note 1)
--------- ------------
COMMON STOCKS 70.5%
Basic Industries 15.8%
Chemical 8.9%
BOC Group PLC* ........................ 243,000 $ 4,220,175
Cabot Corp. ........................... 160,000 4,540,000
Mississippi Chemical Corp. ............ 97,900 2,031,425
Rohm & Haas Co. ........................ 28,000 2,521,750
Thiokol Corp. ........................... 80,000 5,600,000
------------
18,913,350
------------
Diversified 0.8%
Mark IV Industries Inc. ............... 58,695 1,408,680
Ogden Corp. ........................... 15,000 326,250
------------
1,734,930
------------
Forest Product 2.1%
Abitibi-Consolidated Inc. ............... 99,300 1,774,988
Stone Container Corp. .................. 195,000 2,790,937
------------
4,565,925
------------
Machinery 1.3%
Sundstrand Corp. ........................ 48,000 2,679,000
------------
Metal & Mining 0.6%
Kennametal Inc. ........................ 30,000 1,290,000
------------
Railroad 2.1%
Canadian National Railway Co. ......... 100,000 4,375,000
------------
Total Basic Industries ........................... 33,558,205
------------
Consumer Cyclical 11.2%
Airline 0.5%
America West Holding Corp. Cl. B* ...... 75,000 1,087,500
------------
Automotive 3.8%
Borg-Warner Automotive Inc. ............ 38,600 2,086,813
Exide Corp. ........................... 197,100 4,323,881
Lear Corp.* ........................... 36,600 1,624,125
------------
8,034,819
------------
Building 1.4%
Lafarge Corp. ........................... 125,000 3,062,500
------------
Hotel & Restaurant 2.0%
AmeriKing Inc.* ........................ 1,000 50,000
Harrah's Entertainment Inc.* ............ 225,000 4,106,250
Motels of America Inc.*+ ............... 500 5,500
------------
4,161,750
------------
Recreation 1.5%
HSN Inc.* .............................. 98,450 3,076,562
------------
Value
Shares (Note 1)
--------- ------------
Retail Trade 2.0%
Hannaford Brothers Co. .................. 22,200 $ 789,488
Kroger Co.* ........................... 70,000 2,030,000
Rite Aid Corp. ........................ 29,500 1,471,312
------------
4,290,800
------------
Total Consumer Cyclical ............... 23,713,931
------------
Consumer Staple 16.8%
Business Service 3.5%
ADT Ltd.* .............................. 116,200 3,834,600
Hillenbrand Industries Inc. ............ 40,400 1,919,000
Moore Corp Ltd. ........................ 75,000 1,476,562
Pagemart Nationwide Inc.*+ ............ 1,750 10,500
Vestar/LPA Investment Corp.*+ ......... 3,125 46,875
Viatel Inc.* ........................... 18,050 117,325
------------
7,404,862
------------
Food & Beverage 2.7%
Coca-Cola Enterprises Inc. ............ 121,200 2,787,600
Seven-Up/RC Bottling Co. of Southern
California* ........................ 8,750 102,813
Whitman Corp. ........................... 114,000 2,885,625
------------
5,776,038
------------
Hospital Supply 5.0%
Columbia/HCA Healthcare Corp. ......... 46,700 1,835,895
Pacificare Health Systems, Inc. Cl. A* 49,000 2,967,563
Tenet Healthcare Corp. .................. 93,700 2,770,006
Trigon Healthcare Inc.* ............... 125,000 3,031,250
------------
10,604,714
------------
Printing & Publishing 3.9%
Hollinger International, Inc. Cl. A* ... 118,900 1,330,195
Southam Inc.* ........................... 133,900 2,290,616
Valassis Communications Inc. ............ 195,000 4,680,000
------------
8,300,811
------------
Tobacco 1.7%
Imperial Tobacco Group PLC* ............ 548,000 3,520,462
------------
Total Consumer Staple .................. 35,606,887
------------
Energy 7.2%
Oil 5.8%
Oryx Energy Co.* ........................ 85,700 1,810,413
Seagull Energy Corp.* .................. 165,000 2,887,500
Tosco Corp. ........................... 90,000 2,694,375
Total SA Cl. B ADR ..................... 49,375 2,499,609
Ultramar Diamond Shamrock Co. ......... 75,100 2,450,138
------------
12,342,035
------------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
--------- -------------
Oil Service 1.4%
Mapco Inc. ................................. 95,000 $ 2,992,500
-------------
Total Energy ....................................... 15,334,535
-------------
Finance 10.9%
Bank 4.5%
Bank of New York Inc. ..................... 70,000 3,045,000
Fleet Financial Group Inc. .................. 54,100 3,421,825
Mellon Bank Corp. ........................... 70,000 3,158,750
-------------
9,625,575
-------------
Financial Service 0.9%
Federal National Mortgage Association ...... 45,000 1,963,125
-------------
Insurance 5.5%
Ace Ltd. .................................... 50,000 3,693,750
AMBAC Inc. ................................. 15,000 1,145,625
Mid Ocean Ltd. .............................. 90,000 4,719,375
Saint Paul Companies, Inc. .................. 26,200 1,997,750
-------------
11,556,500
-------------
Total Finance ....................................... 23,145,200
-------------
Science & Technology 6.2%
Aerospace 0.9%
Boeing Co. ................................. 34,120 1,810,492
-------------
Computer Software & Service 0.8%
Western Digital Corp.* ..................... 51,800 1,638,175
-------------
Office Equipment 4.5%
Komag Inc.* ................................. 60,000 982,500
Lexmark International Group Inc. Cl. A* ... 130,000 3,948,750
Quantum Corp.* .............................. 230,800 4,688,125
-------------
9,619,375
-------------
Total Science & Technology ........................... 13,068,042
-------------
Utility 2.4%
Electric 1.9%
Edison International Corp. .................. 80,000 1,990,000
OGE Energy Corp. ........................... 45,000 2,047,500
-------------
4,037,500
-------------
Natural Gas 0.4%
TransTexas Gas Corp.* ..................... 48,000 768,000
-------------
Value
Shares (Note 1)
--------- -------------
Telephone 0.1%
Celcaribe SA*+ .............................. 69,918 $ 174,795
Colt Telecom Group PLC ADR* ............... 5,900 122,425
-------------
297,220
-------------
Total Utility .............................. 5,102,720
-------------
Total Common Stocks (Cost $118,161,327) ...... 149,529,520
-------------
CONVERTIBLE PREFERRED STOCKS & OTHER 11.1%
AmeriKing Inc. Sr. Exch. Pfd.* ............ 40,000 1,120,000
Atlantic Richfield Co. Exch. Notes ......... 193,200 4,153,800
Clearnet Communications Inc. Wts.* ......... 3,300 16,500
Cooper Industries Inc. Exch. Note* ......... 128,000 2,944,000
Crown Packaging Holdings Ltd. Wts.*+ ...... 2,000 250
Food 4 Less Holdings Inc. Wts.*+ ............ 1,344 120,375
Granite Broadcasting Corp. Cv. Pfd. ......... 10,000 515,000
Heartland Wireless Communications, Inc.
Wts.*+ ................................. 1,500 15
Hollinger International, Inc. Cv. Pfd. ...... 420,000 4,830,000
ICG Holdings Inc. Exch. Pfd.* ............... 576 610,560
North Atlantic Trading Inc. Sr. Pfd.*+= ... 30,000 757,500
NS Group Inc. Wts.* ........................ 250 1,250
Pagemart Inc. Wts.*+ ........................ 3,450 17,250
RSL Communications Ltd. Wts.*+ ............ 500 15,000
S.D. Warren Co. Series B Sr. Exch. Pfd.= ... 27,000 1,107,000
Salomon Inc. Cv. Pfd.* ..................... 45,000 1,541,250
SDW Holdings Corp. Wts.*+ .................. 27,000 135,000
Sheffield Steel Corp. Wts.* ............... 2,500 7,500
Station Casinos Inc. Cv. Pfd. ............... 90,000 4,027,500
Supermarkets General Holdings Corp. Exch.
Pfd.= .................................... 80,000 1,640,000
Wireless One Inc. Wts.* ..................... 1,500 15
-------------
Total Convertible Preferred Stocks & Other
(Cost $22,343,008) ................................. 23,559,765
-------------
Principal Maturity
Amount Date
------------ ------------
CONVERTIBLE BONDS 1.3%
Crown Resources Corp. Cv. Sub.
Deb., 5.75% ..................... $ 600,000 8/27/2001 543,000
Rohr Inc. Cv. Sub. Note, 7.75% . 500,000 5/15/2004 825,000
Winstar Communications Inc. Sr.
Sub. Cv. Note, 0.00% to
10/14/00, 14.00% from
10/15/00 to maturity+ ......... 2,150,000 10/15/2005 1,354,500
-------------
Total Convertible Bonds (Cost $2,333,459) .................. 2,722,500
-------------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
------------ ------------ -------------
NON-CONVERTIBLE BONDS 11.7%
Advanced Radio Telecom Corp.
Units, 14.00% .............. $ 250,000 2/15/2007 $ 250,000
Archibald Candy Corp. Sr. Sec.
Notes, 10.25%+ .............. 1,250,000 7/01/2004 1,271,875
Azteca Holdings SA Sr. Note,
11.00%+ .................... 1,000,000 6/15/2002 1,006,250
Belden & Blake Corp. Sr. Sub.
Note, 9.875%+ .............. 250,000 6/15/2007 247,500
Belle Casinos Inc. First
Mortgage Note, 12.00%+# ...... 175,000 10/15/2000 64,313
Celcaribe SA Sr. Sec. Note,
0.00% to 3/14/98, 13.50%
from 3/15/98 to maturity ..... 430,000 3/15/2004 395,600
CHC Helicopter Corp. Sr. Sub.
Note, 11.50% ................. 442,000 7/15/2002 459,680
Clearnet Communications Inc.
Sr. Note, 0.00% to 12/14/00,
14.75% from 12/15/00 to
maturity .................... 750,000 12/15/2005 502,500
Drypers Corp., 10.25%+ ........ 750,000 6/15/2007 750,000
Econophone Inc. Sr. Note,
13.50%+ .................... 1,000,000 7/15/2007 1,017,500
Empire Gas Corp. Sr. Sec. Note,
7.00% to 7/14/99, 12.875%
from 7/15/99 to maturity ..... 1,000,000 7/15/2004 900,000
Envirosource Inc. Note, 9.75% .. 1,250,000 6/15/2003 1,212,500
French Fragrances Inc. Sr. Note,
10.375%+ .................... 750,000 5/15/2007 780,000
Geotek Communications Inc. Sr.
Note, 0.00% to 7/14/00,
15.00% from 7/15/00 to
maturity .................... 500,000 7/15/2005 323,750
Intertek Finance PLC, 10.25%+ . 1,000,000 11/01/2006 1,045,000
L3 Communications Corp. Sr.
Sub. Note, 10.375%+ ........ 125,000 5/01/2007 132,188
La Petite Holdings Corp. Sr. Sec.
Notes, 9.625% .............. 750,000 8/01/2001 761,250
Marcus Cable Co. L.P. Sr. Deb.,
11.875% .................... 525,000 10/01/2005 567,000
North Atlantic Trading Inc. Note,
11.00%+ .................... 1,000,000 6/15/2004 1,017,500
NS Group Inc. Sr. Sec. Note,
13.50% ....................... 250,000 7/15/2003 282,500
Orion Network Systems Inc.
Unit, 11.25% ................. 1,250,000 1/15/2007 1,306,250
Principal Maturity Value
Amount Date (Note 1)
------------ ------------ -------------
Outdoor Systems Inc. Sr. Sub.
Note, 9.375% .................... $ 250,000 10/15/2006 $ 251,250
Packaging Resources Inc. Sr.
Sec. Note, 11.625% .............. 250,000 5/01/2003 258,750
Pagemart Inc. Sr. Exch. Note,
0.00% to 10/31/98, 12.25%
from 11/1/98 to maturity ........ 750,000 11/01/2003 648,750
Plastic Specialties & Technology,
Inc. Sr. Note, 11.25% ........... 250,000 12/01/2003 267,500
Real Time Data Inc. Note,
0.00% to 8/14/01, 13.50%
from 8/15/01 to maturity+ ..... 1,250,000 8/15/2006 718,750
RSL Communications Ltd. Sr.
Note, 12.25% .................... 500,000 11/15/2006 527,500
Sheffield Steel Corp. First
Mortgage Note, 12.00% ........... 500,000 11/01/2001 490,000
Silgan Holdings Inc., 13.25% ..... 279,000 7/15/2006 310,666
Snyder Oil Corp. Sr. Sub. Note,
8.75% .......................... 250,000 6/15/2007 250,625
Spanish Broadcasting Systems
Inc. Sr. Note, 7.50% ........... 750,000 6/15/2002 830,625
Spinnaker Industries Inc. Sr.
Sec. Note, 10.75% .............. 250,000 10/15/2006 252,500
Sun Media Corp. Sr. Sub. Note,
9.50%+ .......................... 750,000 2/15/2007 757,500
Tekni-Plex Inc. Sr. Sub. Note,
11.25%+ ....................... 250,000 4/01/2007 270,625
Transamerican Energy Corp. Sr.
Note, 0.00% to 6/14/00,
13.00% from 6/15/00 to
maturity+ ....................... 1,000,000 6/15/2002 720,000
Transamerican Energy Corp. Sr.
Note, 11.50%+ ................. 500,000 6/15/2002 485,000
U.S.A. Mobile Communications
Inc. Sr. Note, 14.00% ........... 750,000 11/01/2004 825,000
Universal Outdoor Inc. Sr. Sub.
Note, 9.75% .................... 750,000 10/15/2006 776,250
Viacap SA De CV Sr. Note,
11.375%+ ....................... 500,000 5/15/2007 523,125
Viasystems Inc. Sr. Sub. Note,
9.75%+ .......................... 500,000 6/01/2007 506,250
Viatel Inc. Sr. Note, 0.00% to
1/14/00, 15.00% from
1/15/00 to maturity ........... 750,000 1/15/2005 510,000
Wireless One Inc. Sr. Note,
13.00% .......................... 750,000 10/15/2003 478,125
------------
Total Non-Convertible Bonds (Cost $24,467,811) .............. 24,951,947
------------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
------------ ----------- ----------------
SHORT-TERM OBLIGATIONS 6.1%
American Express Credit Corp.,
6.15% ........................ $3,739,000 7/02/1997 $ 3,739,000
Ford Motor Credit Co., 5.48% ... 114,000 7/01/1997 114,000
General Electric Capital Corp.,
5.53% ........................ 7,080,000 7/07/1997 7,080,000
Merrill Lynch & Company Inc.,
6.20% ........................ 2,000,000 7/01/1997 2,000,000
------------
Total Short-Term Obligations (Cost $12,933,000) ......... 12,933,000
------------
Total Investments (Cost $180,238,605)--100.7% ......... 213,696,732
Cash and Other Assets, Less Liabilities--(0.7%) ...... (1,577,938)
------------
Net Assets--100.0% .................................... $212,118,794
============
- --------------------------------------------------------------------------------
Federal Income Tax Information:
At June 30, 1997, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$180,413,321 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost ................................. $ 38,399,138
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ................................. (5,115,727)
------------
$ 33,283,411
============
- --------------------------------------------------------------------------------
* 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, 1997 was $13,769,494
and $13,950,936 (6.58% of net assets), respectively.
[square] Security is in default.
Forward currency exchange contracts outstanding at June 30, 1997 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation Delivery
Total Value Contract Price (Depreciation) Date
----------------- --------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sell Pound Sterling,
Buy U.S. dollars ...... 5,010,000 GBP 1.62570 GBP $(159,734) 12/1/97
Buy Pound Sterling,
Sell U.S. dollars ... 775,000 GBP 1.66430 GBP (5,206) 12/1/97
---------
$(164,940)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
June 30, 1997
Assets
Investments, at value (Cost $180,238,605) (Note 1) ... $213,696,732
Cash ................................................ 510
Receivable for fund shares sold ..................... 813,903
Dividends and interest receivable .................. 680,218
Receivable from Distributor (Note 3) ............... 14,135
Receivable for securities sold ..................... 950
Other assets .......................................... 4,383
------------
215,210,831
Liabilities
Payable for securities purchased ..................... 2,250,000
Payable for open forward contracts .................. 164,940
Payable for fund shares redeemed ..................... 136,944
Accrued transfer agent and shareholder services
(Note 2) .......................................... 122,887
Accrued management fee (Note 2) ..................... 112,952
Accrued distribution and service fees (Note 5) ...... 79,348
Accrued trustees' fees (Note 2) ..................... 7,322
Other accrued expenses .............................. 217,644
------------
3,092,037
------------
Net Assets $212,118,794
============
Net Assets consist of:
Undistributed net investment income ............... $ 296,672
Unrealized appreciation of investments ............ 33,458,127
Unrealized depreciation of foreign currency and
forward contracts ................................. (163,199)
Accumulated net realized gain ..................... 12,137,052
Shares of beneficial interest ..................... 166,390,142
------------
$212,118,794
============
Net Asset Value and redemption price per share of
Class A shares ($71,087,362 [divided by] 4,783,428
shares of beneficial interest) .................... $14.86
======
Maximum Offering Price per share of Class A shares
($14.86 [divided by] .955)........................... $15.56
======
Net Asset Value and offering price per share of
Class B shares ($71,986,427 [divided by] 4,860,245
shares of beneficial interest)* .................... $14.81
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($59,453,203 [divided by]
4,001,422 shares of beneficial interest) ......... $14.86
======
Net Asset Value and offering price per share of
Class D shares ($9,591,802 [divided by] 648,348
shares of beneficial interest)* .................... $14.79
======
- -------------------------------------
* 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, 1997
Investment Income
Dividends, net of foreign taxes of $53,695 ............... $ 3,131,681
Interest ................................................ 2,379,002
-----------
5,510,683
Expenses
Management fee (Note 2) ................................. 975,669
Transfer agent and shareholder services (Note 2) ...... 372,456
Custodian fee .......................................... 132,954
Reports to shareholders ................................. 94,565
Registration fees ....................................... 46,698
Service fee--Class A (Note 5) ........................... 136,021
Distribution and service fees--Class B (Note 5) ......... 423,127
Distribution and service fees--Class D (Note 5) ......... 38,510
Audit fee ............................................. 29,604
Trustees' fees (Note 2) ................................. 13,484
Legal fees ............................................. 7,911
Miscellaneous .......................................... 12,081
-----------
2,283,080
Expenses borne by the Distributor (Note 3) ............ (181,305)
-----------
2,101,775
-----------
Net investment income .................................... 3,408,908
-----------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) ...... 12,981,718
Net realized loss on foreign currency and forward
contracts (Note 1) .................................... (11,078)
-----------
Total net realized gain ............................ 12,970,640
-----------
Net unrealized appreciation of investments ............ 20,321,294
Net unrealized depreciation of foreign currency and
forward contracts .................................... (163,199)
-----------
Total net unrealized appreciation ................... 20,158,095
-----------
Net gain on investments, foreign currency and
forward contracts .................................... 33,128,735
-----------
Net increase in net assets resulting from operations...... $36,537,643
===========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- ------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
Year ended June 30
----------------------------------
1997 1996
---------------- ---------------
Increase (Decrease) in Net Assets
Operations:
Net investment income ............ $ 3,408,908 $ 1,719,834
Net realized gain on
investments, foreign currency
and forward contracts ......... 12,970,640 15,234,292
Net unrealized appreciation
of investments, foreign
currency and forward contracts 20,158,095 2,941,031
------------- ------------
Net increase resulting from
operations ..................... 36,537,643 19,895,157
------------- ------------
Dividends from net investment
income:
Class A ........................ (1,175,982) (882,400)
Class B ........................ (613,879) (304,585)
Class C ........................ (1,191,787) (914,329)
Class D ........................ (66,794) (17,808)
------------- ------------
(3,048,442) (2,119,122)
------------- ------------
Distributions from net realized
gains:
Class A ........................ (6,343,780) (492,304)
Class B ........................ (3,837,994) (223,972)
Class C ........................ (5,623,211) (472,914)
Class D ........................ (219,488) (18,976)
------------- ------------
(16,024,473) (1,208,166)
------------- ------------
Net increase from fund share
transactions (Note 6) ......... 83,963,174 4,473,009
------------- ------------
Total increase in net assets ... 101,427,902 21,040,878
Net Assets
Beginning of year ............... 110,690,892 89,650,014
------------- ------------
End of year (including
undistributed (overdistributed)
net investment income of
$296,672 and $(73,770),
respectively) .................. $ 212,118,794 $110,690,892
============= ============
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
June 30, 1997
Note 1
State Street Research Equity Income Fund (the "Fund"), is a series of State
Street Research 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.
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
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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.
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. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange contract
is an obligation by the Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date of
the contract. Forward foreign currency exchange contracts establish an exchange
rate at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of foreign currencies relative to the U.S. dollar. The aggregate
principal amount of forward currency exchange contracts is recorded in the
Fund's accounts. All commitments are marked-to-market at the applicable
transaction rates resulting in unrealized gains or losses. The Fund records
realized gains or losses at the time the forward contracts are extinguished by
entry into a closing contract or by delivery of the currency. Neither spot
transactions nor forward currency exchange contracts eliminate fluctuations in
the prices of the Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the price of these securities should decline.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
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, 1997, the fees pursuant to such agreement
amounted to $975,669.
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,
1997, the amount of such shareholder servicing and account maintenance expenses
was $212,109.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$13,484 during the year ended June 30, 1997.
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, 1997, the amount of such expenses assumed by the
Distributor and its affiliates was $181,305.
9
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 4
For the year ended June 30, 1997, purchases and sales of securities, exclusive
of short-term obligations, aggregated $155,892,785 and $90,471,481,
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, 1997, fees
pursuant to such plan amounted to $136,021, $423,127 and $38,510 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 $54,328 and $199,756, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1997, and that MetLife Securities, Inc.
earned commissions aggregating $456,724 on sales of Class B shares, and that
the Distributor collected contingent deferred sales charges of $68,306 and
$2,402 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, 1997, Metropolitan
owned 25,420 Class C shares and the Distributor owned 3,614 Class A shares of
the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 1,551,622 $21,339,862 499,172 $ 6,447,619
Issued upon reinvestment of:
Distributions from net realized gains 497,882 5,949,190 37,754 461,359
Dividends from net investment income 78,757 1,077,039 61,647 800,177
Shares repurchased (554,634) (7,538,567) (578,171) (7,338,450)
---------- ----------- ---------- ------------
Net increase 1,573,627 $20,827,524 20,402 $ 370,705
========== =========== ========== ============
Class B Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 3,152,047 $43,148,521 670,304 $ 8,719,427
Issued upon reinvestment of:
Distributions from net realized gains 296,462 3,540,487 17,255 210,166
Dividends from net investment income 32,330 444,756 20,749 269,362
Shares repurchased (469,237) (6,363,046) (241,006) (3,101,383)
---------- ----------- ---------- ------------
Net increase 3,011,602 $40,770,718 467,302 $ 6,097,572
========== =========== ========== ============
Class C Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 1,772,262 $23,914,041 887,078 $ 11,446,658
Issued upon reinvestment of:
Distributions from net realized gains 470,421 5,622,233 38,732 472,914
Dividends from net investment income 87,937 1,191,070 70,662 914,329
Shares repurchased (1,167,373) 15,951,846) (1,135,981) (14,666,301)
---------- ----------- ---------- ------------
Net increase (decrease) 1,163,247 $14,775,498 (139,509) $ (1,832,400)
========== =========== ========== ============
Class D Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 657,453 $ 9,099,018 46,515 $ 607,680
Issued upon reinvestment of:
Distributions from net realized gains 17,516 208,976 1,480 18,010
Dividends from net investment income 4,050 56,205 861 11,171
Shares repurchased (130,981) (1,774,765) (65,543) (799,729)
---------- ----------- ---------- ------------
Net increase (decrease) 548,038 $ 7,589,434 (16,687) $ (162,868)
========== =========== ========== ============
</TABLE>
10
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
Year ended June 30
----------------------------------------------------------
1997** 1996** 1995** 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.85 $11.70 $10.87 $10.79 $ 9.19
------ ------ ------ ------ ------
Net investment income* 0.33 0.23 0.28 0.24 0.44
Net realized and unrealized gain on investments, foreign
currency and forward contracts 2.90 2.36 1.37 0.25 1.52
------ ------ ------ ------ ------
Total from investment operations 3.23 2.59 1.65 0.49 1.96
------ ------ ------ ------ ------
Dividends from net investment income (0.28) (0.28) (0.28) (0.26) (0.36)
Distributions from net realized gains (1.94) (0.16) (0.54) (0.15) --
------ ------ ------ ------ ------
Total distributions (2.22) (0.44) (0.82) (0.41) (0.36)
------ ------ ------ ------ ------
Net asset value, end of year $14.86 $13.85 $11.70 $10.87 $10.79
====== ======= ====== ====== ======
Total return 27.45%+ 22.41%+ 16.12%+ 4.30%+ 21.64%+
Net assets at end of year (000s) $71,087 $44,464 $37,327 $40,484 $28,995
Ratio of operating expenses to average net assets* 1.25% 1.25% 1.42% 1.50% 1.50%
Ratio of net investment income to average net assets* 2.43% 1.78% 2.55% 2.42% 3.76%
Portfolio turnover rate 63.33% 111.13% 67.50% 73.96% 80.42%
Average commission rate @ $0.0512 $0.0140 -- -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $ 0.02 $ 0.03 $ 0.05 $ 0.05 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------
Year ended June 30
------------------------------
1997** 1996** 1995**
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $13.82 $11.68 $10.86
------ ------ ------
Net investment income* 0.22 0.13 0.21
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.89 2.36 1.38
------ ------ ------
Total from investment operations 3.11 2.49 1.59
------ ------ ------
Dividends from net investment income (0.18) (0.19) (0.23)
Distributions from net realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.12) (0.35) (0.77)
------ ------ ------
Net asset value, end of year $14.81 $13.82 $11.68
====== ====== ======
Total return 26.45%+ 21.60%+ 15.43%+
Net assets at end of year (000s) $71,986 $25,543 $16,130
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income to average net assets* 1.65% 1.05% 1.95%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $ 0.02 $ 0.03 $ 0.05
<CAPTION>
1994 1993***
- --------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
---------- ----------
Net investment income* 0.21 0.02
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
---------- ----------
Total from investment operations 0.42 0.00
---------- ----------
Dividends from net investment income (0.20) (0.02)
Distributions from net realized gains (0.15) --
---------- ----------
Total distributions (0.35) (0.02)
---------- ----------
Net asset value, end of year $10.86 $10.79
========== ==========
Total return 3.79%+ 0.05%++
Net assets at end of year (000s) $10,752 $1,060
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income to average net assets* 1.80% 1.53%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.07 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] 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.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
11
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
----------------------------
Year ended June 30
----------------------------
1997** 1996** 1995**
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $13.85 $11.70 $10.86
------ ------ ------
Net investment income* 0.36 0.26 0.32
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.90 2.36 1.39
------ ------ ------
Total from investment operations 3.26 2.62 1.71
------ ------ ------
Dividends from net investment income (0.31) (0.31) (0.33)
Distributions from net realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.25) (0.47) (0.87)
------ ------ ------
Net asset value, end of year $14.86 $13.85 $11.70
====== ====== ======
Total return 27.75%+ 22.82%+ 16.64%+
Net assets at end of year (000s) $59,453 $39,298 $34,827
Ratio of operating expenses to average net assets* 1.00% 1.00% 1.00%
Ratio of net investment income to average net assets* 2.68% 2.03% 2.93%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.02 $0.03 $0.05
<CAPTION>
1994 1993***
- --------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
------ ------
Net investment income* 0.33 0.03
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
------ ------
Total from investment operations 0.54 0.01
------ ------
Dividends from net investment income (0.32) (0.03)
Distributions from net realized gains (0.15) --
------ ------
Total distributions (0.47) (0.03)
------ ------
Net asset value, end of year $10.86 $10.79
====== ======
Total return 4.84%+ 0.14%++
Net assets at end of year (000s) $20,266 $15,988
Ratio of operating expenses to average net assets* 1.00% 1.00%[dbldag]
Ratio of net investment income to average net assets* 2.92% 1.65%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.06 $0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------------
Year ended June 30
-------------------------------
1997** 1996** 1995**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of year $13.82 $11.67 $10.86
------ ------ ------
Net investment income* 0.21 0.13 0.22
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.90 2.37 1.36
------ ------ ------
Total from investment operations 3.11 2.50 1.58
------ ------ ------
Dividends from net investment income (0.20) (0.19) (0.23)
Distributions from realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.14) (0.35) (0.77)
------ ------ ------
Net asset value, end of year $14.79 $13.82 $11.67
====== ====== ======
Total return 26.42%+ 21.68%+ 15.33%+
Net assets at end of year (000s) $9,592 $1,386 $1,366
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income to average net assets* 1.59% 1.03% 1.96%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.01 $0.03 $0.05
<CAPTION>
1994 1993***
------ ------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
------ ------
Net investment income* 0.21 0.02
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
------ ------
Total from investment operations 0.42 0.00
------ ------
Dividends from net investment income (0.20) (0.02)
Distributions from realized gains (0.15) --
------ ------
Total distributions (0.35) (0.02)
------ ------
Net asset value, end of year $10.86 $10.79
====== ======
Total return 3.78%+ 0.04%++
Net assets at end of year (000s) $1,280 $ 628
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income to average net assets* 1.88% 1.49%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.06 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] 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.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
12
<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 (a series of State Street Research Equity Trust, hereafter referred
to as the "Trust") at June 30, 1997, 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, 1997 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 8, 1997
13
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
Equity Income Fund had a fine year. Class A shares of the Fund returned +27.45%
to investors for the 12 months ended June 30, 1997. This total return
performance exceeded that of the average equity income fund tracked by Lipper
Analytical Services (does not reflect sales charges). The S&P 500 Composite
Index was up +34.71% for the period.
The Fund buys primarily equity securities that we believe are undervalued. The
Fund can invest a portion of assets in high-yield bonds to boost yield. Bonds
and convertible securities help diversify portfolio volatility and add
flexibility with stock selection.
Despite its mid-cap emphasis and value approach, Equity Income Fund
participated in a rising stock market that favored large capitalization stocks
and growth stocks. Over the period, small additions were made to several
favored sectors: health care, chemicals, and printing and publishing.
The high-yield exposure lagged much of the period, but made up its losses by
the fourth quarter.
June 30, 1997
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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance. 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 results for the Fund
are increased by the Distributor's voluntary reduction of Fund fees and
expenses; without subsidization, performance would have been lower.
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 10 Years Life of Fund
-------------------------------------------
21.72% 17.06% 11.52% 11.86%
-------------------------------------------
Equity
Income Fund S & P 500
6/87 9550 10000
6/88 9318 9307
6/89 10889 11217
6/90 12139 13061
6/91 11376 14024
6/92 13061 15902
6/93 15902 18066
6/94 16588 18319
6/95 19264 23087
6/96 23582 29085
6/97 30005 39172
Class B Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
21.45% 17.30% 11.87% 12.14%
-------------------------------------------
Equity
Income Fund S & P 500
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16660 18066
6/94 17290 18319
6/95 19958 23087
6/96 24268 29085
6/97 30688 39172
Class C Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
27.75% 18.49% 12.33% 12.57%
-------------------------------------------
Equity
Income Fund S & P 500
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16675 18066
6/94 17481 18319
6/95 20389 23087
6/96 25042 29085
6/97 31992 39172
Class D Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
25.42% 17.50% 11.86% 12.14%
-------------------------------------------
Equity
Income Fund S & P 500
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16659 18066
6/94 17289 18319
6/95 19939 23087
6/96 24263 29085
6/97 30674 39172
____ Equity Income Fund - - - S&P 500
14
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- --------------------------------------------------------------------------------
Fund Information
State Street Research
Equity Income 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
Steve A. Garban
Retired; formerly Senior Vice
President for Finance and
Operations and Treasurer, The
Pennsylvania State University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial Officer,
St. Regis Corp.
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Associate, 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
15
<PAGE>
[back cover]
State Street Research Equity Income Fund
One Financial Center
Boston, MA 02111
[indicia]
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
[Logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Equity Income Fund
prospectus. When used after September 30, 1997, this report must be accompanied
by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 4105-970822(0998)SSR-LD EIN-383D-897IBS
<PAGE>
[front cover]
STATE STREET RESEARCH
EQUITY INVESTMENT FUND
ANNUAL REPORT
June 30, 1997
WHAT'S INSIDE
From the Chairman
An exciting
year for investors
Portfolio Manager's Review
The stock market
rewarded generously
Fund Information
Facts and figures
Plus, Complete Portfolio holdings
and Financial Statements
STATE STREET RESEARCH FUNDS
[Dalbar logo]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1996
For Excellence
in
Shareholder Service
<PAGE>
FROM THE CHAIRMAN
[Photo of Ralph F. Verni]
Dear Shareholders:
The past 12 months have been exciting and rewarding ones for investors. Stocks
and bonds both benefited from slow-but-steady growth in the U.S. economy and low
inflation. Capital spending was strong, consumer demand heightened, and wages
began to accelerate with tight labor markets. With unemployment below 5% and
housing activity up, consumers are about as confident in the American economy
now as they have ever been.
Stocks
Corporate earnings flourished in this economic environment, providing a strong
catalyst for stock market growth. The Dow Jones Industrial Average topped 7000
in February, promptly corrected, and then resumed its upward trajectory to
close at 7672.79 on June 30, 19971, resulting in a +38.54% gain for the 12
month period. In fact, the second quarter of 1997 represented one of the best
in history--the major general stock indices posted gains in excess of +17%.
Large company stocks captured the majority of the gains during the bulk of the
fiscal year, while smaller capitalization companies, mid-caps, and cyclical
stocks participated more broadly in the final three months. High levels of
corporate profitability and free cash flow, benign monetary policies that have
kept inflation in check, and a generally strong competitive position in world
markets have helped drive this growth. Clearly, it was an excellent year to be
invested in stocks.
Bonds
The Lehman Brothers Aggregate Bond Index, a common benchmark of overall bond
performance, gained +8.15% for the year.(1) All fixed-income sectors benefited
from the absence of inflation pressure. The resulting rally drove down the
yield of the benchmark 30-year Treasury bond below 7% in the fourth quarter.
While higher quality issues were in great demand, some yield-seekers sought out
lower-rated bonds, which often participate along with a climbing stock market.
What's Ahead
While the overall environment for stocks is positive, inflated prices can make
it somewhat more difficult to assess opportunities. Stocks could become even
more overvalued as the bull market continues. For this reason, we anticipate
future gains to be relatively modest. And although future corrections are
always inevitable, it should be noted that the markets do not typically move on
the basis of valuations alone. Continued slow economic growth and low inflation
will keep the stock and bond markets healthy.
Thank you for putting your trust in the State Street Research family of mutual
funds.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1997
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)The Dow Jones Industrial Average includes 30 widely traded common stocks and
is a commonly used measure of stock performance. The Lehman Brothers Aggregate
Bond Index is a commonly used measure of bond market performance. The indices
are unmanaged and do not take transaction 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)+29.91% for Class B shares; +31.19% for Class C shares; +29.93% 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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance.
(5)Performance reflects maximum 4.5% "A" share front-end sales charge, or 5% "B"
share or 1% "D" share contingent deferred sales charges, where applicable. "C"
shares, offered without a sales charge, are available only to certain employee
benefit plans and large institutions.
(6)Cumulative total returns are not annualized and do not reflect sales charges,
which, if reflected, would reduce performance.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended June 30, 1997)
- --------------------------------------------------------------------------------
[mountain chart]
Total value of $10,000 invested on June 30, 19872
(Class A shares, at maximum applicable sales charge)
6/87 9550
6/88 8894
6/89 10305
6/90 12010
6/91 11277
6/92 13337
6/93 16054
6/94 16204
6/95 19175
6/96 24033
6/97 31462
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)4,5
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A +13.29% +12.14% +17.64% +25.02%
- -----------------------------------------------------------------
Class B +13.48% +12.36% +17.88% +24.91%
- -----------------------------------------------------------------
Class C +13.91% +12.81% +19.05% +31.19%
- -----------------------------------------------------------------
Class D +13.48% +12.35% +18.07% +28.93%
- -----------------------------------------------------------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)4,6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A +305.68% +229.44% +135.89% +30.91%
- -----------------------------------------------------------------
Class B +294.89% +220.68% +129.62% +29.91%
- -----------------------------------------------------------------
Class C +311.22% +233.94% +139.11% +31.19%
- -----------------------------------------------------------------
Class D +294.68% +220.51% +129.50% +29.93%
- -----------------------------------------------------------------
</TABLE>
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses; without subsidization, performance would
have been lower.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Equity Investment Fund: The Stock Market Rewarded Generously
[Photo of John Wilson]
John Wilson
Portfolio Manager
The following is a discussion with John Wilson, portfolio manager of State
Street Research Equity Investment Fund.
Q: How did the Fund perform this past year?
A: It was a very advantageous year for the Fund, a time when the U.S. stock
market rewarded investors generously. The 12-month performance period ended June
30, 1997 was one of the best in the Fund's history--Class A shares of the Fund
gained +30.91%, topping the +28.07% average return of 547 Growth and Income Fund
classes tracked by Lipper Analytical Services, Inc. Neither performance figure
reflects sales charges.(3)
Q: Why did the Fund outperform its peer group?
A: There are two major reasons. First, the market favored large, top quality
companies for most of the past year, and the Fund has a high percentage of
these types of stocks. At the core of the portfolio is a group of
well-established, high quality companies that are global leaders in their
respective industries. These are names like General Electric and Intel,
domiciled in the U.S.; and Royal Dutch Petroleum, the Anglo-Dutch energy giant.
Second, the market favored growth stocks over value stocks and the Fund has
more of a growth bias than many of its competitors.
Q: Did you alter portfolio strategy during the year?
A: The Fund's dominant strategy is to search for global leaders, or the next
global leaders, who dominate their industries. The difference is, we are now
finding opportunities in less obvious places. For example, in the third quarter
we took a position in a U.S. company called Tyco International, a diversified
manufacturer of industrial equipment for businesses. Tyco is not a household
name, yet the firm dominates over 85% of all the businesses they are in.
Q: Which industry sectors performed well?
A: The technology sector did well. We have taken profits from our technology
holdings and slowly trimmed our allocation. For the period ending June 30,
1997, about 14% of portfolio assets were allocated to the sector, down from
about 18% at the end of 1996. Medical technology holdings also contributed to
the Fund's performance. Core drug companies, including Bristol-Myers and Eli
Lilly, had a solid showing over four quarters based on very strong
fundamentals.
Q: Which sectors underperformed?
A: Oil service stocks did very well, especially in the last quarter. However,
oil stocks were disappointing, primarily from weakening oil prices during the
early part of 1997.
Q: The Fund celebrated its tenth anniversary in August, 1996. What changes lie
ahead?
A: Let me say that Equity Investment Fund's tenth anniversary demonstrates the
Fund's ability to thrive over the long term, and I am pleased to be associated
with its management. Looking ahead, I expect to continue the strategy which has
served us well, investing in high-quality, market leading companies.
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
1 BankAmerica California based national bank 3.3%
2 E.I. Du Pont De Nemours Chemical company 3.2%
3 Royal Dutch Petroleum Oil company 2.7%
4 General Electric Electronics giant 2.7%
5 Citicorp Nation's largest bank 2.6%
6 Schlumberger Leading oil service equipment provider 2.4%
7 Coca-Cola Food/Beverage 2.4%
8 Rohm & Haas Chemical company 2.1%
9 Ace Insurance 1.9%
10 NationsBank Bank 1.8%
These securities represent an aggregate of 25.1% 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.
[BAR CHART]
Top 5 Industries
(by percentage of net assets)
Bank 9.8%
Oil 8.6%
Insurance 6.8%
Chemical 6.5%
Retail Trade 6.4%
Total: 38.1%
Best and Worst Contributors to Performance
(July 1, 1996 through June 30, 1997)
Best
- ---------------------------------------------------------
BankAmerica
Strong EPS performance and strong financial sector.
General Electric
Solid EPS and market enthusiasm for large cap stocks.
E.I. Du Pont De Nemours
Expectation of improvement in long term EPS growth.
Worst
- ---------------------------------------------------------
Electronic Data Systems
Reduced EPS reports from increased competition.
PepsiCo
Reduced EPS from international beverage problems.
AT&T
Increased competition and lower EPS.
2
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- -------------
<S> <C> <C>
COMMON STOCKS 93.5%
Basic Industries 16.4%
Chemical 6.5%
Dow Chemical Co. ........................ 9,200 $ 801,550
E.I. Du Pont De Nemours & Co. ......... 83,800 5,268,925
Monsanto Co. ........................... 28,600 1,231,587
Rohm & Haas Co. ........................ 38,400 3,458,400
------------
10,760,462
------------
Electrical Equipment 2.7%
General Electric Co. .................. 69,000 4,510,875
------------
Forest Product 2.1%
James River Corp. ..................... 46,700 1,727,900
Weyerhaeuser Co. ........................ 33,900 1,762,800
------------
3,490,700
------------
Machinery 1.5%
Tyco International, Inc. ............... 37,300 2,594,681
------------
Metal & Mining 2.8%
Aluminum Co. of America ............... 20,900 1,575,338
Carpenter Technology Corp.* ............ 20,000 915,000
Reynolds Metals Co. ..................... 29,500 2,101,875
------------
4,592,213
------------
Railroad 0.8%
Canadian National Railway Co. ......... 30,900 1,351,875
------------
Total Basic Industries ........................ 27,300,806
------------
Consumer Cyclical 11.5%
Automotive 0.9%
General Motors Corp. .................. 28,300 1,575,956
------------
Hotel & Restaurant 1.0%
HFS Inc.* .............................. 7,600 440,800
Mirage Resorts Inc.* .................. 48,200 1,217,050
------------
1,657,850
------------
Recreation 3.2%
Time Warner Inc. ........................ 50,300 2,426,975
US West Inc.* ........................... 65,900 1,334,475
Walt Disney Co. ........................ 19,643 1,576,351
------------
5,337,801
------------
Retail Trade 6.4%
Circuit City Stores Inc. ............... 34,500 1,226,906
CVS Corp. .............................. 42,100 2,157,625
Kroger Co.* ........................... 80,600 2,337,400
Rite Aid Corp. ........................ 44,400 2,214,450
Value
Shares (Note 1)
-------- -------------
<S> <C> <C>
Retail Trade (cont'd)
Toys "R" Us Inc.* ..................... 76,500 $ 2,677,500
------------
10,613,881
------------
Total Consumer Cyclical ............... 19,185,488
------------
Consumer Staple 21.2%
Business Service 1.6%
HBO & Co. .............................. 10,100 695,638
Interpublic Group of Companies, Inc. ... 27,700 1,698,356
USA Waste Services Inc.* ............... 9,000 347,625
------------
2,741,619
------------
Drug 5.3%
Bristol-Myers Squibb Co. ............... 32,300 2,616,300
Eli Lilly & Co. ........................ 24,672 2,696,958
Novartis AG ADR* ........................ 25,266 2,026,807
Pfizer Inc. ........................... 11,700 1,398,150
------------
8,738,215
------------
Food & Beverage 3.9%
Coca-Cola Co. ........................... 59,000 3,982,500
H.J. Heinz Co. ........................ 54,800 2,527,650
------------
6,510,150
------------
Hospital Supply 6.3%
Aetna Inc. .............................. 11,800 1,208,025
Baxter International Inc. ............... 58,500 3,056,625
Boston Scientific Corp.* ............... 35,400 2,174,887
Columbia / HCA Healthcare Corp. ......... 64,850 2,549,416
Guidant Corp. ........................... 8,900 756,500
Pacificare Health Systems, Inc. Cl. B* 10,500 670,687
------------
10,416,140
------------
Personal Care 2.3%
Avon Products Inc. ..................... 27,200 1,919,300
Gillette Co. ........................... 20,800 1,970,800
------------
3,890,100
------------
Tobacco 1.8%
Philip Morris Companies, Inc. ......... 67,200 2,982,000
------------
Total Consumer Staple .................. 35,278,224
------------
Energy 11.8%
Oil 8.6%
ENI SPA ADR ........................... 16,900 954,850
Exxon Corp. ........................... 26,100 1,605,150
Oryx Energy Co. ........................ 57,700 1,218,913
Royal Dutch Petroleum Co. ............... 83,200 4,524,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- -------------
<S> <C> <C>
Oil (cont'd)
Seagull Energy Corp.* ............... 43,700 $ 764,750
Total SA Cl. B ADR .................. 55,100 2,789,437
Unocal Corp. ........................ 61,900 2,402,494
-------------
14,259,594
-------------
Oil Service 3.2%
Ensco International Inc.* ............ 25,000 1,318,750
Schlumberger Ltd. ..................... 32,500 4,062,500
-------------
5,381,250
-------------
Total Energy ................................. 19,640,844
-------------
Finance 16.6%
Bank 9.8%
BankAmerica Corp. ..................... 85,400 5,513,637
Citicorp .............................. 35,500 4,279,969
H.F. Ahmanson & Co. .................. 51,300 2,205,900
NationsBank Corp. ..................... 47,400 3,057,300
Washington Mutual Inc.* ............... 20,300 1,212,925
-------------
16,269,731
-------------
Insurance 6.8%
Ace Ltd. .............................. 43,600 3,220,950
General Re Corp. ..................... 10,000 1,820,000
Mid Ocean Ltd. ........................ 42,900 2,249,569
Saint Paul Companies, Inc. ............ 20,400 1,555,500
Travelers Group Inc. .................. 40,400 2,547,725
-------------
11,393,744
-------------
Total Finance ................................. 27,663,475
-------------
Science & Technology 14.0%
Aerospace 2.7%
Boeing Co. ........................... 37,200 1,973,925
Raytheon Co. ........................ 15,500 790,500
United Technologies Corp. ............ 19,500 1,618,500
-------------
4,382,925
-------------
Computer Software & Service 1.2%
Cisco Systems Inc.* .................. 21,000 1,409,625
Microsoft Corp.* ..................... 4,100 518,138
-------------
1,927,763
-------------
Electronic Components 2.2%
Intel Corp. ........................... 13,400 1,900,288
LSI Logic Corp.* ..................... 21,100 675,200
Texas Instruments Inc. ............... 13,300 1,118,031
-------------
3,693,519
-------------
Value
Shares (Note 1)
-------- -------------
<S> <C> <C>
Electronic Equipment 4.3%
L.M. Ericsson Telephone Co. ADR Cl. B* 22,440 $ 883,575
Lucent Technologies Inc. ............ 11,600 835,925
Motorola Inc. ........................ 38,800 2,948,800
Perkin-Elmer Corp. .................. 10,400 827,450
Teradyne Inc.* ........................ 43,200 1,695,600
-------------
7,191,350
-------------
Office Equipment 3.6%
Compaq Computer Corp.* ............... 22,800 2,262,900
Diebold Inc. ........................ 14,000 546,000
Hewlett-Packard Co. .................. 31,900 1,786,400
International Business Machines Corp. 15,800 1,424,962
-------------
6,020,262
-------------
Total Science & Technology ............ 23,215,819
-------------
Utility 2.0%
Electric 0.9%
FPL Group Inc. ........................ 31,200 1,437,150
-------------
Natural Gas 0.6%
Calpine Corp.* ........................ 50,000 950,000
-------------
Telephone 0.5%
WorldCom Inc.* ........................ 26,200 838,400
-------------
Total Utility ........................ 3,225,550
-------------
Total Common Stocks (Cost $113,233,754) 155,510,206
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
------------ -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 6.5%
American Express Credit
Corp., 5.25% ............... $6,277,000 7/01/1997 6,277,000
American Express Credit
Corp., 5.70% ............... 676,000 7/03/1997 676,000
Beneficial Corp., 5.53% ...... 1,174,000 7/03/1997 1,174,000
Ford Motor Credit Co., 5.51% . 1,439,000 7/03/1997 1,439,000
Household Finance Corp.,
5.46% ........................ 1,322,000 7/01/1997 1,322,000
-------------
Total Short-Term Obligations (Cost $10,888,000) ......... 10,888,000
-------------
Total Investments (Cost $124,121,754)--100.0% ......... 166,398,206
Cash and Other Assets, Less Liabilities-0.0% ......... (39,468)
-------------
Net Assets--100.0% .................................... $ 166,358,738
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Federal Income Tax Information:
<S> <C>
At June 30, 1997, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $124,121,754 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ............................................... $ 43,181,813
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ............................................ (905,361)
-------------
$ 42,276,452
=============
</TABLE>
- -------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $124,121,754) (Note 1) ... $166,398,206
Cash ................................................ 446
Receivable for securities sold ..................... 735,019
Receivable for fund shares sold ..................... 407,929
Dividends and interest receivable .................. 185,783
Receivable from Distributor (Note 3) ............... 22,645
Other assets ....................................... 12,738
-------------
167,762,766
Liabilities
Payable for securities purchased ..................... 954,850
Accrued transfer agent and shareholder services
(Note 2) .......................................... 115,033
Payable for fund shares redeemed ..................... 108,376
Accrued management fee (Note 2) ..................... 87,487
Accrued distribution and service fees (Note 5) ...... 32,987
Accrued trustees' fees (Note 2) ..................... 9,261
Dividends payable .................................... 2,780
Other accrued expenses .............................. 93,254
-------------
1,404,028
-------------
Net Assets $166,358,738
=============
Net Assets consist of:
Undistributed net investment income ............... $ 117,502
Unrealized appreciation of investments ............ 42,276,452
Accumulated net realized gain ..................... 13,828,882
Shares of beneficial interest ..................... 110,135,902
-------------
$166,358,738
=============
Net Asset Value and redemption price per share of
Class A shares ($55,239,393 [divided by] 2,806,823
shares of
beneficial interest) .............................. $19.68
======
Maximum Offering Price per share of Class A shares
($19.68 [divided by] .955) ........................ $20.61
======
Net Asset Value and offering price per share of
Class B shares ($25,477,975 [divided by] 1,312,020
shares of
beneficial interest)* .............................. $19.42
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($83,999,087 [divided by]
4,273,035 shares of beneficial interest) ......... $19.66
======
Net Asset Value and offering price per share of
Class D shares ($1,642,283 [divided by] 84,607 shares
of
beneficial interest)* .............................. $19.41
======
</TABLE>
- --------------------------------------------------------------------------
* 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 EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------
For the year ended June 30, 1997
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $43,777 ............... $ 2,076,959
Interest ................................................ 304,735
------------
2,381,694
Expenses
Management fee (Note 2) ................................. 869,656
Transfer agent and shareholder services (Note 2) ...... 358,781
Custodian fee .......................................... 110,553
Reports to shareholders ................................. 105,596
Registration fees ....................................... 34,382
Audit fee ............................................. 27,896
Trustees' fees (Note 2) ................................. 15,109
Service fee--Class A (Note 5) ........................... 111,950
Distribution and service fees--Class B (Note 5) ......... 177,412
Distribution and service fees--Class D (Note 5) ......... 11,383
Legal fees ............................................. 7,873
Miscellaneous .......................................... 10,924
------------
1,841,515
Expenses borne by the Distributor (Note 3) ............ (202,837)
------------
1,638,678
------------
Net investment income ................................. 743,016
------------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) ...... 20,424,213
Net unrealized appreciation of investments ............ 15,781,474
------------
Net gain on investments ................................. 36,205,687
------------
Net increase in net assets resulting from operations . $ 36,948,703
============
</TABLE>
- ----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income ......... $ 743,016 $ 907,504
Net realized gain on investments 20,424,213 10,187,786
Net unrealized appreciation of
investments .................. 15,781,474 11,825,753
------------- ------------
Net increase resulting from
operations .................. 36,948,703 22,921,043
------------- ------------
Dividends from net investment
income:
Class A ........................ (233,439) (248,210)
Class C ........................ (560,477) (571,956)
------------- ------------
(793,916) (820,166)
------------- ------------
Distributions from net realized
gains:
Class A ........................ (4,782,504) (1,371,017)
Class B ........................ (1,764,902) (315,045)
Class C ........................ (7,753,956) (2,286,228)
Class D ........................ (116,740) (31,975)
------------- ------------
(14,418,102) (4,004,265)
------------- ------------
Net increase from fund share
transactions (Note 6) ......... 21,085,516 17,130,921
------------- ------------
Total increase in net assets ... 42,822,201 35,227,533
Net Assets
Beginning of year ............... 123,536,537 88,309,004
------------- ------------
End of year (including
undistributed net investment
income of $117,502 and
$671,546, respectively) ...... $166,358,738 $123,536,537
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1997
Note 1
State Street Research Equity Investment Fund (the "Fund"), is a series of State
Street Research 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.
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, 1997, the fees pursuant to such agreement
amounted to $869,656.
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,
1997, the amount of such shareholder servicing and account maintenance expenses
was $198,902.
7
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The fees of the Trustees not currently affiliated with the Adviser amounted to
$15,109 during the year ended June 30, 1997.
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, 1997, the amount of such expenses assumed by the
Distributor and its affiliates was $202,837.
Note 4
For the year ended June 30, 1997, purchases and sales of securities, exclusive
of short-term obligations, aggregated $114,974,321 and $115,375,182,
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, 1997, fees
pursuant to such plan amounted to $111,950, $177,412 and $11,383 for Class A,
Class B and Class D shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $21,636 and $126,763, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1997, and that MetLife Securities, Inc.
earned commissions aggregating $254,948 on sales of Class B shares, and that
the Distributor collected contingent deferred sales charges of $39,421 on
redemptions of Class B shares during the same period.
8
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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, 1997, the
Distributor owned 3,603 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------------------------------------------------
1997 1996
---------------------------------- ----------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................. 588,308 $ 10,233,943 405,624 $ 6,395,709
Issued upon reinvestment of:
Distributions from net realized gains ...... 289,030 4,652,507 89,924 1,331,731
Dividends from net investment income ...... 13,002 224,603 14,813 236,859
Shares repurchased ........................... (389,733) (6,723,255) (387,435) (6,071,101)
----------- ------------- ----------- -------------
Net increase ................................. 500,607 $ 8,387,798 122,926 $ 1,893,198
=========== ============= =========== =============
Class B Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
Shares sold ................................. 598,345 $ 10,270,072 440,639 $ 6,927,207
Issued upon reinvestment of
distributions from net realized gains ...... 108,323 1,728,240 20,913 307,750
Shares repurchased ........................... (172,399) (2,918,908) (102,902) (1,616,965)
----------- ------------- ----------- -------------
Net increase ................................. 534,269 $ 9,079,404 358,650 $ 5,617,992
=========== ============= =========== =============
Class C Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
Shares sold ................................. 1,943,280 $ 33,489,577 1,692,679 $ 26,954,407
Issued upon reinvestment of:
Distributions from net realized gains ...... 481,543 7,753,590 154,432 2,286,228
Dividends from net investment income ...... 32,449 560,098 36,260 571,723
Shares repurchased ........................... (2,305,882) (38,692,177) (1,302,028) (20,281,019)
----------- ------------- ----------- -------------
Net increase ................................. 151,390 $ 3,111,088 581,343 $ 9,531,339
=========== ============= =========== =============
Class D Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
Shares sold ................................. 123,109 $ 2,168,941 5,582 $ 87,865
Issued upon reinvestment of
distributions from net realized gains ...... 7,066 112,590 2,081 30,561
Shares repurchased ........................... (100,734) (1,774,305) (1,906) (30,034)
----------- ------------- ----------- -------------
Net increase ................................. 29,441 $ 507,226 5,757 $ 88,392
=========== ============= =========== =============
</TABLE>
9
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year ended June 30
-------------------------------------------------------------------
1997** 1996** 1995** 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.04 $14.28 $12.44 $14.52 $13.16
------ ------ ------ ------ ------
Net investment income* 0.09 0.12 0.08 0.01 0.04
Net realized and unrealized gain on investments 4.63 3.38 2.14 0.18 2.48
------ ------ ------ ------ ------
Total from investment operations 4.72 3.50 2.22 0.19 2.52
------ ------ ------ ------ ------
Dividends from net investment income (0.09) (0.11) (0.05) -- (0.04)
Distributions from net realized gains (1.99) (0.63) (0.33) (2.27) (1.12)
------ ------ ------ ------ ------
Total distributions (2.08) (0.74) (0.38) (2.27) (1.16)
------ ------ ------ ------ ------
Net asset value, end of year $19.68 $17.04 $14.28 $12.44 $14.52
====== ====== ====== ====== ======
Total return 30.91%+ 25.33%+ 18.34%+ 0.93%+ 20.37%+
Net assets at end of year (000s) $55,239 $39,300 $31,174 $29,821 $26,933
Ratio of operating expenses to average net assets* 1.25% 1.25% 1.42% 1.50% 1.50%
Ratio of net investment income to average net assets* 0.54% 0.79% 0.64% 0.08% 0.23%
Portfolio turnover rate 88.07% 44.44% 47.93% 62.93% 92.35%
Average commission rate @ $0.0583 $0.0331 -- -- --
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $0.03 $0.03 $0.06 $0.04 $0.02
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------
Year ended June 30
-----------------------------------
1997** 1996** 1995**
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $16.88 $14.16 $12.36
------ ------ ------
Net investment income (loss)* (0.03) 0.01 0.01
Net realized and unrealized gain (loss) on investments 4.56 3.34 2.12
------ ------ ------
Total from investment operations 4.53 3.35 2.13
------ ------ ------
Dividend from net investment income -- -- --
Distributions from net realized gains (1.99) (0.63) (0.33)
------ ------ ------
Total distributions (1.99) (0.63) (0.33)
------ ------ ------
Net asset value, end of year $19.42 $16.88 $14.16
====== ====== ======
Total return 29.91%+ 24.39%+ 17.70%+
Net assets at end of year (000s) $25,478 $13,129 $5,933
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net assets* (0.20)% 0.05% 0.08%
Portfolio turnover rate 88.07% 44.44% 47.93%
Average commission rate @ $0.0583 $0.0331 --
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $0.03 $0.03 $0.06
<CAPTION>
1994 1993***
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $14.51 $14.78
------ ------
Net investment income (loss)* (0.02) 0.00
Net realized and unrealized gain (loss) on investments 0.14 (0.26)
------ ------
Total from investment operations 0.12 (0.26)
------ ------
Dividend from net investment income -- (0.01)
Distributions from net realized gains (2.27) --
------ ------
Total distributions (2.27) (0.01)
------ ------
Net asset value, end of year $12.36 $14.51
====== ======
Total return 0.37%+ (1.77)%++
Net assets at end of year (000s) $4,029 $663
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income (loss) to average net assets* (0.39)% 0.03%[dbldag]
Portfolio turnover rate 62.93% 92.35%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $0.04 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] 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.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
10
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------
Year ended June 30
-----------------------------------
1997** 1996** 1995**
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $17.03 $14.27 $12.48
------ ------ ------
Net investment income (loss)* 0.13 0.17 0.14
Net realized and unrealized gain (loss) on investments 4.62 3.37 2.15
------ ------ ------
Total from investment operations 4.75 3.54 2.29
------ ------ ------
Dividends from net investment income (0.13) (0.15) (0.17)
Distributions from net realized gains (1.99) (0.63) (0.33)
------ ------ ------
Total distributions (2.12) (0.78) (0.50)
------ ------ ------
Net asset value, end of year $19.66 $17.03 $14.27
====== ====== ======
Total return 31.19%+ 25.66%+ 18.83%+
Net assets at end of year (000s) $83,999 $70,177 $50,503
Ratio of operating expenses to average net assets* 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average net assets* 0.77% 1.06% 1.09%
Portfolio turnover rate 88.07% 44.44% 47.93%
Average commission rate @ $0.0583 $0.0331 --
*Reflects voluntary assumption of fees or expenses per share
in each year (Note 3). $0.03 $0.03 $0.06
<CAPTION>
1994 1993***
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $14.51 $14.78
------ ------
Net investment income (loss)* 0.07 (0.00)
Net realized and unrealized gain (loss) on investments 0.17 (0.25)
------ ------
Total from investment operations 0.24 (0.25)
------ ------
Dividends from net investment income -- (0.02)
Distributions from net realized gains (2.27) --
------ ------
Total distributions (2.27) (0.02)
------ ------
Net asset value, end of year $12.48 $14.51
====== ======
Total return 1.41%+ (1.69)%++
Net assets at end of year (000s) $32,991 $18,796
Ratio of operating expenses to average net assets* 1.00% 1.00%[dbldag]
Ratio of net investment income (loss) to average net assets* 0.59% (0.39)%[dbldag]
Portfolio turnover rate 62.93% 92.35%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per share
in each year (Note 3). $0.06 $0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
-----------------------------------
Year ended June 30
-----------------------------------
1997** 1996** 1995**
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $16.87 $14.15 $12.36
------ ------ ------
Net investment income (loss)* (0.03) 0.01 0.01
Net realized and unrealized gain (loss) on investments 4.56 3.34 2.11
------ ------ ------
Total from investment operations 4.53 3.35 2.12
------ ------ ------
Dividend from net investment income -- -- --
Distributions from net realized gains (1.99) (0.63) (0.33)
------ ------ ------
Total distributions (1.99) (0.63) (0.33)
------ ------ ------
Net asset value, end of year $19.41 $16.87 $14.15
====== ====== ======
Total return 29.93%+ 24.40%+ 17.53%+
Net assets at end of year (000s) $1,642 $931 $699
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net assets* (0.19)% 0.04% 0.08%
Portfolio turnover rate 88.07% 44.44% 47.93%
Average commission rate @ $0.0583 $0.0331 --
*Reflects voluntary assumption of fees or expenses per share
in each year (Note 3). $0.03 $0.03 $0.06
<CAPTION>
1994 1993***
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $14.51 $14.78
------ ------
Net investment income (loss)* (0.05) 0.00
Net realized and unrealized gain (loss) on investments 0.17 (0.26)
------ ------
Total from investment operations 0.12 (0.26)
------ ------
Dividend from net investment income -- (0.01)
Distributions from net realized gains (2.27) --
------ ------
Total distributions (2.27) (0.01)
------ ------
Net asset value, end of year $12.36 $14.51
====== ======
Total return 0.45%+ (1.77)%++
Net assets at end of year (000s) $551 $491
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income (loss) to average net assets* (0.41)% 0.12%[dbldag]
Portfolio turnover rate 62.93% 92.35%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per share
in each year (Note 3). $0.06 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] 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.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
11
<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 (a series of State Street Research Equity Trust, hereafter
referred to as the "Trust") at June 30, 1997, 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, 1997 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 8, 1997
12
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
Equity Investment Fund had an excellent year. Class A shares of the Fund gained
+30.91% for the 12 months ended June 30, 1997, outpacing the +28.07% return of
the average growth and income fund classes tracked by Lipper Analytical Services
(does not reflect sales charge). This strong performance was achieved over a
period of slowing economic growth, low inflation, high consumer confidence, and
rising common stock prices.
The Fund's diversified portfolio focuses on well-established companies that
dominate their industries around the globe with good earnings growth potential.
The stock market favored both large companies and growth stocks during the past
year.
Technology stocks, a staple of the portfolio, performed well over the year.
Corporate earnings were driven largely by a push by U.S. corporations to
increase productivity. However, with valuations very high, technology stocks
were trimmed by fiscal year-end, as were cyclical stocks, which generally do
not benefit from a slowing economy.
The portfolio maintained high allocations in the oil services industry, which
helped Fund performance as demand for offshore equipment and services grew. The
Fund maintains its overweightings in core drug stocks and medical technology
stocks, and has reduced positions in the financial services and oil industries
which had hurt performance.
June 30, 1997
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 transaction 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, which
resulted in new or increased 12b-1 fees of up to 1% per class thereafter and
which will reduce subsequent performance. Performance reflects maximum 4.5% "A"
share front-end sales charge or 5% "B" share or 1% "D" share contingent
deferred sales charge, where applicable. "C" shares, offered without a sales
charge, are available only to certain employee benefit plans and large
institutions. Performance results for the Fund are increased by the
Distributor's voluntary reduction of Fund fees and expenses; without
subsidization, performance would have been lower.
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 10 Years Life of Fund
- -------------------------------------------------------
25.02% 17.64% 12.14% 13.29%
- -------------------------------------------------------
Equity
Investment
Fund S&P 500
6/87 9550 10000
6/88 8894 9307
6/89 10305 11217
6/90 12010 13061
6/91 11277 14024
6/92 13337 15902
6/93 16054 18066
6/94 16204 18319
6/95 19175 23087
6/96 24033 29085
6/97 31462 39172
Class B Shares
- -------------------------------------------------------
Average Annual Total Return
- -------------------------------------------------------
1 Year 5 Years 10 Years Life of Fund
- -------------------------------------------------------
24.91% 17.88% 12.36% 13.48%
- -------------------------------------------------------
Equity
Investment
Fund S&P 500
6/87 10000 10000
6/88 9313 9307
6/89 10791 11217
6/90 12576 13061
6/91 11809 14024
6/92 13966 15902
6/93 16798 18066
6/94 16860 18319
6/95 19844 23087
6/96 24684 29085
6/97 32068 39172
Class C Shares
- -------------------------------------------------------
Average Annual Total Return
- -------------------------------------------------------
1 Year 5 Years 10 Years Life of Fund
- -------------------------------------------------------
31.19% 19.05% 12.81% 13.91%
- -------------------------------------------------------
Equity
Investment
Fund S&P 500
6/87 10000 10000
6/88 9313 9307
6/89 10791 11217
6/90 12576 13061
6/91 11809 14024
6/92 13966 15902
6/93 16811 18066
6/94 17047 18319
6/95 20257 23087
6/96 25455 29085
6/97 33394 39172
Class D Shares
- -------------------------------------------------------
Average Annual Total Return
- -------------------------------------------------------
1 Year 5 Years 10 Years Life of Fund
- -------------------------------------------------------
28.93% 18.07% 12.35% 13.48%
- -------------------------------------------------------
Equity
Investment
Fund S&P 500
6/87 10000 10000
6/88 9313 9307
6/89 10791 11217
6/90 12576 13061
6/91 11809 14024
6/92 13966 15902
6/93 16797 18066
6/94 16872 18319
6/95 19829 23087
6/96 24668 29085
6/97 32051 39172
____ Equity Investment Fund - - - S&P 500
13
<PAGE>
STATE STREET RESEARCH EQUITY INVESTMENT FUND
- --------------------------------------------------------------------------------
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
Steve A. Garban
Retired; formerly Senior Vice President for Finance and Operations and
Treasurer, The Pennsylvania State University
Malcolm T. Hopkins
Former Vice Chairman of the Board and Chief Financial Officer, St. Regis Corp.
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Associate, 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
14
<PAGE>
[back cover]
State Street Research Equity Investment Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Randolph, 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.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Equity Investment
Fund prospectus. When used after September 30, 1997, this report must be
accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4103-970822(0998)SSR-LD EIV-382D-897IBS
<PAGE>
[front cover]
STATE STREET RESEARCH
-------------------
GLOBAL RESOURCES FUND
-------------------
ANNUAL REPORT
June 30, 1997
-----------------
WHAT'S INSIDE
-----------------
From the Chairman
An exciting
year for investors
Portfolio Manager's Review
Energixed markets
reward generously
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1996
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
FROM THE CHAIRMAN
[photo: Ralph F. Verni]
To Our Shareholders:
The past 12 months have been exciting and rewarding ones for
investors. Stocks and bonds both benefited from slow-but-steady
growth in the U.S. economy and low inflation. Capital spending
was strong, consumer demand heightened, and wages began to
accelerate with tight labor markets. With unemployment below 5%
and housing activity up, consumers are about as confident in the
American economy now as they have ever been.
Stocks
Corporate earnings flourished in this economic environment, providing a strong
catalyst for stock market growth. The Dow Jones Industrial Average topped 7000
in February, promptly corrected, and then resumed its upward trajectory to close
at 7672.79 on June 30, 1997(1), resulting in a +38.54% gain for the 12 month
period. In fact, the second quarter of 1997 represented one of the best in
history--the major general stock indices posted gains in excess of +17%.
Large company stocks captured the majority of the gains during the bulk of the
fiscal year, while smaller capitalization companies, mid-caps, and cyclical
stocks participated more broadly in the final three months. High levels of
corporate profitability and free cash flow, benign monetary policies that have
kept inflation in check, and a generally strong competitive position in world
markets have helped drive this growth. Clearly, it was an excellent year to be
invested in stocks.
Bonds
The Lehman Brothers Aggregate Bond Index, a common benchmark of overall bond
performance, gained +8.15% for the year.1 All fixed-income sectors benefitted
from the absence of inflation pressure. The resulting rally drove down the yield
of the benchmark 30-year Treasury bond below 7% in the fourth quarter. While
higher quality issues were in great demand, some yield-seekers sought out
lower-rated bonds, which often participate along with a climbing stock market.
What's Ahead
While the overall environment for stocks is positive, inflated prices can make
it somewhat more difficult to assess opportunities. Stocks could become even
more overvalued as the bull market continues. For this reason, we anticipate the
gains ahead to be relatively modest. And although future corrections are always
inevitable, it should be noted that the markets do not typically move on the
basis of valuations alone. Continued slow growth and low inflation will help
keep the stock and bond markets healthy.
Thank you for putting your trust in the State Street Research family of mutual
funds.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1997
(1)The Dow Jones Industrial Average includes 30 widely traded common stocks and
is a commonly used measure of U.S. stock market performance. The Lehman Brothers
Aggregate Bond Index is a commonly used measure of bond market performance. The
indices are unmanaged and do not take transaction 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)+31.98% for Class B shares; +33.33% for Class C shares; +31.90% 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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance.
(5)Performance reflects maximum 4.5% "A" share front-end sales charge, or 5% "B"
share or 1% "D" share contingent deferred sales charges where applicable. "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.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended June 30, 1997)
- --------------------------------------------------------------------------------
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 9786
6/96 14036
6/97 18662
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(4),(5)
<TABLE>
<CAPTION>
- ---------------------------------------------------
Life of Fund
(since 3/2/90) 5 Years 1 Year
- ---------------------------------------------------
<S> <C> <C> <C>
Class A +8.88% +22.52% +26.98%
- ---------------------------------------------------
Class B +9.17% +22.84% +26.98%
- ---------------------------------------------------
Class C +9.77% +24.01% +33.33%
- ---------------------------------------------------
Class D +9.15% +22.97% +30.90%
- ---------------------------------------------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(4),(6)
<TABLE>
<CAPTION>
- ---------------------------------------------------
Life of Fund
(since 3/2/90) 5 Years 1 Year
- ---------------------------------------------------
<S> <C> <C> <C>
Class A +95.41% +189.13% +32.96%
- ---------------------------------------------------
Class B +90.42% +181.74% +31.98%
- ---------------------------------------------------
Class C +98.20% +193.26% +33.33%
- ---------------------------------------------------
Class D +90.08% +181.24% +31.90%
- ---------------------------------------------------
</TABLE>
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. Without subsidization, performance would
have been lower.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Global Resources Fund: Energy Markets Rewarded Generously
The following is a discussion with Dan Rice, portfolio
manager of State Street Research Global Resources Fund.
[photo: Daniel J. Rice III]
Q: How did the Fund perform?
Daniel J. Rice III A: It's been a remarkable year for Global Resources Fund.
Portfolio Manager Over the past 12 months ended June 30, 1997, Class A
shares of the Fund returned +32.96% to shareholders
(without sales charges)(3), twice the +15.78% average
return of the 42 fund classes in Lipper Analytical
Services' Natural Resources Funds category.
Q: Why did the Fund outperform its peer group?
A: Our portfolio is one of the few to focus on small capitalization energy
companies. This year small-cap energy stocks significantly outperformed both the
general market and the larger capitalization energy companies emphasized by most
funds in the Lipper group. Additionally, small-cap natural resources stocks were
much cheaper 12 months ago than larger-cap stocks due to lower liquidity, so we
started the year at a depressed point.
Moreover, a continued consolidation wave in the industry focused on small- and
mid-cap companies. Two of the Fund's top ten holdings last year, Nowsco and
Global Natural Resources, were bought out during the last half of the year. CS
Resources and Dreco Energy Services were also subjects of takeover at prices
well above where the stocks had been trading.
Q: What other factors contributed to superior performance?
A: Much of the Fund's excellent performance can be attributed to the allocations
we made within the oil services sectors. Oil service stocks have done well.
Increased rig activity and utilization rates have pushed up prices, leading to
substantial increases in profitability. Approximately 25% of Fund assets were
oil service holdings, which is double the weighting of natural resources stocks
in the Lipper Analytical Services' Natural Resources Funds category.
Q: How did oil and natural gas stocks perform?
A: At the beginning of the year, the price of natural gas was $1.80 mcf (per
thousand cubic feet) and the stocks were trading at five times cash flow. Now
the price is $2.10 mcf and stocks are trading at six times cash flow. Despite a
25% increase in drilling last year and every available rig operating today, it
is unlikely that domestic output will increase by more than 1% this year. The
annual demand growth in the U.S. is 2%-3%. Crude oil prices were down a dollar a
barrel over the period, netting out some of the gains from our natural gas
holdings. This softness is likely to continue until demand and supply are in
balance.
Q: What is your outlook for natural resources stocks?
A: We foresee a 15%-20% increase in oil drilling costs for 1997 and continued
money flows into the oil service business. However, the stock market has begun
to discount this growth for the next three years or so. For this reason, we are
cutting back in this sector. In the metals and mining sector, central banks have
been selling their gold, outstripping the supply shortfall and keeping gold
prices weak. Gold prices came down significantly over the past twelve months,
hurting the Fund's performance. I expect this sector to continue to
underperform. We think that a short-term supply bubble will keep oil prices
relatively weak until near the end of the year. Supply and demand factors will
continue to drive up natural gas stocks. There's not as much natural gas out
there as one might think, and the rigs are drilling to capacity.
Q: Do you plan any strategic changes for the portfolio?
A: We will continue to build the portfolio from the bottom up, one company at a
time. This approach has rewarded investors very well since the Fund's inception
in 1990, and we will continue to seek out the most attractive long-term growth
opportunities for shareholders.
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
1 KCS Energy Oil and gas exploration company 5.1%
2 Seagull Energy Oil company 4.4%
3 Nuevo Energy Oil and gas exploration firm 4.4%
4 Noble Drilling Oil service company 4.0%
5 Oil Search Oil company 3.0%
6 TransTexas Gas Oil and gas exploration firm 2.7%
7 Atwood Oceanics Oil service company 2.4%
8 Ocean Energy Oil and gas exploration service company 2.3%
9 Barrett Resources Oil and gas exploration company 2.3%
10 Tom Brown Oil and gas exploration firm 2.2%
These securities represent an aggregate of 32.8% 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, 1996 through June 30, 1997)
Best [triangle]
- ------------------------------
Oil Search
Positive exploration.
Noble Drilling
Offshore drilling improved.
TransTexas Gas
Recapitalization boosts company.
Worst [triangle]
- ------------------------------
Abacan Resources
Production shortfalls.
Barrett Resources
Poor exploration results.
Corriente Resources
Poor exploration results.
2
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- --------------
<S> <C> <C>
EQUITY SECURITIES 96.8%
Basic Industries 16.1%
Chemical 0.4%
Agrium Inc. ........................... 70,000 $ 805,000
-------------
Machinery 0.2%
Hanover Compressor Co.* ............... 19,200 374,400
-------------
Metal & Mining 13.3%
Ashanti Goldfields Co. Ltd. GDR ......... 100,000 1,168,750
Battle Mountain Gold Co. ............... 150,000 853,125
Bema Gold Corp.* ........................ 120,000 720,000
Boliden Ltd.* ........................... 380,000 2,022,521
Cameco Corp. ........................... 40,000 1,491,727
Corriente Resources Inc.* ............... 150,000 358,449
Crown Resources Corp.* .................. 120,000 765,000
Crystallex International Corp.* ......... 150,000 760,346
Delta Gold NL* ........................ 300,000 501,062
Denison Mines Ltd.* ..................... 1,500,000 418,190
Great Central Mines Ltd.* ............... 400,000 762,400
Homestake Mining Co. .................. 60,000 783,750
Impala Platinum Holdings ADR* ......... 50,000 559,465
Menzies Gold NL* ........................ 1,000,000 302,300
Newcrest Mining Ltd.* .................. 300,000 829,587
Newmont Mining Corp. .................. 20,000 780,000
Normandy Mining Ltd.* .................. 700,000 788,247
Orogen Minerals Inc.* .................. 1,250,000 3,580,365
Pan African Resources Corp* ............ 287,400 54,111
Pangea Goldfields Inc.* ............... 100,000 289,656
Placer Dome Inc. ........................ 50,000 818,750
Randgold Resources Inc. GDR*+ ......... 55,000 907,500
South Pacific Resources Inc.* ......... 350,000 149,535
Southernera Resources Ltd.* ............ 100,000 564,828
Southwestern Gold Corp.* ............... 80,000 544,553
Special Metals Corp.* .................. 26,100 508,950
Stelco Inc. Cl. A ..................... 35,000 261,052
Stillwater Mining Co.* .................. 70,000 1,557,500
Sutton Resources Ltd.* .................. 125,000 1,011,719
TVX Gold Inc.* ........................ 70,000 371,875
Vaal Reefs Exploration & Mining Ltd. ADR 125,000 601,562
Valerie Gold Resources Ltd.* ............ 100,000 102,828
Viceroy Resource Corp.* ............... 150,000 488,794
X-Cal Resources Ltd.* .................. 840,000 395,380
-------------
26,073,877
-------------
Railroad 2.2%
Mosvold Shipping Ltd.* .................. 2,000,000 2,578,726
OMI Corp. .............................. 183,500 1,754,719
-------------
4,333,445
-------------
Total Basic Industries ........................... 31,586,722
-------------
<CAPTION>
Value
Shares (Note 1)
----------- --------------
<S> <C> <C>
Energy 76.7%
Oil 53.1%
3DX Technologies Inc.* .................. 100,000 $ 975,000
Abacan Resource Corp.* .................. 545,900 1,740,056
Apache Corp. ........................... 50,025 1,625,812
Arakis Energy Corp.* .................. 1,000,000 3,781,250
Barrett Resources Corp.* ............... 150,100 4,493,619
Barrington Petroleum Ltd.* ............ 120,000 477,932
Basin Exploration Inc.* ............... 200,000 1,550,000
Brigham Exploration Co.* ............... 91,700 767,988
Cabot Oil & Gas Corp. .................. 100,000 1,762,500
Cairn Energy USA Inc.* .................. 150,000 1,968,750
Callon Petroleum Co.* .................. 100,000 1,600,000
Canadian 88 Energy Corp.* ............... 166,600 675,593
Canadian Conquest Exploration Inc.* ... 165,000 162,497
Chesapeake Energy Corp.* ............... 75,000 735,938
Clayton Williams Energy Inc.* ......... 24,930 283,579
COHO Energy Inc.* ..................... 85,700 910,562
Crystal Oil Co.* ........................ 41,600 1,476,800
Elk Point Resources Inc. Cl. A* ......... 300,000 1,890,003
Forcenergy, Inc.* ..................... 60,000 1,822,500
KCS Energy Inc. ........................ 490,000 9,983,750
Kelley Oil & Gas Corp.* ............... 300,000 918,750
Maxx Petroleum Ltd.* .................. 400,000 680,691
Mercantile International Inc.* ......... 72,500 79,750
Morrison Middlefield Ltd. ............... 240,000 2,476,556
New Cache Petroleum Ltd.* ............... 80,000 521,380
Novus Petroleum Ltd.* .................. 892,600 3,069,350
Nuevo Energy Co.* ..................... 210,000 8,610,000
Ocean Energy Inc.* ..................... 98,600 4,560,250
Oil Search Ltd.* ........................ 2,139,100 5,819,849
Pan East Petroleum Inc.* ............... 135,800 354,017
Pendaries Petroleum Ltd.* ............... 141,200 1,610,413
Plains Resources Inc.* .................. 250,000 3,687,500
Ranger Oil Ltd.* ........................ 400,000 3,725,000
Seagull Energy Corp.* .................. 500,000 8,750,000
Seven Seas Petroleum Inc.* ............... 150,000 1,770,000
Southern Mineral Corp.* .................. 150,000 750,000
Southwestern Energy Co.* ............... 100,000 1,300,000
Stampeder Exploration Ltd.* ............ 249,950 984,178
Stone Energy Corp.* ..................... 117,500 3,216,562
Tarragon Oil & Gas Ltd.* ............... 250,052 2,933,374
Thunder Energy Inc.* .................. 300,000 358,449
Titan Exploration Inc.* ............... 124,600 1,510,775
Tom Brown, Inc.* ........................ 200,000 4,250,000
Triton Energy Ltd. Cl. A ............... 46,400 2,125,700
Ulster Petroleum Ltd.* .................. 200,000 1,810,348
-------------
104,557,021
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- -------------
<S> <C> <C>
Oil Service 23.6%
Atwood Oceanics Inc.* ............... 69,800 $ 4,676,600
Cliffs Drilling Co.* ............... 100,000 3,650,000
Dailey Petroleum Services Corp.* ... 200,000 1,350,000
Daniel Industries Inc. ............ 200,000 3,087,500
Dreco Energy Services Ltd. Cl. A* ... 45,000 2,362,500
Ensco International Inc.* ......... 59,975 3,163,681
Global Marine Inc.* ............... 62,700 1,457,775
Grant Geophysical Inc.* ............ 100,000 3,500
J. Ray McDermott SA* ............... 150,700 4,068,900
Noble Drilling Corp.* ............... 350,000 7,896,875
Oceaneering International Inc.* ... 53,000 980,500
Offshore Energy Development Corp.* 40,000 185,000
Patterson Energy, Inc.* ............ 21,254 964,400
Pool Energy Services Co.* ......... 74,200 1,344,875
Post Energy Corp.* .................. 369,000 1,002,028
Precision Drilling Corp.* ......... 44,200 2,138,175
Reading & Bates Corp.* ............ 10,000 267,500
Rowan Companies, Inc.* ............ 70,700 1,992,856
Solid State Geophysical Inc. Cl. A 47,300 119,881
TMBR/Sharp Drilling Inc.* ......... 136,800 1,846,800
Unit Corp.* ........................ 200,000 2,087,500
Weatherford Enterra Inc.* ......... 50,000 1,925,000
-------------
46,571,846
-------------
Total Energy ................................. 151,128,867
-------------
Utility 4.0%
Natural Gas 4.0%
Markwest Hydrocarbon Inc.* ......... 37,500 567,188
Questar Corp. ..................... 50,000 2,018,750
TransTexas Gas Corp.* ............... 330,600 5,289,600
-------------
7,875,538
-------------
Total Utility .............................. 7,875,538
-------------
Total Equity Securities (Cost $163,177,350) ... 190,591,127
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------ ----------- ----------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 3.8%
American Express Credit Corp.,
5.70% ..................... $ 993,000 7/03/1997 $ 993,000
Ford Motor Credit Co., 5.50% . 6,538,000 7/01/1997 6,538,000
------------
Total Short-Term Obligations (Cost $7,531,000) ......... 7,531,000
------------
Total Investments (Cost $170,708,350)--100.6% ............ 198,122,127
Cash and Other Assets, Less Liabilities--(0.6%) ......... (1,117,243)
------------
Net Assets--100.0% ....................................... $197,004,884
============
</TABLE>
<TABLE>
<CAPTION>
Federal Income Tax Information:
<S> <C>
At June 30, 1997, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $170,925,485 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ............................................... $36,175,097
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ............................................ (8,978,455)
-----------
$27,196,642
===========
</TABLE>
- -------------------------------------
* Nonincome-producing securities.
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, 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, 1997 were $907,500 and $907,500 (0.46% of net
assets), respectively.
Diversification of Equity Securities at June 30, 1997 (as a percentage of net
assets) was United States 66.8%, Canada 22.8%, Australia 6.1%, Papua New
Guinea 1.8%, Norway 1.3%, South Africa 0.6%, Ghana 0.6%, and British Virgin
Islands 0.0%.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------
June 30, 1997
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $170,708,350) (Note 1) ... $198,122,127
Cash ................................................ 22,916
Receivable for fund shares sold ..................... 790,749
Receivable for securities sold ........................ 267,339
Dividends and interest receivable ..................... 24,016
Other assets .......................................... 2,034
-------------
199,229,181
Liabilities
Payable for securities purchased ..................... 1,366,621
Payable for fund shares redeemed ..................... 453,620
Accrued management fee (Note 2) ..................... 122,363
Accrued distribution and service fees (Note 5) ...... 104,003
Accrued transfer agent and shareholder services
(Note 2) .......................................... 77,279
Accrued trustees' fees (Note 2) ..................... 7,587
Other accrued expenses .............................. 92,824
-------------
2,224,297
-------------
Net Assets $197,004,884
=============
Net Assets consist of:
Unrealized appreciation of investments ............... $ 27,413,777
Accumulated net realized gain ........................ 7,125,672
Shares of beneficial interest ........................ 162,465,435
-------------
$197,004,884
=============
Net Asset Value and redemption price per share of
Class A shares ($80,028,888[divided by]3,574,507 shares of
beneficial interest) ................................. $22.39
======
Maximum Offering Price per share of Class A shares
($22.39 [divided by] .955) ........................... $23.45
======
Net Asset Value and offering price per share of Class
B shares ($78,701,053 [divided by] 3,610,815 shares of
beneficial interest)* .............................. $21.80
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($10,746,753 [divided by]
473,002 shares of beneficial interest) ............... $22.72
======
Net Asset Value and offering price per share of Class
D shares ($27,528,190 [divided by] 1,265,314 shares of
beneficial interest)* .............................. $21.76
======
</TABLE>
- -------------------------------------
*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, 1997
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $20,985 ............... $ 407,643
Interest ................................................ 459,027
------------
866,670
Expenses
Management fee (Note 2) ................................. 940,108
Transfer agent and shareholder services (Note 2) ...... 226,295
Service fee--Class A (Note 5) ........................... 142,417
Distribution and service fees--Class B (Note 5) ......... 421,036
Distribution and service fees--Class D (Note 5) ......... 170,898
Custodian fee .......................................... 128,281
Registration fees ....................................... 75,418
Reports to shareholders ................................. 41,085
Audit fee ............................................. 26,983
Trustees' fees (Note 2) ................................. 14,061
Miscellaneous .......................................... 8,126
------------
2,194,708
Expenses borne by the Distributor (Note 3) ............ (3,933)
------------
2,190,775
------------
Net investment loss .................................... (1,324,105)
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments (Notes 1 and 4) ...... 12,486,164
Net realized loss on foreign currency .................. (27,759)
------------
Total net realized gain .............................. 12,458,405
Net unrealized appreciation of investments ............ 13,310,514
------------
Net gain on investments ................................. 25,768,919
------------
Net increase in net assets resulting from operations . $24,444,814
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------------
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss ......... $ (1,324,105) $ (679,747)
Net realized gain on
investments ............... 12,458,405 4,871,429
Net unrealized appreciation of
investments ............... 13,310,514 11,106,956
------------ -----------
Net increase resulting from
operations .................. 24,444,814 15,298,638
------------ -----------
Distribution from net realized
gains:
Class A ..................... (1,857,796) --
Class B ..................... (1,170,575) --
Class C ..................... (352,673) --
Class D ..................... (581,660) --
------------ -----------
(3,962,704) --
------------ -----------
Net increase from fund share
transactions (Note 7) ...... 121,964,798 900,350
------------ -----------
Total increase in net assets 142,446,908 16,198,988
Net Assets
Beginning of year ............ 54,557,976 38,358,988
------------ -----------
End of year .................. $197,004,884 $54,557,976
============ ===========
</TABLE>
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
June 30, 1997
Note 1
State Street Research Global Resources Fund (the "Fund"), is a series of State
Street Research 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.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
NOTES (cont'd)
- -------------------------------------------------------------------------------
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.
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 0.75% 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, 1997, the fees pursuant to such agreement
amounted to $940,108.
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,
1997, the amount of such shareholder servicing and account maintenance expenses
was $112,253.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$14,061 during the year ended June 30, 1997.
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, 1997, the amount of such expenses assumed by the
Distributor and its affiliates was $3,933.
Note 4
For the year ended June 30, 1997, purchases and sales of securities, exclusive
of short-term obligations, aggregated $172,476,754 and $61,225,861,
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, 1997, fees pursuant to such plan amounted to
$142,417, $421,036 and $170,898 for Class A, Class B and Class D shares,
respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $169,805 and $114,790, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1997, and that MetLife Securities, Inc.
earned commissions aggregating $217,475 on sales of Class B shares, and that the
Distributor collected contingent deferred sales charges of $109,834 and $33,827
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>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1997, the
Distributor owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------------------------------
1997 1996
------------------------------------ ------------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................... 3,660,723 $ 77,832,076 723,940 $ 10,571,034
Issued upon reinvestment of distribution from net
realized gains .............................. 82,889 1,767,355 -- --
Shares repurchased ........................... (1,943,823) (40,902,436) (1,062,091) (14,571,296)
------------ -------------- ------------ --------------
Net increase (decrease) ........................ 1,799,789 $ 38,696,995 (338,151) $ (4,000,262)
============ ============== ============ ==============
Class B Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................... 3,312,555 $ 69,477,881 438,451 $ 6,509,210
Issued upon reinvestment of distribution from net
realized gains .............................. 51,654 1,077,181 -- --
Shares repurchased ........................... (502,773) (10,470,845) (273,265) (3,881,920)
------------ -------------- ------------ --------------
Net increase ................................. 2,861,436 $ 60,084,217 165,186 $ 2,627,290
============ ============== ============ ==============
Class C Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................... 736,188 $ 15,558,855 354,475 $ 5,359,929
Issued upon reinvestment of distribution from net
realized gains .............................. 14,897 321,658 -- --
Shares repurchased ........................... (597,301) (12,708,131) (303,110) (4,509,482)
------------ -------------- ------------ --------------
Net increase ................................. 153,784 $ 3,172,382 51,365 $ 850,447
============ ============== ============ ==============
Class D Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................... 1,676,809 $ 34,986,489 210,219 $ 2,813,802
Issued upon reinvestment of distribution from net
realized gains .............................. 25,665 534,412 -- --
Shares repurchased ........................... (738,597) (15,509,697) (104,262) (1,390,927)
------------ -------------- ------------ --------------
Net increase ................................. 963,877 $ 20,011,204 105,957 $ 1,422,875
============ ============== ============ ==============
</TABLE>
8
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Year ended June 30
---------------------------------------------------------------
1997** 1996** 1995** 1994** 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.44 $12.16 $11.84 $13.51 $8.02
------ ------ ------ ------ -----
Net investment loss* (0.15) (0.20) (0.16) (0.17) (0.13)
Net realized and unrealized gain (loss) on investments 5.86 5.48 0.48 (1.50) 5.62
------ ------ ------ ------ -----
Total from investment operations 5.71 5.28 0.32 (1.67) 5.49
------ ------ ------ ------ -----
Distribution from net realized gains (0.76) -- -- -- --
------ ------ ------ ------ -----
Total distributions (0.76) -- -- -- --
------ ------ ------ ------ -----
Net asset value, end of year $22.39 $17.44 $12.16 $11.84 $13.51
====== ====== ====== ====== ======
Total return 32.96%[dag] 43.42%[dag] 2.70%[dag] (12.36)%[dag] 68.45%[dag]
Net assets at end of year (000s) $80,029 $30,943 $25,692 $30,679 $33,513
Ratio of operating expenses to average net assets* 1.42% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment loss to average net assets* (0.73)% (1.47)% (1.41)% (1.46)% (1.44)%
Portfolio turnover rate 51.67% 92.33% 62.94% 30.98% 61.00%
Average commission rate@ $0.0233 $0.0237 -- -- --
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3). $0.00 $0.05 $0.09 $0.11 $0.03
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------
Year ended June 30
-----------------------------------------------------------------
1997** 1996** 1995** 1994** 1993***
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.12 $12.03 $11.78 $13.51 $12.99
------ ------ ------ ------ ------
Net investment loss* (0.30) (0.30) (0.23) (0.23) (0.02)
Net realized and unrealized gain (loss) on investments 5.74 5.39 0.48 (1.50) 0.54
------ ------ ------ ------ ------
Total from investment operations 5.44 5.09 0.25 (1.73) 0.52
------ ------ ------ ------ ------
Distribution from net realized gains (0.76) -- -- -- --
------ ------ ------ ------ ------
Total distributions (0.76) -- -- -- --
------ ------ ------ ------ ------
Net asset value, end of year $21.80 $17.12 $12.03 $11.78 $13.51
====== ====== ====== ====== ======
Total return 31.98%[dag] 42.31%[dag] 2.12%[dag] (12.81)%[dag] 4.00%++
Net assets at end of year (000s) $78,701 $12,828 $7,030 $6,333 $1,048
Ratio of operating expenses to average net assets* 2.17% 2.50% 2.33% 2.25% 2.25%[dbldag]
Ratio of net investment loss to average net assets* (1.47)% (2.20)% (1.98)% (1.93)% (1.98)%[dbldag]
Portfolio turnover rate 51.67% 92.33% 62.94% 30.98% 61.00%
Average commission rate@ $0.0233 $0.0237 -- -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3). $0.00 $0.04 $0.09 $0.14 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30, 1993.
[dbldag] Annualized.
[dag]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.
@ Average commission rate per share paid for security trades beginning with the
fiscal year ended June 30, 1996.
9
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------
Year ended June 30
-----------------------------------
1997** 1996** 1995**
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $17.64 $12.27 $11.90
------ ------ ------
Net investment loss* (0.10) (0.17) (0.11)
Net realized and unrealized gain (loss) on investments 5.94 5.54 0.48
------ ------ ------
Total from investment operations 5.84 5.37 0.37
------ ------ ------
Distribution from net realized gains (0.76) -- --
------ ------ ------
Total distributions (0.76) -- --
------ ------ ------
Net asset value, end of year $22.72 $17.64 $12.27
====== ====== ======
Total return 33.33%[dag] 43.77%[dag] 3.11%[dag]
Net assets at end of year (000s) $10,747 $5,632 $3,288
Ratio of operating expenses to average net assets* 1.17% 1.50% 1.33%
Ratio of net investment loss to average net assets* (0.48)% (1.20)% (1.01)%
Portfolio turnover rate 51.67% 92.33% 62.94%
Average commission rate@ $0.0233 $0.0237 --
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3). $0.00 $0.05 $0.08
<CAPTION>
1994** 1993***
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $13.52 $12.99
------ ------
Net investment loss* (0.15) (0.00)
Net realized and unrealized gain (loss) on investments (1.47) 0.53
------ ------
Total from investment operations (1.62) 0.53
------ ------
Distribution from net realized gains -- --
------ ------
Total distributions -- --
------ ------
Net asset value, end of year $11.90 $13.52
====== ======
Total return (11.98)%[dag] 4.08%++
Net assets at end of year (000s) $960 $146
Ratio of operating expenses to average net assets* 1.25% 1.25%[dbldag]
Ratio of net investment loss to average net assets* (0.95)% (1.05)%[dbldag]
Portfolio turnover rate 30.98% 61.00%
Average commission rate@ -- --
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3). $0.16 $0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
-----------------------------------
Year ended June 30
-----------------------------------
1997** 1996** 1995**
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $17.10 $12.02 $11.77
------ ------ ------
Net investment loss* (0.30) (0.30) (0.23)
Net realized and unrealized gain (loss) on investments 5.72 5.38 0.48
------ ------ ------
Total from investment operations 5.42 5.08 0.25
------ ------ ------
Distribution from net realized gains (0.76) -- --
------ ------ ------
Total distributions (0.76) -- --
------ ------ ------
Net asset value, end of year $21.76 $17.10 $12.02
====== ====== ======
Total return 31.90%[dag] 42.26%[dag] 2.12%[dag]
Net assets at end of year (000s) $27,528 $5,154 $2,350
Ratio of operating expenses to average net assets* 2.17% 2.50% 2.33%
Ratio of net investment loss to average net assets* (1.45)% (2.20)% (1.99)%
Portfolio turnover rate 51.67% 92.33% 62.94%
Average commission rate@ $0.0233 $0.0237 --
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3). $0.00 $0.05 $0.09
<CAPTION>
1994** 1993***
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $13.51 $12.99
------ ------
Net investment loss* (0.23) (0.02)
Net realized and unrealized gain (loss) on investments (1.51) 0.54
------ ------
Total from investment operations (1.74) 0.52
------ ------
Distribution from net realized gains -- --
Total distributions -- --
------ ------
Net asset value, end of year $11.77 $13.51
====== ======
Total return (12.88)%[dag] 4.00%++
Net assets at end of year (000s) $1,931 $588
Ratio of operating expenses to average net assets* 2.25% 2.25%[dbldag]
Ratio of net investment loss to average net assets* (1.94)% (2.00)%[dbldag]
Portfolio turnover rate 30.98% 61.00%
Average commission rate@ -- --
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3). $0.13 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30, 1993.
[dbldag] Annualized.
[dag]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.
@ Average commission rate per share paid for security trades beginning with
the fiscal year ended June 30, 1996.
10
<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, 1997, 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, 1997 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 8, 1997
11
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
Global Resources Fund was among the top performers in its category for the year
ended June 30, 1997. The Fund's total return was +32.96%, double the average of
the 42 natural resources fund classes tracked by Lipper Analytical Services.
Rising oil and gas prices, increased output among exploration and production
companies, and an emphasis on smaller capitalization stocks all contributed to
the Fund's successful year.
Portfolio strategy changed little over the period. Approximately 70% of the
portfolio was held in energy exploration and production stocks, of which 24% was
oil service stocks. Oil service stocks have substantially outperformed the
broader exploration and production indices year-to-date. The Fund held a 13%
position in metals and mining shares at year-end.
Industry consolidations continued to be prevalent in the natural resources
sector. The portfolio benefited from consolidations among two of its mid-cap
holdings, CS Resources and Dreco Energy Services. Two of last year's top-ten
holdings, Nowsco and Global Natural Resources, were also subjects of takeover.
Less positively, Abacan Resources lost nearly two-thirds of its value, as their
key oil field in Nigeria experienced a sudden short-term decline in production.
Abacan had been a top-ten holding.
June 30, 1997
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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance. 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 results for the Fund
are increased by the Distributor's voluntary reduction of Fund fees and
expenses; without subsidization, performance would have been lower.
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
26.98% 22.52% 8.88%
3/2/90 95 10000
6/30/90 8982 10901
6/30/91 734 11704
6/30/92 645 13271
6/30/93 10873 15076
6/30/94 952 15287
6/30/95 978 19267
6/30/96 14036 24272
6/30/97 18662 32689
Class B Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
26.98% 22.84% 9.17%
3/2/90 10000 10000
6/30/90 9405 10901
6/30/91 7686 11704
6/30/92 6759 13271
6/30/93 11385 15076
6/30/94 9927 15287
6/30/95 10138 19267
6/30/96 14427 24272
6/30/97 19042 32689
Class C Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
33.33% 24.01% 9.77%
3/2/90 10000 10000
6/30/90 9405 10901
6/30/91 7686 11704
6/30/92 6759 13271
6/30/93 11394 15076
6/30/94 10028 15287
6/30/95 10340 19267
6/30/96 14866 24272
6/30/97 19820 32689
Class D Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
30.90% 22.97% 9.15%
3/2/90 10000 10000
6/30/90 9405 10901
6/30/91 7686 11704
6/30/92 6759 13271
6/30/93 11385 15076
6/30/94 9919 15287
6/30/95 10130 19267
6/30/96 14411 24272
6/30/97 19008 32689
____ Global Resources Fund - - - S&P 500
12
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
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
Steve A. Garban
Retired; formerly Senior Vice
President for Finance and
Operations and Treasurer, The
Pennsylvania State University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial Officer,
St. Regis Corp.
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Associate, 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 Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Randolph, 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 logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied by a current State Street Research Global Resources Fund prospectus.
When used after September 30, 1997, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 4099-970821 (0998)SSr-LD GR-384D-8971BS
