<PAGE>
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STATE STREET RESEARCH
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ARGO FUND
(formerly Equity Investment Fund)
----------------------------------
SEMIANNUAL REPORT
December 31, 1998
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WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
- ----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
- ----------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH ARGO FUND (formerly Equity Investment Fund)
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy slowed to a modest pace in the second half of the year.
Inflation fell to 1.5%, personal income rose, and unemployment remained low.
o Lower mortgage rates and declining energy costs boosted consumer purchasing
power. Consumer spending rose strongly while the U.S. savings rate fell
below zero for the first time in 50 years.
o The Federal Reserve Board lowered interest rates three times in the second
half of the year. The federal funds rate, the rate that banks charge each
other for overnight loans, came down from 5.5% to 4.75% at year's end.
THE MARKETS
o Equity markets plunged in the third quarter, then reversed direction to make
up earlier losses. The S&P 500, a broad measure of common stock performance,
gained 9.24% over the six-month period ended December 31, 1998.(1)
o The market rewarded firms with steady earnings growth, and gave the highest
valuation to technology leaders and innovators. Large company growth stocks
gained 15.22%, as measured by the Russell 1000 Growth Index.(1) Small
company growth stocks fell, returning -4.01%, as measured by the Russell
2000 Growth Index.(1)
o U.S. Treasury bonds rallied as the benchmark fell below 5.0% then edged back
up at year-end. After three years as market leaders, high-yield bonds lost
ground.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended December 31, 1998, State Street Research Argo Fund
Class A shares returned -1.90% [does not reflect sales charge].(2) That fell
short of the 3.08% gain for the Lipper average growth and income fund. The
Fund also underperformed the S&P 500.
o The Fund's emphasis on large-cap value stocks hurt performance as the market
was led by a narrow band of large-cap growth stocks which have been bid up
to very high levels after a brief period of sharp volatility.
o Difficult economic conditions abroad affected both the demand for and the
prices of products of energy, financial and cyclical companies, which
account for a significant portion of the Fund's investments.
CURRENT STRATEGY
o The Fund is currently invested in large, domestic companies trading at
attractive valuations relative to their normal earning power.
o We believe the Fund's investments have the potential to perform well when
the valuation gap closes between them and richly-priced, large-cap growth
companies.
December 31, 1998
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell 1000 Growth
Index contains only those stocks within the complete Russell 1000 Index (a
large company index) that show above-average growth. The Russell 2000 Growth
Index contains only those stocks within the complete Russell 2000 Index (a
small company index) that show above-average growth. The indices do not take
transaction charges into consideration. It is not possible to invest
directly in the indices.
(2) -2.24% for Class B shares; -2.24% for Class C shares; -1.78% for Class S
shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
Performance reflects a maximum 4.5% Class A share front-end sales charge, or
5% Class B share or 1% Class C share contingent deferred sales charge, where
applicable.
(4) Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
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FUND INFORMATION (all data are for periods ended December 31, 1998)
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AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(3) (4)
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LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
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Class A 13.63% 15.30% 17.06% 11.65%
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Class B 13.70% 15.40% 17.12% 11.06%
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Class C 13.71% 15.40% 17.33% 15.18%
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Class S 14.21% 16.03% 18.49% 17.15%
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The performance data shown above do not reflect an increase in the maximum
Class A sales charge from 4.5% to 5.75%, effective as of 1/1/99. At the new,
higher Class A sales charge, the performance would have been lower. Assuming
the increased sales charge was in effect, performance would have been as
follows:
LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
- ---------------------------------------------------------------------------
Class A 13.50% 15.15% 16.75% 10.19%
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 BURLINGTON RESOURCES Oil & gas exploration 3.1%
2 AT&T Telecommunications 3.0%
3 BANKAMERICA Banking 3.0%
4 EXXON Oil 2.8%
5 CITIGROUP Financial services 2.7%
6 ACE Insurance 2.6%
7 AMOCO Oil 2.3%
8 FORT JAMES Paper products 2.3%
9 UNUM Insurance 2.3%
10 FLEET FINANCIAL GROUP Banking 2.3%
These securities represent an aggregate of 26.4% 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.
TOP 5 EQUITY INDUSTRIES
(by percentage of net assets)
OIL 15.2%
INSURANCE 14.0%
BANK 9.3%
CHEMICAL 8.7%
TELEPHONE 7.4%
Total: 54.6%
<PAGE>
STATE STREET RESEARCH ARGO FUND
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INVESTMENT PORTFOLIO
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December 31, 1998 (Unaudited)
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VALUE
SHARES (NOTE 1)
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COMMON STOCKS 99.2%
BASIC INDUSTRIES 17.9%
CHEMICAL 8.7%
Air Products & Chemicals, Inc. ................. 110,000 $ 4,400,000
Dow Chemical Co. ............................... 33,000 3,000,938
E.I. Du Pont De Nemours & Co. .................. 34,100 1,809,431
PPG Industries Inc. ............................ 64,900 3,780,425
Rohm & Haas Co. ................................ 140,700 4,238,587
------------
17,229,381
------------
DIVERSIFIED 2.0%
Minnesota Mining & Manufacturing Co. ........... 55,900 3,975,887
------------
ELECTRICAL EQUIPMENT 3.6%
Cooper Industries Inc. ......................... 62,000 2,956,625
Honeywell Inc. ................................. 54,400 4,097,000
------------
7,053,625
------------
FOREST PRODUCT 2.3%
Fort James Corp. ............................... 114,000 4,560,000
------------
RAILROAD 1.3%
Norfolk Southern Corp. ......................... 83,000 2,630,063
------------
Total Basic Industries ......................... 35,448,956
------------
CONSUMER CYCLICAL 7.5%
AUTOMOTIVE 1.0%
General Motors Corp. ........................... 28,300 2,025,219
------------
RECREATION 0.5%
Mattel Inc. .................................... 44,100 1,006,031
------------
RETAIL TRADE 6.0%
Cendant Corp.* ................................. 161,100 3,070,969
Dayton Hudson Corp. ............................ 9,400 509,950
Federated Department Stores Inc.* .............. 97,700 4,256,056
May Department Stores Co. ...................... 66,700 4,027,013
------------
11,863,988
------------
Total Consumer Cyclical ........................ 14,895,238
------------
CONSUMER STAPLE 14.1%
BUSINESS SERVICE 2.1%
Browning-Ferris Industries Inc. ................ 148,300 4,217,281
------------
FOOD & BEVERAGE 3.6%
Archer Daniels Midland Co. ..................... 240,800 4,138,750
Sara Lee Corp. ................................. 108,200 3,049,888
------------
7,188,638
------------
HOSPITAL SUPPLY 4.1%
Aetna Inc. ..................................... 46,500 3,656,062
Columbia/HCA Healthcare Corp. .................. 178,300 4,412,925
------------
8,068,987
------------
PRINTING & PUBLISHING 2.2%
Tribune Co. .................................... 66,200 4,369,200
------------
TOBACCO 2.1%
Philip Morris Companies, Inc. .................. 75,300 4,028,550
------------
Total Consumer Staple .......................... 27,872,656
------------
ENERGY 15.2%
OIL 15.2%
Amoco Corp. .................................... 76,900 $ 4,642,837
Anadarko Petroleum Corp. ....................... 34,100 1,052,838
Burlington Resources Inc. ...................... 171,500 6,141,844
Conoco Inc. Cl. A .............................. 195,800 4,087,325
Exxon Corp. .................................... 77,000 5,630,625
Tosco Corp. .................................... 93,700 2,424,487
Total SA Cl. B ADR ............................. 39,500 1,965,125
Unocal Corp. ................................... 141,700 4,135,869
------------
30,080,950
------------
Total Energy ................................... 30,080,950
------------
FINANCE 24.9%
BANK 9.3%
Bank One Corp. ................................. 79,000 4,033,937
BankAmerica Corp. .............................. 98,903 5,946,543
Fleet Financial Group Inc. ..................... 100,900 4,508,969
Mellon Bank Corp. .............................. 58,200 4,001,250
------------
18,490,699
------------
FINANCIAL SERVICE 1.6%
CIT Group Inc. Cl. A ........................... 96,700 3,076,269
------------
INSURANCE 14.0%
Ace Ltd. ....................................... 150,000 5,165,625
Allstate Corp. ................................. 107,700 4,159,912
Chubb Corp. .................................... 65,600 4,255,800
Citigroup, Inc. ................................ 108,450 5,368,275
Saint Paul Companies, Inc. ..................... 122,600 4,260,350
UNUM Corp. ..................................... 77,600 4,529,900
------------
27,739,862
------------
Total Finance .................................. 49,306,830
------------
SCIENCE & TECHNOLOGY 4.9%
AEROSPACE 2.2%
Raytheon Co. Cl. B* ............................ 80,500 4,286,625
------------
COMPUTER SOFTWARE & SERVICE 0.6%
First Data Corp. ............................... 38,000 1,204,125
------------
OFFICE EQUIPMENT 2.1%
International Business Machines Corp. .......... 22,100 4,082,975
------------
Total Science & Technology ..................... 9,573,725
------------
UTILITY 14.7%
ELECTRIC 7.3%
FPL Group Inc. ................................. 55,800 3,438,675
Pacificorp ..................................... 148,400 3,125,675
Texas Utilities Co. ............................ 83,400 3,893,738
Unicom Corp. ................................... 105,400 4,064,487
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14,522,575
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TELEPHONE 7.4%
AT&T Corp. ..................................... 79,300 5,967,325
Bell Atlantic Corp. ............................ 84,900 4,499,700
U.S. West Inc. ................................. 63,100 4,077,838
------------
14,544,863
------------
Total Utility .................................. 29,067,438
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Total Common Stocks (Cost $170,019,175) ........ 196,245,793
------------
SHORT-TERM INVESTMENTS 3.3%
State Street Navigator Securities
Lending Prime Portfolio ...................... 6,565,514 $ 6,565,514
------------
Total Short-Term Investments (Cost $6,565,514) . 6,565,514
------------
Total Investments (Cost $176,584,689) - 102.5% . 202,811,307
Other Assets, Less Liabilities - (2.5%) ........ (4,975,201)
------------
Net Assets - 100.0% ............................ $197,836,106
============
Federal Income Tax Information:
At December 31, 1998, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $176,623,444 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ....... 29,501,922
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ....... (3,314,059)
------------
$ 26,187,863
============
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* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ARGO FUND
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STATEMENT OF ASSETS AND LIABILITIES
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December 31, 1998 (Unaudited)
ASSETS
Investments, at value (Cost $176,584,689) (Note 1) ............. $202,811,307
Receivable for securities sold ................................. 3,853,154
Receivable for Fund shares sold ................................ 560,448
Dividends and interest receivable .............................. 427,180
Receivable from Distributor (Note 3) ........................... 12,301
Other assets ................................................... 43,506
------------
207,707,896
LIABILITIES
Payable for collateral received on securities loaned ........... 6,565,514
Payable to custodian ........................................... 2,537,985
Accrued transfer agent and shareholder services (Note 2) 265,447
Payable for fund shares redeemed ............................... 231,764
Accrued management fee (Note 2) ................................ 113,577
Accrued distribution and service fees (Note 5) ................. 66,547
Accrued trustees' fees (Note 2) ................................ 33,160
Other accrued expenses ......................................... 57,796
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9,871,790
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NET ASSETS $197,836,106
============
Net Assets consist of:
Undistributed net investment income .......................... $ 118,948
Unrealized appreciation of investments ....................... 26,226,618
Accumulated net realized gain ................................ 23,090,432
Paid-in capital .............................................. 148,400,108
------------
$197,836,106
============
Net Asset Value and redemption price per share of
Class A shares ($73,214,034 / 3,827,921 shares) .............. $19.13
======
Maximum Offering Price per share of Class A shares
($19.13 / .955) .............................................. $20.03
======
Net Asset Value and offering price per share of
Class B shares ($57,568,404 / 3,084,948 shares)* ............. $18.66
======
Net Asset Value and offering price per share of
Class C shares ($1,866,445 / 99,961 shares)* ................. $18.67
======
Net Asset Value, offering price and redemption price per
share of Class S shares ($65,187,223 / 3,413,631 shares) ..... $19.10
======
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* Redemption price per share for Class B and Class C is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ARGO FUND
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STATEMENT OF OPERATIONS
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For the six months ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends ................................................ $ 1,644,474
Interest (Note 1) ........................................ 162,393
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1,806,867
EXPENSES
Management fee (Note 2) .................................. 693,270
Transfer agent and shareholder services (Note 2) ......... 281,501
Custodian fee ............................................ 76,010
Registration fees ........................................ 22,653
Reports to shareholders .................................. 19,456
Trustee's fees (Note 2) .................................. 19,072
Audit fee ................................................ 14,080
Service fee - Class A (Note 5) ........................... 90,964
Distribution and service fees - Class B (Note 5) ......... 271,044
Distribution and service fees - Class C (Note 5) ......... 8,361
Legal fees ............................................... 3,328
Miscellaneous ............................................ 4,623
-------------
1,504,362
Expenses borne by the Distributor (Note 3) ............... (51,868)
Fees paid indirectly (Note 2) ............................ (12,199)
-------------
1,440,295
-------------
Net investment income .................................... 366,572
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) ......... 27,342,394
Net unrealized depreciation of investments ............... (34,105,370)
-------------
Net loss on investments .................................. (6,762,976)
-------------
Net decrease in net assets resulting from operations ..... $ (6,396,404)
=============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ARGO FUND
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STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
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<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ....................................... $ 525,350 $ 366,572
Net realized gain on investments ............................ 29,310,326 27,342,394
Net unrealized appreciation (depreciation) of investments ... 18,055,536 (34,105,370)
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Net increase (decrease) resulting from operations ........... 47,891,212 (6,396,404)
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Dividends from net investment income:
Class A ................................................... (164,598) (76,804)
Class S ................................................... (478,254) (170,820)
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(642,852) (247,624)
-------------- --------------
Distributions from net realized gains:
Class A ................................................... (8,192,653) (7,384,171)
Class B ................................................... (4,307,362) (5,516,923)
Class C ................................................... (267,380) (158,506)
Class S ................................................... (12,448,041) (9,054,570)
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(25,215,436) (22,114,170)
-------------- --------------
Net increase (decrease) from Fund share transactions (Note 6) 44,734,317 (6,531,675)
-------------- --------------
Total increase (decrease) in net assets 66,767,241 (35,289,873)
NET ASSETS
Beginning of period ......................................... 166,358,738 233,125,979
-------------- --------------
End of period (including undistributed net investment income
of $0 and $118,948, respectively) ......................... $ 233,125,979 $ 197,836,106
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ARGO FUND
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
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December 31, 1998
NOTE 1
State Street Research Argo Fund, formerly 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 Argo Fund, State Street Research Alpha Fund,
State Street Research Global Resources Fund and State Street Research Athletes
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. Until December 31, 1998 Class A shares
were subject to an initial sales charge of up to 4.50% and effective January
1, 1999 became subject to an initial sales charge of up to 5.75%. Class A
shares pay a service fee equal to 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. Effective January 1, 1999, the Fund began
offering Class B(1) shares which are subject to a contingent deferred sales
charge on certain redemptions made within six years. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. The Fund's expenses are
borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the 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.
G. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
recenves in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At December 31, 1998, the value of the securities loaned and the value
of collateral were $6,280,670 and $6,565,514, respectively. During the six
months ended December 31, 1998, income from securities lending amounted to
$17,669 and is included in interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% 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 six months ended December 31, 1998, the
fees pursuant to such agreement amounted to $693,270.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of 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 six months ended
December 31, 1998, the amount of such shareholder servicing and account
maintenance expenses was $166,560.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended December 31, 1998
the Fund's transfer agent fees were reduced by $12,199 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$19,072 during the six months ended December 31, 1998.
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 six months ended December 31, 1998, the amount of such
expenses assumed by the Distributor and its affiliates was $51,868.
NOTE 4
For the six months ended December 31, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $170,883,124 and $193,543,272,
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 C shares. In addition, the Fund pays
annual distribution fees of 0.75% of average daily net assets for Class B and
Class C 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 six months ended December 31, 1998, fees pursuant to such plan amounted
to $90,964, $271,044 and $8,361 for Class A, Class B and Class C 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 $12,435 and $74,152, respectively, on sales of Class A shares of
the Fund during the six months ended December 31, 1998, and that MetLife
Securities, Inc. earned commissions aggregating $241,733 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $47,659 and $1,122 on redemptions of Class B and Class C 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.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
------------------------------------- -------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 804,843 $ 16,069,612 447,924 $ 8,792,199
Issued upon reinvestment of:
Distributions from net
realized gains .......... 436,011 7,978,243 377,796 7,137,865
Dividends from net
investment income ....... 8,147 156,176 3,866 71,865
Shares repurchased ...... (543,128) (10,895,290) (514,361) (9,808,924)
----------- ------------- ------------ ------------
Net increase ............ 705,873 $ 13,308,741 315,225 $ 6,193,005
=========== ============= ============ ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 1,176,521 $ 22,985,589 610,992 $ 11,828,612
Issued upon reinvestment
of distributions from net
realized gains .......... 235,125 4,221,732 293,842 5,422,431
Shares repurchased ...... (266,675) (5,250,654) (276,877) (5,192,681)
----------- ------------- ------------ ------------
Net increase ............ 1,144,971 $ 21,956,667 627,957 $ 12,058,362
=========== ============= ============ ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 123,388 $ 2,341,959 359,647 $ 6,613,486
Issued upon reinvestment
of distributions from net
realized gains .......... 14,256 256,153 7,870 145,219
Shares repurchased ...... (141,471) (2,560,836) (348,336) (6,455,538)
----------- ------------- ------------ ------------
Net increase (decrease) . (3,827) $ 37,276 19,181 $ 303,167
=========== ============= ============ ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 1,888,511 $ 37,815,205 998,652 $ 19,174,216
Issued upon reinvestment of:
Distributions from net
realized gains .......... 681,187 12,448,029 479,326 9,052,915
Dividends from net
investment income ....... 24,360 475,782 8,745 162,307
Shares repurchased ...... (2,108,363) (41,307,383) (2,831,822) (53,475,647)
----------- ------------- ------------ ------------
Net increase (decrease) . 485,695 $ 9,431,633 (1,345,099) $(25,086,209)
=========== ============= ============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 14.52 12.44 14.28 17.04 19.68 21.68
----- ----- ----- ----- ----- -----
Net investment income($)* 0.01 0.08 0.12 0.09 0.06 0.05
Net realized and
unrealized gain
(loss) on investments($) 0.18 2.14 3.38 4.63 4.74 (0.52)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.19 2.22 3.50 4.72 4.80 (0.47)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) -- (0.05) (0.11) (0.09) (0.06) (0.02)
Distributions from net
realized gains ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (2.27) (0.38) (0.74) (2.08) (2.80) (2.08)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.44 14.28 17.04 19.68 21.68 19.13
===== ===== ===== ===== ===== =====
Total return(b) (%) 0.93 18.34 25.33 30.91 27.62 (1.90) (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 29,821 31,174 39,300 55,239 76,151 73,214
Ratio of operating
expenses to average net
assets (%)* 1.50 1.42 1.25 1.25 1.25 1.26 (d)
Ratio of net investment
income to average net
assets (%)* 0.08 0.64 0.79 0.54 0.29 0.46 (d)
Portfolio turnover rate (%) 62.93 47.93 44.44 88.07 81.53 84.06
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.04 0.06 0.03 0.03 0.01 0.00
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 14.51 12.36 14.16 16.88 19.42 21.25
----- ----- ----- ----- ----- -----
Net investment income
(loss) ($)* (0.02) 0.01 0.01 (0.03) (0.09) (0.03)
Net realized and
unrealized gain
(loss) on investments($) 0.14 2.12 3.34 4.56 4.66 (0.50)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.12 2.13 3.35 4.53 4.57 (0.53)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.36 14.16 16.88 19.42 21.25 18.66
===== ===== ===== ===== ===== =====
Total return(b) (%) 0.37 17.70 24.39 29.91 26.67 (2.24) (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 4,029 5,933 13,129 25,478 52,211 57,568
Ratio of operating
expenses to average net
assets (%)* 2.00 2.00 2.00 2.00 2.00 2.01 (d)
Ratio of net investment
income (loss) to
average net assets (%)* (0.39) 0.08 0.05 (0.20) (0.46) (0.27) (d)
Portfolio turnover rate (%) 62.93 47.93 44.44 88.07 81.53 84.06
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.04 0.06 0.03 0.03 0.01 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 14.51 12.36 14.15 16.87 19.41 21.26
----- ----- ----- ----- ----- -----
Net investment income
(loss) ($)* (0.05) 0.01 0.01 (0.03) (0.09) (0.02)
Net realized and
unrealized gain
(loss) on investments ($) 0.17 2.11 3.34 4.56 4.68 (0.51)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.12 2.12 3.35 4.53 4.59 (0.53)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.36 14.15 16.87 19.41 21.26 18.67
===== ===== ===== ===== ===== =====
Total return(b) ($) 0.45 17.53 24.40 29.93 26.80 (2.24) (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 551 699 931 1,642 1,718 1,866
Ratio of operating
expenses to average net
assets (%)* 2.00 2.00 2.00 2.00 2.00 2.01 (d)
Ratio of net investment
income (loss) to
average net assets (%)* (0.41) 0.08 0.04 (0.19) (0.43) (0.25) (d)
Portfolio turnover rate (%) 62.93 47.93 44.44 88.07 81.53 84.06
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.06 0.06 0.03 0.03 0.01 0.00
<CAPTION>
CLASS S
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 14.51 12.48 14.27 17.03 19.66 21.65
----- ----- ----- ----- ----- -----
Net investment income($)* 0.07 0.14 0.17 0.13 0.11 0.06
Net realized and
unrealized gain
(loss) on investments($) 0.17 2.15 3.37 4.62 4.73 (0.51)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.24 2.29 3.54 4.75 4.84 (0.45)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) -- (0.17) (0.15) (0.13) (0.11) (0.04)
Distributions from net
realized gains ($) (2.27) (0.33) (0.63) (1.99) (2.74) (2.06)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (2.27) (0.50) (0.78) (2.12) (2.85) (2.10)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.48 14.27 17.03 19.66 21.65 19.10
===== ===== ===== ===== ===== =====
Total return(b) (%) 1.41 18.83 25.66 31.19 27.90 (1.78) (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 32,991 50,503 70,177 83,999 103,046 65,187
Ratio of operating
expenses to average net
assets (%)* 1.00 1.00 1.00 1.00 1.00 1.01 (d)
Ratio of net investment
income to average net
assets (%)* 0.59 1.09 1.06 0.77 0.55 0.65 (d)
Portfolio turnover rate(%) 62.93 47.93 44.44 88.07 81.53 84.06
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.06 0.06 0.03 0.03 0.01 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
- -------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- -------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
ARGO FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center BARTLETT R. GEER Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President
DISTRIBUTOR F. GARDNER JACKSON, JR. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center THOMAS P. MOORE, JR. Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES BRIAN P. O'DELL State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 DANIEL J. RICE III Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
JAMES M. WEISS
CUSTODIAN Vice President EDWARD M. LAMONT
State Street Bank and Formerly in banking
Trust Company JOHN T. WILSON (with an affiliate of
225 Franklin Street Vice President J.P. Morgan & Co. in New York);
Boston, MA 02110 presently engaged in private
PETER A. ZUGER investments and civic affairs
LEGAL COUNSEL Vice President
Goodwin, Procter & Hoar LLP ROBERT A. LAWRENCE
Exchange Place GERARD P. MAUS Former Partner, Saltonstall & Co.
Boston, MA 02109 Treasurer
DEAN O. MORTON
JOSEPH W. CANAVAN Former Executive Vice President,
Assistant Treasurer Chief Operating Officer and
Director, Hewlett-Packard
DOUGLAS A. ROMICH Company
Assistant Treasurer
TOBY ROSENBLATT
FRANCIS J. MCNAMARA, III President,
Secretary and General Counsel The Glen Ellen Company
Vice President,
DARMAN A. WING Founders Investments Ltd.
Assistant Secretary and
Assistant General Counsel MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
AMY L. SIMMONS Management, Sloan School of
Assistant Secretary Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
-------------------
STATE STREET RESEARCH ARGO FUND Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
PermiT #20
Holliston, Ma 01746
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032 or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used as supplemental sales literature, this publication must be preceded or
accompanied by a current State Street Research Argo Fund prospectus. The
prospectus contains more complete information, including sales charges and
expenses. Please read the prospectus carefully before investing.
When used after March 31, 1999, 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: (exp0200)SSR-LD AG-526F-0299
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
ALPHA FUND
-----------
SEMIANNUAL REPORT
December 31, 1998
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
- ----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
- ----------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy slowed to a modest pace in the second half of the year.
Inflation fell to 1.5%, personal income rose, and unemployment remained low.
o Lower mortgage rates and declining energy costs boosted consumer purchasing
power. Consumer spending rose strongly while the U.S. savings rate fell
below zero for the first time in 50 years.
o The Federal Reserve Board lowered interest rates three times in the second
half of the year. The federal funds rate, the rate that banks charge each
other for overnight loans, came down from 5.5% to 4.75% at year's end.
THE MARKETS
o Equity markets plunged in the third quarter, then reversed direction to make
up earlier losses. The S&P 500, a broad measure of common stock performance,
gained 9.24% over the six-month period ended December 31, 1998.(1)
o The market rewarded firms with steady earnings growth and gave the highest
valuation to technology leaders and innovators. Large company growth stocks
gained 15.22%, as measured by the Russell 1000 Growth Index.(1) Small
company growth stocks fell, returning a negative 4.01%, as measured by the
Russell 2000 Growth Index(1).
o U.S. Treasury bonds rallied as the benchmark fell below 5.0% then edged back
up at year-end. After three years as market leaders, high-yield bonds lost
ground.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended December 31, 1998, State Street Research Alpha Fund
Class A shares returned -5.97% [does not reflect sales charge].(2) The Fund
underperformed the Lipper average equity income fund, which gained 1.80%.
o The Fund's disappointing returns were partly the result of a significant
divergence in performance between growth and value investment styles, and
the outperformance of large stocks over mid- and small-cap stocks.
o A massive stock market sell-off late in the summer, the result of currency
and economic woes in Russia, hurt mid-cap value stocks because many of the
companies in this segment depend heavily on revenues from overseas markets.
o Investments in utilities, technology, media, communications, and financial
stocks contributed positive performance. However, it was overshadowed by
weakness in gaming, chemicals, energy, and aerospace stocks. High-yield and
convertible bonds also underperformed.
CURRENT STRATEGY
o We continue to avoid companies and industries operating at peak pricing and
high levels of capacity utilization.
o Our current focus is on companies that occupy a market niche, have strong
management and are attractively priced relative to their cash flows or
assets.
December 31, 1998
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell 1000 Growth
Index contains only those stocks within the complete Russell 1000 Index (a
large company index) that show above-average growth. The Russell 2000 Growth
Index contains only those stocks within the complete Russell 2000 Index (a
small company index) that show above- average growth. The indices do not
take transaction charges into consideration. It is not possible to invest
directly in the indices.
(2) -6.35% for Class B shares; -6.35% for Class C shares; -5.92% for Class S
shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
Performance reflects a maximum 4.5% Class A share front-end sales charge, or
5% Class B share or 1% Class C share contingent deferred sales charge, where
applicable.
(4) Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
- -----------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended December 31, 1998)
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(3)(4)
- -----------------------------------------------------------------------------
LIFE OF FUND
(SINCE 8/25/86) 10 YEARS 5 YEARS 1 YEAR
- -----------------------------------------------------------------------------
Class A 12.11% 13.66% 14.52% 0.67%
- -----------------------------------------------------------------------------
Class B 12.17% 13.75% 14.55% -0.29%
- -----------------------------------------------------------------------------
Class C 12.16% 13.75% 14.78% 3.67%
- -----------------------------------------------------------------------------
Class S 12.68% 14.39% 15.93% 5.60%
- -----------------------------------------------------------------------------
The performance data shown above do not reflect an increase in the maximum Class
A sales charge from 4.5% to 5.75%, effective as of 1/1/99. At the new, higher
Class A sales charge, the performance would have been lower. Assuming the
increased sales charge was in effect, performance would have been as follows:
LIFE OF FUND
(SINCE 8/25/86) 10 YEARS 5 YEARS 1 YEAR
- -----------------------------------------------------------------------------
Class A 11.99% 13.51% 14.21% -0.65%
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 BALL Containers 3.8%
2 A.C. NIELSON Marketing, information analysis 3.6%
3 NATIONAL BANK OF CANADA Banking 3.3%
4 MARK IV INDUSTRIES Power transfer equipment 2.8%
5 LAGARDERE Media; defense 2.7%
6 WILLIAMS COMPANIES Gas, petroleum, telecommunications 2.7%
7 VALASSIS COMMUNICATIONS Newspaper promotions 2.7%
8 RSL COMMUNICATIONS Telecommunications 2.6%
9 GENCORP Aerospace, auto products 2.5%
10 HOLLINGER INTERNATIONAL Newspaper publishing 2.5%
These securities represent an aggregate of 29.2% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
ASSET ALLOCATION
(by percentage of net assets)
COMMON AND PREFERRED STOCK 85%
HIGH-YIELD BONDS 14%
CASH/OTHER 1%
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
December 31, 1998 (Unaudited
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -------------------------------------------------------------------------------
COMMON STOCKS 80.6%
BASIC INDUSTRIES 15.4%
CHEMICAL 4.7%
Cabot Corp. ................................. 328,600 $ 9,180,262
Cordant Technologies Inc. ................... 95,200 3,570,000
Mississippi Chemical Corp. .................. 425,000 5,950,000
------------
18,700,262
------------
DIVERSIFIED 7.7%
Coltec Industries Inc.* ..................... 195,000 3,802,500
Johnson Controls Inc. ....................... 57,800 3,410,200
Mark IV Industries Inc. ..................... 840,195 10,922,535
Ogden Corp. ................................. 350,300 8,779,394
Tomkins PLC* ................................ 700,000 3,326,134
------------
30,240,763
------------
MACHINERY 3.0%
Howmet International Inc.* .................. 600,000 9,675,000
Sundstrand Corp. ............................ 38,400 1,992,000
------------
11,667,000
------------
Total Basic Industries ...................... 60,608,025
------------
CONSUMER CYCLICAL 9.8%
AUTOMOTIVE 2.5%
Gencorp Inc. ................................ 390,000 9,725,625
------------
HOTEL & RESTAURANT 2.7%
Ameriking Inc.* ............................. 1,000 40,000
Harrah's Entertainment Inc.* ................ 382,800 6,005,175
Mirage Resorts Inc.* ........................ 312,500 4,667,969
Motels of America Inc.*+ .................... 500 4,125
------------
10,717,269
------------
RECREATION 2.6%
Fox Entertainment Group Inc.* ............... 71,800 1,808,463
GTech Holdings Corp.* ....................... 107,900 2,764,937
U.S.A. Networks Inc.* ....................... 166,900 5,528,562
------------
10,101,962
------------
RETAIL TRADE 2.0%
Hannaford Brothers Co. ...................... 150,000 7,950,000
------------
Total Consumer Cyclical ..................... 38,494,856
------------
CONSUMER STAPLE 23.1%
BUSINESS SERVICE 4.9%
A.C. Nielson Corp.* ......................... 500,000 14,125,000
Hillenbrand Industries Inc. ................. 56,300 3,202,062
Pagemart Nationwide Inc.*+ .................. 1,750 9,844
Safety Kleen Corp. .......................... 1,200 16,950
Viatel Inc.* ................................ 18,050 412,894
Waste Management Inc.* ...................... 33,200 1,547,950
------------
19,314,700
------------
CONTAINER 3.8%
Ball Corp. .................................. 325,000 14,868,750
------------
FOOD & BEVERAGE 1.6%
Keebler Foods Co.* .......................... 89,500 3,367,438
Seven-Up/RC Bottling Co. of Southern
California* ............................... 8,750 105,000
Whitman Corp. ............................... 114,000 2,892,750
------------
6,365,188
------------
HOSPITAL SUPPLY 2.6%
Quorum Health Group Inc.* ................... 350,000 $ 4,528,125
Tenet Healthcare Corp. ...................... 210,000 5,512,500
------------
10,040,625
------------
PRINTING & PUBLISHING 8.7%
Hollinger International, Inc. Cl. A* ........ 695,492 9,693,420
Lagardere SCA* .............................. 246,400 10,466,822
Torstar Corp. Cl. B ......................... 300,000 3,542,689
Valassis Communications Inc. ................ 202,100 10,433,412
------------
34,136,343
------------
TOBACCO 1.5%
RJR Nabisco Holdings Corp.* ................. 63,700 1,891,094
UST Inc. .................................... 109,700 3,825,787
------------
5,716,881
------------
Total Consumer Staple ....................... 90,442,487
------------
ENERGY 2.0%
OIL 2.0%
Conoco Inc. Cl. A ........................... 81,700 1,705,488
Oryx Energy Co. ............................. 65,100 874,781
Tosco Corp. ................................. 50,000 1,293,750
Unocal Corp. ................................ 135,000 3,940,312
------------
7,814,331
------------
Total Energy ................................ 7,814,331
------------
FINANCE 14.1%
BANK 5.7%
Bank of New York Inc. ....................... 70,000 2,817,500
Mercantile Bankshares Corp. ................. 75,000 2,887,500
National Bank of Canada ..................... 789,900 12,816,172
Peoples Heritage Financial Group* ........... 120,000 2,400,000
SouthTrust Corp. ............................ 42,900 1,584,619
------------
22,505,791
------------
FINANCIAL SERVICE 1.0%
Bear Stearns Company Inc. ................... 67,200 2,511,600
Financial Security Assurance Co.* ........... 25,800 1,399,650
------------
3,911,250
------------
INSURANCE 7.4%
Ace Ltd. .................................... 167,000 5,751,063
AMBAC Inc. .................................. 88,300 5,314,556
Exel Ltd. Cl. A ............................. 91,935 6,895,125
Saint Paul Companies, Inc. .................. 128,600 4,468,850
UNUM Corp. .................................. 110,000 6,421,250
------------
28,850,844
------------
Total Finance ............................... 55,267,885
------------
SCIENCE & TECHNOLOGY 6.3%
ELECTRONIC COMPONENTS 0.9%
Analog Devices Inc.* ........................ 110,000 3,451,250
------------
OFFICE EQUIPMENT 5.4%
Lexmark International Group Inc. Cl. A* ..... 72,500 7,286,250
Silicon Graphics Inc.* ...................... 411,900 5,303,213
Unisys Corp. ................................ 252,700 8,702,356
------------
21,291,819
------------
Total Science & Technology .................. 24,743,069
------------
UTILITY 9.9%
ELECTRIC 4.6%
GPU Inc. .................................... 171,500 $ 7,578,156
OGE Energy Corp. ............................ 140,000 4,060,000
Pinnacle West Capital Corp. ................. 150,000 6,356,250
------------
17,994,406
------------
NATURAL GAS 2.7%
Williams Companies Inc. ..................... 334,998 10,447,750
------------
TELEPHONE 2.6%
Celcaribe SA*+ .............................. 69,918 157,316
RSL Communications Ltd. Cl. A* .............. 345,000 10,177,500
------------
10,334,816
------------
Total Utility ............................... 38,776,972
------------
Total Common Stocks (Cost $258,401,354) ..... 316,147,625
------------
CONVERTIBLE PREFERRED STOCKS & OTHER 4.4%
Advanced Radio Telecom Corp. Wts.* .......... 3,750 28,597
Ameriking Inc. Sr. Exch. Pfd.(*) 51,622 1,290,550
Clark U.S.A. Inc. Sr. Exch. Pfd.(*) ......... 558 449,190
Clearnet Communications Inc. Wts.* .......... 3,300 14,850
Cluett American Corp. Sr. Exch. Pfd.+(*) .... 18,000 1,611,000
Concentric Network Corp. Wts.*+ ............. 1,500 223,365
Crown Packaging Holdings Ltd. Wts.*+ ........ 2,000 1,150
DECS Trust Exch. Pfd. ....................... 204,700 1,919,063
Econophone Inc. Wts.*+ ...................... 1,500 15,000
Golden Ocean Group Ltd. Wts.* ............... 2,000 4,000
Granite Broadcasting Corp. Cv. Pfd. ......... 10,000 340,000
Heartland Wireless Communications, Inc.
Wts.*+ .................................... 1,500 15
ICG Holdings Inc. Exch. Pfd.* ............... 707 714,405
KTI Inc. Exch. Note ......................... 1,000,000 1,907,500
Loral Orion Network Systems Inc. Wts.* ...... 1,250 12,500
Nextel Communications Inc. Series D
Exch. Pfd.(*) ............................. 1,168 1,156,320
North Atlantic Trading Inc. Sr. Pfd.(*) ..... 58,988 1,356,735
NS Group Inc. Wts.* ......................... 250 11,875
Pagemart Inc. Wts.*+ ........................ 3,450 10,350
Primus Telecommunications Group Wts.* ....... 500 6,250
RSL Communications Ltd. Wts.*+ .............. 500 50,000
Salomon Inc. Cv. Pfd.* ...................... 45,000 2,058,750
Startec Global Communications Corp. Wts.*+ .. 1,000 1,000
Supermarkets General Holdings Corp.
Exch. Pfd.(*) ............................. 80,000 1,760,000
Viatel Inc. Pfd.(*) ......................... 2,958 325,337
Winstar Communications Inc. Cv. Pfd.(*) ..... 42,455 1,825,545
Wireless One Inc. Wts.* ..................... 1,500 15
North Atlantic Trading Inc. Wts.*+ .......... 50 50
------------
Total Convertible Preferred Stocks
& Other (Cost $17,699,841) ............... 17,093,412
------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS 12.7%
Ameristar Casinos Inc. Sr. Sub. Note, 10.50% .......... $ 850,000 8/01/2004 782,000
Ametek Inc. Sr. Note, 7.20% ........................... 500,000 7/15/2008 501,700
Archibald Candy Corp. Sr. Sec. Note, 10.25% ........... 1,250,000 7/01/2004 1,275,000
Ball Corp. Sr. Note, 7.75%+ ........................... 500,000 8/01/2006 525,000
Ball Corp. Sr. Sub. Note, 8.25%+ ...................... 1,750,000 8/01/2008 1,833,125
Celcaribe SA Sr. Sec. Note, 13.50% .................... 430,000 3/15/2004 387,000
Cellnet Data Systems Inc. Sr. Note Series B, 0.00% to
9/30/2002, 14.00% from 10/1/2002 to maturity ........ 2,250,000 10/01/2007 495,000
Concentric Network Corp. Sr. Note, 12.75% ............. 1,500,000 12/15/2007 1,533,750
Econophone Inc. Sr. Note, 13.50% ...................... 1,750,000 7/15/2007 1,793,750
Elgin National Industries Inc. Sr. Note
Series B, 11.00% .................................... 500,000 11/01/2007 505,000
Empire Gas Corp. Sr. Sec. Note, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity .................... 1,500,000 7/15/2004 1,173,750
Envirosource Inc. Note, 9.75% ......................... 1,750,000 6/15/2003 1,627,500
First Wave Marine Inc. Sr. Note, 11.00% ............... 250,000 2/01/2008 233,750
Frontier Corp. Sr. Note, 9.125% ....................... 1,000,000 2/15/2006 937,500
General Binding Corp. Sr. Note, 9.375% ................ 500,000 6/01/2008 495,000
GNI Group Inc. Sr. Note, 10.875% ...................... 500,000 7/15/2005 440,000
Golden Ocean Group Ltd. Sr. Note, 10.00% .............. 4,000,000 8/31/2001 1,080,000
Great Central Mines Ltd. Sr. Note, 8.875% ............. 1,250,000 4/01/2008 1,253,125
International Shipholding Corp. Sr. Note
Series B, 7.75% ..................................... 500,000 10/15/2007 475,000
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% ... 1,000,000 11/01/2006 930,000
J. Crew Group Inc. Sr. Deb., 0.00% to
10/14/2002, 13.125% from 10/15/2002 to maturity ..... 250,000 10/15/2008 112,500
J. Crew Operating Corp. Sr. Sub. Note, 10.375% ........ 1,000,000 10/15/2007 850,000
J. H. Heafner Inc. Sr. Note, 10.00%+ .................. 1,000,000 5/15/2008 1,000,000
J.B. Poindexter Inc. Sr. Note, 12.50% ................. 1,750,000 5/15/2004 1,662,500
Johnstown America Industries Inc. Sr. Sub. Note, 11.75% 250,000 8/15/2005 265,000
Joseph E. Seagram & Sons Inc. Sr. Deb., 7.50% ......... 1,000,000 12/15/2018 1,005,910
Loehmanns Inc. Sr. Note, 11.875% ...................... 500,000 5/15/2003 365,000
Loewen Group International Inc. Sr. Note, 7.60%+ ...... 1,000,000 6/01/2008 810,000
Microcell Telecommunications Inc. Sr. Note Series B,
0.00% to 10/14/2002,11.125% from 10/15/2002 to
maturity ............................................ 625,000 10/15/2007 224,894
NE Restaurant Inc. Sr. Note, 10.75%+ .................. 1,000,000 7/15/2008 1,027,500
North Atlantic Trading Inc. Sr. Note, 11.00% .......... 1,000,000 6/15/2004 1,010,000
Orion Network Systems Inc. Sr. Note, 11.25% ........... 500,000 1/15/2007 490,000
Owens-Illinois Inc. Sr. Deb., 7.50% ................... 2,000,000 5/15/2010 2,038,040
Packaging Resources Inc. Sr. Sec. Note, 11.625% ....... 250,000 5/01/2003 262,500
Pagemart Nationwide Inc. Sr. Note, 0.00% to 1/31/2000,
15.00% from 2/1/2000 to maturity .................... 825,000 2/01/2005 726,000
Phase Metrics Inc. Sr. Note, 10.75% ................... 1,500,000 2/01/2005 1,087,500
Primus Telecommunications Group Inc. Sr. Note, 11.75% . 250,000 8/01/2004 258,750
Real Time Data Inc. Sub. Note, 0.00% to 8/14/2001,
13.50% from 8/15/2001 to maturity+ .................. 3,490,000 8/15/2006 1,814,800
Rose Hills Co. Sr. Sub. Note, 9.50% ................... 1,500,000 11/15/2004 1,440,000
RSL Communications Ltd. Sr. Note, 12.25% .............. 2,750,000 11/15/2006 2,887,500
Shop Vac Corp. Sr. Sec. Note, 10.625% ................. 500,000 9/01/2003 547,500
Silgan Holdings Inc. Sub. Deb., 13.25% ................ 279,000 7/15/2006 306,900
Smiths Food & Drug Inc. Note Series 1994 A3, 9.20% .... 500,000 7/02/2018 579,535
Spanish Broadcasting Systems Inc. Sr. Note, 12.50% .... 500,000 6/15/2002 557,500
Startec Global Communications Corp. Sr. Note, 12.00% .. 1,000,000 5/15/2008 870,000
Tenet Healthcare Corp. Sr. Note, 8.00% ................ 1,000,000 1/15/2005 1,015,000
Transamerican Energy Corp. Sr. Sec. Note Series B,
0.00% to 6/14/2000, 13.00% from 6/15/2000 to
maturity ............................................ 500,000 6/15/2002 140,000
Transamerican Energy Corp. Sr. Sec. Note Series B,
11.50% .............................................. 1,500,000 6/15/2002 435,000
U.S.A. Mobile Communications Inc. Sr. Note, 9.50% ..... 800,000 2/01/2004 720,000
Unilab Corp. Sr. Note, 11.00% ......................... 750,000 4/01/2006 768,750
Viatel Inc. Sr. Note, 0.00% to 4/14/2003, 12.50% from
4/15/2003 to maturity ............................... 3,050,000 4/15/2008 1,753,750
Viatel Inc. Sr. Note, 11.25% .......................... 2,750,000 4/15/2008 2,763,750
Westpoint Stevens Inc. Sr. Note, 7.875% ............... 1,750,000 6/15/2008 1,758,750
Wireless One Inc. Sr. Note, 13.00% .................... 750,000 10/15/2003 73,125
------------
Total Non-Convertible Bonds (Cost $55,303,866) ...................................... 49,904,904
------------
CONVERTIBLE BONDS 1.3%
Crown Resources Corp. Cv. Sub. Deb., 5.75% ............ 1,500,000 8/27/2001 975,000
Winstar Communications Inc. Sr. Sub. Cv. Note, 0.00%
to 10/14/2000, 14.00% from 10/15/2000 to maturity+ .. 2,150,000 10/15/2005 3,010,000
Winstar Equipment Corp. Sr. Sec. Exch. Note, 12.50% ... 1,000,000 3/15/2004 1,005,000
------------
Total Convertible Bonds (Cost $3,516,668) ........................................... 4,990,000
------------
COMMERCIAL PAPER 1.1%
American Express Credit Corp., 5.25% .................. 2,953,000 1/04/1999 2,953,000
American Express Credit Corp., 4.00% .................. 1,497,000 1/07/1999 1,497,000
------------
Total Commercial Paper (Cost $4,450,000) ............................................ 4,450,000
------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.1%
State Street Navigator Securities Lending Prime Portfolio ........... 20,154,403 20,154,403
------------
Total Short-Term Investments (Cost $20,154,403) ..................................... 20,154,403
------------
Total Investments (Cost $359,526,132) - 105.2% ...................................... 412,740,344
Cash and Other Assets, Less Liabilities - (5.2%) .................................... (20,313,066)
------------
Net Assets - 100.0% ................................................................. $392,427,278
============
- --------------------------------------------------------------------------------------------------
Federal Income Tax Information:
At December 31, 1998, the net unrealized appreciation of investments based
on cost for Federal income tax purposes of $359,728,382 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost ............................................... $ 74,353,744
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ............................................... (21,341,782)
------------
$ 53,011,962
============
</TABLE>
- ------------------------------------------------------------------------------
* Nonincome-producing 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 December 31, 1998 was $10,514,620 and $12,103,640
(3.08% of net assets), respectively.
Forward currency exchange contracts outstanding at December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Canadian dollars,
Buy U.S. dollars 306,898 CAD 0.64842 CAD $ (1,793) 1/22/99
Sell Canadian dollars,
Buy U.S. dollars 5,403,002 CAD 0.64712 CAD (38,642) 1/29/99
Sell Canadian dollars,
Buy U.S. dollars 20,875,134 CAD 0.64895 CAD (112,899) 3/19/99
Sell French francs,
Buy U.S. dollars 37,297,320 FRF 0.18232 FRF 88,730 4/30/99
Sell French francs,
Buy U.S. dollars 8,547,916 FRF 0.18088 FRF 8,016 4/30/99
Sell Pound sterling,
Buy U.S. dollars 1,743,155 GBP 1.66365 GBP 12,189 4/30/99
---------
$(44,399)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1998 (Unaudited)
ASSETS
Investments, at value (Cost $359,526,132) (Note 1) .... $ 412,740,344
Cash .................................................. 15,387
Receivable for securities sold ........................ 9,669,918
Dividends and interest receivable ..................... 1,888,518
Receivable for Fund shares sold ....................... 414,430
Receivable for open forward contracts ................. 108,935
Receivable from Distributor (Note 3) .................. 13,361
Other assets .......................................... 25,296
--------------
424,876,189
LIABILITIES
Payable for collateral received on securities loaned .. 20,154,403
Payable for securities purchased ...................... 10,104,393
Payable for Fund shares redeemed ...................... 1,064,497
Accrued transfer agent and shareholder services
(Note 2) ............................................ 399,653
Accrued management fee (Note 2) ....................... 214,863
Accrued distribution and service fees (Note 5) ........ 192,797
Payable for open forward contracts .................... 153,334
Accrued trustees' fees (Note 2) ....................... 39,956
Other accrued expenses ................................ 125,015
--------------
32,448,911
--------------
NET ASSETS $ 392,427,278
==============
Net Assets consist of:
Undistributed net investment income ................. $ 1,659,232
Unrealized appreciation of investments .............. 53,214,212
Unrealized depreciation of foreign currency and
forward contracts ................................. (37,834)
Accumulated net realized loss ....................... (18,446,260)
Paid-in capital ..................................... 356,037,928
--------------
$ 392,427,278
==============
Net Asset Value and redemption price per share of
Class A shares ($120,247,406 / 8,018,432 shares) .... $15.00
======
Maximum Offering Price per share of Class A shares
($15.00 / .955) ...................................... $15.71
======
Net Asset Value and offering price per share of
Class B shares ($169,415,376 / 11,343,487 shares)* .. $14.94
======
Net Asset Value and offering price per share of
Class C shares ($29,040,544 / 1,948,042 shares)* .... $14.91
======
Net Asset Value, offering price and redemption price
per share of Class S shares
($73,723,952 / 4,918,275 shares) .................... $14.99
======
- --------------------------------------------------------------------------
* Redemption price per share for Class B and Class C is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends, net of foreign taxes of $60,868 ................. $ 3,422,988
Interest (Note 1) .......................................... 3,608,719
------------
7,031,707
EXPENSES
Management fee (Note 2) .................................... 1,250,693
Transfer agent and shareholder services (Note 2) ........... 484,133
Service fee-Class A (Note 5) ............................... 146,550
Distribution and service fees-Class B (Note 5) ............. 822,821
Distribution and service fees-Class C (Note 5) ............. 135,114
Custodian fee .............................................. 115,782
Registration fees .......................................... 81,030
Reports to shareholders .................................... 30,177
Trustees' fees (Note 2) .................................... 24,031
Audit fee .................................................. 15,232
Legal fees ................................................. 4,224
Miscellaneous .............................................. 5,966
------------
3,115,753
Fees paid indirectly (Note 2) .............................. (16,877)
Expenses borne by the Distributor (Note 3) ................. (70,710)
------------
3,028,166
------------
Net investment income ...................................... 4,003,541
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized loss on investments (Notes 1 and 4) ........... (18,125,743)
Net realized loss on foreign currency and forward
contracts (Note 1) ....................................... (118,555)
------------
Total net realized loss ................................ (18,244,298)
------------
Net unrealized depreciation of investments ................. (12,706,195)
Net unrealized depreciation of foreign currency
and forward contracts .................................... (33,560)
------------
Total net unrealized depreciation ...................... (12,739,755)
------------
Net loss on investments, foreign currency and
forward contracts ........................................ (30,984,053)
------------
Net decrease in net assets resulting from operations $(26,980,512)
============
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ....................................... $ 5,365,762 $ 4,003,541
Net realized gain (loss) on investments, foreign currency and
forward contracts 30,071,297 (18,244,298)
Net unrealized appreciation (depreciation) of investments,
foreign currency and forward contracts .................... 32,621,205 (12,739,755)
------------ ------------
Net increase (decrease) resulting from operations ........... 68,058,264 (26,980,512)
------------ ------------
Dividends from net investment income:
Class A ................................................... (1,799,241) (1,133,648)
Class B ................................................... (1,117,871) (940,189)
Class C ................................................... (180,265) (169,704)
Class S ................................................... (1,445,033) (810,218)
------------ ------------
(4,542,410) (3,053,759)
------------ ------------
Distributions from net realized gains:
Class A ................................................... (8,828,000) (4,849,837)
Class B ................................................... (9,977,340) (6,856,725)
Class C ................................................... (1,257,633) (1,115,493)
Class S ................................................... (6,735,342) (3,216,541)
------------ ------------
(26,798,315) (16,038,596)
------------ ------------
Net increase from Fund share
transactions (Note 6) ..................................... 167,523,185 22,140,627
------------ ------------
Total increase (decrease) in net assets ..................... 204,240,724 (23,932,240)
NET ASSETS
Beginning of period ......................................... 212,118,794 416,359,518
------------ ------------
End of period (including undistributed
net investment income of $709,450 and $1,659,232,
respectively) ............................................. $416,359,518 $392,427,278
============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
December 31, 1998
NOTE 1
State Street Research Alpha 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 Alpha Fund, State Street Research
Argo Fund, State Street Research Global Resources Fund and State Street
Research Athletes 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. Until December 31, 1998, Class A
shares were subject to an initial sales charge of up to 4.50% and effective
January 1, 1999 became subject to an initial sales charge of up to 5.75%.
Class A shares pay a service fee equal to 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. Effective January 1, 1999, the Fund began
offering Class B(1) shares which are subject to a contingent deferred sales
charge on certain redemptions made within six years. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. The Fund's expenses are
borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the 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 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.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities as
collateral in an amount equal to at least 100% of the current market value of
any loaned securities plus accrued interest. By reinvesting any cash
collateral it receives in these transactions, the Fund could realize
additional gains and losses. If the borrower fails to return the securities
and the value of the collateral has declined during the term of the loan, the
Fund will bear the loss. At December 31, 1998, the value of the securities
loaned and the value of collateral were $19,650,370 and $20,154,403,
respectively. During the six months ended December 31, 1998, income from
securities lending amounted to $82,043 and is included in interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% 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 six months ended December 31, 1998, the
fees pursuant to such agreement amounted to $1,250,693.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of 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 six months ended
December 31, 1998, the amount of such shareholder servicing and account
maintenance expenses was $276,780.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended December 31, 1998,
the Fund's transfer agent fees were reduced by $16,877 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$24,031 during the six months ended December 31, 1998.
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 six months ended December 31, 1998, the amount of such
expenses assumed by the Distributor and its affiliates was $70,710.
NOTE 4
For the six months ended December 31, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $146,770,631 and $132,863,407,
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 C shares. In addition,
the Fund pays annual distribution fees of 0.75% of average daily net assets
for Class B and Class C 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 six months ended December 31,
1998, fees pursuant to such plan amounted to $146,550, $822,821 and $135,114
for Class A, Class B and Class C 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 $38,017 and $141,232, respectively, on sales of Class A shares of
the Fund during the six months ended December 31, 1998, and that MetLife
Securities, Inc. earned commissions aggregating $477,736 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
of $260,619 and $4,139 on redemptions of Class B and Class C 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.
Share transactions were as follows:
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
NOTES (cont'd)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
-------------------------- ----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 2,949,813 $ 47,114,911 1,289,610 $ 19,012,877
Issued upon reinvestment of:
Distributions from net 0realized gains 553,080 8,327,638 312,465 4,596,362
Dividends from net investment income . 102,726 1,649,472 75,361 1,051,803
Shares repurchased ..................... (925,964) (14,870,574) (1,122,087) (15,966,350)
------------ ------------ ------------ ------------
Net increase ........................... 2,679,655 $ 42,221,447 555,349 $ 8,694,692
============ ============ ============ ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 5,798,007 $ 92,300,816 1,990,015 $ 29,457,162
Issued upon reinvestment of:
Distributions from net realized gains 616,819 9,237,865 438,063 6,408,860
Dividends from net investment income . 62,427 894,047 64,665 868,673
Shares repurchased ..................... (892,024) (14,277,520) (1,594,730) (22,839,393)
------------ ------------ ------------ ------------
Net increase ........................... 5,585,229 $ 88,155,208 898,013 $ 13,895,302
============ ============ ============ ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 1,104,564 $ 17,816,137 663,651 $ 9,806,400
Issued upon reinvestment of:
Distributions from net realized gains 77,469 1,158,998 70,468 1,028,840
Dividends from net investment income . 10,006 160,435 11,124 154,499
Shares repurchased ..................... (237,675) (3,760,763) (399,913) (5,707,911)
------------ ------------ ------------ ------------
Net increase ........................... 954,364 $ 15,374,807 345,330 $ 5,281,828
============ ============ ============ ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 2,483,912 $ 40,481,661 1,154,040 $ 16,949,107
Issued upon reinvestment of:
Distributions from net realized gains 447,035 6,734,398 218,567 3,215,116
Dividends from net investment income . 90,030 1,443,084 58,130 809,821
Shares repurchased ..................... (1,702,870) (26,887,420) (1,831,991) (26,705,239)
------------ ------------ ------------ ------------
Net increase (decrease) ................ 1,318,107 $ 21,771,723 (401,254) $ (5,731,195)
============ ============ ============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 10.79 10.87 11.70 13.85 14.86 16.80
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.24 0.28 0.23 0.33 0.33 0.18
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) 0.25 1.37 2.36 2.90 3.56 (1.21)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.49 1.65 2.59 3.23 3.89 (1.03)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.26) (0.28) (0.28) (0.28) (0.28) (0.14)
Distributions from net
realized gains ($) (0.15) (0.54) (0.16) (1.94) (1.67) (0.63)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.41) (0.82) (0.44) (2.22) (1.95) (0.77)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.87 11.70 13.85 14.86 16.80 15.00
===== ===== ===== ===== ===== =====
Total return(b) (%) 4.30 16.12 22.41 27.45 28.15 (5.97)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 40,484 37,327 44,464 71,087 125,402 120,247
Ratio of operating
expenses to average net
assets (%)* 1.50 1.42 1.25 1.25 1.24 1.26(d)
Ratio of net investment
income to average net
assets (%)* 2.42 2.55 1.78 2.43 2.06 2.41(d)
Portfolio turnover rate(%) 73.96 67.50 111.13 63.33 52.99 36.31
* Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.05 0.05 0.03 0.02 0.00 0.00
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30
SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 10.79 10.86 11.68 13.82 14.81 16.74
----- ----- ----- ----- ----- -----
Net investment income($)* 0.21 0.21 0.13 0.22 0.21 0.12
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) 0.21 1.38 2.36 2.89 3.55 (1.20)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.42 1.59 2.49 3.11 3.76 (1.08)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.20) (0.23) (0.19) (0.18) (0.16) (0.09)
Distributions from net
realized gains ($) (0.15) (0.54) (0.16) (1.94) (1.67) (0.63)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.35) (0.77) (0.35) (2.12) (1.83) (0.72)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.86 11.68 13.82 14.81 16.74 14.94
===== ===== ===== ===== ===== =====
Total return(b) (%) 3.79 15.43 21.60 26.45 27.23 (6.35)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 10,752 16,130 25,543 71,986 174,835 169,415
Ratio of operating
expenses to average net
assets (%)* 2.00 2.00 2.00 2.00 1.99 2.01(d)
Ratio of net investment
income to average net
assets (%)* 1.80 1.95 1.05 1.65 1.32 1.65(d)
Portfolio turnover rate (%) 73.96 67.50 111.13 63.33 52.99 36.31
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.07 0.05 0.03 0.02 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
<S> <C> <C> <C> <C> <C> <C>
BEGINNING OF PERIOD ($) 10.79 10.86 11.67 13.82 14.79 16.71
----- ----- ----- ----- ----- -----
Net investment income($)* 0.21 0.22 0.13 0.21 0.21 0.12
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) 0.21 1.36 2.37 2.90 3.54 (1.20)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.42 1.58 2.50 3.11 3.75 (1.08)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.20) (0.23) (0.19) (0.20) (0.16) (0.09)
Distributions from net
realized gains ($) (0.15) (0.54) (0.16) (1.94) (1.67) (0.63)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.35) (0.77) (0.35) (2.14) (1.83) (0.72)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.86 11.67 13.82 14.79 16.71 14.91
===== ===== ===== ===== ===== =====
Total return(b) (%) 3.78 15.33 21.68 26.42 27.23 (6.35)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 1,280 1,366 1,386 9,592 26,777 29,041
Ratio of operating
expenses to average net
assets (%)* 2.00 2.00 2.00 2.00 1.99 2.01(d)
Ratio of net investment
income to average net
assets (%)* 1.88 1.96 1.03 1.59 1.32 1.65(d)
Portfolio turnover rate (%) 73.96 67.50 111.13 63.33 52.99 36.31
* Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.06 0.05 0.03 0.01 0.00 0.00
<CAPTION>
CLASS S
--------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 3 SIX MONTHS ENDED
----------------------------------------------------------------------------- DECEMBER 31, 1998
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 10.79 10.86 11.70 13.85 14.86 16.80
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.33 0.32 0.26 0.36 0.37 0.19
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) 0.21 1.39 2.36 2.90 3.56 (1.21)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.54 1.71 2.62 3.26 3.93 (1.02)
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.32) (0.33) (0.31) (0.31) (0.32) (0.16)
Distributions from net
realized gains ($) (0.15) (0.54) (0.16) (1.94) (1.67) (0.63)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.47) (0.87) (0.47) (2.25) (1.99) (0.79)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.86 11.70 13.85 14.86 16.80 14.99
===== ===== ===== ===== ===== =====
Total return(b) (%) 4.84 16.64 22.82 27.75 28.45 (5.92)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 20,266 34,827 39,298 59,453 89,345 73,724
Ratio of operating
expenses to average net
assets (%)* 1.00 1.00 1.00 1.00 0.99 1.01(d)
Ratio of net investment
income to average net
assets (%)* 2.92 2.93 2.03 2.68 2.30 2.65(d)
Portfolio turnover rate
(%) 73.96 67.50 111.13 63.33 52.99 36.31
*Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.06 0.05 0.03 0.02 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- ------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
ALPHA FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center BARTLETT R. GEER Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President,
DISTRIBUTOR F. GARDNER JACKSON, JR. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center THOMAS P. MOORE, JR. Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES BRIAN P. O'DELL State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 DANIEL J. RICE III Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
JAMES M. WEISS
CUSTODIAN Vice President EDWARD M. LAMONT
State Street Bank and Formerly in banking
Trust Company JOHN T. WILSON (with an affiliate of
225 Franklin Street Vice President J.P. Morgan & Co. in New York);
Boston, MA 02110 presently engaged in private
PETER A. ZUGER investments and civic affairs
LEGAL COUNSEL Vice President
Goodwin, Procter & Hoar LLP ROBERT A. LAWRENCE
Exchange Place GERARD P. MAUS Former Partner, Saltonstall & Co.
Boston, MA 02109 Treasurer
DEAN O. MORTON
JOSEPH W. CANAVAN Former Executive Vice President,
Assistant Treasurer Chief Operating Officer and
Director, Hewlett-Packard
DOUGLAS A. ROMICH Company
Assistant Treasurer
TOBY ROSENBLATT
FRANCIS J. MCNAMARA, III President,
Secretary and General Counsel The Glen Ellen Company
Vice President,
DARMAN A. WING Founders Investments Ltd.
Assistant Secretary and
Assistant General Counsel MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
AMY L. SIMMONS Management, Sloan School of
Assistant Secretary Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
-------------------
STATE STREET RESEARCH ALPHA FUND Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
PermiT #20
Holliston, Ma 01746
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032 or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used as supplemental sales literature, this publication must be preceded or
accompanied by a current State Street Research Alpha Fund prospectus. The
prospectus contains more complete information, including sales charges and
expenses. Please read the prospectus carefully before investing.
When used after March 31, 1999, 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: (exp0200)SSR-LD AL-820C-0299
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
GLOBAL RESOURCES FUND
---------------------
SEMIANNUAL REPORT
December 31, 1998
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
- ----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
- ----------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy slowed to a modest pace in the second half of the year.
Inflation fell to 1.5%, personal income rose, and unemployment remained low.
o Lower mortgage rates and declining energy costs boosted consumer purchasing
power. Consumer spending rose strongly while the U.S. savings rate fell
below zero for the first time in 50 years.
o The Federal Reserve Board lowered interest rates three times in the second
half of the year. The federal funds rate, the rate that banks charge each
other for overnight loans, came down from 5.5% to 4.75% at year's end.
THE MARKETS
o Equity markets plunged in the third quarter, then reversed direction to make
up earlier losses. The S&P 500, a broad measure of common stock performance,
gained 9.24% over the six-month period ended December 31, 1998.(1)
o The market rewarded firms with steady earnings growth, and gave the highest
valuation to technology leaders and innovators. Large company growth stocks
gained 15.22%, as measured by the Russell 1000 Growth Index.(1) Small
company growth stocks fell, returning a negative 4.01%, as measured by the
Russell 2000 Growth Index.(1)
o U.S. Treasury bonds rallied as the benchmark fell below 5.0% then edged back
up at year-end. After three years as market leaders, high-yield bonds lost
ground.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended December 31, 1998, State Street Research Global
Resources Fund Class A shares returned a negative 38.66% [does not reflect
sales charge].(2) The Fund underperformed the Lipper average natural
resources fund, which returned a negative 19.08%. Small-cap energy sector
performance was off sharply against broader market indices.
o The Fund's disappointing returns were partly the result of record warm
weather in the United States, resulting in reduced energy demand and excess
supplies, lower natural gas and crude oil prices, and negative stock
psychology.
o Venezuela and Iran produced crude oil above quotas, adding one-half million
barrels daily to world oil supplies. Inventory stocking, which had been
taking place, halted in October.
CURRENT STRATEGY
o The Fund increased its overweighting in oil and natural gas exploration and
production company stocks. We continue to focus on this sector which we
believe can benefit substantially in this environment. We continued to
reduce investment in oil service growth stocks because of concerns about
company profitability.
o Our medium and longer-term outlook for natural gas is positive. Drilling
rigs have been drastically cut, and capital expenditures have been slashed.
Existing inventories are being drawn down. We expect demand to rise with
normal winter weather patterns and the popularity of gas generators.
o Crude oil markets had expected increased production outside OPEC, and prices
fell. We anticipate rising demand worldwide and surplus inventory to decline
by summer.
December 31, 1998
(1) The S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell 1000 Growth
Index contains only those stocks within the complete Russell 1000 Index (a
large company index) that show above-average growth. The Russell 2000 Growth
Index contains only those stocks within the complete Russell 2000 Index (a
small company index) that show above-average growth. The indices do not take
transaction charges into consideration. It is not possible to invest
directly in the indices.
(2) -38.94% for Class B shares; -38.91% for Class C shares; -38.58% for Class S
shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
Performance reflects a maximum 4.5% Class A share front-end sales charge, or
5% Class B share or 1% Class C share contingent deferred sales charge, where
applicable.
(4) Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
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 December 31, 1998)
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (at maximum applicable sales charge)(3)(4)
- -----------------------------------------------------------------------------
LIFE OF FUND
(since 3/2/90) 5 YEARS 1 YEAR
- -----------------------------------------------------------------------------
Class A -0.21% 0.71% -50.80%
- -----------------------------------------------------------------------------
Class B -0.13% 0.59% -51.30%
- -----------------------------------------------------------------------------
Class C -0.14% 0.90% -49.38%
- -----------------------------------------------------------------------------
Class S 0.51% 1.96% -48.39%
- -----------------------------------------------------------------------------
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses. Without subsidization, performance would have been
lower.
The performance data shown above do not reflect an increase in the maximum
Class A sales charge from 4.5% to 5.75%, effective as of 1/1/99. At the new,
higher Class A sales charge, the performance would have been lower. Assuming
the increased sales charge was in effect, performance would have been as
follows:
LIFE OF FUND
(since 3/2/90) 5 YEARS 1 YEAR
- ---------------------------------------------------------------------
Class A -0.36% 0.44% -51.45%
- ---------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 RANGER OIL International oil exploration 5.5%
2 WESTERN GAS RESOURCES Natural gas processing 4.2%
3 SEVEN SEAS PETROLEUM Oil and gas exploration 3.5%
4 ASHANTI GOLDFIELDS Gold mining 3.4%
5 TITAN EXPLORATION Oil and gas exploration 3.1%
6 SEAGULL ENERGY Oil and gas exploration 3.1%
7 BASIN EXPLORATION Oil and gas exploration 3.0%
8 PLAINS RESOURCES Oil and gas exploration 2.8%
9 NEWPARK RESOURCES Oil and gas services 2.7%
10 NUEVO ENERGY Oil and gas exploration 2.6%
These securities represent an aggregate of 33.9% 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.
ASSET ALLOCATION
(by percentage of net assets)
Oil production 66%
Oil service 12%
Other 2%
Metal and mining 15%
Natural gas 5%
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 100.9%
BASIC INDUSTRIES 16.9%
METAL & MINING 14.8%
Anglogold Ltd. ADR* ............................................ 40,000 $ 782,480
Ashanti Goldfields Co. Ltd. GDR ................................ 450,000 4,218,750
Canyon Resources Corp.* ........................................ 1,250,000 312,500
Corriente Resources Inc.* ...................................... 323,200 143,785
Crown Resources Corp.* ......................................... 150,000 304,688
Delta Gold NL* ................................................. 750,000 1,139,776
Denison Mines Ltd.* ............................................ 1,500,000 88,322
Goldcorp Inc. .................................................. 100,000 575,000
Golden Star Resources Ltd.* .................................... 5,748 6,107
Great Central Mines Ltd.* ...................................... 400,000 286,782
Homestake Mining Co. ........................................... 88,000 808,500
Impala Platinum Holdings ADR* .................................. 50,000 679,970
Lexacal Investment Corp. ....................................... 125,000 27,805
Menzies Gold NL* ............................................... 1,000,000 76,598
Nevsun Resources Ltd.* ......................................... 400,000 245,993
Newcrest Mining Ltd.* .......................................... 500,000 693,057
Normandy Mining Ltd.* .......................................... 1,772,841 1,640,413
Pangea Goldfields Inc.* ........................................ 100,000 127,576
Placer Dome Inc. ............................................... 50,000 575,000
Randgold Resources Inc. GDR*+ .................................. 93,500 233,750
Romarco Minerals Inc.* ......................................... 300,000 294,406
Southernera Resources Ltd.* .................................... 302,400 1,642,080
Southwestern Gold Corp.* ....................................... 400,000 1,609,421
Sutton Resources Ltd.* ......................................... 207,500 855,937
Tombstone Exploration Co. Ltd.* ................................ 350,000 25,188
Trillion Resources Ltd.* ....................................... 200,000 50,000
Viceroy Resource Corp.* ........................................ 333,000 522,866
Virginia Gold Mines Inc.* ...................................... 550,000 248,283
X-Cal Resources Ltd.* .......................................... 2,000,000 366,372
Zimbabwe Platinum Mines Ltd. ................................... 150,000 29,414
-------------
18,610,819
-------------
RAILROAD 2.1%
Marine Transport Corp. ......................................... 55,950 125,888
Mosvold Shipping Ltd.* ......................................... 2,000,000 710,666
Mosvold Shipping Ltd.*+ ........................................ 200,000 67,933
OMI Corp.* ..................................................... 559,500 1,818,375
-------------
2,722,862
-------------
Total Basic Industries ......................................... 21,333,681
-------------
ENERGY 78.0%
OIL 66.2%
3DX Technologies Inc.* ......................................... 100,000 34,375
Abacan Resource Corp.* ......................................... 1,861,200 639,788
Basin Exploration Inc.* ........................................ 300,000 3,768,750
Baytex Energy Ltd. Cl. A* ...................................... 682,300 1,740,903
Bellator Exploration Inc.* ..................................... 2,405,600 1,290,541
Blue Range Resource Corp. ...................................... 176,600 398,606
Brigham Exploration Co.* ....................................... 68,800 378,400
Cabot Oil & Gas Corp. Cl. A .................................... 196,500 2,947,500
Callon Petroleum Co.* .......................................... 245,500 2,853,938
Canadian 88 Energy Corp.* ...................................... 969,500 3,090,281
Canadian Conquest Exploration Inc.* ............................ 165,000 73,405
Chieftain International Inc. ................................... 100,000 1,437,500
Clayton Williams Energy Inc.* .................................. 17,530 175,300
Crystal Oil Co.* ............................................... 41,600 1,570,400
Cultus Petroleum NL ............................................ 877,500 360,270
Elk Point Resources Inc. Cl. A* ................................ 490,500 1,283,611
Exco Resources Inc. ............................................ 150,000 1,087,500
Forest Oil Corp.* .............................................. 91,400 776,900
FX Energy Inc.* ................................................ 100,000 1,012,500
Gulfstream Resources Ltd. ...................................... 347,000 726,464
Interoil Corp.* ................................................ 156,500 112,633
KCS Energy Inc. ................................................ 540,000 1,653,750
Kelley Oil & Gas Corp.* ........................................ 400,000 237,500
Mallon Resources Corp. ......................................... 193,000 1,326,875
Maxx Petroleum Ltd.* ........................................... 300,975 564,328
Meridian Resource Corp.* ....................................... 102,000 325,125
Merit Energy Ltd.* ............................................. 203,300 698,283
Miller Exploration Co.* ........................................ 113,300 509,850
Morrison Middlefield Ltd. ...................................... 240,000 667,321
New Cache Petroleum Ltd.* ...................................... 80,000 337,586
Nuevo Energy Co.* .............................................. 281,800 3,240,700
Oil Search Ltd.* ............................................... 1,751,300 1,770,724
Patina Oil & Gas Corp. ......................................... 94,700 278,181
Pease Oil & Gas Co. ............................................ 28,750 22,641
Pendaries Petroleum Ltd.*+ ..................................... 167,000 73,063
Petromet Resources Ltd.* ....................................... 250,000 453,125
Petsec Energy Ltd. ............................................. 46,000 77,625
Plains Resources Inc.* ......................................... 250,000 3,515,625
Post Energy Corp.* ............................................. 400,000 1,086,032
Probe Exploration Inc.*+ ....................................... 1,500,000 2,208,047
Purcell Energy Ltd.* ........................................... 229,000 125,849
Ranger Oil Ltd.* ............................................... 1,553,000 6,891,437
Richland Petroleum Corp. ....................................... 332,900 490,039
Santa Fe Energy Resources Inc. ................................. 195,900 1,444,763
Seagull Energy Corp.* .......................................... 608,600 3,841,787
Seven Seas Petroleum Inc.* ..................................... 657,600 4,397,700
Snyder Oil Corp. ............................................... 156,600 2,084,738
Southern Mineral Corp.* ........................................ 213,500 153,453
Southwestern Energy Co. ........................................ 359,300 2,694,750
St. Mary Land & Exploration Co.* ............................... 58,400 1,080,400
Talisman Energy Inc. ........................................... 135,000 2,362,500
Tap Oil NL* .................................................... 1,926,400 932,567
Thunder Energy Inc.* ........................................... 300,000 314,033
Titan Exploration Inc.* ........................................ 599,323 3,933,057
Tom Brown, Inc.* ............................................... 205,900 2,065,434
Tri-Link Resources Ltd. Cl. A* ................................. 175,100 1,426,232
Ulster Petroleum Ltd.* ......................................... 373,500 2,810,108
Ultra Petroleum Corp.* ......................................... 586,100 471,641
Vermilion Resources Ltd.* ...................................... 200,000 372,915
Volterra Resources Inc.+ ....................................... 400,000 122,996
Westminster Resource Ltd. ...................................... 144,300 604,200
Wolverine Energy Corp.* ........................................ 165,000 21,590
-------------
83,448,135
-------------
OIL SERVICE 11.8%
Atwood Oceanics Inc.* .......................................... 100,500 1,708,500
Badger Daylighting Inc. ........................................ 50,000 237,161
BJ Services Co.* ............................................... 82,200 1,284,375
Esenjay Exploration Inc. ....................................... 86,300 161,813
Global Industries Inc.* ........................................ 185,900 1,138,637
NewPark Resources Inc.* ........................................ 493,800 3,364,012
Noble Drilling Corp.* .......................................... 206,000 2,665,125
Ocean Energy Inc. .............................................. 199,900 1,261,869
Petroleum Geo-Services AS ADR .................................. 100,000 1,575,000
Precision Drilling Corp.* ...................................... 65,400 739,837
Stellarton Energy Corp. Cl. A*+ ................................ 150,000 137,390
TMBR/Sharp Drilling Inc.* ...................................... 136,800 440,325
Willbros Group Inc.* ........................................... 29,100 161,869
-------------
14,875,913
-------------
Total Energy ................................................... 98,324,048
-------------
SCIENCE & TECHNOLOGY 0.6%
ELECTRONIC EQUIPMENT 0.6%
Pason Systems Inc. ............................................. 400,000 758,914
-------------
Total Science & Technology ..................................... 758,914
-------------
UTILITY 5.4%
NATURAL GAS 5.4%
Markwest Hydrocarbon Inc.* ..................................... 37,500 337,500
TransTexas Gas Corp.* .......................................... 442,000 1,160,250
Western Gas Resources Inc. ..................................... 928,000 5,336,000
-------------
6,833,750
-------------
Total Utility .................................................. 6,833,750
-------------
otal Equity Securities (Cost $229,960,616) ..................... 127,250,393
-------------
SHORT-TERM INVESTMENTS 3.2%
AIM Liquid Assets Portfolio .................................... 2,513,037 2,513,037
-------------
Total Short-Term Investments (Cost $2,513,037) ................................ 2,513,037
-------------
- -------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 0.2%
American Express Credit Corp., 4.50% ............. $240,000 1/06/1999 240,000
-------------
Total Commercial Paper (Cost $240,000) ....................................... 240,000
-------------
Total Investments (Cost $232,713,653) - 103.2% ............................... 130,003,430
Other Assets, Less Liabilities - 3.2% ........................................ (3,976,557)
-------------
Net Assets - 100.0% .......................................................... $ 126,026,873
=============
- ------------------------------------------------------------------------------------------------------
Federal Income Tax Information:
At December 31, 1998, the net unrealized depreciation of investments based
on cost for Federal income tax purposes of $232,722,981 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost ........................................ $ 3,056,142
Aggregate gross unrealized depreciation for all investments in which there is
an excess of tax cost over value ........................................... (105,775,693)
-------------
$(102,719,551)
=============
- ------------------------------------------------------------------------------------------------------
* 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 December 31, 1998 were $5,939,639 and $2,843,179 (2.26% of net
assets), respectively.
Diversification of Equity Securities at December 31, 1998 (as a percentage of net assets) was United
States 51.1%, Canada 36.8%, Australia 4.1%, Ghana 3.3%, Norway 1.9%, Papua New Guinea 1.4%, South Africa
1.2% and United Kingdom 0.2%.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $232,713,653) (Note 1) ..................... $ 130,003,430
Receivable for fund shares sold ........................................ 822,888
Receivable for securities sold ......................................... 707,783
Dividends and interest receivable ...................................... 76,114
Other assets ........................................................... 500
--------------
131,610,715
LIABILITIES
Payable for collateral received on securities loaned ................... 2,513,037
Payable for fund shares redeemed ....................................... 1,653,368
Payable to custodian ................................................... 527,557
Accrued transfer agent and shareholder services
(Note 2) ............................................................. 339,333
Payable for securities purchased ....................................... 250,720
Accrued management fee (Note 2) ........................................ 83,590
Accrued distribution and service fees (Note 4) ......................... 74,457
Accrued trustees' fees (Note 2) ........................................ 35,524
Other accrued expenses ................................................. 106,256
--------------
5,583,842
--------------
NET ASSETS $ 126,026,873
==============
Net Assets consist of:
Unrealized depreciation of investments ............................... (102,710,223)
Accumulated net realized loss ........................................ (27,072,318)
Paid-in capital ...................................................... 255,809,414
--------------
$ 126,026,873
==============
Net Asset Value and redemption price per share of Class A shares
($50,948,276 / 5,155,905 shares) $ 9.88
======
Maximum Offering Price per share of Class A shares ($9.88 / .955) ...... $10.35
======
Net Asset Value and offering price per share of Class B shares
($52,105,549 / 5,518,716 shares)* $ 9.44
======
Net Asset Value and offering price per share of Class C shares
($19,860,844 / 2,108,383 shares)* $ 9.42
======
Net Asset Value, offering price and redemption price per share of Class
S shares ($3,112,204 / 308,354 shares) ............................... $10.09
======
- ----------------------------------------------------------------------------------------
*Redemption price per share for Class B and Class C is equal to net asset value less any
applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends, net of foreign taxes of $5,673 .................. $ 359,411
Interest (Note 1) .......................................... 179,574
--------------
538,985
EXPENSES
Management fee (Note 2) .................................... 616,290
Transfer agent and shareholder services (Note 2) ........... 341,677
Custodian fee .............................................. 86,009
Service fee-Class A (Note 4) ............................... 79,784
Distribution and service fees-Class B (Note 4) ............. 344,904
Distribution and service fees-Class C (Note 4) ............. 138,661
Registration fees .......................................... 38,547
Reports to shareholders .................................... 20,597
Trustees' fees (Note 2) .................................... 19,592
Audit fee .................................................. 14,208
Legal fees ................................................. 3,200
Miscellaneous .............................................. 6,700
--------------
1,710,169
Fees paid indirectly (Note 2) .............................. (19,795)
--------------
1,690,374
--------------
Net investment loss ........................................ (1,151,389)
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (Notes 1 and 3) ........... (27,051,864)
Net unrealized depreciation of investments ................. (56,966,747)
--------------
Net loss on investments .................................... (84,018,611)
--------------
Net decrease in net assets resulting from operations $ (85,170,000)
==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss ....................................... $ (2,976,161) $ (1,151,389)
Net realized gain (loss) on investments, foreign currency
and forward contracts 30,028,876 (27,051,864)
Net unrealized depreciation of investments (73,157,253) (56,966,747)
------------- -------------
Net decrease resulting from operations (46,104,538) (85,170,000)
------------- -------------
Distributions from net realized gains:
Class A ................................................. (9,874,227) (3,619,471)
Class B ................................................. (10,098,016) (3,887,384)
Class C ................................................. (3,889,057) (1,503,483)
Class S ................................................. (1,118,083) (209,120)
------------- -------------
(24,979,383) (9,219,458)
------------- -------------
Net increase from fund share
transactions (Note 6) ................................... 89,454,451 5,040,917
------------- -------------
Total increase (decrease) in net assets 18,370,530 (89,348,541)
NET ASSETS
Beginning of period ....................................... 197,004,884 215,375,414
------------- -------------
End of period ............................................. $ 215,375,414 $ 126,026,873
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
December 31, 1998
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 Alpha Fund, State Street Research Argo
Fund and State Street Research Athletes 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. Until December 31, 1998, Class A
shares were subject to an initial sales charge of up to 4.50% and effective
January 1, 1999 became subject to an initial sales charge of up to 5.75%.
Class A shares pay a service fee equal to 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. Effective January 1, 1999, the Fund began
offering Class B(1) shares which are subject to a contingent deferred sales
charge on certain redemptions made within six years. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered to certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. The Fund's expenses are
borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the 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. Securities quoted in foreign
currencies are translated into dollars at the current exchange rate. Gains and
losses that arise from changes in exchange rates are not segregated from gains
and losses that arise from changes in market prices of investments. Short-term
securities maturing within sixty days are valued at amortized cost. Other
securities, if any, are valued at their fair value as determined in accordance
with established methods consistently applied.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. NET INVESTMENT INCOME
Investment income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated among all funds in the Trust.
D. DIVIDENDS
Dividends from net investment income, if any, are declared and paid or
reinvested semiannually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital 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.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At December 31, 1998, the value of the securities loaned and the value
of collateral were $3,184,144 and $2,938,285 (including $2,513,037 of cash
collateral), respectively. During the six months ended December 31, 1998,
income from securities lending amounted to $30,876 and is included in
interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.75% 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 six months ended December 31, 1998, the
fees pursuant to such agreement amounted to $616,290.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of 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 six months ended
December 31, 1998, the amount of such shareholder servicing and account
maintenance expenses was $146,265.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended December 31, 1998,
the Fund's transfer agent fees were reduced by $19,795 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$19,592 during the six months ended December 31, 1998.
NOTE 3
For the six months ended December 31, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $47,793,230 and $47,033,350,
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 C shares. In addition,
the Fund pays annual distribution fees of 0.75% of average daily net assets
for Class B and Class C 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 six months ended December 31,
1998, fees pursuant to such plan amounted to $79,784, $344,904 and $138,661
for Class A, Class B and Class C 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 $38,872 and $20,824, respectively, on sales of Class A shares of
the Fund during the six months ended December 31, 1998, and that MetLife
Securities, Inc. earned commissions aggregating $63,180 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
of $184,975 and $7,541 on redemptions of Class B and Class C shares,
respectively, during the same period.
NOTE 5
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.
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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
---------------------------------- ----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 3,760,941 $ 87,083,305 3,943,743 $ 48,036,079
Issued upon reinvestment of
distributions from net
realized gains ....................... 408,880 9,169,116 347,217 3,362,264
Shares repurchased ..................... (2,997,412) (66,376,129) (3,881,971) (46,239,365)
------------ ------------ ------------ ------------
Net increase ........................... 1,172,409 $ 29,876,292 408,989 $ 5,158,978
============ ============ ============ ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 2,966,308 $ 63,952,013 1,256,571 $ 15,526,843
Issued upon reinvestment of
distributions from net
realized gains ....................... 437,810 9,510,796 392,245 3,628,438
Shares repurchased ..................... (1,646,026) (33,380,085) (1,499,007) (17,373,271)
------------ ------------ ------------ ------------
Net increase ........................... 1,758,092 $ 40,082,724 149,809 $ 1,782,010
============ ============ ============ ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 1,640,285 $ 35,555,627 498,272 $ 6,034,561
Issued upon reinvestment of
distributions from net
realized gains ....................... 167,922 3,639,263 148,917 1,374,717
Shares repurchased ..................... (819,924) (16,782,276) (792,403) (9,042,026)
------------ ------------ ------------ ------------
Net increase (decrease) ................ 988,283 $ 22,412,614 (145,214) $ (1,632,748)
============ ============ ============ ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 529,650 $ 12,184,343 218,670 $ 2,854,256
Issued upon reinvestment of
distributions from net
realized gains ....................... 48,358 1,107,030 21,123 208,699
Shares repurchased ..................... (725,982) (16,208,552) (256,467) (3,330,278)
------------ ------------ ------------ ------------
Net decrease ........................... (147,974) $ (2,917,179) (16,674) $ (267,323)
============ ============ ============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 Six months ended
-------------------------------------------------------------------- December 31, 1998
1994(a) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 13.51 11.84 12.16 17.44 22.39 17.35
----- ----- ----- ----- ----- -----
Net investment loss ($)* (0.17) (0.16) (0.20) (0.15) (0.18) (0.06)
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) (1.50) 0.48 5.48 5.86 (2.52) (6.66)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) (1.67) 0.32 5.28 5.71 (2.70) (6.72)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 11.84 12.16 17.44 22.39 17.35 9.88
===== ===== ===== ===== ===== ====
Total return(b) (%) (12.36) 2.70 43.42 32.96 (14.28) (38.66)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 30,679 25,692 30,943 80,029 82,376 50,948
Ratio of operating
expenses to average
net assets (%)* 1.75 1.75 1.75 1.42 1.46 1.65(d)
Ratio of net investment
loss to average net
assets (%)* (1.46) (1.41) (1.47) (0.73) (0.82) (0.97)(d)
Portfolio turnover rate (%) 30.98 62.94 92.33 51.67 68.69 30.01
*Reflects voluntary
reduction of expenses
per share of these
amounts ($) 0.11 0.09 0.05 0.00 -- --
<PAGE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 Six months ended
-------------------------------------------------------------------- December 31, 1998
1994(a) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 13.51 11.78 12.03 17.12 21.80 16.71
----- ----- ----- ----- ----- -----
Net investment loss($)* (0.23) (0.23) (0.30) (0.30) (0.33) (0.11)
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) (1.50) 0.48 5.39 5.74 (2.42) (6.41)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) (1.73) 0.25 5.09 5.44 (2.75) (6.52)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 11.78 12.03 17.12 21.80 16.71 9.44
===== ===== ===== ===== ===== ====
Total return(b) (%) (12.81) 2.12 42.31 31.98 (14.94) (38.94)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 6,333 7,030 12,828 78,701 89,689 52,106
Ratio of operating
expenses to average
net assets (%)* 2.25 2.33 2.50 2.17 2.21 2.40(d)
Ratio of net investment
loss to average net
assets (%)* (1.93) (1.98) (2.20) (1.47) (1.57) (1.72)(d)
Portfolio turnover rate(%) 30.98 62.94 92.33 51.67 68.69 30.01
*Reflects voluntary
reduction of expenses
per share of these
amounts ($) 0.14 0.09 0.04 0.00 -- --
- -----------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor
and its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized
(d) Annualized
</TABLE>
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 Six months ended
-------------------------------------------------------------------- December 31, 1998
1994(a) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 13.51 11.77 12.02 17.10 21.76 16.67
----- ----- ----- ----- ----- -----
Net investment loss($)* (0.23) (0.23) (0.30) (0.30) (0.33) (0.11)
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) (1.51) 0.48 5.38 5.72 (2.42) (6.39)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) (1.74) 0.25 5.08 5.42 (2.75) (6.50)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 11.77 12.02 17.10 21.76 16.67 9.42
===== ===== ===== ===== ===== ====
Total return(b) (%) (12.88) 2.12 42.26 31.90 (14.97) (38.91)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 1,931 2,350 5,154 27,528 37,566 19,861
Ratio of operating
expenses to average
net assets (%)* 2.25 2.33 2.50 2.17 2.21 2.40(d)
Ratio of net investment
loss to average net
assets (%)* (1.94) (1.99) (2.20) (1.45) (1.57) (1.71)(d)
Portfolio turnover rate(%) 30.98 62.94 92.33 51.67 68.69 30.01
*Reflects voluntary
reduction of expenses
per share of these
amounts ($) 0.13 0.09 0.05 0.00 -- --
<PAGE>
<CAPTION>
CLASS S
-------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30 Six months ended
-------------------------------------------------------------------- December 31, 1998
1994(a) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 13.52 11.90 12.27 17.64 22.72 17.67
----- ----- ----- ----- ----- -----
Net investment loss($)* (0.15) (0.11) (0.17) (0.10) (0.13) (0.04)
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) (1.47) 0.48 5.54 5.94 (2.58) (6.79)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) (1.62) 0.37 5.37 5.84 (2.71) (6.83)
----- ----- ----- ----- ----- -----
Distributions from net
realized gains ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- -- -- (0.76) (2.34) (0.75)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 11.90 12.27 17.64 22.72 17.67 10.09
===== ===== ===== ===== ===== =====
Total return(b) (%) (11.98) 3.11 43.77 33.33 (14.11) (38.58)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 960 3,288 5,632 10,747 5,745 3,112
Ratio of operating
expenses to average
net assets (%)* 1.25 1.33 1.50 1.17 1.21 1.40(d)
Ratio of net investment
loss to average net
assets (%)* (0.95) (1.01) (1.20) (0.48) (0.55) (0.68)(d)
Portfolio turnover rate(%) 30.98 62.94 92.33 51.67 68.69 30.01
*Reflects voluntary
reduction of expenses
per share of these
amounts ($) 0.16 0.08 0.05 0.00 -- --
- -----------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) 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 reduced a portion of the Fund's expenses.
(c) Not annualized
(d) Annualized
</TABLE>
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- -------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
GLOBAL RESOURCES FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
Management Company
INVESTMENT ADVISER PETER C. BENNETT
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center Chairman of the Board,
Boston, MA 02111 BARTLETT R. GEER Chief Executive Officer and
Vice President President
PictureTel Corporation
DISTRIBUTOR
State Street Research F. GARDNER JACKSON, JR.
Investment Services, Inc. Vice President STEVE A. GARBAN
One Financial Center Former Senior Vice President
Boston, MA 02111 for Finance and Operations and
THOMAS P. MOORE, JR. Treasurer, The Pennsylvania
Vice President State University
SHAREHOLDER SERVICES
State Street Research
Service Center BRIAN P. O'DELL MALCOLM T. HOPKINS
P.O. Box 8408 Vice President Former Vice Chairman of the
Boston, MA 02266-8408 Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
DANIEL J. RICE III
Vice President
CUSTODIAN EDWARD M. LAMONT
State Street Bank and Formerly in banking
Trust Company JAMES M. WEISS (with an affiliate of
225 Franklin Street Vice President J.P. Morgan & Co. in New York);
Boston, MA 02110 presently engaged in private
investments and civic affairs
JOHN T. WILSON
LEGAL COUNSEL Vice President
Goodwin, Procter & Hoar LLP ROBERT A. LAWRENCE
Exchange Place Former Partner, Saltonstall & Co.
Boston, MA 02109 PETER A. ZUGER
Vice President
DEAN O. MORTON
Former Executive Vice President,
GERARD P. MAUS Chief Operating Officer and
Treasurer Director, Hewlett-Packard
Company
JOSEPH W. CANAVAN
Assistant Treasurer TOBY ROSENBLATT
President,
The Glen Ellen Company
DOUGLAS A. ROMICH Vice President,
Assistant Treasurer Founders Investments Ltd.
FRANCIS J. MCNAMARA, III MICHAEL S. SCOTT MORTON
Secretary and General Counsel Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
DARMAN A. WING Institute of Technology
Assistant Secretary and
Assistant General Counsel
AMY L. SIMMONS
Assistant Secretary
</TABLE>
<PAGE>
-------------------
STATE STREET RESEARCH GLOBAL RESOURCES FUND Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
PermiT #20
Holliston, Ma 01746
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032 or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used as supplemental sales literature, this publication must be preceded or
accompanied by a current State Street Research Global Resources Fund prospectus.
The prospectus contains more complete information, including sales charges and
expenses. Please read the prospectus carefully before investing.
When used after March 31, 1999, 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: (exp0200)SSR-LD GR-384D-0299
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
ATHLETES FUND
-------------
SEMIANNUAL REPORT
December 31, 1998
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
- ----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
- ----------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy slowed to a modest pace in the second half of the year.
Inflation fell to 1.5%, personal income rose, and unemployment remained low.
o Lower mortgage rates and declining energy costs boosted consumer purchasing
power. Consumer spending rose strongly while the U.S. savings rate fell
below zero for the first time in 50 years.
o The Federal Reserve Board lowered interest rates three times in the second
half of the year. The federal funds rate, the rate that banks charge each
other for overnight loans, came down from 5.5% to 4.75% at year's end.
THE MARKETS
o Equity markets plunged in the third quarter, then reversed direction to make
up earlier losses. The S&P 500, a broad measure of common stock performance,
gained 9.24% over the six-month period ended December 31, 1998.(1)
o The market rewarded firms with steady earnings growth and gave the highest
valuation to technology leaders and innovators. Large company growth stocks
gained 15.22%, as measured by the Russell 1000 Growth Index.(1) Small
company growth stocks fell, returning a negative 4.01%, as measured by the
Russell 2000 Growth Index.(1)
o U.S. Treasury bonds rallied as the benchmark fell below 5.0% then edged back
up at year-end. After three years as market leaders, high-yield bonds lost
ground.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended December 31, 1998, State Street Research Athletes
Fund Class A shares returned 13.95% [does not reflect sales charge].(2) The
Fund outperformed the S&P 500, noted above, as well as the Lipper average
growth fund, which gained 6.25%.
o The Fund continued to invest in large- company, high-confidence stocks which
proved popular with investors throughout the year. While remaining broadly-
diversified, the portfolio emphasized the technology sector and
underweighted financial holdings.
o After the market correction in the third quarter, technology positions were
expanded in America Online, Lucent Technologies, Cisco Systems, Ascend
Communications, EMC and IBM. We eliminated the investment in U.S. Bancorp.
CURRENT STRATEGY
o In the United States, we expect growth in the money supply and declining
interest rates to build investor confidence in companies and industries that
benefit from a rising business cycle.
o In a strengthening economic environment, smaller or more
industrially-sensitive companies may become attractive.
December 31, 1998
(1) The S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell 1000 Growth
Index contains only those stocks within the complete Russell 1000 Index (a
large company index) that show above-average growth. The Russell 2000 Growth
Index contains only those stocks within the complete Russell 2000 Index (a
small company index) that show above-average growth. The indices do not take
transaction charges into consideration. It is not possible to invest
directly in the indices.
(2) 13.62% for Class B shares; 13.62% for Class C shares; 14.25% for Class S
shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
Performance reflects a maximum 4.5% Class A share front-end sales charge, or
5% Class B share or 1% Class C share contingent deferred sales charge, where
applicable.
(4) Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
(5) Aggregate returns; not annualized.
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 December 31, 1998)
- -------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN (at maximum applicable sales charge)(3) (4) (5)
- -------------------------------------------------------------------------------
LIFE OF FUND
(since 3/27/98)
- -------------------------------------------------------------------------------
Class A 14.41%
- -------------------------------------------------------------------------------
Class B 14.14%
- -------------------------------------------------------------------------------
Class C 18.14%
- -------------------------------------------------------------------------------
Class S 20.12%
- -------------------------------------------------------------------------------
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
The performance data shown above do not reflect an increase in the maximum Class
A sales charge from 4.5% to 5.75%, effective as of 1/1/99. At the new, higher
Class A sales charge, the performance would have been lower. Assuming the
increased sales charge effect, performance would have been as follows:
LIFE OF FUND
(since 3/27/98)
- -------------------------------------------------------------------------------
Class A 12.92%
- -------------------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 CISCO SYSTEMS Computer network products 3.4%
2 STAPLES Office product superstores 3.4%
3 LUCENT TECHNOLOGIES Telecommunications 3.2%
4 AMERICA ONLINE Internet software 3.1%
5 MCI WORLDCOM Telecommunication services 3.1%
6 GENERAL ELECTRIC Consumer/industrial products 3.0%
7 HOME DEPOT Home Improvement superstores 2.8%
8 TYCO INTERNATIONAL Diversified manufacturer 2.8%
9 WAL-MART STORES Discount stores 2.8%
10 MICROSOFT Software 2.6%
These securities represent an aggregate of 30.2% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
TOP 5 INDUSTRIES
(by percentage of net assets)
RETAIL TRADE 16.5%
COMPUTER SOFTWARE & SERVICE 16.2%
DRUG 7.5%
TELEPHONE 5.9%
RECREATION 5.4%
Total: 51.5%
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.1%
BASIC INDUSTRIES 5.8%
ELECTRICAL EQUIPMENT 3.0%
General Electric Co. ............................................ 4,200 $ 428,662
-----------
MACHINERY 2.8%
Tyco International Ltd. ......................................... 5,300 399,819
-----------
Total Basic Industries .......................................... 828,481
-----------
CONSUMER CYCLICAL 26.2%
AUTOMOTIVE 2.1%
Danaher Corp. ................................................... 5,500 298,719
-----------
HOTEL & RESTAURANT 2.2%
McDonald's Corp. ................................................ 4,100 314,162
-----------
RECREATION 5.4%
Cox Communications Inc. Cl. A* .................................. 2,100 145,163
MediaOne Group Inc.* ............................................ 7,800 366,600
Time Warner Inc. ................................................ 4,200 260,662
-----------
772,425
-----------
RETAIL TRADE 16.5%
CVS Corp. ....................................................... 6,300 346,500
Home Depot Inc. ................................................. 6,600 403,837
Kroger Co.* ..................................................... 3,000 181,500
Rite Aid Corp. .................................................. 4,700 232,944
Safeway Inc. .................................................... 5,400 329,063
Staples Inc.* ................................................... 11,100 484,931
Wal-Mart Stores, Inc. ........................................... 4,900 399,044
-----------
2,377,819
-----------
Total Consumer Cyclical ......................................... 3,763,125
-----------
CONSUMER STAPLE 16.1%
DRUG 7.5%
Pfizer Inc. ..................................................... 2,900 363,769
Schering-Plough Corp. ........................................... 6,200 342,550
SmithKline Beecham PLC .......................................... 3,200 222,400
Warner-Lambert Co. .............................................. 1,900 142,856
-----------
1,071,575
-----------
FOOD & BEVERAGE 2.5%
Anheuser-Busch Companies, Inc. .................................. 5,500 360,938
-----------
HOSPITAL SUPPLY 4.6%
Abbott Laboratories ............................................. 5,200 254,800
Johnson & Johnson ............................................... 1,900 159,362
Medtronic Inc. .................................................. 3,400 252,450
-----------
666,612
-----------
PERSONAL CARE 1.5%
Procter & Gamble Co. ............................................ 2,300 210,019
-----------
Total Consumer Staple ........................................... 2,309,144
-----------
ENERGY 3.0%
OIL 3.0%
Amoco Corp. ..................................................... 2,900 175,088
Exxon Corp. ..................................................... 3,600 263,250
-----------
438,338
-----------
Total Energy .................................................... 438,338
-----------
FINANCE 7.5%
BANK 1.2%
Chase Manhattan Corp. ........................................... 2,600 176,962
-----------
FINANCIAL SERVICE 1.9%
Federal National Mortgage Association ........................... 3,700 273,800
-----------
INSURANCE 4.4%
American International Group Inc. ............................... 2,250 217,406
Citigroup, Inc. ................................................. 3,700 183,150
UNUM Corp. ...................................................... 3,900 227,663
-----------
628,219
-----------
Total Finance ................................................... 1,078,981
-----------
SCIENCE & TECHNOLOGY 28.1%
COMPUTER SOFTWARE & SERVICE 16.2%
America Online Inc.* ............................................ 2,800 448,000
Ascend Communications Inc.* ..................................... 5,300 348,475
Automatic Data Processing Inc. .................................. 1,900 152,356
Cadence Design Systems Inc.* .................................... 6,500 193,375
Cisco Systems Inc.* ............................................. 5,250 487,266
EMC Corp.* ...................................................... 3,800 323,000
Microsoft Corp.* ................................................ 2,700 374,456
-----------
2,326,928
-----------
ELECTRONIC COMPONENTS 4.0%
Intel Corp.* .................................................... 2,200 260,838
Texas Instruments Inc. .......................................... 3,700 316,581
-----------
577,419
-----------
ELECTRONIC EQUIPMENT 3.2%
Lucent Technologies Inc. ........................................ 4,200 462,000
-----------
OFFICE EQUIPMENT 4.7%
International Business Machines Corp. ........................... 2,000 369,500
Xerox Corp. ..................................................... 2,600 306,800
-----------
676,300
-----------
Total Science & Technology ...................................... 4,042,647
-----------
UTILITY 5.9%
TELEPHONE 5.9%
BellSouth Corp. ................................................. 5,000 249,375
MCI WorldCom Inc.* .............................................. 6,200 444,850
Qwest Communications International Inc.* ........................ 3,200 160,000
-----------
854,225
-----------
Total Utility ................................................... 854,225
-----------
OTHER 1.5%
MULTI-SECTOR COMPANIES 1.5%
Standard & Poor's Depositary Receipt ............................ 1,800 221,400
-----------
Total Other ..................................................... 221,400
-----------
Total Common Stocks (Cost $10,755,048) .......................... 13,536,341
-----------
- ------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- ------------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS 5.8%
Ford Motor Credit Co., 5.96% ............... $ 690,000 1/04/1999 690,000
General Electric Capital Corp., 5.95% ...... 149,000 1/07/1999 149,000
-----------
Total Short-Term Obligations (Cost $839,000) ....................................... 839,000
-----------
Total Investments (Cost $11,594,048) - 99.9% ....................................... 14,375,341
Other Assets, Less Liabilities - 0.1% .............................................. 10,917
-----------
Net Assets - 100.0% ................................................................ $14,386,258
===========
Federal Income Tax Information:
At December 31, 1998, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $11,603,442 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of value over tax cost ...................................................... $ 2,818,604
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value ...................................................... (46,705)
-----------
$ 2,771,899
===========
- ------------------------------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $11,594,048) (Note 1) ........................ $14,375,341
Receivable from Distributor (Note 3) ..................................... 11,926
Dividends and interest receivable ........................................ 4,597
Deferred organization costs (Note 1) ..................................... 76,144
-----------
14,468,008
LIABILITIES
Accrued trustees' fees (Note 2) .......................................... 15,506
Accrued management fee (Note 2) .......................................... 7,369
Payable to custodian ..................................................... 4,270
Accrued distribution and service fees (Note 5) ........................... 1,438
Accrued transfer agent and shareholder services (Note 2) 467
Other accrued expenses ................................................... 52,700
-----------
81,750
-----------
NET ASSETS $14,386,258
===========
NET ASSETS CONSIST OF:
Accumulated net investment loss ........................................ $ (4,516)
Unrealized appreciation of investments ................................. 2,781,293
Accumulated net realized loss .......................................... (615,996)
Paid-in capital ........................................................ 12,225,477
-----------
$14,386,258
===========
Net Asset Value and redemption price per share of Class A shares
($1,924,170 / 229,560 shares) $8.38
=====
Maximum Offering Price per share of Class A shares ($8.38 / .955) ........ $8.77
=====
Net Asset Value and offering price per share of
Class B shares ($679,721 / 81,507 shares)* $8.34
=====
Net Asset Value and offering price per share of
Class C shares ($595,937 / 71,441 shares)* $8.34
=====
Net Asset Value, offering price and redemption price per share of Class S
shares ($11,186,430 / 1,332,337 shares) ................................ $8.40
=====
- -------------------------------------------------------------------------------------------
* Redemption price per share for Class B and Class C is equal to net asset value less any
applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends ....................................................... $ 35,445
Interest ........................................................ 18,843
----------
54,288
EXPENSES
Custodian fee ................................................... 46,234
Management fee (Note 2) ......................................... 34,426
Reports to shareholders ......................................... 14,840
Amortization of organization costs (Note 1) ..................... 9,357
Trustees' fees (Note 2) ......................................... 7,472
Audit fee ....................................................... 4,324
Legal fees ...................................................... 3,824
Service fee - Class A (Note 5) .................................. 1,296
Distribution and service fees - Class B (Note 5) ................ 2,825
Distribution and service fees - Class C (Note 5) ................ 2,624
Transfer agent and shareholder services (Note 2) ................ 467
----------
127,689
Fees paid indirectly (Note 2) ................................... (286)
Expenses borne by the Distributor (Note 3) ...................... (65,489)
----------
61,914
----------
Net investment loss ............................................. (7,626)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (Notes 1 and 4) ................ (515,064)
Net unrealized appreciation of investments ...................... 2,180,735
----------
Net gain on investments ......................................... 1,665,671
----------
Net increase in net assets resulting from operations ............ $1,658,045
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 27, 1998
(COMMENCEMENT
OF OPERATIONS) SIX MONTHS ENDED
TO DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ................................ $ 7,666 $ (7,626)
Net realized loss on investments ............................ (100,932) (515,064)
Net unrealized appreciation of investments .................. 600,558 2,180,735
---------- -----------
Net increase resulting from operations 507,292 1,658,045
---------- -----------
Dividend from net investment income:
Class A ................................................... -- (1,374)
Class S ................................................... -- (10,314)
---------- -----------
-- (11,688)
---------- -----------
Net increase from Fund share
transactions (Note 6) ..................................... 9,414,453 2,818,156
---------- -----------
Total increase in net assets ................................ 9,921,745 4,464,513
NET ASSETS
Beginning of period ......................................... -- 9,921,745
---------- -----------
End of period (including undistributed (overdistributed) net
investment income of $14,798 and $(4,516), respectively ... $9,921,745 $14,386,258
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
December 31, 1998
NOTE 1
State Street Research Athletes 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, 1998. The Trust presently consists presently of
four separate funds: State Street Research Athletes Fund, State Street Research
Alpha Fund, State Street Research Global Resources Fund and State Street
Research Argo 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 at least 65% of
total assets in stocks and convertible securities of large-size companies. The
Fund is intended primarily for professional athletes and associated persons.
The Fund offers four classes of shares. Until December 31, 1998 Class A shares
were subject to an initial sales charge of up to 4.50% and effective January 1,
1999 became subject to an initial sales charge of up to 5.75%. Class A shares
pay a service fee equal to 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. Effective January 1, 1999, the Fund began offering Class B(1) shares
which are subject to a contingent deferred sales charge on certain redemptions
made within six years. Class C shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase. Class
C shares also pay annual distribution and service fees of 1.00%. Class S shares
are only offered through certain retirement accounts, advisory accounts of State
Street Research & Management Company (the "Adviser"), an indirect wholly owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan"), and special
programs. No sales charge is imposed at the time of purchase or redemption of
Class S shares. Class S shares do not pay any distribution or service fees. The
Fund's expenses are borne pro-rata by each class, except that each class bears
expenses, and has exclusive voting rights with respect to provisions of the 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 the closing price 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 annually. 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 intends to
qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a twelve-
month period ending October 31. In this connection, the Fund is permitted to
defer into its next fiscal year any net capital losses incurred between each
November 1 and the end of its fiscal year. From March 27, 1998 (commencement
of operations) to June 30, 1998, the Fund incurred net capital losses of
approximately $92,000 and intends to defer and treat such losses as arising in
the fiscal year ended June 30, 1999.
F. DEFERRED ORGANIZATION COSTS
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. During the six months ended December 31, 1998, there were no loaned
securities.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% 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 six months ended December 31, 1998, the
fees pursuant to such agreement amounted to $34,426.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of 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. During the six months ended December 31, 1998, the amount of
such expenses was $139.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended December 31, 1998
the Fund's transfer agent fees were reduced by $286 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$7,472 during the six months ended December 31, 1998.
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 six months ended December 31, 1998, the amount of such
expenses assumed by the Distributor and its affiliates was $65,489.
NOTE 4
For the six months ended December 31, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $10,549,425 and $7,493,296,
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 C shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily net
assets for Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to compensate or reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the six months ended December
31, 1998, fees pursuant to such plan amounted to $1,296, $2,825 and $2,624 for
Class A, Class B and Class C 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 $73 and $608, respectively, on sales of Class A shares of the Fund
during the six months ended December 31, 1998, and that MetLife Securities,
Inc. earned commissions aggregating $100 on sales of Class B shares 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 December 31, 1998, the
Adviser owned one share of each of Class A, Class B, Class C and Class S and
Metropolitan owned 71,428 shares of each of Class A, Class B and Class C and
440,476 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
MARCH 27, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO DECEMBER 31, 1998
JUNE 30, 1998 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 108,371 $ 765,934 121,143 $ 930,427
Issued upon reinvestment of
dividend ................... -- -- 106 842
Shares repurchased ........... -- -- (60) (447)
--------- --------- --------- ---------
Net increase ................. 108,371 $ 765,934 121,189 $ 930,822
========= ========= ========= =========
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 72,159 $ 505,082 9,348 $ 69,731
--------- --------- --------- ---------
Net increase ................. 72,159 $ 505,082 9,348 $ 69,731
========= ========= ========= =========
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold .................. 71,441 $ 500,082 -- $ --
--------- --------- --------- ---------
Net increase ................. 71,441 $ 500,082 -- $ --
========= ========= ========= =========
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 1,121,958 $7,824,978 362,196 $2,721,678
Shares repurchased ........... (26,084) (181,623) (125,733) (904,075)
--------- --------- --------- ---------
Net increase ................. 1,095,874 $7,643,355 236,463 $1,817,603
========= ========= ========= =========
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------ ---------------------------------------
MARCH 27, 1998 MARCH 27, 1998
(COMMENCEMENT OF SIX MONTHS ENDED (COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS) TO DECEMBER 31, 1998
JUNE 30, 1998(a) (UNAUDITED)(a) JUNE 30, 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.36 7.00 7.34
----- ----- ----- -----
Net investment income (loss) ($)* 0.00 (0.01) (0.01) (0.02)
Net realized and unrealized gain on investments($) 0.36 1.04 0.35 1.02
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.03 0.34 1.00
----- ----- ----- -----
Dividend from net investment income ($) -- (0.01) -- --
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.01) -- --
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.36 8.38 7.34 8.34
===== ===== ===== =====
Total return(b) (%) 5.14(c) 13.95(c) 4.86(c) 13.62(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 797 1,924 530 680
Ratio of operating expenses to average
net assets (%)* 1.25(d) 1.26(d) 2.00(d) 2.01(d)
Ratio of net investment income (loss) to
average net assets (%)* 0.25(d) (0.31)(d) 0.44(d) (1.01)(d)
Portfolio turnover rate (%) 30.76 75.45 30.76 75.45
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.07 0.04 0.07 0.04
<CAPTION>
CLASS C CLASS S
------------------------------------ ---------------------------------------
MARCH 27, 1998 MARCH 27, 1998
(COMMENCEMENT OF SIX MONTHS ENDED (COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS) TO DECEMBER 31, 1998
JUNE 30, 1998(a) (UNAUDITED)(a) JUNE 30, 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.34 7.00 7.36
----- ----- ----- -----
Net investment income (loss) ($)* (0.01) (0.04) 0.01 (0.00)
Net realized and unrealized gain on investments($) 0.35 1.04 0.35 1.05
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.34 1.00 0.36 1.05
----- ----- ----- -----
Dividend from net investment income ($) -- -- -- (0.01)
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- -- -- (0.01)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.34 8.34 7.36 8.40
===== ===== ===== =====
Total return (b) (%) 4.86(c) 13.62(c) 5.14(c) 14.25(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 525 596 8,070 11,186
Ratio of operating expenses to average
net assets (%)* 2.00(d) 2.01(d) 1.00(d) 1.01(d)
(0.43)(d) (1.00)(d) 0.46(d) (0.01)(d)
Ratio of net investment income (loss) to
average net assets (%)*
Portfolio turnover rate (%) 30.76 75.45 30.76 75.45
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.07 0.04 0.06 0.04
- -----------------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) 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 reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- -------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
ATHLETES FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center BARTLETT R. GEER Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President
DISTRIBUTOR F. GARDNER JACKSON, JR. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center THOMAS P. MOORE, JR. Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES BRIAN P. O'DELL State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 DANIEL J. RICE III Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
JAMES M. WEISS
CUSTODIAN Vice President EDWARD M. LAMONT
State Street Bank and Formerly in banking
Trust Company JOHN T. WILSON (with an affiliate of
225 Franklin Street Vice President J.P. Morgan & Co. in New York);
Boston, MA 02110 presently engaged in private
PETER A. ZUGER investments and civic affairs
LEGAL COUNSEL Vice President
Goodwin, Procter & Hoar LLP ROBERT A. LAWRENCE
Exchange Place GERARD P. MAUS Former Partner, Saltonstall & Co.
Boston, MA 02109 Treasurer
DEAN O. MORTON
JOSEPH W. CANAVAN Former Executive Vice President,
Assistant Treasurer Chief Operating Officer and
Director, Hewlett-Packard
DOUGLAS A. ROMICH Company
Assistant Treasurer
TOBY ROSENBLATT
FRANCIS J. MCNAMARA, III President,
Secretary and General Counsel The Glen Ellen Company
Vice President,
DARMAN A. WING Founders Investments Ltd.
Assistant Secretary and
Assistant General Counsel MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
AMY L. SIMMONS Management, Sloan School of
Assistant Secretary Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
-------------------
STATE STREET RESEARCH ATHLETES FUND Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
PermiT #20
Holliston, Ma 01746
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032 or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used as supplemental sales literature, this publication must be preceded or
accompanied by a current State Street Research Athletes Fund prospectus. The
prospectus contains more complete information, including sales charges and
expenses. Please read the prospectus carefully before investing.
When used after March 31, 1999, 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: (exp0200)SSR-LD AT-472F-0299
