[front cover]
STATE STREET RESEARCH
---------------------
ARGO FUND
---------------------
ANNUAL REPORT
June 30, 1999
-------------
WHAT'S INSIDE
-------------
From the Chairman
American investors have been
handsomely rewarded
Portfolio Manager's Review
Value stocks lag market,
then turn around
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR AWARD:
Dalbar Key Honors
Commitment To:
Investors
1998]
For Excellence
in
Shareholder Service
[logo: State Street Research]
<PAGE>
FROM THE CHAIRMAN
[photo: Ralph Verni]
Dear Shareholder:
For seven years running, and with few interruptions, the United States has
enjoyed a "best of all possible financial worlds" existence. Stocks and bonds
have been strong, inflation and interest rates have fallen, and the economy has
grown at a pace that seemed just right.
Better yet, American workers have reaped the benefits of a healthy economy, and
American investors have been handsomely rewarded. Many have taken their
prosperity to the mall, where retail sales have been strong. However, we may
have been carried away with our recent success. The nation's savings rate has
fallen to -1.2%.
Stocks
Although the U.S. stock market suffered a severe correction last summer, most
segments staged a comeback. In the first quarter of 1999, the Dow Jones
Industrial Average passed a significant milestone, 10,000, and ended the
12-month period just short of 11,000. The S&P 500, a broad measure of stock
market performance, gained 22.76%.(1)
Large-company growth and technology stocks were the strongest performers, led
by Internet stocks. Gains were concentrated in a narrow band of stocks most of
the time. It was a challenge for investors to match the market's returns with
their own portfolios. Finally, the gap between large-company growth stocks and
the rest began to narrow. Performance of small and medium-sized company stocks
improved, and value stocks came back to life.
Bonds
The bond market benefited from the Federal Reserve Board's three quick interest
rate cuts last fall, then struggled under the weight of a robust economy. Even
before the Fed raised the short-term interest rate--a move widely-expected
before it was actually announced on June 30--the yield on the benchmark climbed
back above 6.0%. (Remember, the higher the yield, the worse it is for bonds.)
As a result, U.S. Treasury bonds went from leaders to laggards. High-yield
"junk" bonds, which had been weak, were buoyed by the strong economic news.
International
Hopes for the euro, the new common currency shared by 11 European nations,
helped European markets initially. But the luster was short-lived. Many
European economies, still feeling the effects of weakness in Asian markets,
stumbled in the first half of 1999. Asian emerging markets started to show some
signs of life, while Latin emerging markets remain mired in currency woes.
Japan's stock market delivered strong gains in the first half of 1999,
encouraged by corporate restructurings and signs that Japan's Central Bank is
beginning to help its economy.
Outlook and Opportunities
As investors, you may be pondering your strategy in a market that has produced
both strong gains and extraordinary volatility. Regardless of the environment,
we are confident that our in-depth research can help us uncover good values,
both at home and abroad. As always, we will be diligent in seeking new
investments and in monitoring those we already own. Thank you for your
confidence in State Street Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The index does not take transaction
charges into consideration. It is not possible to invest directly in the index.
(2) 8.80% for Class B(1) shares; 8.82% for Class B shares; 8.81% for Class C
shares; 9.84% 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 5.75% A share front-end sales charge, or 5% Class B(1) or Class B share
or 1% Class C share contingent deferred sales charge, where applicable. The
Fund's returns include performance before the creation of share classes. If this
performance reflected the share classes' current 12b-1 fees, the Fund's returns
may have been lower.
(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 June 30, 1999)
- --------------------------------------------------------------------------------
[mountain chart]
Total value of $10,000 invested on June 30, 1989(3)
(Class A shares, at maximum applicable sales charge)
<TABLE>
<S> <C>
6/89 $ 9,425
6/90 10,984
6/91 10,314
6/92 12,198
6/93 14,682
6/94 14,819
6/95 17,537
6/96 21,979
6/97 28,774
6/98 36,721
6/99 40,248
</TABLE>
[end mountain chart]
Average Annual Total Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 13.93% 14.94% 20.68% 3.30%
- ----------------------------------------------------------------------
Class B(1) 14.08% 15.14% 21.07% 3.92%
- ----------------------------------------------------------------------
Class B 14.09% 15.14% 21.07% 3.93%
- ----------------------------------------------------------------------
Class C 14.09% 15.15% 21.25% 7.83%
- ----------------------------------------------------------------------
Class S 14.62% 15.83% 22.44% 9.84%
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Argo Fund: Value stocks lag market, then turn around
[photo: Peter Zuger]
Peter Zuger
Portfolio Manager
We spoke with Peter Zuger, portfolio manager of State Street Research Argo Fund,
about the Fund's performance for the year ended June 30, 1999 and his views on
the period ahead.
Q: How did the Fund perform during the year?
A: It was a year of modest returns for the Fund relative to its peer group and
the broader market. Class A shares returned 9.61% for the 12 months ended June
30, 1999 [does not reflect sales charge].(2) This was lower than the Lipper
average growth and income fund, which returned 14.48%. The Fund underperformed
the Standard & Poor's 500 Stock Index (S&P 500), which gained 22.76% for the
same period.(1)
Q: What factors detracted from performance?
A: We emphasized large, value-oriented companies in the portfolio.
Unfortunately, investors favored large growth company stocks for most of the
period. Returns were also held back by our emphasis in the insurance and
electric utilities sectors, which were vulnerable to rising interest rates
throughout the period, and by our underexposure to technology and investment
sectors. However, late in the period, after a downturn for most of the market
leaders, many of the attractively-priced cyclical industrial and energy stocks
in the portfolio recovered. The Fund picked up against both measurements in the
second half.
Q: What areas of the Fund helped performance?
A: Some of the Fund's cyclical and industrial stocks did quite well. For
example, Dow Chemical has been strong, yet I believe the stock still represents
good value. It is a global company that stands to benefit from the recovery that
has started to take shape overseas. Dow Chemical has also made some significant
investments outside the U.S. -- notably in Germany, where modernization has the
potential to improve profitability.
Q: Did you make significant changes to the portfolio because of its
underperformance?
A: No. I expect the market to confirm the confidence we continue to have in
some of our key investments. For example, our emphasis on insurance stocks hurt
us during the last period. However, we own a number of high quality names that
represent good value as well as appreciation potential: For example, Ace Ltd.,
which has recently acquired Cigna's property/casualty insurance business that
has the potential to make a significant addition to the earnings of the new,
combined businesses; and Chubb, which enjoys an attractive niche as underwriter
for wealthy individuals and other specialty insurance markets.
Q: What is your outlook for the period ahead?
A: I believe that the Fund's value-oriented investments are positioned to
benefit if the global business environment continues to improve as it signified
at the end of the last 12-month period. Conversely, if the business environment
deteriorates, the Fund's investments in consumer staples, utilities and
selected financial stocks make the Fund more defensive than the average growth
and income fund. Finally, with growth companies trading at historically high
prices relative to their earnings, the prospects for large, value-oriented
companies remain positive.
June 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<S> <C> <C>
1 Exxon Oil 2.8%
2 Bank of America Banking 2.7%
3 AT&T Telecommunications 2.6%
4 Bell Atlantic Telecommunications 2.6%
5 Citigroup Financial services 2.5%
6 Burlington Resources Oil & gas exploration 2.4%
7 SBC Communications Telecommunications 2.4%
8 Unocal Oil & gas exploration 2.3%
9 Federated Department Stores Retail store chain 2.2%
10 Dow Chemical Chemical 2.2%
</TABLE>
These securities represent an aggregate of 24.7% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities or industries listed in this table
or in the text above.
[bar chart]
Top 5 Industries
(by percentage of net assets)
<TABLE>
<S> <C>
Telecommunications 10.7%
Banks &
Savings & Loans 9.9%
Insurance 9.6%
International Oil 8.1%
Electric
Utilities 6.7%
Total: 45.0%
</TABLE>
[end bar chart]
2
<PAGE>
Largest Contributors to Performance
(July 1, 1998 through June 30, 1999)
Positive [arrow up]
- -----------------------------------------------------
IBM
Business fundamentals continued to improve.
Cendant
Stock price moved up sharply after re-stated earnings.
Honeywell
Stock appreciated after announced merger with
AlliedSignal.
Negative [arrow down]
- -----------------------------------------------------
Rhodia
Tyco International
Chase Manhattan
Three stocks sold off substantially during market correction in fall 1998.
Manager sold stocks for tax losses to offset capital gains, benefiting
shareholders.
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 99.0%
Automobiles & Transportation 3.8%
Automotive Parts 0.6%
Delphi Automotive Systems Corp. ............... 71,839 $1,333,511
----------
Automobiles 1.1%
General Motors Corp. .......................... 32,900 2,171,400
----------
Railroads 2.1%
Burlington Northern Santa Fe Corp. ............ 101,700 3,152,700
Canadian National Railway Co. ................. 16,500 1,105,500
----------
4,258,200
----------
Total Automobiles & Transportation .......................... 7,763,111
----------
Consumer Discretionary 9.6%
Commercial Services 2.4%
Cendant Corp.* ................................ 109,100 2,236,550
Waste Management Inc. ......................... 50,600 2,719,750
----------
4,956,300
----------
Printing & Publishing 2.2%
Tribune Co. ................................... 50,400 4,391,100
----------
Retail 3.9%
Federated Department Stores Inc.* ............. 84,400 4,467,925
May Department Stores Co. ..................... 87,250 3,566,344
----------
8,034,269
----------
Toys 1.1%
Mattel Inc. ................................... 87,700 2,318,569
----------
Total Consumer Discretionary ................................ 19,700,238
----------
Consumer Staples 6.5%
Drug & Grocery Store Chains 0.5%
Rite Aid Corp. ................................ 40,200 989,925
----------
Foods 2.8%
Ralston Purina Co. ............................ 95,500 2,906,781
Sara Lee Corp. ................................ 130,900 2,969,794
----------
5,876,575
----------
Tobacco 3.2%
Nabisco Group Holdings Corp. .................. 156,200 3,055,663
Philip Morris Companies,Inc. .................. 87,500 3,516,406
----------
6,572,069
----------
Total Consumer Staples ...................................... 13,438,569
----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Financial Services 23.5%
Banks & Savings & Loan 9.9%
Bank of America Corp. ......................... 76,503 $ 5,608,626
Bank One Corp. ................................ 65,400 3,895,388
First Union Corp. ............................. 56,900 2,674,300
Fleet Financial Group Inc. .................... 96,700 4,291,062
Mellon Bank Corp. ............................. 108,600 3,950,325
-----------
20,419,701
-----------
Insurance 9.6%
Ace Ltd. ...................................... 148,100 4,183,825
Allstate Corp. ................................ 114,800 4,118,450
Chubb Corp. ................................... 54,800 3,808,600
Saint Paul Companies, Inc. .................... 123,400 3,925,662
Unum Provident Corp. .......................... 67,200 3,679,200
-----------
19,715,737
-----------
Miscellaneous Financial 4.0%
Citigroup, Inc. ............................... 106,275 5,048,063
Federal National Mortgage Association ......... 45,000 3,076,875
-----------
8,124,938
-----------
Total Financial Services .................................... 48,260,376
-----------
Health Care 3.9%
Health Care Facilities 2.0%
Columbia / HCA HealthcareCorp. ................ 178,300 4,067,469
-----------
Health Care Services 1.9%
Aetna Inc. .................................... 43,700 3,908,419
-----------
Total Health Care ........................................... 7,975,888
-----------
Integrated Oils 10.4%
Integrated Domestic 2.3%
Unocal Corp. .................................. 119,900 4,751,037
-----------
Integrated International 8.1%
BP Amoco PLC ADR .............................. 28,182 3,057,747
Conoco Inc. Cl. A ............................. 145,600 4,058,600
Exxon Corp. ................................... 74,400 5,738,100
Texaco Inc. ................................... 31,600 1,975,000
Total Fina SA ADR* ............................ 28,800 1,855,800
-----------
16,685,247
-----------
Total Integrated Oils ....................................... 21,436,284
-----------
Materials & Processing 11.7%
Agriculture 1.9%
Archer Daniels Midland Co. .................... 251,300 3,879,444
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Chemicals 6.5%
Air Products & Chemicals, Inc. ................ 80,200 $ 3,228,050
Dow Chemical Co. .............................. 35,000 4,440,625
PPG Industries Inc. ........................... 31,400 1,854,562
Rohm & Haas Co. ............................... 88,800 3,807,300
-----------
13,330,537
-----------
Paper & Forest Products 3.3%
Fort James Corp. .............................. 108,500 4,109,438
International Paper Co. ....................... 53,200 2,686,600
-----------
6,796,038
-----------
Total Materials & Processing ................................ 24,006,019
-----------
Other 5.1%
Multi-Sector 5.1%
Cooper Industries, Inc. ....................... 59,600 3,099,200
Minnesota Mining & Manufacturing Co. .......... 46,900 4,077,369
Raytheon Co. Cl. B ............................ 47,300 3,328,737
-----------
Total Other ................................................. 10,505,306
-----------
Other Energy 3.0%
Oil & Gas Producers 2.4%
Burlington Resources Inc. ..................... 114,800 4,965,100
-----------
Oil Well Equipment & Services 0.6%
Halliburton Co. ............................... 28,200 1,276,050
-----------
Total Other Energy .......................................... 6,241,150
-----------
Producer Durables 1.9%
Aerospace 1.9%
Lockheed Martin Corp. ......................... 106,100 3,952,225
-----------
Total Producer Durables ..................................... 3,952,225
-----------
Technology 2.2%
Computer Technology 2.2%
Gateway Inc.* ................................. 33,600 1,982,400
International Business Machines Corp. ......... 19,800 2,559,150
-----------
4,541,550
-----------
Total Technology ............................................ 4,541,550
-----------
Utilities 17.4%
Electrical 6.7%
FPL Group Inc. ................................ 66,800 3,648,950
Pacificorp .................................... 166,000 3,050,250
Texas Utilities Co. ........................... 82,700 3,411,375
Unicom Corp. .................................. 93,400 3,601,737
-----------
13,712,312
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Telecommunications 10.7%
AT&T Corp. .................................... 95,550 $ 5,332,884
Bell Atlantic Corp. ........................... 80,500 5,262,688
Bellsouth Corp. ............................... 48,600 2,278,125
SBC Communications Inc. ....................... 84,000 4,872,000
U.S. West Inc. ................................ 73,900 4,341,625
------------
22,087,322
------------
Total Utilities ............................................... 35,799,634
------------
Total Common Stocks (Cost $166,794,336) ....................... 203,620,350
------------
SHORT-TERM INVESTMENTS 8.1%
State Street Navigator Securities Lending
Prime Portfolio ............................. 16,579,813 16,579,813
------------
Total Short-Term Investments (Cost $16,579,813) ............... 16,579,813
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 2.2%
Exxon Corp., 5.70% ............... $1,000,000 7/01/1999 1,000,000
Ford Motor Credit Co., 5.36% ..... 3,000,000 7/02/1999 3,000,000
Ford Motor Credit Co., 5.25% ..... 633,000 7/07/1999 633,000
---------
Total Commercial Paper (Cost $4,633,000) ................. 4,633,000
---------
Total Investments (Cost $188,007,149)--109.3% ............ 224,833,163
Cash and Other Assets, Less Liabilities--(9.3%) .......... (19,219,153)
-----------
Net Assets--100.0% ....................................... $205,614,010
============
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
At June 30, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $188,667,512 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ............................................ $39,043,711
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value .......................................... (2,878,060)
-----------
$36,165,651
===========
</TABLE>
- --------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $188,007,149) (Note 1) ............ $224,833,163
Cash .......................................................... 1,190
Receivable for securities sold ................................ 2,051,078
Dividends and interest receivable ............................. 411,161
Receivable for fund shares sold ............................... 145,034
Receivable from Distributor (Note 3) .......................... 1,847
Other assets .................................................. 47,801
------------
227,491,274
Liabilities
Payable for collateral received on securities loaned .......... 16,579,813
Payable for fund shares redeemed .............................. 4,831,402
Accrued management fee (Note 2) ............................... 184,745
Accrued transfer agent and shareholder services
(Note 2) .................................................... 144,863
Accrued trustees' fees (Note 2) ............................... 27,476
Dividends payable ............................................. 9,465
Accrued distribution and service fees (Note 5) ................ 6,611
Other accrued expenses ........................................ 92,889
------------
21,877,264
------------
Net Assets $205,614,010
============
Net Assets consist of:
Undistributed net investment income .......................... $ 336,422
Unrealized appreciation of investments ....................... 36,826,014
Accumulated net realized gain ................................ 34,635,132
Paid-in capital .............................................. 133,816,442
------------
$205,614,010
============
Net Asset Value and redemption price per share of
Class A shares ($76,942,632 [divided by] 3,612,861 shares) .. $21.30
======
Maximum Offering Price per share of Class A shares
($21.30 [divided by] .9425) ................................. $22.60
======
Net Asset Value and offering price per share of Class
B(1) shares ($4,243,574 [divided by] 204,456 shares)* ....... $20.76
======
Net Asset Value and offering price per share of Class
B shares ($59,526,522 [divided by] 2,865,984 shares)* ....... $20.77
======
Net Asset Value and offering price per share of Class
C shares ($1,555,171 [divided by] 74,835 shares)* ........... $20.78
======
Net Asset Value, offering price and redemption price
per share of Class S shares
($63,346,111 [divided by] 2,979,974 shares) ................. $21.26
======
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended June 30, 1999
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $4,772 ................ $ 3,708,696
Interest (Note 1) ........................................ 274,330
-----------
3,983,026
Expenses
Management fee (Note 2) .................................. 1,348,049
Transfer agent and shareholder services (Note 2) ......... 520,316
Custodian fee ............................................ 131,537
Reports to shareholders .................................. 48,654
Registration fees ........................................ 44,395
Trustees' fees (Note 2) .................................. 33,488
Audit fee ................................................ 29,826
Legal fees ............................................... 19,130
Service fee-Class A (Note 5) ............................. 180,912
Distribution and service fees-Class B(1) (Note 5) ........ 11,290
Distribution and service fees-Class B (Note 5) ........... 551,185
Distribution and service fees-Class C (Note 5) ........... 17,007
Miscellaneous ............................................ 16,589
-----------
2,952,378
Expenses borne by the Distributor (Note 3) ............... (102,408)
Fees paid indirectly (Note 2) ............................ (16,521)
-----------
2,833,449
-----------
Net investment income .................................... 1,149,577
-----------
Realized and Unrealized Gain (Loss) on
Investments
Net realized gain on investments (Notes 1 and 4) ......... 38,935,822
Net unrealized depreciation of investments ............... (23,505,974)
-----------
Net gain on investments .................................. 15,429,848
-----------
Net increase in net assets resulting from operations ..... $16,579,425
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended June 30
----------------------------------
1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income .................... $ 525,350 $ 1,149,577
Net realized gain on investments ......... 29,310,326 38,935,822
Net unrealized appreciation
(depreciation) of investments .......... 18,055,536 (23,505,974)
------------ ------------
Net increase resulting from
operations ............................. 47,891,212 16,579,425
------------ ------------
Dividends from net investment
income:
Class A ................................. (164,598) (331,356)
Class B(1) .............................. -- (1,635)
Class S ................................. (478,254) (499,905)
------------ ------------
(642,852) (832,896)
------------ ------------
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)
------------ ------------
(25,215,436) (22,114,170)
------------ ------------
Net increase (decrease) from fund
share transactions (Note 6) ............ 44,734,317 (21,144,328)
------------ ------------
Total increase (decrease) in net
assets ................................. 66,767,241 (27,511,969)
Net Assets
Beginning of year ........................ 166,358,738 233,125,979
------------ ------------
End of year (including undistributed
net investment income of $0 and
$336,422, respectively) ................ $233,125,979 $205,614,010
============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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 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 five 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. On January 1,
1999, the Fund began offering Class B(1) shares and continued offering Class B
shares but only to current shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of State
Street Research funds. Class B(1) and Class B pay annual distribution and
service fees of 1.00% and both classes automatically convert into Class A
shares (which pay lower ongoing expenses) at the end of eight years. Class B(1)
shares are subject to a contingent deferred sales charge on certain redemptions
made within six years of purchase. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase. Class C shares are subject to a contingent deferred sales charge of
1.00% on any shares redeemed within one year of 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.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at closing prices
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are at
the mean of the closing bid and asked quotations. Short-term securities
maturing within sixty days are valued at amortized cost. Other securities, if
any, are valued at their fair value as determined in accordance with
established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to it,
while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested quarterly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations. For the year ended June 30, 1999, the Fund has
designated as long-term $20,575,300 of the distributions from net realized
gains.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
G. Securities Lending
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At June 30, 1999, the value of the securities loaned and the value of
collateral were $16,167,334 and $16,579,813, respectively. During the year
ended June 30, 1999, income from securities lending amounted to $26,018 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 year ended June 30, 1999, the fees pursuant
to such agreement amounted to $1,348,049.
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 year ended June 30,
1999, the amount of such shareholder servicing and account maintenance expenses
was $265,167.
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 year ended June 30, 1999 the Fund's
transfer agent fees were reduced by $16,521 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$33,488 during the year ended June 30, 1999.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund.
During the year ended June 30, 1999, the amount of such expenses assumed by the
Distributor and its affiliates was $102,408.
Note 4
For the year ended June 30, 1999, purchases and sales of securities, exclusive
of short-term obligations, aggregated $239,395,307 and $276,873,720,
respectively.
Note 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal ser-
7
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
vices and/or the maintenance or servicing of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish ongoing
assistance to investors and to defray a portion of its distribution and
marketing expenses. For the year ended June 30, 1999, fees pursuant to such
plans amounted to $180,912, $551,185 and $17,007 for Class A, Class B and Class
C shares, respectively. For the period January 1, 1999 (commencement of shares
class) to June 30, 1999, fees pursuant to such plans amounted to $11,290 for
Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $26,029 and $155,622, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1999, and that MetLife Securities, Inc.
earned commissions aggregating $315,980 on sales of Class B shares, and that
the Distributor collected contingent deferred sales charges aggregating $91,437
and $273 on redemptions of Class B and Class C shares, respectively, during the
same period. MetLife Securities, Inc. earned commissions aggregating $32,410 on
sales and the Distributor collected contingent deferred sales charges
aggregating $385 on redemptions of Class B(1) shares during the period January
1, 1999 (commencement of share class) to June 30, 1999.
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>
Years ended June 30
--------------------------------
1998
--------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ......................................................... 804,843 $ 16,069,612
Issued upon reinvestment of:
Distributions from net realized gains .............................. 436,011 7,978,243
Dividends from net investment income ............................... 8,147 156,176
Shares repurchased .................................................. (543,128) (10,895,290)
--------- --------------
Net increase ........................................................ 705,873 $ 13,308,741
========= ==============
Class B(1)* Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... -- --
Issued upon reinvestment of dividend from net investment income ..... -- --
Shares repurchased .................................................. -- --
--------- --------------
Net increase ........................................................ -- --
========= ==============
Class B Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 1,176,521 $ 22,985,589
Issued upon reinvestment of distributions from net realized gains ... 235,125 4,221,732
Shares repurchased .................................................. (266,675) (5,250,654)
--------- --------------
Net increase ........................................................ 1,144,971 $ 21,956,667
========= ==============
Class C Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 123,388 $ 2,341,959
Issued upon reinvestment of distributions from net realized gains ... 14,256 256,153
Shares repurchased .................................................. (141,471) (2,560,836)
--------- --------------
Net increase (decrease) ............................................. (3,827) $ 37,276
========= ==============
Class S Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 1,888,511 $ 37,815,205
Issued upon reinvestment of:
Distributions from net realized gains .............................. 681,187 12,448,029
Dividends from net investment income ............................... 24,360 475,782
Shares repurchased .................................................. (2,108,363) (41,307,383)
---------- --------------
Net increase (decrease) ............................................. 485,695 $ 9,431,633
========== ==============
</TABLE>
<TABLE>
<CAPTION>
Years ended June 30
--------------------------------
1999
--------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ......................................................... 952,096 $ 18,460,508
Issued upon reinvestment of:
Distributions from net realized gains .............................. 377,796 7,137,865
Dividends from net investment income ............................... 15,825 317,273
Shares repurchased .................................................. (1,245,552) (23,863,674)
---------- -------------
Net increase ........................................................ 100,165 $ 2,051,972
========== =============
Class B(1)* Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 237,803 $ 4,568,242
Issued upon reinvestment of dividend from net investment income ..... 150 1,635
Shares repurchased .................................................. (33,497) (677,927)
---------- -------------
Net increase ........................................................ 204,456 $ 3,891,950
========== =============
Class B Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 798,834 $ 15,458,889
Issued upon reinvestment of distributions from net realized gains ... 293,842 5,422,431
Shares repurchased .................................................. (683,683) (12,921,381)
---------- -------------
Net increase ........................................................ 408,993 $ 7,959,939
========== =============
Class C Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 657,186 $ 12,433,576
Issued upon reinvestment of distributions from net realized gains ... 7,870 145,219
Shares repurchased .................................................. (671,001) (12,786,000)
---------- -------------
Net increase (decrease) ............................................. (5,945) $ (207,205)
========== =============
Class S Shares Amount
- -----------------------------------------------------------------------------------------------------
Shares sold ......................................................... 2,203,797 $ 41,755,985
Issued upon reinvestment of:
Distributions from net realized gains .............................. 479,326 9,052,915
Dividends from net investment income ............................... 25,046 492,632
Shares repurchased .................................................. (4,486,925) (86,142,516)
---------- -------------
Net increase (decrease) ............................................. (1,778,756) $ (34,840,984)
========== =============
</TABLE>
- --------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to June 30, 1999.
8
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
Years ended June 30
----------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.44 14.28 17.04 19.68 21.68
------ ------ ------ ------ -------
Net investment income* ($) 0.08 0.12 0.09 0.06 0.13
Net realized and unrealized gain on investments ($) 2.14 3.38 4.63 4.74 1.64
------ ------ ------ ------ -------
Total from investment operations ($) 2.22 3.50 4.72 4.80 1.77
------ ------ ------ ------ -------
Dividends from net investment income ($) (0.05) (0.11) (0.09) (0.06) (0.09)
Distributions from net realized gains ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------ -------
Total distributions ($) (0.38) (0.74) (2.08) (2.80) (2.15)
------ ------ ------ ------ -------
Net asset value, end of year ($) 14.28 17.04 19.68 21.68 21.30
====== ====== ====== ====== =======
Total return(b) (%) 18.34 25.33 30.91 27.62 9.61
Ratios/supplemental data:
Net assets at end of year ($ thousands) 31,174 39,300 55,239 76,151 76,943
Ratio of operating expenses to average net assets (%)* 1.42 1.25 1.25 1.25 1.26
Ratio of net investment income to average net
assets (%)* 0.64 0.79 0.54 0.29 0.68
Portfolio turnover rate (%) 47.93 44.44 88.07 81.53 118.91
*Reflects voluntary reduction of expenses per share of these
amounts (Note 3) ($) 0.06 0.03 0.03 0.01 0.01
</TABLE>
<TABLE>
<CAPTION>
Class B(1)
--------------------
Period ended
June 30, 1999(a)(c)
- ------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ($) 18.66
------
Net investment income ($)* 0.02
Net realized and unrealized gain on investments ($) 2.09
------
Total from investment operations ($) 2.11
------
Dividend from net investment income ($) (0.01)
-------
Total distributions ($) (0.01)
-------
Net asset value, end of period ($) 20.76
=======
Total return(b) (%) 11.30(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 4,244
Ratio of operating expenses to average net assets (%)* 2.01(e)
Ratio of net investment income to average net
assets (%)* 0.24(e)
Portfolio turnover rate (%) 118.91
*Reflects voluntary reduction of expenses per share of these
amounts (Note 3) ($) 0.00
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not not reflect any front-end or contingent deferred sales charges.
Total return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
9
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------
Years ended June 30
-------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.36 14.16 16.88 19.42 21.25
------ ------ ------ ------ -------
Net investment income (loss) ($)* 0.01 0.01 (0.03) (0.09) (0.01)
Net realized and unrealized gain on investments ($) 2.12 3.34 4.56 4.66 1.59
------ ------ ------ ------ -------
Total from investment operations ($) 2.13 3.35 4.53 4.57 1.58
------ ------ ------ ------ -------
Dividends from net investment income ($) -- -- -- -- --
Distributions from net realized gains ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------ -------
Total distributions ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------ -------
Net asset value, end of year ($) 14.16 16.88 19.42 21.25 20.77
====== ====== ====== ====== =======
Total return(b) (%) 17.70 24.39 29.91 26.67 8.82
Ratios/supplemental data:
Net assets at end of year ($ thousands) 5,933 13,129 25,478 52,211 59,527
Ratio of operating expenses to average net assets (%)* 2.00 2.00 2.00 2.00 2.01
Ratio of net investment income (loss) to average net
assets (%)* 0.08 0.05 (0.20) (0.46) (0.06)
Portfolio turnover rate (%) 47.93 44.44 88.07 81.53 118.91
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.06 0.03 0.03 0.01 0.01
</TABLE>
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------
Years ended June 30
----------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.36 14.15 16.87 19.41 21.26
------ ------ ------ ------ -------
Net investment income (loss) ($)* 0.01 0.01 (0.03) (0.09) (0.01)
Net realized and unrealized gain on investments ($) 2.11 3.34 4.56 4.68 1.59
------ ------ ------ ------ -------
Total from investment operations ($) 2.12 3.35 4.53 4.59 1.58
------ ------ ------ ------ -------
Distributions from net realized gains ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------ -------
Total distributions ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------ -------
Net asset value, end of year ($) 14.15 16.87 19.41 21.26 20.78
====== ====== ====== ====== =======
Total return(b) ($) 17.53 24.40 29.93 26.80 8.81
Ratios/supplemental data:
Net assets at end of year ($ thousands) 699 931 1,642 1,718 1,555
Ratio of operating expenses to average net assets (%)* 2.00 2.00 2.00 2.00 2.01
Ratio of net investment income (loss) to average net
assets (%)* 0.08 0.04 (0.19) (0.43) (0.07)
Portfolio turnover rate (%) 47.93 44.44 88.07 81.53 118.91
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.06 0.03 0.03 0.01 0.01
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not not reflect any front-end or contingent deferred sales charges.
Total return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
10
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
---------------------------------------------------------------
Years ended June 30
---------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.48 14.27 17.03 19.66 21.65
------ ------ ------ ------- -------
Net investment income ($)* 0.14 0.17 0.13 0.11 0.17
Net realized and unrealized gain on investments ($) 2.15 3.37 4.62 4.73 1.64
------ ------ ------ ------- -------
Total from investment operations ($) 2.29 3.54 4.75 4.84 1.81
------ ------ ------ ------- -------
Dividends from net investment income ($) (0.17) (0.15) (0.13) (0.11) (0.14)
Distributions from net realized gains ($) (0.33) (0.63) (1.99) (2.74) (2.06)
------ ------ ------ ------- -------
Total distributions ($) (0.50) (0.78) (2.12) (2.85) (2.20)
------ ------ ------ ------- -------
Net asset value, end of year ($) 14.27 17.03 19.66 21.65 21.26
====== ====== ====== ======= =======
Total return(b) (%) 18.83 25.66 31.19 27.90 9.84
Ratios/supplemental data:
Net assets at end of year ($ thousands) 50,503 70,177 83,999 103,046 63,346
Ratio of operating expenses to average net assets (%)* 1.00 1.00 1.00 1.00 1.01
Ratio of net investment income to average net assets (%)* 1.09 1.06 0.77 0.55 0.89
Portfolio turnover rate (%) 47.93 44.44 88.07 81.53 118.91
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.06 0.03 0.03 0.01 0.01
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not 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.
11
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Argo Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Argo Fund
(formerly State Street Research Equity Investment Fund) (a series of State
Street Research Equity Trust, hereafter referred to as the "Trust") at June 30,
1999, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at June 30, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 16, 1999
12
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
State Street Research Argo Fund delivered modest returns for the year. The
total return for Class A shares was 9.61% (does not reflect sales charge) for
the 12 months ended June 30, 1999. The Fund underperformed the Lipper average
growth and income fund which rose 14.48%. It lagged the Standard & Poor's 500
Index, which gained 22.76% for the same period.
During the period, the Fund was hurt by its shift from growth to an emphasis on
large, value-oriented companies. Returns were disappointing from investments in
the insurance and electric utilities sectors. An under-representation in
technology and investment sectors also hurt performance.
However, late in the period, the Fund's investments in cyclical and energy
stocks helped performance.
We believe that the Fund's value emphasis is appropriate given an improving
world economic environment and the attractive valuations represented in the
portfolio. The Fund's defensive posture could be a plus in any economic
environment.
June 30, 1999
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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
The Fund's returns include performance before the creation of share classes. If
this performance reflected the share classes' current 12b-1 fees, the Fund's
returns may have been lower. Class S shares, offered without a sales charge,
are available through certain employee benefit plans and special programs. The
S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is an
unmanaged index of 500 U.S. stocks. The index does not take transaction charges
into consideration. It is not possible to invest directly in the index.
[line charts]
Change in Value of
$10,000 Based on the S&P 500
Compared to Change in Value of $10,000
Invested in the Fund
Class A Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
3.30% 20.68% 14.94%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Argo Fund S&P 500
--------- -------
<S> <C> <C>
6/89 9425 10000
6/90 10894 11645
6/91 10314 12503
6/92 12198 14177
6/93 14682 16106
6/94 14819 16332
6/95 17537 20582
6/96 21979 25930
6/97 28774 34922
6/98 36721 45459
6/99 40248 55806
</TABLE>
Class B(1) Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
3.92% 21.07% 15.14
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Argo Fund S&P 500
--------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11654 11645
6/91 10943 12503
6/92 12942 14177
6/93 15556 16106
6/94 15624 16332
6/95 18389 20582
6/96 22874 25930
6/97 29717 34922
6/98 37643 45459
6/99 40957 55806
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
3.93% 21.07% 15.14%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Argo Fund S&P 500
--------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11654 11645
6/91 10943 12503
6/92 12942 14177
6/93 15566 16106
6/94 15624 16332
6/95 18389 20582
6/96 22874 25930
6/97 29717 34922
6/98 37643 45459
6/99 40961 55806
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
7.83% 21.25% 15.15%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Argo Fund S&P 500
--------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11654 11645
6/91 10943 12503
6/92 12942 14177
6/93 15565 16106
6/94 15635 16332
6/95 18375 20582
6/96 22860 25930
6/97 29701 34922
6/98 37663 45459
6/99 40981 55806
</TABLE>
Class S Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
9.84% 22.44% 15.83%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Argo Fund S&P 500
--------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11654 11645
6/91 10943 12503
6/92 12942 14177
6/93 15578 16106
6/94 15797 16332
6/95 18772 20582
6/96 23589 25930
6/97 30946 34922
6/98 39580 45459
6/99 43475 55806
</TABLE>
[end line chart]
- --------------------------------------------------------------------------------
___ Argo Fund ---S&P 500
- --------------------------------------------------------------------------------
13
<PAGE>
STATE STREET RESEARCH ARGO FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- --------------------------------------------------------------------------------
Fund Information
State Street Research
Argo Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
F. Gardner Jackson, Jr.
Vice President
Thomas P. Moore, Jr.
Vice President
Brian P. O'Dell
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Peter A. Zuger
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Bruce R. Bond
Chairman of the Board,
Chief Executive Officer and
President, PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and
Treasurer, The Pennsylvania
State University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial
Officer, St. Regis Corp.
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and
Director, Hewlett-Packard
Company
Toby Rosenblatt
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
14
<PAGE>
[back cover]
---------------------
State Street Research Argo Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Permit #20
Holliston, MA 01746
---------------------
[logo: STATE STREET RESEARCH
75 YEARS
LASTING VALUES
--------------
LEADING IDEAS]
Questions? Comments?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[logo: State Street Research]
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded by a current State Street Research
Argo Fund prospectus. When used after September 30, 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: (exp0800)SSR-LD AG-023G-0899
<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
ALPHA FUND
---------------------
ANNUAL REPORT
June 30, 1999
-------------
WHAT'S INSIDE
-------------
From the Chairman
American investors have been
handsomely rewarded
Portfolio Manager's Review
Style focus out of favor
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR AWARD:
Dalbar Key Honors
Commitment To:
Investors
1998]
For Excellence
in
Shareholder Service
[logo: State Street Research]
<PAGE>
FROM THE CHAIRMAN
[photo: Ralph Verni]
Dear Shareholder:
For seven years running, and with few interruptions, the United States has
enjoyed a "best of all possible financial worlds" existence. Stocks and bonds
have been strong, inflation and interest rates have fallen, and the economy has
grown at a pace that seemed just right.
Better yet, American workers have reaped the benefits of a healthy economy, and
American investors have been handsomely rewarded. Many have taken their
prosperity to the mall, where retail sales have been strong. However, we may
have been carried away with our recent success. The nation's savings rate has
fallen to -1.2%.
Stocks
Although the U.S. stock market suffered a severe correction last summer, most
segments staged a comeback. In the first quarter of 1999, the Dow Jones
Industrial Average passed a significant milestone, 10,000, and ended the
12-month period just short of 11,000. The S&P 500, a broad measure of stock
market performance, gained 22.76%.(1)
Large-company growth and technology stocks were the strongest performers, led
by Internet stocks. Gains were concentrated in a narrow band of stocks most of
the time. It was a challenge for investors to match the market's returns with
their own portfolios. Finally, the gap between large-company growth stocks and
the rest began to narrow. Performance of small and medium-sized company stocks
improved, and value stocks came back to life.
Bonds
The bond market benefited from the Federal Reserve Board's three quick interest
rate cuts last fall, then struggled under the weight of a robust economy. Even
before the Fed raised the short-term interest rate--a move widely-expected
before it was actually announced on June 30--the yield on the benchmark climbed
back above 6.0%. (Remember, the higher the yield, the worse it is for bonds.)
As a result, U.S. Treasury bonds went from leaders to laggards. High-yield
"junk" bonds, which had been weak, were buoyed by the strong economic news.
International
Hopes for the euro, the new common currency shared by 11 European nations,
helped European markets initially. But the luster was short-lived. Many
European economies, still feeling the effects of weakness in Asian markets,
stumbled in the first half of 1999. Asian emerging markets started to show some
signs of life, while Latin emerging markets remain mired in currency woes.
Japan's stock market delivered strong gains in the first half of 1999,
encouraged by corporate restructurings and signs that Japan's Central Bank is
beginning to help its economy.
Outlook and Opportunities
As investors, you may be pondering your strategy in a market that has produced
both strong gains and extraordinary volatility. Regardless of the environment,
we are confident that our in-depth research can help us uncover good values,
both at home and abroad. As always, we will be diligent in seeking new
investments and in monitoring those we already own. Thank you for your
confidence in State Street Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The index does not take transaction
charges into consideration. It is not possible to invest directly in the index.
(2) -0.91% for Class B(1) shares; -0.80% for Class B shares; -0.78% for Class C
shares; 0.15% 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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
The Fund's returns include performance before the creation of share classes. If
this performance reflected the share classes' current 12b-1 fees, the Fund's
returns may have been lower.
(4) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
(5) The S&P rating is for Class A shares, among 103 mid-capitalization value
funds as of 3/31/99, based on a six month moving average of three years of
absolute and volatility adjusted performance. Select Funds must also demonstrate
an appropriate level of management skill and experience, consistency of
investment process and depth of organization. Select Fund evaluations are not a
recommendation to buy, sell or hold and are based on information available to
Standard & Poor's and may change at any time. Standard & Poor's does not
guarantee the accuracy, adequacy or completeness of this information and is not
responsible for any error or omission in or for results obtained from the use of
such information. Complete and current information regarding terms for the use
of information can be found at www. standardandpoors.com/onfunds.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended June 30, 1999)
- --------------------------------------------------------------------------------
[mountain chart]
Total value of $10,000 invested on June 30, 1989(3)
(Class A shares, at maximum applicable sales charge)
<TABLE>
<S> <C>
6/89 11160
6/90 12441
6/91 11659
6/92 13386
6/93 16298
6/94 17001
6/95 19744
6/96 24169
6/97 30803
6/98 39475
6/99 33325
</TABLE>
[end mountain chart]
Average Annual Total Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since 8/25/86) 10 Years 5 Years 1 Year
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 12.03% 12.79% 16.95% -5.79%
- ----------------------------------------------------------------------
Class B(1) 12.16% 12.98% 17.27% -5.60%
- ----------------------------------------------------------------------
Class B 12.17% 12.99% 17.30% -5.50%
- ----------------------------------------------------------------------
Class C 12.20% 12.99% 17.50% -1.72%
- ----------------------------------------------------------------------
Class S 12.73% 13.68% 18.68% 0.15%
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Alpha Fund: Style focus out of favor
[photo: Bart Geer]
Bart Geer
Portfolio Manager
We spoke with Bart Geer, portfolio manager of State Street Research Alpha Fund,
about the Fund's performance for the year ended June 30, 1999 and his views on
the period ahead.
Q: How did the Fund perform during the fiscal year?
A: It was a disappointing year for the Fund. Class A shares returned -0.04% for
the 12 months ended June 30, 1999 [does not reflect sales charge].2 That was
significantly lower than the Lipper average equity income fund, which returned
11.36%. The Fund also underperformed the Standard & Poor's 500 Stock Index (S&P
500), which gained 22.76% for the same period.(1)
Q: What hurt the Fund's performance?
A: We have positioned the portfolio to emphasize mid-sized value stocks.
Unfortunately, these companies were out of favor with investors during the
period. It was difficult to compete in an environment that was so heavily
dominated during the first part of the period by a narrow group of stocks:
large, brand name growth companies. Then, near the end of the year, when value
stocks scored something of a comeback, the focus was on companies that were
significantly larger than the stocks represented in this portfolio.
On the brighter side, the technology stocks we targeted were strong performers.
We also cut back on the Fund's high-yield bond investments in order to add to
equity investments -- a good move at the right time.
Q: How did you react to the unfavorable environment?
A: With patience. We are confident that the companies we have invested in have
considerable long-term potential. In fact, our top 10 list of holdings has not
changed very much. We thought there was good value in these companies when we
invested in them, and we still think there is good value. Investment styles go
in and out of favor. It's a mistake to try to change your investment strategy
to second-guess the market.
Q: What are some of the companies that have continued to earn your confidence?
A: Mark IV Industries, an auto parts manufacturer, was the Fund's largest
investment at the end of the period. When it had several disappointing quarters
during which profits failed to live up to the company's expectations by a
modest margin, its stock price came down by about 40%. Now, it's come back to
about where it was before the decline. We continue to like the company's
prospects because we think it represents good value. But has it been recognized
in the portfolio's performance? No, it has not.
Ball Corporation, a beverage canning firm, is another example. The company has
continued to improve its operating margins. It is generating free cash and
putting that to work to pay down debt. In fact, the company has actually
surprised Wall Street with higher-than-expected earnings, yet the price has
barely budged. However, we think the company represents a solid opportunity,
and we continue to own it.
Q: Alpha Fund was recently cited by Standard & Poor's as one of the top five
mid-cap value funds. What does that mean?
A. I was very pleased with this award because it recognizes a combination of
performance, risk-adjusted performance and consistency. The criteria were
rigorous, including a personal, in-depth interview during which I was asked to
talk about my investment style.5
Q. What is your outlook?
A: I believe that the portfolio is well-positioned to benefit when investors
broaden their search away from some of the large company growth stocks that
have been bid up to extremely high valuations. It's important for us to stick
with our investment style. We have and we will.
June 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<S> <C> <C>
1 Mark IV Industries Power transfer equipment 5.4%
2 A.C. Nielson Marketing, information analysis 3.9%
3 Ogden Support services to industry 3.9%
4 Harrah's Entertainment Hotel and casino
operations 3.8%
5 Ball Containers 3.8%
6 Williams Companies Energy, telecommunications 3.4%
7 Hollinger International Newspaper publishing 3.3%
8 Valassis Communications Newspaper
promotions 3.3%
9 Silicon Graphics Computer workstations 3.0%
10 Howmet International Turbine engine parts 2.9%
</TABLE>
These securities represent an aggregate of 36.7% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
[bar chart]
Top 5 Equity Industries
(by percentage of net assets)
<TABLE>
<S> <C>
Multi-Sector
Companies 7.2%
Computer
Technology 5.6%
Commercial
Services 5.6%
Electrical Equipment
& Components 5.4%
Casinos/Gambling,
Hotel/Motel 5.3%
Total: 29.1%
</TABLE>
[end bar chart]
Largest Contributors to Performance
(July 1, 1998 through June 30, 1999)
Positive [arrow up]
- -----------------------------------------------------------
Valassis Communications
Strong earnings growth
Lexmark International Group
Strong earnings growth, market share
Williams Companies
Increasing market for telecommunications
Negative [arrow down]
- -----------------------------------------------------------
Exide
Management fired; stock sold
Kennametal
Management missed earnings objectives; stock sold
Cabot
Global slowdown brought results below expectations
2
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 84.8%
Consumer Discretionary 21.5%
Advertising Agencies 3.3%
Valassis Communications Inc.* ................ 291,600 $10,679,850
-----------
Casinos/Gambling, Hotel/Motel 5.3%
GTech Holdings Corp.* ........................ 130,000 3,063,125
Harrah's Entertainment Inc.* ................. 565,800 12,447,600
Mirage Resorts Inc.* ......................... 120,000 2,010,000
Motels of America Inc.*+ ..................... 500 3,375
-----------
17,524,100
-----------
Commercial Services 5.6%
A.C. Nielson Corp.* .......................... 420,000 12,705,000
E.W. Scripps Co. Cl. A ....................... 3,000 142,687
Safety Kleen Corp.* .......................... 300,000 5,437,500
-----------
18,285,187
-----------
Printing & Publishing 3.3%
Hollinger International, Inc. Cl. A* ......... 905,292 10,750,343
-----------
Restaurants 0.0%
Ameriking Inc.* .............................. 1,000 40,000
-----------
Retail 4.0%
Federated Department Stores Inc.* ............ 150,000 7,940,625
U.S.A. Networks Inc.* ........................ 130,000 5,216,250
-----------
13,156,875
-----------
Total Consumer Discretionary ............................... 70,436,355
-----------
Consumer Staples 5.0%
Beverages 0.0%
Seven-Up/RC Bottling Co. of Southern
California*++@ ............................ 8,750 105,000
-----------
Drug & Grocery Store Chains 2.8%
Hannaford Brothers Co. ....................... 90,000 4,815,000
Rite Aid Corp.* .............................. 170,000 4,186,250
-----------
9,001,250
-----------
Foods 1.1%
Aurora Foods Inc.* ........................... 75,000 1,312,500
Keebler Foods Co.* ........................... 50,000 1,518,750
Nabisco Group Holdings Corp. ................. 40,000 782,500
-----------
3,613,750
-----------
Tobacco 1.1%
R.J. Reynolds Tobacco Holdings Inc.* ......... 13,333 420,000
UST Inc. ..................................... 109,700 3,208,725
-----------
3,628,725
-----------
Total Consumer Staples ..................................... 16,348,725
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Financial Services 10.1%
Banks & Savings & Loan 3.4%
Mercantile Bankshares Corp. .................. 90,000 $ 3,183,750
Peoples Heritage Financial Group* ............ 265,000 4,985,312
SouthTrust Corp. ............................. 80,000 3,070,000
-----------
11,239,062
-----------
Insurance 4.2%
Ace Ltd. ..................................... 167,000 4,717,750
Saint Paul Companies, Inc. ................... 115,000 3,658,438
XL Capital Ltd. Cl. A* ....................... 91,935 5,194,327
-----------
13,570,515
-----------
Miscellaneous Financial 2.5%
AMBAC Inc. ................................... 88,300 5,044,138
Financial Security Assurance Co.* ............ 60,886 3,166,072
-----------
8,210,210
-----------
Total Financial Services .................................... 33,019,787
-----------
Health Care 2.5%
Health Care Facilities 0.6%
Quest Diagnostics, Inc.* ..................... 65,000 1,779,375
-----------
Health Care Services 1.9%
Quorum Health Group Inc.* .................... 500,000 6,281,250
-----------
Total Health Care ........................................... 8,060,625
-----------
Integrated Oils 1.1%
Integrated Domestic 1.1%
Unocal Corp. ................................. 90,000 3,566,250
-----------
Total Integrated Oils ....................................... 3,566,250
-----------
Materials & Processing 7.5%
Chemicals 1.8%
Cabot Corp. .................................. 240,000 5,805,000
-----------
Containers & Packaging 0.2%
Owens-Illinois Inc.* ......................... 20,000 653,750
-----------
Diversified Manufacturing 3.8%
Ball Corp. ................................... 293,000 12,379,250
-----------
Fertilizers 0.8%
Mississippi Chemical Corp. ................... 280,000 2,747,500
-----------
Forest Products 0.7%
Boise Cascade Corp. .......................... 55,000 2,358,125
-----------
Steel 0.2%
Harsco Corp.* ................................ 25,000 800,000
-----------
Total Materials & Processing ................................ 24,743,625
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Other 7.2%
Multi-Sector 7.2%
Gencorp Inc. .................................. 355,000 $ 8,963,750
Hillenbrand Industries, Inc. .................. 50,000 2,162,500
Ogden Corp. ................................... 470,000 12,660,625
-----------
Total Other ................................................. 23,786,875
-----------
Other Energy 3.4%
Gas Pipelines 3.4%
Williams Companies Inc. ....................... 265,000 11,279,062
-----------
Total Other Energy .......................................... 11,279,062
-----------
Producer Durables 9.5%
Aerospace 1.2%
Cordant Technologies Inc. ..................... 90,000 4,066,875
-----------
Electrical Equipment & Components 5.4%
Mark IV Industries Inc. ....................... 835,095 17,641,382
-----------
Machinery 2.9%
Howmet International Inc.* .................... 550,000 9,453,125
-----------
Total Producer Durables ..................................... 31,161,382
-----------
Technology 8.9%
Communications Technology 0.2%
Concentric Network Corp. ...................... 19,022 756,125
-----------
Computer Software 0.5%
Cadence Design Systems Inc. * ................. 125,000 1,593,750
-----------
Computer Technology 5.6%
Silicon Graphics Inc.* ........................ 600,000 9,825,000
Unisys Corp. .................................. 222,700 8,671,381
-----------
18,496,381
-----------
Electronics 0.9%
Coltec Industries, Inc.* ...................... 130,000 2,819,375
-----------
Electronics: Semi-Conductors/Components 1.7%
Analog Devices Inc.* .......................... 55,000 2,760,312
Cypress Semiconductor Corp.* .................. 170,000 2,805,000
-----------
5,565,312
-----------
Total Technology ............................................ 29,230,943
-----------
Utilities 5.9%
Electrical 1.7%
OGE Energy Corp. .............................. 95,000 2,256,250
Pinnacle West Capital Corp. ................... 80,000 3,220,000
-----------
5,476,250
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Gas Distribution 0.3%
UGI Corp. ..................................... 50,000 $ 1,009,375
------------
Telecommunications 3.9%
Celcaribe SA*+ ................................ 69,918 139,836
Pagemart Nationwide Inc.*+ .................... 1,750 13,125
RSL Communications Ltd. Cl. A* ................ 320,000 6,180,000
Viatel Inc.* .................................. 41,572 2,333,229
Winstar Communications Inc. ................... 86,647 4,224,041
------------
12,890,231
------------
Total Utilities ............................................. 19,375,856
------------
Non-US Equities 2.2%
Lagardere SCA* ................................ 190,000 7,070,602
------------
Total Non-US Equities ........................................ 7,070,602
------------
Total Common Stocks (Cost $213,020,917) ...................... 278,080,087
------------
CONVERTIBLE PREFERRED STOCKS & OTHER 2.6%
Advanced Radio Telecom Corp. Wts.* ............ 3,750 66,067
Clark U.S.A. Inc. Sr. Exch. Pfd.# ............. 590 398,250
Clearnet Communications Inc. Wts.* ............ 3,300 13,200
Cluett American Corp. Sr. Exch. Pfd.# ......... 20,300 1,319,500
Econophone Inc. Wts.*+ ........................ 1,500 22,500
Golden Ocean Group Ltd. Wts.* ................. 2,000 500
Granite Broadcasting Corp. Cv. Exch. Pfd. ..... 10,000 377,500
Loral Orion Network Systems Inc. Wts.* ........ 1,250 7,938
Nextel Communications Inc.
Series D Exch. Pfd.# ....................... 77 80,850
North Atlantic Trading Inc. Sr. Pfd.# ......... 62,599 1,377,178
NS Group Inc. Wts.* ........................... 250 22,875
Nucentrix Broadband Networks Inc. Wts.* ....... 1,500 15
Pagemart Inc. Wts.*+ .......................... 3,450 10,350
Primus Telecommunications Group Wts.* ......... 500 10,000
Real Time Data Inc. Series B Pfd.*@++ ......... 4,264 1,066,000
Real Time Data Inc. Series C Pfd.*@++ ......... 6,136 1,361,149
RSL Communications Ltd. Wts.*+ ................ 500 41,000
Startec Global Communications Wts.*+ .......... 1,150 1,150
Winstar Communications Cv. Pfd.* .............. 43,736 2,307,074
Wireless One Inc. Wts.* ....................... 1,500 15
------------
Total Convertible Preferred Stocks & Other
(Cost $8,978,032) .......................................... 8,483,111
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS 9.2%
Advanced Radio Telecom Corp.
Sr. Note, 14.00% ........................................... $ 680,000 2/15/2007 $ 618,800
Ametek Inc. Sr. Note, 7.20% .................................. 500,000 7/15/2008 467,305
Archibald Candy Corp. Sr. Sec.
Note, 10.25% ............................................... 250,000 7/01/2004 251,250
Ball Corp. Sr. Sub. Note, 8.25% .............................. 1,000,000 8/01/2008 975,000
Celcaribe SA Sr. Sec. Note,
13.50% ..................................................... 430,000 3/15/2004 331,100
Cellnet Data Systems Inc. Sr.
Note Series B, 0.00% to
9/30/2002, 14.00% from
10/1/2002 to maturity ...................................... 2,000,000 10/01/2007 885,000
Drypers Corp. Sr. Note Series B,
10.25% ..................................................... 1,200,000 6/15/2007 960,000
Econophone Inc. Sr. Note,
13.50% ..................................................... 1,750,000 7/15/2007 1,868,125
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 675,000
Envirosource Inc. Note, 9.75% ................................ 1,250,000 6/15/2003 787,500
GNI Group Inc. Sr. Note,
10.875% .................................................... 500,000 7/15/2005 325,000
Golden Ocean Group Ltd.
Sr. Note, 10.00% ........................................... 4,000,000 8/31/2001 560,000
Great Central Mines Ltd.
Sr. Note, 8.875% ........................................... 750,000 4/01/2008 714,375
Intertek Finance PLC Series B
Sr. Sub. Note, 10.25% ...................................... 250,000 11/01/2006 242,500
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 143,750
J. Crew Operating Corp. Sr. Sub.
Note, 10.375% .............................................. 1,000,000 10/15/2007 1,002,500
J. H. Heafner Inc. Sr. Note,
10.00%+ .................................................... 750,000 5/15/2008 759,375
J.B. Poindexter Inc. Sr. Note,
12.50% ..................................................... 1,500,000 5/15/2004 1,440,000
Loehmanns Inc. Sr. Note,
11.875%##................................................... 500,000 5/15/2003 105,000
NE Restaurant Inc. Sr. Note,
10.75% ..................................................... 1,000,000 7/15/2008 915,000
North Atlantic Trading Inc. Sr.
Note, 11.00% ............................................... 1,000,000 6/15/2004 1,025,000
Orion Network Systems Inc. Sr.
Note, 11.25% ............................................... 500,000 1/15/2007 440,000
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Owens-Illinois Inc. Sr. Deb.,
7.50% ...................................................... $ 500,000 5/15/2010 $ 475,565
Pagemart Nationwide Inc. Sr.
Note, 0.00% to 1/31/2000,
15.00% from 2/1/2000 to
maturity ................................................... 825,000 2/01/2005 697,125
Pagemart Wireless Inc. Sr. Sub.
Note, 0.00% to 1/31/2003,
11.25% from 2/1/2003 to
maturity ................................................... 2,250,000 2/01/2008 945,000
Phase Metrics Inc. Sr. Note,
10.75% ..................................................... 1,500,000 2/01/2005 900,000
Rose Hills Co. Sr. Sub. Note,
9.50% ...................................................... 1,500,000 11/15/2004 1,350,000
RSL Communications Ltd. Sr.
Note, 12.25% ............................................... 1,000,000 11/15/2006 1,045,000
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 529,645
Spanish Broadcasting Systems
Inc. Sr. Note, 12.50% ...................................... 500,000 6/15/2002 557,500
Startec Global Communications
Sr. Note, 12.00% ........................................... 1,150,000 5/15/2008 1,000,500
Unilab Corp. Sr. Note, 11.00% ................................ 750,000 4/01/2006 821,250
Viatel Inc. Sr. Note, 0.00% to
4/14/2003, 12.50% from
4/15/2003 to maturity ...................................... 1,000,000 4/15/2008 640,000
Viatel Inc. Sr. Note, 11.25% ................................. 1,750,000 4/15/2008 1,776,250
Westpoint Stevens Inc. Sr. Note,
7.875% ..................................................... 750,000 6/15/2008 720,000
Winstar Communications Inc. Sr.
Exch. Note, 14.50% ......................................... 1,250,000 10/15/2005 1,800,000
Winstar Equipment Corp. Sr.
Sec. Exch. Note, 12.50% .................................... 1,000,000 3/15/2004 1,045,000
----------
Total Non-Convertible Bonds (Cost $34,403,084)....................................................... 30,101,315
----------
CONVERTIBLE BONDS 1.0%
Crown Resources Corp. Cv. Sub.
Deb., 5.75% ................................................ 2,000,000 8/27/2001 1,240,000
Networks Associates Inc. Cv.
Sub. Deb., 0.00% ........................................... 6,800,000 2/13/2018 2,050,676
----------
Total Convertible Bonds (Cost $3,663,645) ........................................................... 3,290,676
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 1.0%
American Express Credit Corp.,
4.95% ....................... $ 226,000 7/01/1999 $ 226,000
American Express Credit Corp.,
5.25% ....................... 1,894,000 7/01/1999 1,894,000
Ford Motor Credit Co., 5.25% .. 134,000 7/07/1999 134,000
Ford Motor Credit Co., 5.28% .. 1,091,000 7/07/1999 1,091,000
------------
Total Commercial Paper (Cost $3,345,000) ............. 3,345,000
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS 6.9%
State Street Navigator Securities Lending
Prime Portfolio ............................. 22,774,631 22,774,631
------------
Total Short-Term Investments (Cost $22,774,631) ........... 22,774,631
------------
Total Investments (Cost $286,185,309)--105.5% ............. 346,074,820
Other Assets, Less Liabilities--(5.5%) .................... (18,050,421)
------------
Net Assets--100.0% ........................................ $328,024,399
============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
At June 30, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $286,938,970 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost ................................... $ 71,581,149
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ...................................... (12,445,299)
-------------
$ 59,135,850
=============
</TABLE>
- --------------------------------------------------------------------------------
* Nonincome-producing securities.
# Payments of income may be made in cash or in the form of additional
securities.
## Security is in default.
@ Security valued under consistently applied procedures established by the
Trustees.
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule
144A securities owned at June 30, 1999 was $998,009 and $990,711 (0.30% of
net assets), respectively.
++ Security restricted as to public resale. At June 30, 1999, there were no
outstanding unrestricted securities of the same class as those held. The
total cost and market value of restricted securities owned at June 30,
1999 were $3,090,025 and $2,532,149 (0.77% of net assets), respectively.
Forward currency exchange contracts outstanding at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Total Value Price (Depreciation) Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy Canadian dollars, Sell U.S. dollars 415,000 CAD 0.68526 CAD $ (2,456) 7/23/99
Sell Canadian dollars, Buy U.S. dollars 415,000 CAD 0.67420 CAD (2,132) 7/23/99
Sell Euro, Buy U.S. dollars 6,155,807 EUR 1.06420 EUR 191,041 7/30/99
--------
$186,453
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $286,185,309) (Note 1) ............. $346,074,820
Receivable for securities sold ................................. 8,680,568
Dividends and interest receivable .............................. 1,676,200
Receivable for fund shares sold ................................ 334,367
Receivable for open forward contracts .......................... 191,041
Receivable from Distributor (Note 3) ........................... 743
Other assets ................................................... 81,613
-------------
357,039,352
Liabilities
Payable for collateral received on securities loaned ........... 22,774,631
Payable for fund shares redeemed ............................... 3,228,775
Payable to custodian ........................................... 2,131,527
Accrued transfer agent and shareholder services
(Note 2) ..................................................... 188,804
Accrued management fee (Note 2) ................................ 187,077
Accrued distribution and service fees (Note 5) ................. 175,447
Payable for securities purchased ............................... 36,660
Accrued trustees' fees (Note 2) ................................ 26,745
Payable for open forward contracts ............................. 4,588
Other accrued expenses ......................................... 260,699
-------------
29,014,953
-------------
Net Assets $328,024,399
=============
Net Assets consist of:
Undistributed net investment income ........................... $ 2,702,099
Unrealized appreciation of investments ........................ 59,889,511
Unrealized appreciation of foreign currency and
forward contracts ........................................... 183,904
Accumulated net realized loss ................................. (11,540,158)
Paid-in capital ............................................... 276,789,043
-------------
$328,024,399
=============
Net Asset Value and redemption price per share of
Class A shares ($114,235,433 [divided by] 7,230,680 shares) .. $15.80
======
Maximum Offering Price per share of Class A shares
($15.80 [divided by] .9425) .................................. $16.76
======
Net Asset Value and offering price per share of
Class B(1) shares ($7,453,951 [divided by] 474,717 shares)* .. $15.70
======
Net Asset Value and offering price per share of
Class B shares ($141,558,577 [divided by] 8,996,120 shares)* $15.74
======
Net Asset Value and offering price per share of
Class C shares ($24,026,741 [divided by] 1,529,646 shares)* .. $15.71
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($40,749,697 [divided by] 2,580,989 shares) .................. $15.79
======
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended June 30, 1999
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $130,827 .................. $ 6,435,576
Interest (Note 1) ............................................ 6,138,176
-----------
12,573,752
Expenses
Management fee (Note 2) ...................................... 2,332,465
Transfer agent and shareholder services (Note 2) ............. 920,152
Custodian fee ................................................ 201,020
Reports to shareholders ...................................... 55,903
Audit fee .................................................... 31,141
Trustees' fees (Note 2) ...................................... 30,920
Registration fees ............................................ 22,767
Legal fees ................................................... 19,369
Service fee-Class A (Note 5) ................................. 284,079
Distribution and service fees-Class B(1) (Note 5) ............ 19,177
Distribution and service fees-Class B (Note 5) ............... 1,543,626
Distribution and service fees-Class C (Note 5) ............... 257,936
Miscellaneous ................................................ 17,044
-----------
5,735,599
Fees paid indirectly (Note 2) ................................ (29,131)
Expenses borne by the Distributor (Note 3) ................... (161,385)
-----------
5,545,083
-----------
Net investment income ........................................ 7,028,669
-----------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency and Forward Contracts
Net realized loss on investments (Notes 1 and 4) ............. (11,352,988)
Net realized gain on foreign currency and forward
contracts (Note 1) ......................................... 561,583
-----------
Total net realized loss .................................... (10,791,405)
-----------
Net unrealized depreciation of investments ................... (6,030,896)
Net unrealized appreciation of foreign currency and
forward contracts .......................................... 188,178
-----------
Total net unrealized depreciation .......................... (5,842,718)
-----------
Net loss on investments, foreign currency and
forward contracts .......................................... (16,634,123)
-----------
Net decrease in net assets resulting from operations ......... $(9,605,454)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended June 30
----------------------------------
1998 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income ............... $ 5,365,762 $ 7,028,669
Net realized gain (loss) on
investments, foreign currency
and forward contracts ............. 30,071,297 (10,791,405)
Net unrealized appreciation
(depreciation) of investments,
foreign currency and forward
contracts ......................... 32,621,205 (5,842,718)
------------ ------------
Net increase (decrease) resulting
from operations ................... 68,058,264 (9,605,454)
------------ ------------
Dividends from net investment income:
Class A ............................ (1,799,241) (2,160,169)
Class B(1) ......................... -- (38,185)
Class B ............................ (1,117,871) (1,709,386)
Class C ............................ (180,265) (300,621)
Class S ............................ (1,445,033) (1,319,451)
------------ ------------
(4,542,410) (5,527,812)
------------ ------------
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 (decrease) from
fund share transactions
(Note 6) .......................... 167,523,185 (57,163,257)
------------ ------------
Total increase (decrease) in net
assets ............................ 204,240,724 (88,335,119)
Net Assets
Beginning of year ................... 212,118,794 416,359,518
------------ ------------
End of year (including
undistributed net investment
income of $709,450 and
$2,702,099, respectively) ......... $416,359,518 $328,024,399
============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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 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 five 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. On January 1,
1999, the Fund began offering Class B(1) shares and continued offering Class B
shares but only to current shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of State
Street Research funds. Class B(1) and Class B pay annual distribution and
service fees of 1.00% and both classes automatically convert into Class A
shares (which pay lower ongoing expenses) at the end of eight years. Class B(1)
shares are subject to a contingent deferred sales charge on certain redemptions
made within six years of purchase. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase. Class C shares are subject to a contingent deferred sales charge of
1.00% on any shares redeemed within one year of 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.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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, were valued at
their fair value as determined in accordance with established methods
consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. Discount on debt obligations is amortized under the effective
yield method. Certain preferred securities held by the Fund pay dividends in
the form of additional securities (payment-in-kind securities). Dividend income
on payment-in-kind preferred securities is recorded at the market value of
securities received. Differences between the market value of securities
received and the corresponding amounts of income accrued are recorded as
adjustments to income. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations. For the year ended June 30, 1999, the Fund has designated as
long-term $9,949,448 of the distributions from net realized gains.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. At June 30, 1999, the Fund had a capital
loss carryforward of $10,786,497 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on June 30,
2007.
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 June 30, 1999, the value of the securities loaned and the value of
collateral were $21,894,793 and $22,774,631, respectively. During the year
ended June 30, 1999, income from securities lending amounted to $121,479 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
9
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 2 (cont'd)
the year ended June 30, 1999, the fees pursuant to such agreement amounted to
$2,332,465.
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 year ended June 30,
1999, the amount of such shareholder servicing and account maintenance expenses
was $488,101.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the year ended June 30, 1999, the Fund's
transfer agent fees were reduced by $29,131 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$30,920 during the year ended June 30, 1999.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund.
During the year ended June 30, 1999, the amount of such expenses assumed by the
Distributor and its affiliates was $161,385.
Note 4
For the year ended June 30, 1999, purchases and sales of securities, exclusive
of short-term obligations, aggregated $195,613,008 and $263,773,307,
respectively.
Note 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal services and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the year ended June 30, 1999, fees
pursuant to such plans amounted to $284,079, $1,543,626 and $257,936 for Class
A, Class B and Class C shares, respectively. For the period January 1, 1999
(commencement of share class) to June 30, 1999, fees pursuant to such plans
amounted to $19,177 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $55,547 and $206,302, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1999, and that MetLife Securities, Inc.
earned commissions aggregating $526,134 on sales of Class B shares, and that
the Distributor collected contingent deferred sales charges of $378,752 and
$10,287 on redemptions of Class B and Class C shares, respectively, during the
same period. MetLife Securities, Inc. earned commissions aggregating $60,582 on
sales and the Distributor collected contingent deferred sales charges
aggregating $1,236 on redemptions of Class B(1) shares during the period
January 1, 1999 (commencement of share class) to June 30, 1999.
10
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
Years ended June 30
--------------------------------
1998
--------------------------------
Class A Shares Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .................................................... 2,949,813 $ 47,114,911
Issued upon reinvestment of:
Distributions from net realized gains ......................... 553,080 8,327,638
Dividends from net investment income .......................... 102,726 1,649,472
Shares repurchased ............................................. (925,964) (14,870,574)
--------- --------------
Net increase (decrease) ........................................ 2,679,655 $ 42,221,447
========= ==============
Class B(1)* Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... -- $ --
Issued upon reinvestment of dividend from net investment income -- --
Shares repurchased ............................................. -- --
--------- --------------
Net increase ................................................... -- $ --
========= ==============
Class B Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 5,798,007 $ 92,300,816
Issued upon reinvestment of:
Distributions from net realized gains ......................... 616,819 9,237,865
Dividends from net investment income .......................... 62,427 894,047
Shares repurchased ............................................. (892,024) (14,277,520)
--------- --------------
Net increase (decrease) ........................................ 5,585,229 $ 88,155,208
========= ==============
Class C Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 1,104,564 $ 17,816,137
Issued upon reinvestment of:
Distributions from net realized gains ......................... 77,469 1,158,998
Dividends from net investment income .......................... 10,006 160,435
Shares repurchased ............................................. (237,675) (3,760,763)
--------- --------------
Net increase (decrease) ........................................ 954,364 $ 15,374,807
========= ==============
Class S Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 2,483,912 $ 40,481,661
Issued upon reinvestment of:
Distributions from net realized gains ......................... 447,035 6,734,398
Dividends from net investment income .......................... 90,030 1,443,084
Shares repurchased ............................................. (1,702,870) (26,887,420)
---------- --------------
Net increase (decrease) ........................................ 1,318,107 $ 21,771,723
========== ==============
</TABLE>
<TABLE>
<CAPTION>
Years ended June 30
--------------------------------
1999
--------------------------------
Class A Shares Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .................................................... 1,872,980 $ 27,773,497
Issued upon reinvestment of:
Distributions from net realized gains ......................... 312,465 4,596,362
Dividends from net investment income .......................... 138,693 2,006,101
Shares repurchased ............................................. (2,556,541) (37,261,318)
---------- -------------
Net increase (decrease) ........................................ (232,403) $ (2,885,358)
========== =============
Class B(1)* Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 561,224 $ 8,434,485
Issued upon reinvestment of dividend from net investment income 2,256 34,508
Shares repurchased ............................................. (88,763) (1,366,884)
---------- -------------
Net increase ................................................... 474,717 $ 7,102,109
========== =============
Class B Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 2,188,749 $ 32,437,372
Issued upon reinvestment of:
Distributions from net realized gains ......................... 438,063 6,408,860
Dividends from net investment income .......................... 116,587 1,643,800
Shares repurchased ............................................. (4,192,753) (60,996,254)
---------- -------------
Net increase (decrease) ........................................ (1,449,354) $ (20,506,222)
========== =============
Class C Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 832,769 $ 12,348,336
Issued upon reinvestment of:
Distributions from net realized gains ......................... 70,468 1,028,840
Dividends from net investment income .......................... 19,057 273,103
Shares repurchased ............................................. (995,360) (14,475,298)
---------- -------------
Net increase (decrease) ........................................ (73,066) $ (825,019)
========== =============
Class S Shares Amount
- -------------------------------------------------------------------------------------------------
Shares sold .................................................... 1,755,098 $ 25,878,565
Issued upon reinvestment of:
Distributions from net realized gains ......................... 218,567 3,215,116
Dividends from net investment income .......................... 92,102 1,318,800
Shares repurchased ............................................. (4,804,307) (70,461,248)
---------- -------------
Net increase (decrease) ........................................ (2,738,540) $ (40,048,767)
========== =============
</TABLE>
- --------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to June 30, 1999.
11
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Years ended June 30
---------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.87 11.70 13.85 14.86 16.80
------ ------- ------ ------ ------
Net investment income ($)* 0.28 0.23 0.33 0.33 0.34
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 1.37 2.36 2.90 3.56 (0.43)
------ ------- ------ ------ ------
Total from investment operations ($) 1.65 2.59 3.23 3.89 (0.09)
------ ------- ------ ------ ------
Dividends from net investment income ($) (0.28) (0.28) (0.28) (0.28) (0.28)
Distributions from net realized gains ($) (0.54) (0.16) (1.94) (1.67) (0.63)
------ ------- ------ ------ ------
Total distributions ($) (0.82) (0.44) (2.22) (1.95) (0.91)
------ ------- ------ ------ ------
Net asset value, end of year ($) 11.70 13.85 14.86 16.80 15.80
====== ======= ====== ====== ======
Total return(b)(%) 16.12 22.41 27.45 28.15 (0.04)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 37,327 44,464 71,087 125,402 114,235
Ratio of operating expenses to average net assets (%)* 1.42 1.25 1.25 1.24 1.22
Ratio of net investment income to average net assets (%)* 2.55 1.78 2.43 2.06 2.29
Portfolio turnover rate (%) 67.50 111.13 63.33 52.99 56.04
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.05 0.03 0.02 0.00 0.01
</TABLE>
<TABLE>
<CAPTION>
Class B(1)
--------------------
Period ended
June 30, 1999(a)(c)
- ----------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ($) 14.94
------
Net investment income ($)* 0.11
Net realized and unrealized gain on investments, foreign
currency and forward contracts ($) 0.75
------
Total from investment operations ($) 0.86
------
Dividend from net investment income ($) (0.10)
------
Total distributions ($) (0.10)
------
Net asset value, end of period ($) 15.70
======
Total return(b)(%) 5.81(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 7,454
Ratio of operating expenses to average net assets (%)* 1.86(e)
Ratio of net investment income to average net assets (%)* 1.46(e)
Portfolio turnover rate (%) 56.04
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.00
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
12
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
Years ended June 30
---------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.86 11.68 13.82 14.81 16.74
------ ------- ------ ------- -------
Net investment income ($)* 0.21 0.13 0.22 0.21 0.23
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 1.38 2.36 2.89 3.55 (0.43)
------ ------- ------ ------- -------
Total from investment operations ($) 1.59 2.49 3.11 3.76 (0.20)
------ ------- ------ ------- -------
Dividends from net investment income ($) (0.23) (0.19) (0.18) (0.16) (0.17)
Distributions from net realized gains ($) (0.54) (0.16) (1.94) (1.67) (0.63)
------ ------- ------ ------- -------
Total distributions ($) (0.77) (0.35) (2.12) (1.83) (0.80)
------ ------- ------ ------- -------
Net asset value, end of year ($) 11.68 13.82 14.81 16.74 15.74
====== ======= ====== ======= =======
Total return(b)(%) 15.43 21.60 26.45 27.23 (0.80)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 16,130 25,543 71,986 174,835 141,559
Ratio of operating expenses to average net assets (%)* 2.00 2.00 2.00 1.99 1.97
Ratio of net investment income to average net assets (%)* 1.95 1.05 1.65 1.32 1.54
Portfolio turnover rate (%) 67.50 111.13 63.33 52.99 56.04
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.05 0.03 0.02 0.00 0.01
</TABLE>
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------
Years ended June 30
-----------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.86 11.67 13.82 14.79 16.71
------ ------- ------ ------- ------
Net investment income ($)* 0.22 0.13 0.21 0.21 0.23
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 1.36 2.37 2.90 3.54 (0.43)
------ ------- ------ ------- ------
Total from investment operations ($) 1.58 2.50 3.11 3.75 (0.20)
------ ------- ------ ------- ------
Dividends from net investment income ($) (0.23) (0.19) (0.20) (0.16) (0.17)
Distributions from realized gains ($) (0.54) (0.16) (1.94) (1.67) (0.63)
------ ------- ------ ------- ------
Total distributions ($) (0.77) (0.35) (2.14) (1.83) (0.80)
------ ------- ------ ------- ------
Net asset value, end of year ($) 11.67 13.82 14.79 16.71 15.71
====== ======= ====== ======= ======
Total return(b)(%) 15.33 21.68 26.42 27.23 (0.78)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 1,366 1,386 9,592 26,777 24,027
Ratio of operating expenses to average net assets (%)* 2.00 2.00 2.00 1.99 1.97
Ratio of net investment income to average net assets (%)* 1.96 1.03 1.59 1.32 1.54
Portfolio turnover rate (%) 67.50 111.13 63.33 52.99 56.04
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.05 0.03 0.01 0.00 0.01
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
13
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
--------------------------------------------------------------
Years ended June 30
--------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.86 11.70 13.85 14.86 16.80
------ ------- ------ ------ ------
Net investment income ($)* 0.32 0.26 0.36 0.37 0.38
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 1.39 2.36 2.90 3.56 (0.44)
------ ------- ------ ------ ------
Total from investment operations ($) 1.71 2.62 3.26 3.93 (0.06)
------ ------- ------ ------ ------
Dividends from net investment income ($) (0.33) (0.31) (0.31) (0.32) (0.32)
Distributions from net realized gains ($) (0.54) (0.16) (1.94) (1.67) (0.63)
------ ------- ------ ------ ------
Total distributions ($) (0.87) (0.47) (2.25) (1.99) (0.95)
------ ------- ------ ------ ------
Net asset value, end of year ($) 11.70 13.85 14.86 16.80 15.79
====== ======= ====== ====== ======
Total return(b)(%) 16.64 22.82 27.75 28.45 0.15
Ratios/supplemental data:
Net assets at end of year ($ thousands) 34,827 39,298 59,453 89,345 40,750
Ratio of operating expenses to average net assets (%)* 1.00 1.00 1.00 0.99 0.97
Ratio of net investment income to average net assets (%)* 2.93 2.03 2.68 2.30 2.56
Portfolio turnover rate (%) 67.50 111.13 63.33 52.99 56.04
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.05 0.03 0.02 0.00 0.01
</TABLE>
- --------------------------------------------------------------------------------
(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.
14
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Alpha Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Alpha Fund
(a series of State Street Research Equity Trust, hereafter referred to as the
"Trust") at June 30, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at June 30, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 16, 1999
15
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
State Street Research Alpha Fund had a disappointing year. The total return for
the Fund's Class A shares was -0.04% (does not reflect sales charge) for the 12
months ended June 30, 1999. The Fund underperformed the Lipper average equity
income fund, which rose 11.36%, and the Standard & Poor's 500 Index, which
gained 22.76% for the same period.
The Fund was hurt by the market's preference for large-cap growth stocks during
most of the period. However, the portfolio's emphasis on medium-sized "value"
stocks put the Fund in a good position to benefit if investment sentiment turns
in the period ahead.
Stock selection among technology stocks was rewarded. The Fund also benefited
from a timely cut back in high-yield bonds and a redirection of proceeds to
equities. However, depressed valuations in the mid-cap value sector coupled
with the Fund's underweight in energy stocks, which made a strong comeback
early in 1999, more than offset any positive benefits of those decisions.
We remain confident in the companies we've selected and we will remain
consistent in our investment style. We continue to believe that the portfolio
has the potential to provide attractive risk-adjusted returns over the
long-term.
June 30, 1999
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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
The Fund's returns include performance before the creation of share classes. If
this performance reflected the share classes' current 12b-1 fees, the Fund's
returns may have been lower. Class S shares, offered without a sales charge,
are available through certain employee benefit plans and special programs. The
S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is an
unmanaged index of 500 U.S. stocks. The index does not take transaction charges
into consideration. It is not possible to invest directly in the index.
[line charts]
Change in Value of
$10,000 Based on the S&P 500
Compared to Change in Value of $10,000
Invested in the Fund
Class A Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
-5.79% 16.95% 12.79%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Alpha Fund S&P 500
---------- -------
<S> <C> <C>
6/89 9425 10000
6/90 10506 11645
6/91 9847 12503
6/92 11305 14177
6/93 13764 16106
6/94 14358 16332
6/95 16674 20582
6/96 20411 25930
6/97 26014 34922
6/98 33338 45459
6/99 33325 55806
</TABLE>
Class B(1) Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
-5.60% 17.27% 12.98%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Alpha Fund S&P 500
---------- -------
<S> <C> <C>
6/98 10000 10000
6/90 11149 11645
6/91 10443 12503
6/92 11991 14177
6/93 14586 16106
6/94 15139 16332
6/95 17474 20582
6/96 21248 25930
6/97 26869 34922
6/98 34187 45459
6/99 33877 55806
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
-5.50% 17.30% 12.99%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Alpha Fund S&P 500
---------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11149 11645
6/91 10443 12503
6/92 11991 14177
6/93 14586 16106
6/94 15139 16332
6/95 17474 20582
6/96 21248 25930
6/97 26869 34922
6/98 34187 45459
6/99 33914 55806
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
-1.72% 17.50% 12.99%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Alpha Fund S&P 500
---------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11149 11645
6/91 10443 12503
6/92 11991 14177
6/93 14586 16106
6/94 15137 16332
6/95 17457 20582
6/96 21243 25903
6/97 26856 34922
6/98 34171 45459
6/99 33903 55806
</TABLE>
Class S Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year 5 Years 10 Years
-----------------------------
<S> <C> <C>
0.15% 18.68% 13.68%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Alpha Fund S&P 500
---------- -------
<S> <C> <C>
6/89 10000 10000
6/90 11149 11645
6/91 10443 12503
6/92 11991 14177
6/93 14600 16106
6/94 15305 16332
6/95 17852 20582
6/96 21926 25930
6/97 28010 34922
6/98 35980 45459
6/99 36035 55806
</TABLE>
[end line chart]
- --------------------------------------------------------------------------------
___ Alpha Fund --- S&P 500
- --------------------------------------------------------------------------------
16
<PAGE>
STATE STREET RESEARCH ALPHA FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- --------------------------------------------------------------------------------
Fund Information
State Street Research
Alpha Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
F. Gardner Jackson, Jr.
Vice President
Thomas P. Moore, Jr.
Vice President
Brian O'Dell
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Peter A. Zuger
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Bruce R. Bond
Chairman of the Board,
Chief Executive Officer and
President, PictureTel Corporation
Steve A. Garban
Former Senior Vice
President for Finance and
Operations and Treasurer, The
Pennsylvania State University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial Officer,
St. Regis Corp.
Dean O. Morton
Former Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Toby Rosenblatt
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
17
<PAGE>
[back cover]
--------------
State Street Research Alpha Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Permit #6
Hartford, CT
--------------
[logo: STATE STREET RESEARCH
75 YEARS
LASTING VALUES
--------------
LEADING IDEAS]
Questions? Comments?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[logo: State Street Research]
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded by a current State Street Research
Alpha Fund prospectus. When used after September 30, 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: (exp0800)SSR-LD AL-024G-0899
<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
GLOBAL RESOURCES FUND
---------------------
ANNUAL REPORT
June 30, 1999
-------------
WHAT'S INSIDE
-------------
From the Chairman
American investors have been
handsomely rewarded
Portfolio Manager's Review
A challenging year
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR AWARD:
Dalbar Key Honors
Commitment To:
Investors
1998]
For Excellence
in
Shareholder Service
[logo: State Street Research]
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF RALPH F. VERNI]
Dear Shareholder:
For seven years running, and with few interruptions, the United States has
enjoyed a "best of all possible financial worlds" existence. Stocks and bonds
have been strong, inflation and interest rates have fallen, and the economy has
grown at a pace that seemed just right.
Better yet, American workers have reaped the benefits of a healthy economy, and
American investors have been handsomely rewarded. Many have taken their
prosperity to the mall, where retail sales have been strong. However, we may
have been carried away with our recent success. The nation's savings rate has
fallen to -1.2%.
Stocks
Although the U.S. stock market suffered a severe correction last summer, most
segments staged a comeback. In the first quarter of 1999, the Dow Jones
Industrial Average passed a significant milestone, 10,000, and ended the
12-month period just short of 11,000. The S&P 500, a broad measure of stock
market performance, gained 22.76%.(1)
Large-company growth and technology stocks were the strongest performers, led
by Internet stocks. Gains were concentrated in a narrow band of stocks most of
the time. It was a challenge for investors to match the market's returns with
their own portfolios. Finally, the gap between large-company growth stocks and
the rest began to narrow. Performance of small and medium-sized company stocks
improved, and value stocks came back to life.
Bonds
The bond market benefited from the Federal Reserve Board's three quick interest
rate cuts last fall, then struggled under the weight of a robust economy. Even
before the Fed raised the short-term interest rate--a move widely-expected
before it was actually announced on June 30--the yield on the benchmark climbed
back above 6.0%. (Remember, the higher the yield, the worse it is for bonds.)
As a result, U.S. Treasury bonds went from leaders to laggards. High-yield
"junk" bonds, which had been weak, were buoyed by the strong economic news.
International
Hopes for the euro, the new common currency shared by 11 European nations,
helped European markets initially. But the luster was short-lived. Many
European economies, still feeling the effects of weakness in Asian markets,
stumbled in the first half of 1999. Asian emerging markets started to show some
signs of life, while Latin emerging markets remain mired in currency woes.
Japan's stock market delivered strong gains in the first half of 1999,
encouraged by corporate restructurings and signs that Japan's Central Bank is
beginning to help its economy.
Outlook and Opportunities
As investors, you may be pondering your strategy in a market that has produced
both strong gains and extraordinary volatility. Regardless of the environment,
we are confident that our in-depth research can help us uncover good values,
both at home and abroad. As always, we will be diligent in seeking new
investments and in monitoring those we already own. Thank you for your
confidence in State Street Research.
Sincerely,
/S/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The index does not take transaction
charges into consideration. It is not possible to invest directly in the index.
(2) -25.23% for Class B(1) shares; -25.10 for Class B shares; -25.17% for Class
C shares; -24.33% 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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
The Fund's returns include performance before the creation of share classes. If
this performance reflected the share classes' current 12b-1 fees, the Fund's
returns may have been lower.
(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 June 30, 1999)
- --------------------------------------------------------------------------------
[start mountain chart]
Total value of $10,000 invested at Fund's inception(3)
(Class A shares, at maximum applicable sales charge)
<TABLE>
<S> <C>
3/90 9425
6/90 8865
6/91 7244
6/92 6370
6/93 10731
6/94 9404
6/95 9658
6/96 13852
6/97 18418
6/98 15788
6/99 11910
</TABLE>
[end mountain chart]
Average Annual Total Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
Life of Fund
(since 3/2/90) 5 Years 1 Year
- ------------------------------------------------------
<S> <C> <C> <C>
Class A 1.89% 3.60% -28.90%
- ------------------------------------------------------
Class B(1) 2.07% 3.72% -28.69%
- ------------------------------------------------------
Class B 2.09% 3.76% -28.56%
- ------------------------------------------------------
Class C 2.06% 4.05% -25.86%
- ------------------------------------------------------
Class S 2.75% 5.13% -24.33%
- ------------------------------------------------------
</TABLE>
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses. Without subsidization, performance would have been
lower.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Global Resources Fund: A challenging year
[photo: Daniel J. Rice III]
Daniel J. Rice III
Portfolio Manager
We spoke with Dan Rice, portfolio manager of State Street Research Global
Resources Fund, about the Fund's performance for the year ended June 30, 1999
and his views on the period ahead.
Q: How did the Fund perform during the fiscal year?
A: It was a difficult year for the Fund. Class A shares returned -24.56% for the
12 months ended June 30, 1999 [does not reflect sales charge]2. That was
significantly lower than the Lipper average natural resources fund, which gained
2.50%.
Q: What were the challenges facing the natural resources sector over 12 months?
A: During the first half of our fiscal year, oil and natural gas prices were
weak. During the second half, oil and natural gas prices have rebounded
strongly. Unfortunately, the gains were not enough to offset the earlier losses.
Q: What factors have made the price of oil so erratic?
A: We started the year with declining oil prices because OPEC (Oil Producing
Economic Council) nations increased their production and world energy demand
fell, the result of a warmer-than-usual winter in key markets and economic
weakness in emerging market nations. As a result, the price of crude oil fell
as low as $11 per barrel late in 1998.
Then, the situation began to turn around: OPEC nations announced a cut back in
production--and so far there has been about 90% compliance with the quotas they
set for themselves. Worldwide demand has risen by an estimated 1.5% over 1998.
About half of that can be accounted for in the U.S., where the economy is
strong. The other half is the result of increased demand in the Far East and,
surprisingly, Brazil. By June 30, 1999, the price of oil had climbed back to
$18-$20 per barrel. In fact, it came back higher and somewhat faster than we
expected.
Q: Are you invested in any segments outside of energy? And how did those
investments perform?
A: Energy accounts for most of the sector's market capitalization--and most of
the Fund's assets. However, we did have a modest investment in gold, which we
pared back from about 12% at the start to about 4% at the end of the period.
That was, in fact, a good move as the price of gold has continued to drop.
Several countries have reduced their inventories of gold, thus raising market
supply. Despite rising demand for gold jewelry, this supply has tipped the
scales, and prices are now well below recent historical levels.
Q: Did you make any other significant changes to the portfolio based on the
changing environment for natural resources?
A: We deployed assets from the sale of gold to increase our investment in oil
service stocks, which represented about 21% of the Fund at the end of the
period. Our biggest position remains in oil exploration and production
companies, which was the strongest performing sector in the last quarter of the
year. That's because oil prices rose higher than expected, and gas prices were
stronger than expected despite an inventory build-up.
Q: What is your outlook?
A: We believe that oil prices could climb even higher and that the outlook for
the price of natural gas is also bullish. Historically, smaller companies have
lagged large companies in an energy rebound. We have positioned the Fund to
take advantage of a potential rebound in small-cap energy stocks.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<S> <C> <C>
(1) Western Gas Resources Natural gas processing 9.0%
(2) Ocean Energy Oil and gas exploration 5.4%
(3) Ranger Oil International oil exploration 4.8%
(4) Plains Resources Oil and gas exploration 4.7%
(5) Basin Exploration Oil and gas exploration 3.8%
(6) Baytex Energy Oil and gas exploration 2.8%
(7) Talisman Energy Oil and gas exploration 2.7%
(8) Callon Petroleum Oil and gas exploration 2.6%
(9) Precision Drilling Oilfield and industrial services 2.5%
(1)0 NewPark Resources Oil and gas services 2.5%
</TABLE>
These securities represent an aggregate of 40.8% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
Asset Allocation
(by percentage of net assets)
[start pie chart]
<TABLE>
<S> <C>
Oil and gas producers 63%
Oil service 21%
Other 3%
Metal and mining 4%
Natural gas pipelines 9%
</TABLE>
[end pie chart]
Largest Contributors to Performance
(July 1, 1998 through June 30, 1999)
Positive [upward arrow]
- -----------------------------------------------------
Western Gas Resources
Rising gas prices
Bellator Exploration
High oil prices
Negative [downward arrow]
- -----------------------------------------------------
KCS Energy
Impaired financial condition
Seven Seas Petroleum
Disappointing exploration from Colombia
2
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Value
Shares (Note 1)
- ---------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 98.3%
Basic Industries 5.2%
Metal & Mining 3.9%
Ashanti Goldfields Co. Ltd. GDR .......... 100,000 $ 693,750
Canyon Resources Corp.* .................. 950,000 148,438
Denison Mines Ltd.* ...................... 1,500,000 162,988
Impala Platinum Holdings ADR* ............ 50,000 1,257,805
Menzies Gold NL* ......................... 800,000 31,730
Nevsun Resources Ltd.* ................... 400,000 141,256
Newcrest Mining Ltd.* .................... 300,000 672,684
Normandy Mining Ltd.* .................... 872,841 580,453
Pangea Goldfields Inc.* .................. 100,000 133,107
Randgold Resources Inc. GDR*+ ............ 93,500 374,000
Romarco Minerals Inc.* ................... 223,000 216,564
Romarco Minerals Inc. Wts.* .............. 77,000 26,146
Southwestern Gold Corp.* ................. 343,300 792,679
Tombstone Exploration Co. Ltd.* .......... 200,000 9,508
Viceroy Resource Corp.* .................. 183,000 156,591
Virginia Gold Mines Inc.* ................ 700,000 237,691
X-Cal Resources Ltd.* .................... 2,000,000 509,338
Zimbabwe Platinum Mines Ltd.* ............ 150,000 33,714
-----------
6,178,442
-----------
Railroad 1.3%
Mosvold Shipping Ltd.*+ .................. 2,200,000 893,344
OMI Corp.* ............................... 559,500 1,153,969
-----------
2,047,313
-----------
Total Basic Industries ............................... 8,225,755
-----------
Energy 83.9%
Oil 62.9%
3DX Technologies Inc.* ................... 100,000 56,250
Abacan Resource Corp.* ................... 1,861,200 232,650
Basin Exploration Inc.* .................. 300,000 6,018,750
Baytex Energy Ltd. Cl. A* ................ 782,300 4,409,569
Bellator Exploration Inc.* ............... 2,790,600 3,183,842
Brigham Exploration Co.* ................. 34,400 68,800
Cabot Oil & Gas Corp. Cl. A .............. 196,500 3,659,812
Callon Petroleum Co.* .................... 400,500 4,130,156
Canadian 88 Energy Corp.* ................ 969,500 2,726,719
Chieftain International Inc.* ............ 100,000 1,750,000
Clayton Williams Energy Inc.* ............ 17,530 104,084
Crystal Gas Storage Inc.* ................ 41,600 1,383,200
Cultus Petroleum NL* ..................... 877,500 423,452
Cypress Energy Inc. Cl. A* ............... 1,118 4,518
Edge Energy Inc.* ........................ 90,800 169,576
Elk Point Resources Inc. Cl. A* .......... 490,500 1,199,185
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Value
Shares (Note 1)
- ---------------------------------------------------------------------------
<S> <C> <C>
Esenjay Exploration Inc.* ................ 86,300 $ 194,175
Exco Resources Inc.* ..................... 150,000 1,012,500
Forest Oil Corp.* ........................ 41,600 522,600
FX Energy Inc.* .......................... 30,000 196,875
Gulfstream Resources Ltd. ................ 347,000 765,874
Interoil Corp.* .......................... 156,500 117,375
KCS Energy Inc. .......................... 540,000 337,500
Kelley Oil & Gas Corp.* .................. 400,000 87,500
Mallon Resources Corp.* .................. 210,100 1,457,569
Maxx Petroleum Ltd.* ..................... 300,975 865,303
Meridian Resource Corp.* ................. 150,000 581,250
Merit Energy Ltd.* ....................... 33,300 135,688
Miller Exploration Co.* .................. 322,800 716,212
Morrison Middlefield Ltd. ................ 240,000 929,032
Nuevo Energy Co.* ........................ 256,800 3,402,600
Ocean Energy Inc.* ....................... 900,000 8,662,500
Oil Search Ltd.* ......................... 1,351,300 2,001,833
Patina Oil & Gas Corp. ................... 94,700 597,794
Pease Oil & Gas Co.* ..................... 20,000 13,125
Pease Oil & Gas Co.*++@ .................. 8,750 4,522
Pendaries Petroleum Ltd.*+ ............... 167,000 167,000
Pennaco Energy Inc.* ..................... 63,000 740,250
Petromet Resources Ltd.* ................. 250,000 781,250
Petsec Energy Ltd. ADR* .................. 46,000 74,750
Plains Resources Inc.* ................... 400,000 7,600,000
Post Energy Corp.* ....................... 400,000 1,765,705
Probe Exploration Inc.*+ ................. 1,500,000 550,085
Purcell Energy Ltd.* ..................... 229,000 348,360
Ranger Oil Ltd.* ......................... 1,553,000 7,667,937
Richland Petroleum Corp.* ................ 332,900 746,058
Santa Fe Snyder Corp.* ................... 266,930 2,035,341
Seven Seas Petroleum Inc.* ............... 657,600 1,808,400
Southern Mineral Corp.* .................. 213,500 73,391
Southernera Resources Ltd.* .............. 302,400 1,006,289
Southwestern Energy Co. .................. 359,300 3,795,106
St. Mary Land & Exploration Co.* ......... 58,400 1,200,850
Talisman Energy Inc. ..................... 160,000 4,250,000
Tap Oil NL* .............................. 1,926,400 827,740
Thunder Energy Inc.* ..................... 300,000 356,536
Titan Exploration Inc.* .................. 668,723 3,343,615
Tom Brown, Inc.* ......................... 205,900 3,204,319
Tri-Link Resources Ltd. Cl. A* ........... 175,100 1,183,188
Ulster Petroleum Ltd.* ................... 373,500 3,703,294
Ultra Petroleum Corp.* ................... 586,100 477,637
Vermilion Resources Ltd.* ................ 200,000 584,041
Westminster Resource Ltd.* ............... 66,300 180,102
Wolverine Energy Corp.* .................. 165,000 20,730
-----------
100,614,364
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Value
Shares (Note 1)
- -----------------------------------------------------------------------
<S> <C> <C>
Oil Service 21.0%
Atwood Oceanics Inc.* .................... 75,400 $ 2,356,250
Badger Daylighting Inc. .................. 125,000 496,605
BJ Services Co.* ......................... 54,800 1,613,175
Cooper Cameron Corp.* .................... 37,500 1,389,844
Ensco International Inc. ................. 150,000 2,990,625
Global Industries Inc.* .................. 150,900 1,933,406
Halliburton Co. .......................... 50,000 2,262,500
Marine Drilling Companies, Inc.* ......... 150,000 2,053,125
NewPark Resources Inc.* .................. 443,800 3,938,725
Niko Resources Ltd.* ..................... 100,000 373,515
Noble Drilling Corp.* .................... 133,300 2,624,344
Pason Systems Inc.* ...................... 400,000 1,358,234
Petroleum Geo-Services ADR ............... 150,000 2,231,250
Precision Drilling Corp.* ................ 208,900 3,982,156
R & B Falcon Corp.* ...................... 100,000 937,500
Stellarton Energy Corp.Cl. A*+ ........... 150,000 193,548
TMBR / Sharp Drilling Inc.* .............. 136,800 743,850
Transocean Offshore Inc. ................. 75,000 1,968,750
Willbros Group Inc.* ..................... 29,100 247,350
-----------
33,694,752
-----------
Total Energy ......................................... 134,309,116
-----------
Utility 9.2%
Natural Gas 9.2%
Markwest Hydrocarbon Inc.* ............... 37,500 328,125
Western Gas Resources Inc. ............... 899,900 14,398,400
-----------
14,726,525
-----------
Total Utility ........................................ 14,726,525
-----------
Total Equity Securities (Cost $209,572,428) .......... 157,261,396
-----------
SHORT-TERM INVESTMENTS 2.6%
AIM Liquid Assets Portfolio .............. 4,215,196 4,215,196
-----------
Total Short-Term Investments (Cost $4,215,196) ....... 4,215,196
-----------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Principal Maturity
Amount Date
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 2.2%
Associates First Capital Corp.,
5.70% ........................................ $3,528,000 7/01/1999 3,528,000
---------
Total Commercial Paper (Cost $3,528,000) ............................... 3,528,000
---------
Total Investments (Cost $217,315,624)--103.1% .......................... 165,004,592
Cash and Other Assets, Less Liabilities--(3.1%) ........................ (4,960,224)
-----------
Net Assets--100.0% ..................................................... $160,044,368
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At June 30, 1999, the net unrealized depreciation of
investments based on cost for Federal income tax
purposes of $218,935,946 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost .... $ 24,214,754
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value .... (78,146,108)
------------
$(53,931,354)
============
</TABLE>
- --------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
++Security restricted as to public resale. The total cost and market value of
restricted securities owned at June 30, 1999 were $218,770 and $4,522 (0.00%
of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of
1933, which allows for the resale of such securities among certain qualified
institutional buyers. The total cost and market value of Rule 144A
securities owned at June 30, 1999 were $8,131,168 and $2,177,978 (1.36% of
net assets), respectively.
Diversification of Equity Securities at June 30, 1999 (as a percentage of
net assets) was United States 60.0%, Canada 32.4%, Norway 2.0%, Australia
1.7%, Papua New Guinea 1.3%, Cayman Islands 1.2%, South Africa 0.8%, Ghana
0.4%, United Kingdom 0.2%.
@ Security valued under consistently applied procedures established by the
Trustees.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $217,315,624) (Note 1) ................... $165,004,592
Cash ................................................................. 916
Receivable for fund shares sold ...................................... 126,408
Dividends and interest receivable .................................... 49,492
Receivable for securities sold ....................................... 32,499
Other assets ......................................................... 28,375
------------
165,242,282
Liabilities
Payable for collateral received on securities loaned ................. 4,215,196
Payable for fund shares redeemed ..................................... 493,077
Accrued transfer agent and shareholder services
(Note 2) ........................................................... 187,711
Accrued management fee (Note 2) ...................................... 103,694
Accrued distribution and service fees (Note 4) ....................... 89,337
Accrued trustees' fees (Note 2) ...................................... 17,730
Other accrued expenses ............................................... 91,169
------------
5,197,914
------------
Net Assets $160,044,368
============
Net Assets consist of:
Unrealized depreciation of investments .............................. $(52,311,032)
Accumulated net realized loss ....................................... (46,033,924)
Paid-in capital ..................................................... 258,389,324
------------
$160,044,368
============
Net Asset Value and redemption price per share of
Class A shares ($67,155,202 [divided by] 5,525,602 shares) ......... $12.15
======
Maximum Offering Price per share of Class A shares
($12.15 [divided by] .9425) ........................................ $12.89
======
Net Asset Value and offering price per share of
Class B(1) shares ($5,052,913 [divided by] 437,168 shares)*......... $11.56
======
Net Asset Value and offering price per share of
Class B shares ($56,707,842 [divided by] 4,898,888 shares)*......... $11.58
======
Net Asset Value and offering price per share of
Class C shares ($25,537,921 [divided by] 2,212,208 shares)*......... $11.54
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($5,590,490 [divided by] 449,650 shares) ........................... $12.43
======
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended June 30, 1999
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $9,381 ............... $ 645,335
Interest (Note 1) ....................................... 245,811
------------
891,146
Expenses
Management fee (Note 2) ................................. 1,116,563
Transfer agent and shareholder services (Note 2) ........ 592,482
Custodian fee ........................................... 150,657
Reports to shareholders ................................. 49,566
Audit fee ............................................... 27,552
Legal fees .............................................. 24,836
Trustees' fees (Note 2) ................................. 17,730
Service fee-Class A (Note 4) ............................ 148,925
Distribution and service fees-Class B(1) (Note 4) ....... 15,097
Distribution and service fees-Class B (Note 4) .......... 592,566
Distribution and service fees-Class C (Note 4) .......... 245,037
Miscellaneous ........................................... 14,011
------------
2,995,022
Fees paid indirectly (Note 2) ........................... (25,561)
------------
2,969,461
------------
Net investment loss ..................................... (2,078,315)
------------
Realized and Unrealized Loss on Investments
Net realized loss on investments (Notes 1 and 3) ........ (46,014,337)
Net unrealized depreciation of investments .............. (6,567,556)
------------
Net loss on investments ................................. (52,581,893)
------------
Net decrease in net assets resulting from operations..... $(54,660,208)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended June 30
-------------------------------
1998 1999
- ------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss .................. $ (2,976,161) $ (2,078,315)
Net realized gain (loss) on
investments, foreign currency
and forward contracts .............. 30,028,876 (46,014,337)
Net unrealized depreciation
of investments ..................... (73,157,253) (6,567,556)
------------ ------------
Net decrease resulting from
operations ......................... (46,104,538) (54,660,208)
------------ ------------
Distributions from net realized gains:
Class A ............................. (9,874,227) (3,619,542)
Class B ............................. (10,098,016) (3,887,699)
Class C ............................. (3,889,057) (1,503,483)
Class S ............................. (1,118,083) (209,120)
------------ ------------
(24,979,383) (9,219,844)
------------ ------------
Net increase from fund share
transactions (Note 6) .............. 89,454,451 8,549,006
------------ ------------
Total increase (decrease) in
net assets ......................... 18,370,530 (55,331,046)
Net Assets
Beginning of year .................... 197,004,884 215,375,414
------------ ------------
End of year .......................... $215,375,414 $160,044,368
============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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 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 five 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. On January 1,
1999, the Fund began offering Class B(1) shares and continued offering Class B
shares but only to current shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of State
Street Research funds. Class B(1) and Class B pay annual distribution and
service fees of 1.00% and both classes automatically convert into Class A
shares (which pay lower ongoing expenses) at the end of eight years. Class B(1)
shares are subject to a contingent deferred sales charge on certain redemptions
made within six years of purchase. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase. Class C shares are subject to a contingent deferred sales charge of
1.00% on any shares redeemed within one year of 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
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to it,
while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested semiannually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations. For the year ended June 30, 1999, the Fund has
designated as long-term $7,111,389 of the distributions from net realized
gains.
Income dividends and capital gains distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. At June 30, 1999, the Fund had a capital
loss carryforward of $6,860,770 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on June 30,
2007.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1998
through June 30, 1999, the Fund incurred net capital losses of approximately
$37,553,000 and it intends to defer and treat such losses as arising in the
fiscal year ended June 30, 2000.
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 June 30, 1999, the value of the securities loaned and the value of
collateral were $3,702,363 and $4,592,794 (including $4,215,196 of cash
collateral), respectively. During the year ended June 30, 1999, income from
securities lending amounted to $57,100 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 year ended June 30, 1999, the fees pursuant
to such agreement amounted to $1,116,563.
7
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 year ended June 30,
1999, the amount of such shareholder servicing and account maintenance expenses
was $199,452.
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 year ended June 30, 1999, the Fund's
transfer agent fees were reduced by $25,561 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$17,730 during the year ended June 30, 1999.
Note 3
For the year ended June 30, 1999, purchases and sales of securities, exclusive
of short-term obligations, aggregated $82,339,795 and $83,004,159,
respectively.
Note 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal services and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the year ended June 30, 1999, fees
pursuant to such plans amounted to $148,925, $592,566 and $245,037 for Class A,
Class B and Class C shares, respectively. For the period January 1, 1999
(commencement of share class) to June 30, 1999, fees pursuant to such plans
amounted to $15,097 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $86,354 and $45,842, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1999, and that MetLife Securities, Inc.
earned commissions aggregating $85,074 on sales of Class B shares, and that the
Distributor collected contingent deferred sales charges of $126,973 and $7,664
on redemptions of Class B and Class C shares, respectively, during the same
period. MetLife Securities, Inc. earned commissions aggregating $15,186 on
sales and the Distributor collected contingent deferred sales charges
aggregating $6,745 on redemptions of Class B(1) shares during the period
January 1, 1999 (commencement of share class) to June 30, 1999.
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.
8
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
Years ended June 30
---------------------------
1998
---------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................................................. 3,760,941 $ 87,083,305
Issued upon reinvestment of distributions from net realized gains ........ 408,880 9,169,116
Shares repurchased ....................................................... (2,997,412) (66,376,129)
---------- -------------
Net increase ............................................................. 1,172,409 $ 29,876,292
========== =============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. -- --
Shares repurchased ....................................................... -- --
---------- -------------
Net increase ............................................................. -- --
========== =============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 2,966,308 $ 63,952,013
Issued upon reinvestment of distributions from net realized gains ........ 437,810 9,510,796
Shares repurchased ....................................................... (1,646,026) (33,380,085)
---------- -------------
Net increase (decrease) .................................................. 1,758,092 $ 40,082,724
========== =============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 1,640,285 $ 35,555,627
Issued upon reinvestment of distributions from net realized gains ........ 167,922 3,639,263
Shares repurchased ....................................................... (819,924) (16,782,276)
---------- -------------
Net increase (decrease) .................................................. 988,283 $ 22,412,614
========== =============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 529,650 $ 12,184,343
Issued upon reinvestment of distributions from net realized gains ........ 48,358 1,107,030
Shares repurchased ....................................................... (725,982) (16,208,552)
---------- -------------
Net increase (decrease) .................................................. (147,974) $ (2,917,179)
========== =============
</TABLE>
<TABLE>
<CAPTION>
Years ended June 30
---------------------------
1999
---------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................................................. 9,547,596 $ 106,672,440
Issued upon reinvestment of distributions from net realized gains ........ 347,217 3,362,264
Shares repurchased ....................................................... (9,116,127) (101,535,221)
---------- -------------
Net increase ............................................................. 778,686 $ 8,499,483
========== =============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 552,033 $ 5,148,104
Shares repurchased ....................................................... (114,865) (1,235,708)
---------- -------------
Net increase ............................................................. 437,168 $ 3,912,396
========== =============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 1,834,773 $ 20,961,694
Issued upon reinvestment of distributions from net realized gains ........ 392,245 3,628,438
Shares repurchased ....................................................... (2,697,037) (28,620,805)
---------- -------------
Net increase (decrease) .................................................. (470,019) $ (4,030,673)
========== =============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 1,115,539 $ 11,753,691
Issued upon reinvestment of distributions from net realized gains ........ 148,917 1,374,717
Shares repurchased ....................................................... (1,305,845) (13,956,016)
---------- -------------
Net increase (decrease) .................................................. (41,389) $ (827,608)
========== =============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 510,007 $ 5,687,504
Issued upon reinvestment of distributions from net realized gains ........ 21,123 208,699
Shares repurchased ....................................................... (406,508) (4,900,795)
---------- -------------
Net increase (decrease) .................................................. 124,622 $ 995,408
========== =============
- ---------------------------------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
9
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Years ended June 30
------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.84 12.16 17.44 22.39 17.35
----- ----- ----- ------ ------
Net investment loss ($)* (0.16) (0.20) (0.15) (0.18) (0.11)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 0.48 5.48 5.86 (2.52) (4.34)
------ ------ ------ ------- -------
Total from investment operations ($) 0.32 5.28 5.71 (2.70) (4.45)
------ ------ ------ ------- -------
Distributions from net realized gains ($) -- -- (0.76) (2.34) (0.75)
------ ------ ------ ------- -------
Total distributions ($) -- -- (0.76) (2.34) (0.75)
------ ------ ------ ------- -------
Net asset value, end of year ($) 12.16 17.44 22.39 17.35 12.15
====== ====== ====== ======= =======
Total return(b) (%) 2.70 43.42 32.96 (14.28) (24.56)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 25,692 30,943 80,029 82,376 67,155
Ratio of operating expenses to average net assets (%)* 1.75 1.75 1.42 1.46 1.59
Ratio of net investment loss to average net assets (%)* (1.41) (1.47) (0.73) (0.82) (0.97)
Portfolio turnover rate (%) 62.94 92.33 51.67 68.69 55.89
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.09 0.05 0.00 -- --
</TABLE>
<TABLE>
<CAPTION>
Class B(1)
-------------------
Period ended
June 30, 1999(a)(c)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ($) 9.44
-----
Net investment loss ($) (0.08)
Net realized and unrealized gain on investments,
foreign currency and forward contracts ($) 2.20
-----
Total from investment operations ($) 2.12
-----
Net asset value, end of period ($) 11.56
=====
Total return(b) (%) 22.46(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 5,053
Ratio of operating expenses to average net assets (%) 2.19(e)
Ratio of net investment loss to average net assets (%) (1.64)(e)
Portfolio turnover rate (%) 55.89
</TABLE>
- --------------------------------------------------------------------------------
(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) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
10
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------
Years ended June 30
-----------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.78 12.03 17.12 21.80 16.71
------ ------ ------ ------ ------
Net investment loss ($)* (0.23) (0.30) (0.30) (0.33) (0.19)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 0.48 5.39 5.74 (2.42) (4.19)
------ ------ ------ ------ ------
Total from investment operations ($) 0.25 5.09 5.44 (2.75) (4.38)
------ ------ ------ ------ ------
Distributions from net realized gains ($) -- -- (0.76) (2.34) (0.75)
------ ------ ------ ------ ------
Total distributions ($) -- -- (0.76) (2.34) (0.75)
------ ------ ------ ------ ------
Net asset value, end of year ($) 12.03 17.12 21.80 16.71 11.58
====== ====== ====== ====== ======
Total return(b) (%) 2.12 42.31 31.98 (14.94) (25.10)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 7,030 12,828 78,701 89,689 56,708
Ratio of operating expenses to average net assets (%)* 2.33 2.50 2.17 2.21 2.34
Ratio of net investment loss to average net assets (%)* (1.98) (2.20) (1.47) (1.57) (1.73)
Portfolio turnover rate (%) 62.94 92.33 51.67 68.69 55.89
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.09 0.04 0.00 -- --
</TABLE>
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------
Years ended June 30
-----------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.77 12.02 17.10 21.76 16.67
------ ----- ------ ------ ------
Net investment loss ($)* (0.23) (0.30) (0.30) (0.33) (0.19)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 0.48 5.38 5.72 (2.42) (4.19)
------ ----- ------ ------ ------
Total from investment operations ($) 0.25 5.08 5.42 (2.75) (4.38)
------ ----- ------ ------ ------
Distributions from net realized gains ($) -- -- (0.76) (2.34) (0.75)
------ ----- ------ ------ ------
Total distributions ($) -- -- (0.76) (2.34) (0.75)
------ ----- ------ ------ ------
Net asset value, end of year ($) 12.02 17.10 21.76 16.67 11.54
====== ===== ====== ====== ======
Total return(b) (%) 2.12 42.26 31.90 (14.97) (25.17)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 2,350 5,154 27,528 37,566 25,538
Ratio of operating expenses to average net assets (%)* 2.33 2.50 2.17 2.21 2.34
Ratio of net investment loss to average net assets (%)* (1.99) (2.20) (1.45) (1.57) (1.72)
Portfolio turnover rate (%) 62.94 92.33 51.67 68.69 55.89
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.09 0.05 0.00 -- --
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
11
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
------------------------------------------------------------
Years ended June 30
------------------------------------------------------------
1995(a) 1996(a) 1997(a) 1998(a) 1999(a)
- ----------------------------------------------------------------------------------------------------------------------------=
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.90 12.27 17.64 22.72 17.67
----- ----- ------ ------ ------
Net investment loss ($)* (0.11) (0.17) (0.10) (0.13) (0.08)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 0.48 5.54 5.94 (2.58) (4.41)
----- ----- ------ ------ ------
Total from investment operations ($) 0.37 5.37 5.84 (2.71) (4.49)
----- ----- ------ ------ ------
Distributions from net realized gains ($) -- -- (0.76) (2.34) (0.75)
----- ----- ------ ------ ------
Total distributions ($) -- -- (0.76) (2.34) (0.75)
----- ----- ------ ------ ------
Net asset value, end of year ($) 12.27 17.64 22.72 17.67 12.43
===== ===== ====== ====== ======
Total return(b) (%) 3.11 43.77 33.33 (14.11) (24.33)
Ratios/supplemental data:
Net assets at end of year ($ thousands) 3,288 5,632 10,747 5,745 5,590
Ratio of operating expenses to average net assets (%)* 1.33 1.50 1.17 1.21 1.34
Ratio of net investment loss to average net assets (%)* (1.01) (1.20) (0.48) (0.55) (0.70)
Portfolio turnover rate (%) 62.94 92.33 51.67 68.69 55.89
*Reflects voluntary reduction of expenses per share of these
amounts ($) 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.
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Equity Trust and the Shareholders of
State Street Research Global Resources Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Global
Resources Fund (a series of State Street Research Equity Trust, hereafter
referred to as the "Trust") at June 30, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at June 30, 1999 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 16, 1999
13
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
State Street Research Global Resources Fund had a difficult year. The total
return for the Fund's Class A shares was -24.56% (does not reflect sales
charge) for the 12 months ended June 30, 1999. The Fund underperformed the
Lipper average natural resources fund, which rose 2.50%.
The Fund was hurt by declining prices in the first half of the year. The price
of crude oil fell as a result of rising supply and lower demand. The price of
gold sank as several countries reduced their inventories, thus raising the
supply of gold on the market. However, in the second half of the year, the
price of oil rose and natural gas prices also moved higher.
Early in the period, the Fund was hurt by its heavy emphasis on oil exploration
and production stocks. However, once the price of oil began to move up, this
was one of the strongest performing groups in the energy sector.
The Fund is positioned to take advantage of a potential comeback in smaller
company energy stocks, which historically have lagged large company energy
stocks by as much as nine months.
June 30, 1999
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 5.75% Class A share front-end sales charge, or 5% Class B(1) share or
Class B share or 1% Class C share contingent deferred sales charge, where
applicable. The fund's returns include performance before the creation of share
classes. If this performance reflected the share classes' current 12b-1 fees,
the fund's returns may have been lower. Class S shares, offered without a sales
charge, are available through certain employee benefit plans and special
programs. The S&P 500 (officially the "Standard and Poor's 500 Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest directly
in the index.
[line charts]
Change in Value of $10,000 Based on
the S&P 500 Compared to Change in Value
of $10,000 Invested in the Fund
Class A Shares
<TABLE>
<CAPTION>
---------------------------------
Average Annual Total Return
---------------------------------
1 Year 5 Years Life of Fund
---------------------------------
<S> <C> <C>
-28.90% 3.60% 1.89%
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Resources Fund S&P 500
--------------------- -------
<S> <C> <C>
3/90 9425 10000
6/90 8865 10901
6/91 7244 11704
6/92 6370 13271
6/93 10731 15076
6/94 9404 15287
6/95 9658 19267
6/96 13852 24272
6/97 18418 32689
6/98 15788 42553
6/99 11910 52238
</TABLE>
Class B(1) Shares
<TABLE>
<CAPTION>
---------------------------------
Average Annual Total Return
---------------------------------
1 Year 5 Years Life of Fund
---------------------------------
<S> <C> <C>
-28.69% 3.72% 2.07%
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Resources Fund S&P 500
--------------------- -------
<S> <C> <C>
3/90 10000 10000
6/90 9405 10901
6/91 7686 11704
6/92 6759 13271
6/93 11385 15076
6/94 9927 15287
6/95 10138 19267
6/96 14427 24272
6/97 19042 32689
6/98 16197 42553
6/99 12111 52238
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
---------------------------------
Average Annual Total Return
---------------------------------
1 Year 5 Years Life of Fund
---------------------------------
<S> <C> <C>
-28.56% 3.76% 2.09%
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Resources Fund S&P 500
--------------------- -------
<S> <C> <C>
3/90 10000 10000
6/90 9405 10901
6/91 7686 11704
6/92 6759 13271
6/93 11385 15076
6/94 9927 15287
6/95 10138 19267
6/96 14427 24272
6/97 19042 32689
6/98 16197 42553
6/99 12132 52238
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
---------------------------------
Average Annual Total Return
---------------------------------
1 Year 5 Years Life of Fund
---------------------------------
<S> <C> <C>
-25.86% 4.05% 2.06%
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
<CAPTION>
Global Resources Fund S&P 500
--------------------- -------
<S> <C> <C>
3/90 10000 10000
6/90 9405 10901
6/91 7686 11704
6/92 6759 13271
6/93 11385 15076
6/94 9919 15287
6/95 10130 19267
6/96 14411 24272
6/97 19008 32689
6/98 16163 42553
6/99 12095 52238
</TABLE>
Class S Shares
<TABLE>
<CAPTION>
---------------------------------
Average Annual Total Return
---------------------------------
1 Year 5 Years Life of Fund
---------------------------------
<S> <C> <C>
-24.33% 5.13% 2.75%
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Resources Fund S&P 500
--------------------- -------
<S> <C> <C>
3/90 10000 10000
6/90 9405 10901
6/91 7686 11704
6/92 6759 13271
6/93 11394 15076
6/94 10028 15287
6/95 10340 19267
6/96 14866 24272
6/97 19820 32689
6/98 17024 42553
6/99 12882 52238
</TABLE>
[end line charts]
- --------------------------------------------------------------------------------
___ Global Resources Fund --- S&P 500
- --------------------------------------------------------------------------------
14
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- --------------------------------------------------------------------------------
Fund Information
State Street Research
Global Resources Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
F. Gardner Jackson, Jr.
Vice President
Thomas P. Moore, Jr.
Vice President
Brian P. O'Dell
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Peter A. Zuger
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Bruce R. Bond
Chairman of the Board,
Chief Executive Officer and
President, PictureTel Corporation
Steve A. Garban
Former Senior Vice President for
Finance and Operations and
Treasurer, The Pennsylvania State
University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial Officer,
St. Regis Corp.
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and
Director, Hewlett-Packard
Company
Toby Rosenblatt
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
15
<PAGE>
[back cover]
--------------
State Street Research Global Resources Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Permit #6
Hartford, CT
--------------
[logo: STATE STREET RESEARCH
75 YEARS
LASTING VALUES
--------------
LEADING IDEAS]
Questions? Comments?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[logo: State Street Research]
This report is prepared for the general information of current shareholders.
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 September 30, 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: (exp0800)SSR-LD GR-021G-0899
<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
ATHLETES FUND
---------------------
ANNUAL REPORT
June 30, 1999
-------------
WHAT'S INSIDE
-------------
From the Chairman
American investors have been
handsomely rewarded
Portfolio Manager's Review
An all-star performance
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR AWARD:
Dalbar Key Honors
Commitment To:
Investors
1998]
For Excellence
in
Shareholder Service
[logo: State Street Research]
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF RALPH F. VERNI]
Dear Shareholder:
For seven years running, and with few interruptions, the United
States has enjoyed a "best of all possible financial worlds"
existence. Stocks and bonds have been strong, inflation and
interest rates have fallen, and the economy has grown at a pace
that seemed just right.
Better yet, American workers have reaped the benefits of a
healthy economy, and American investors have been handsomely
rewarded. Many have taken their prosperity to the mall, where
retail sales have been strong. However, we may have been
carried away with our recent success. The nation's savings rate
has fallen to -1.2%.
Stocks
Although the U.S. stock market suffered a severe correction last summer, most
segments staged a comeback. In the first quarter of 1999, the Dow Jones
Industrial Average passed a significant milestone, 10,000, and ended the
12-month period just short of 11,000. The S&P 500, a broad measure of stock
market performance, gained 22.76%.(1)
Large-company growth and technology stocks were the strongest performers, led
by Internet stocks. Gains were concentrated in a narrow band of stocks most of
the time. It was a challenge for investors to match the market's returns with
their own portfolios. Finally, the gap between large-company growth stocks and
the rest began to narrow. Performance of small- and medium-sized company stocks
improved, and value stocks came back to life.
Bonds
The bond market benefited from the Federal Reserve Board's three quick interest
rate cuts last fall, then struggled under the weight of a robust economy. Even
before the Fed raised the short-term interest rate--a move widely-expected
before it was actually announced on June 30--the yield on the benchmark climbed
back above 6.0%. (Remember, the higher the yield, the worse it is for bonds.)
As a result, U.S. Treasury bonds went from leaders to laggards. High-yield
"junk" bonds, which had been weak, were buoyed by the strong economic news.
International
Hopes for the euro, the new common currency shared by 11 European nations,
helped European markets initially. But the luster was short-lived. Many
European economies, still feeling the effects of weakness in Asian markets,
stumbled in the first half of 1999. Asian emerging markets started to show some
signs of life, while Latin emerging markets remain mired in currency woes.
Japan's stock market delivered strong gains in the first half of 1999,
encouraged by corporate restructurings and signs that Japan's Central Bank is
beginning to help its economy.
Outlook and Opportunities
As investors, you may be pondering your strategy in a market that has produced
both strong gains and extraordinary volatility. Regardless of the environment,
we are confident that our in-depth research can help us uncover good values,
both at home and abroad. As always, we will be diligent in seeking new
investments and in monitoring those we already own. Thank you for your
confidence in State Street Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
June 30, 1999
(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 index does not take
transaction charges into consideration. It is not possible to invest directly
in the index.
(2)25.34% for Class B(1) shares; 25.34% for Class B shares; 25.48% for Class C
shares; 26.62% 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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
(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 June 30, 1999)
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
- -----------------------------------------
Life of Fund
(since 3/27/98) 1 Year
- -----------------------------------------
<S> <C> <C>
Class A 19.46% 19.06%
- -----------------------------------------
Class B(1) 21.16% 20.34%
- -----------------------------------------
Class B 21.16% 20.34%
- -----------------------------------------
Class C 24.26% 24.48%
- -----------------------------------------
Class S 25.43% 26.62%
- -----------------------------------------
</TABLE>
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses. Without subsidization, performance would have been
lower.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Athletes Fund: An all-star performance
[PHOTO OF GARDNER JACKSON]
Gardner Jackson
Portfolio Manager
We spoke with Gardner Jackson, portfolio manager of State
Street Research Athletes Fund, about the year ended June
30, 1999 and his views on the period ahead.
Q: How did the Fund perform last year?
A: This was the Fund's first full fiscal year, and we
certainly met our objectives. Class A shares gained 26.32%,
[does not reflect sales charge]2 for the 12 months ended
June 30, 1999. Returns were in the top fifth of the Lipper
growth funds average, which gained 18.87% over the same
period. The Fund also outpaced the S&P 500, a broad measure
of common stock performance, which gained 22.76% for the
year.1
Q: What accounted for the Fund's all-star performance relative to its peers?
A: More than half of the Fund's success was the result of sector weighting,
specifically our emphasis on technology. Over the course of the year, we
underweighted industrial commodity and cyclical stocks and had no investments
in the automotive industry.
Stock selection in the consumer discretionary sector and in multi-sector
companies accounted for much of the rest of our outperformance. The leaders in
these two groups were America Online in consumer and Tyco International and
General Electric in multi-sector stocks.
Q: Were there any disappointments during the year?
A: In technology, Cadence Design was the most significant disappointment as a
new market opportunity did not develop as rapidly as expected. In addition, two
well-positioned companies, Boston Scientific and Rite Aid, tried to grow their
businesses faster than their ability to control them, resulting in earnings and
stock price disappointments.
Q: What other strategies have helped propel Athletes Fund?
A: We responded to the volatility and changing nature of the market by moving
from several high-quality, high-confidence, but highly-valued growth companies,
such as Pfizer, to investments in companies with accelerating earnings and
lower valuations such as Texas Instruments and Ascend Communications.
By aggressively harvesting losses, we were able to absorb capital gains when
reducing individual stock positions which had become too large. America Online
is a good example of a large position which we cut back over two quarters.
Q: What is your outlook for growth stocks?
A: Our outlook over the near term is that rising long-term interest rates in
the U.S. will gradually slow the drivers of the economy. As that happens,
companies with strong sustainable growth which comprise the core of the Fund
should hold and improve on their current returns.
June 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<S> <C> <C>
(1) Microsoft Computer software & service 4.1%
(2) Tyco International Diversified manufacturer 3.8%
(3) Cisco Systems Computer network products 3.8%
(4) IBM Computer systems 3.0%
(5) MCI WorldCom Telecommunications services 3.0%
(6) Johnson & Johnson Medical products 2.9%
(7) McDonald's Fast food restaurant franchising 2.8%
(8) Anheuser Busch Brewer 2.6%
(9) Texas Instruments Semiconductors 2.6%
(10) General Electric Consumer/industrial products 2.6%
</TABLE>
These securities represent an aggregate of 31.2% 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)
[start bar chart]
<TABLE>
<S> <C>
Computer
Technology 12.8%
Multi-Sector
Companies 10.1%
Telecommunications 8.5%
Drugs &
Biotechnology 6.4%
Retail 6.3%
Total: 44.1%
</TABLE>
Largest Contributors to Performance
(July 1, 1998 through June 30, 1999)
Positive [upward arrow]
- --------------------------------------------------------------------------------
America Online
Excitement about Internet and strong subscriber growth
Cisco Systems
Higher earnings growth and demand for Internet infrastructure
MediaOne Group
Benefited from AT&T's need for cable assets
Negative [downward arrow]
- --------------------------------------------------------------------------------
Boston Scientific
Disappointing financial controls
Rite Aid
Expansion program outgrew management's control
Coca-Cola
Slowdown in foreign business due to economic recession
2
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Value
Shares (Note 1)
- ---------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 96.8%
Consumer Discretionary 16.8%
Commercial Services 4.2%
America Online Inc.* ...................... 3,100 $ 342,550
Waste Management Inc.* .................... 8,200 440,750
-----------
783,300
-----------
Communications, Media & Entertainment 1.5%
CBS Corp.* ................................ 6,600 286,688
-----------
Household Furnishings 2.0%
Black & Decker Corp. ...................... 6,000 378,750
-----------
Restaurants 2.8%
McDonald's Corp. .......................... 12,600 520,537
-----------
Retail 6.3%
Circuit City Stores Inc. .................. 3,200 297,600
Home Depot Inc. ........................... 4,600 296,413
Staples Inc.* ............................. 9,150 283,078
Wal-Mart Stores, Inc. ..................... 6,600 318,450
-----------
1,195,541
-----------
Total Consumer Discretionary ......................... 3,164,816
-----------
Consumer Staples 4.5%
Beverages 2.7%
Anheuser-Busch Companies, Inc. ............ 7,000 496,563
-----------
Household Products 1.8%
Colgate-Palmolive Co. ..................... 3,500 345,625
-----------
Total Consumer Staples ............................... 842,188
-----------
Financial Services 11.7%
Banks & Savings & Loan 2.5%
Chase Manhattan Corp. ..................... 5,500 476,437
-----------
Insurance 3.3%
Ace Ltd. .................................. 6,600 186,450
American International Group Inc. ......... 3,650 427,278
-----------
613,728
-----------
Miscellaneous Financial 5.9%
Capital One Financial Corp. ............... 8,100 451,069
Citigroup, Inc. ........................... 7,950 377,625
Morgan Stanley Dean Witter & Co. .......... 2,700 276,750
-----------
1,105,444
-----------
Total Financial Services ............................. 2,195,609
-----------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Value
Shares (Note 1)
- ---------------------------------------------------------------------
<S> <C> <C>
Health Care 6.4%
Drugs & Biotechnology 6.4%
Johnson & Johnson ......................... 5,500 $ 539,000
Pharmacia & Upjohn Inc. ................... 6,900 392,006
Schering-Plough Corp. ..................... 5,200 275,600
-----------
1,206,606
-----------
Total Health Care .................................... 1,206,606
-----------
Integrated Oils 2.9%
Integrated International 2.9%
Exxon Corp. ............................... 4,800 370,200
Total SA Cl. B ADR* ....................... 2,800 180,425
-----------
550,625
-----------
Total Integrated Oils ................................ 550,625
-----------
Materials & Processing 1.1%
Chemicals 1.1%
Dow Chemical Co. .......................... 1,600 203,000
-----------
Total Materials & Processing ......................... 203,000
-----------
Other 10.1%
Multi-Sector 10.1%
AlliedSignal Inc. ......................... 6,400 403,200
General Electric Co. ...................... 4,300 485,900
Raytheon Co. Cl. B ........................ 4,100 288,537
Tyco International Ltd. ................... 7,600 720,100
-----------
1,897,737
-----------
Total Other .......................................... 1,897,737
-----------
Other Energy 1.7%
Oil Well Equipment & Services 1.7%
Halliburton Co. ........................... 6,900 312,225
-----------
Total Other Energy ................................... 312,225
-----------
Producer Durables 7.6%
Miscellaneous Equipment 1.8%
Danaher Corp. ............................. 5,800 337,125
-----------
Office Furniture & Business Equipment 1.7%
Xerox Corp. ............................... 5,600 330,750
-----------
Production Technology Equipment 4.1%
Solectron Corp.* .......................... 4,800 320,100
Teradyne Inc.* ............................ 6,200 444,850
-----------
764,950
-----------
Total Producer Durables .............................. 1,432,825
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Value
Shares (Note 1)
- ------------------------------------------------------------------------
<S> <C> <C>
Technology 23.7%
Communications Technology 2.1%
Lucent Technologies Inc. ......................... 5,900 $ 397,881
----------
Computer Software 4.1%
Microsoft Corp.* ................................. 8,500 766,594
----------
Computer Technology 12.8%
Cisco Systems Inc.* .............................. 11,100 715,950
Electronic Data Systems Corp. .................... 7,200 407,250
EMC Corp.* ....................................... 5,800 319,000
International Business Machines Corp. ............ 4,400 568,700
Sun Microsystems Inc.* ........................... 5,600 385,875
----------
2,396,775
----------
Electronics 2.1%
Nokia Corp. ADR .................................. 4,300 393,719
----------
Electronics: Semi-Conductors/Components 2.6%
Texas Instruments Inc. ........................... 3,400 493,000
----------
Total Technology .......................................... 4,447,969
----------
Utilities 10.3%
Cable Television & Radio 1.8%
Cox Communications Inc. Cl. A* ................... 9,000 331,313
----------
Telecommunications 8.5%
Alltel Corp. ..................................... 6,100 436,150
MCI WorldCom Inc.* ............................... 6,600 568,012
MediaOne Group Inc.* ............................. 3,500 260,313
Qwest Communications International Inc.* ......... 10,200 337,237
----------
1,601,712
----------
Total Utilities ........................................... 1,933,025
----------
Total Common Stocks (Cost $14,175,544) .................... 18,186,625
----------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Principal Maturity
Amount Date
- -------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 4.1%
American Express Credit Corp.,
4.95% ...................... $403,000 7/01/1999 403,000
American Express Credit Corp.,
5.25% ...................... 363,000 7/07/1999 363,000
-------
Total Commercial Paper (Cost $766,000) ............. 766,000
-------
Total Investments (Cost $14,941,544)--100.9% ....... 18,952,625
Cash and Other Assets, Less Liabilities--(0.9%) .... (171,620)
----------
Net Assets--100.0% ................................. $18,781,005
===========
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
- -------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
At June 30, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $14,966,728 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ............................................ $4,017,834
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value .......................................... (31,937)
----------
$3,985,897
==========
</TABLE>
- --------------------------------------------------------------------------------
*Nonincome-producing securities
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $14,941,544) (Note 1) ............. $18,952,625
Cash .......................................................... 6,148
Receivable for securities sold ................................ 1,048,821
Receivable from Distributor (Note 3) .......................... 58,182
Dividends and interest receivable ............................. 8,300
Receivable for fund shares sold ............................... 834
Deferred organization costs and other assets (Note 1) ......... 97,388
-----------
20,172,298
Liabilities
Payable for securities purchased .............................. 1,231,185
Accrued management fee (Note 2) ............................... 10,127
Accrued trustees' fees (Note 2) ............................... 9,079
Accrued distribution and service fees (Note 5) ................ 2,251
Other accrued expenses ........................................ 138,651
-----------
1,391,293
-----------
Net Assets $18,781,005
===========
Net Assets consist of:
Unrealized appreciation of investments ....................... $ 4,011,081
Accumulated net realized loss ................................ (67,981)
Paid-in capital .............................................. 14,837,905
-----------
$18,781,005
===========
Net Asset Value and redemption price per share of
Class A shares ($2,336,224 [divided by] 251,578 shares) ..... $9.29
=====
Maximum Offering Price per share of Class A shares
($9.29 [divided by] .9425) .................................. $9.86
=====
Net Asset Value and offering price per share of Class
B(1) shares ($634,093 [divided by] 68,939 shares)* .......... $9.20
=====
Net Asset Value and offering price per share of Class
B shares ($794,984 [divided by] 86,365 shares)* ............. $9.20
=====
Net Asset Value and offering price per share of Class
C shares ($672,747 [divided by] 73,058 shares)* ............. $9.21
=====
Net Asset Value, offering price and redemption price
per share of Class S shares
($14,342,957 [divided by] 1,540,011 shares) ................. $9.31
=====
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended June 30, 1999
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $76 ................... $ 81,932
Interest ................................................. 34,532
----------
116,464
Expenses
Custodian fee ............................................ 93,722
Management fee (Note 2) .................................. 88,232
Reports to shareholders .................................. 51,421
Legal fees ............................................... 50,736
Registration fees ........................................ 23,781
Amortization of organization costs (Note 1) .............. 18,215
Audit fee ................................................ 13,178
Trustees' fees (Note 2) .................................. 10,520
Service fee--Class A (Note 5) ............................ 3,871
Distribution and service fees--Class B(1) (Note 5) ....... 2,763
Distribution and service fees--Class B (Note 5) .......... 6,373
Distribution and service fees--Class C (Note 5) .......... 5,715
Miscellaneous ............................................ 1,258
----------
369,785
Fees paid indirectly (Note 2) ............................ (63)
Expenses borne by the Distributor (Note 3) ............... (215,232)
----------
154,490
----------
Net investment loss ...................................... (38,026)
----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) ......... 32,951
Net unrealized appreciation of investments ............... 3,410,523
----------
Net gain on investments .................................. 3,443,474
----------
Net increase in net assets resulting from operations ..... $3,405,448
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1998
(Commencement of
Operations) to Year ended
June 30, 1998 June 30, 1999
---------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income (loss) ......... $ 7,666 $ (38,026)
Net realized gain (loss) on
investments ........................ (100,932) 32,951
Net unrealized appreciation of
investments ........................ 600,558 3,410,523
---------- -----------
Net increase resulting from
operations ......................... 507,292 3,405,448
---------- -----------
Dividend from net investment
income:
Class A ............................. -- (1,375)
Class S ............................. -- (10,313)
---------- -----------
-- (11,688)
---------- -----------
Net increase from fund share
transactions (Note 6) .............. 9,414,453 5,465,500
---------- -----------
Total increase in net assets ......... 9,921,745 8,859,260
Net Assets
Beginning of year .................... -- 9,921,745
---------- -----------
End of year (including undistributed
net investment income of $14,798
and $0, respectively) .............. $9,921,745 $18,781,005
========== ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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
Trust presently consists 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 five 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. On January 1,
1999, the Fund began offering Class B(1) shares and continued offering Class B
shares but only to current shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of State
Street Research funds. Class B(1) and Class B pay annual distribution and
service fees of 1.00% and both classes automatically convert into Class A
shares (which pay lower ongoing expenses) at the end of eight years. Class B(1)
shares are subject to a contingent deferred sales charge on certain redemptions
made within six years of purchase. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase. Class C shares are subject to a contingent deferred sales charge of
1.00% on any shares redeemed within one year of 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 represent final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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 has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. At June 30, 1999, the Fund had a capital
loss carryforward of $42,797 available, to the extent provided in regulations,
to offset future capital gains, if any, which expires on June 30, 2007.
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 $91,539 and has deferred and treated 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 year ended June 30, 1999, 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 year ended June 30, 1999, the fees pursuant
to such agreement amounted to $88,232.
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 year ended June 30, 1999, the amount of such
expenses was $262.
The Fund has entered into an agreement 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 year ended June 30, 1999 the Fund's transfer
agent fees were reduced by $63 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$10,520 during the year ended June 30, 1999.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund.
During the year ended June 30, 1999, the amount of such expenses assumed by the
Distributor and its affiliates was $215,232.
Note 4
For the year ended June 30, 1999, purchases and sales of securities, exclusive
of short-term obligations, aggregated $24,303,443 and $18,374,833,
respectively.
7
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), 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 year ended June 30, 1999, fees
pursuant to such plans amounted to $3,871, $6,373 and $5,715 for Class A, Class
B and Class C shares, respectively. For the period January 1, 1999
(commencement of share class) to June 30, 1999, fees pursuant to such plans
amounted to $2,763 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $91 and $740, respectively, on sales of Class A shares of the Fund
during the year ended June 30, 1999, and that MetLife Securities, Inc. earned
commissions aggregating $161 on sales and the Distributor collected contingent
deferred sales charges aggregating $5 on redemptions 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 June 30, 1999, 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,
59,952 Class B(1) shares and 440,476 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
March 27, 1998
(Commencement of
Operations) to Year ended
June 30, 1998 June 30, 1999
------------------------- ---------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................. 108,371 $ 765,934 144,360 $ 1,138,520
Issued upon reinvestment of dividend ......... -- -- 106 842
Shares repurchased ........................... -- -- (1,259) (11,157)
--------- ---------- -------- ------------
Net increase ................................. 108,371 $ 765,934 143,207 $ 1,128,205
========= ========== ======== ============
Class B(1)* Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
Shares sold .................................. -- $ -- 68,939 $ 578,077
--------- ---------- -------- ------------
Net increase ................................. -- $ -- 68,939 $ 578,077
========= ========== ======== ============
Class B Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
Shares sold .................................. 72,159 $ 505,082 14,242 $ 112,402
Shares repurchased ........................... -- -- (36) (305)
--------- ---------- -------- ------------
Net increase ................................. 72,159 $ 505,082 14,206 $ 112,097
========= ========== ======== ============
Class C Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
Shares sold .................................. 71,441 $ 500,082 1,617 $ 14,091
--------- ---------- -------- ------------
Net increase ................................. 71,441 $ 500,082 1,617 $ 14,091
========= ========== ======== ============
Class S Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
Shares sold .................................. 1,121,958 $7,824,978 673,473 $ 5,476,910
Shares repurchased ........................... (26,084) (181,623) (229,336) (1,843,880)
--------- ---------- -------- ------------
Net increase ................................. 1,095,874 $7,643,355 444,137 $ 3,633,030
========= ========== ======== ============
</TABLE>
- --------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to June 30, 1999.
8
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
-----------------------------------
March 27, 1998
(Commencement of
Operations) to Year ended
June 30, 1998(a) June 30, 1999(a)
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of year ($) 7.00 7.36
----- ------
Net investment income (loss) ($)* 0.00 (0.03)
Net realized and unrealized gain on investments ($) 0.36 1.97
----- ------
Total from investment operations ($) 0.36 1.94
----- ------
Dividend from net investment income ($) -- (0.01)
----- ------
Total distributions ($) -- (0.01)
----- ------
Net asset value, end of year ($) 7.36 9.29
===== ======
Total return(b) (%) 5.14(d) 26.32
Ratios/supplemental data:
Net assets at end of year ($ thousands) 797 2,336
Ratio of operating expenses to average net assets (%)* 1.25(e) 1.25
Ratio of net investment income (loss) to average net assets (%)* 0.25(e) (0.41)
Portfolio turnover rate (%) 30.76 141.92
*Reflects voluntary reduction of expenses per share
of these amounts (Note 3) ($) 0.07 0.06
</TABLE>
<TABLE>
<CAPTION>
Class B(1) Class B
------------------- -----------------------------------
March 27, 1998
(Commencement of
Period ended Operations) to Year ended
June 30, 1999(a)(c) June 30, 1998(a) June 30, 1999(a)
------------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of year ($) 8.34 7.00 7.34
------ ----- ------
Net investment income (loss) ($)* (0.05) (0.01) (0.09)
Net realized and unrealized gain on investments ($) 0.91 0.35 1.95
------ ----- ------
Total from investment operations ($) 0.86 0.34 1.86
------ ----- ------
Dividend from net investment income ($) -- -- --
------ ----- ------
Total distributions ($) -- -- --
------ ----- ------
Net asset value, end of year ($) 9.20 7.34 9.20
====== ===== ======
Total return(b) (%) 10.31(d) 4.86(d) 25.34
Ratios/supplemental data:
Net assets at end of year ($ thousands) 634 530 795
Ratio of operating expenses to average net assets (%)* 2.00(e) 2.00(e) 2.00
Ratio of net investment income (loss) to average net assets (%)* (1.27)(e) (0.44)(e) (1.12)
Portfolio turnover rate (%) 141.92 30.76 141.92
*Reflects voluntary reduction of expenses per share
of these amounts (Note 3) ($) 0.08 0.07 0.15
</TABLE>
<TABLE>
<CAPTION>
Class C
-----------------------------------
March 27, 1998
(Commencement of
Operations) to Year ended
June 30, 1998(a) June 30, 1999(a)
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of year ($) 7.00 7.34
----- ------
Net investment income (loss) ($)* (0.01) (0.09)
Net realized and unrealized gain on investments ($) 0.35 1.96
------ -------
Total from investment operations ($) 0.34 1.87
------ -------
Dividend from net investment income ($) -- --
------ -------
Total distributions ($) -- --
------ -------
Net asset value, end of year ($) 7.34 9.21
====== =======
Total return(b) (%) 4.86(d) 25.48
Ratios/supplemental data:
Net assets at end of year ($ thousands) 525 673
Ratio of operating expenses to average net assets (%)* 2.00(e) 2.00
Ratio of net investment income (loss) to average net assets (%)* (0.43)(e) (1.12)
Portfolio turnover rate (%) 30.76 141.92
*Reflects voluntary reduction of expenses per share
of these amounts (Note 3) ($) 0.07 0.16
</TABLE>
<TABLE>
<CAPTION>
Class S
-----------------------------------
March 27, 1998
(Commencement of
Operations) to Year ended
June 30, 1998(a) June 30, 1999(a)
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of year ($) 7.00 7.36
----- ------
Net investment income (loss) ($)* 0.01 (0.01)
Net realized and unrealized gain on investments ($) 0.35 1.97
----- ------
Total from investment operations ($) 0.36 1.96
----- ------
Dividend from net investment income ($) -- (0.01)
----- ------
Total distributions ($) -- (0.01)
----- ------
Net asset value, end of year ($) 7.36 9.31
===== ======
Total return(b) (%) 5.14(d) 26.62
Ratios/supplemental data:
Net assets at end of year ($ thousands) 8,070 14,343
Ratio of operating expenses to average net assets (%)* 1.00(e) 1.00
Ratio of net investment income (loss) to average net assets (%)* 0.46(e) (0.14)
Portfolio turnover rate (%) 30.76 141.92
*Reflects voluntary reduction of expenses per share
of these amounts (Note 3) ($) 0.06 0.13
</TABLE>
- --------------------------------------------------------------------------------
(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) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
9
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Equity Trust and Shareholders of
State Street Research Athletes Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Athletes
Fund (a series of State Street Research Equity Trust, hereafter referred to as
the "Trust") at June 30, 1999, and the results of its operations, the changes
in its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at June 30, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 16, 1999
10
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
For the year ended June 30, 1999, Class A shares of State Street Research
Athletes Fund returned +26.32% [does not reflect sales charge]. That return
surpassed the Lipper average growth fund, which was up 18.87%, as well as the
22.76% gain by the S&P 500.
Sector weightings favoring technology stocks and reducing the materials and
processing sector contributed significantly to the Fund's performance. Stock
selection within consumer discretionary and multi-sector companies also helped.
Two technology holdings and several diverse sector holdings underperformed,
however.
The manager shifted some holdings from high-profile growth companies to
lower-valued stocks during the year. Potential capital gains from the sale of a
large, appreciated holding in America Online over two quarters were mitigated
by applying losses from other sales.
June 30, 1999
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 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
Class S shares, offered without a sales charge, are available through certain
employee benefit plans and special programs. The S&P 500 (officially "Standard
and Poor's 500 Composite Stock Price Index") is an unmanaged index of 500 U.S.
stocks. The index does not take transaction charges into consideration. Direct
investment in the index is not possible; results are for illustrative purposes
only.
[line charts]
Change in Value of $10,000
Based on the S&P 500
Compared to Change in Value of $10,000
Invested in the Fund
Class A Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year Life of Fund
-----------------------------
<S> <C>
19.06% 19.46%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Athletes Fund S&P 500
------------- -------
<S> <C> <C>
Inception 3/27/98 9425 10000
6/30/98 9910 10332
6/30/99 12518 12684
</TABLE>
Class B(1) Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year Life of Fund
-----------------------------
<S> <C>
20.34% 21.16%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Athletes Fund S&P 500
------------- -------
<S> <C> <C>
Inception 3/27/98 10000 10000
6/30/98 10486 10332
6/30/99 12743 12684
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year Life of Fund
-----------------------------
<S> <C>
20.34% 21.16%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Athletes Fund S&P 500
------------- -------
<S> <C> <C>
Inception 3/27/98 10000 10000
6/30/98 10486 10332
6/30/99 12743 12684
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year Life of Fund
-----------------------------
<S> <C>
24.48% 24.26%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Athletes Fund S&P 500
------------- -------
<S> <C> <C>
Inception 3/27/98 10000 10000
6/30/98 10486 10332
6/30/99 13157 12684
</TABLE>
Class S Shares
<TABLE>
<CAPTION>
-----------------------------
Average Annual Total Return
-----------------------------
1 Year Life of Fund
-----------------------------
<S> <C>
26.62% 25.43%
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Athletes Fund S&P 500
------------- -------
<S> <C> <C>
Inception 3/27/98 10000 10000
6/30/98 10514 10332
6/30/99 13313 12684
</TABLE>
[end line charts]
- ---------------------------------------------------------------------------
___ Athletes Fund --- S&P 500
- ---------------------------------------------------------------------------
11
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH EQUITY TRUST
- --------------------------------------------------------------------------------
Fund Information
State Street Research
Athletes Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Bartlett R. Geer
Vice President
F. Gardner Jackson, Jr.
Vice President
Thomas P. Moore, Jr.
Vice President
Brian P. O'Dell
Vice President
Daniel J. Rice III
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Peter A. Zuger
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Bruce R. Bond
Chairman of the Board,
Chief Executive Officer and
President, PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and
Treasurer, The Pennsylvania
State University
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial
Officer, St. Regis Corp.
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer
and Director, Hewlett-Packard
Company
Toby Rosenblatt
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
12
<PAGE>
[back cover]
--------------
State Street Research Athletes Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Permit #6
Hartford, CT
--------------
[logo: STATE STREET RESEARCH
75 YEARS
LASTING VALUES
--------------
LEADING IDEAS]
Questions? Comments?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[logo: State Street Research]
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded 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 September 30, 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: (exp0800)SSR-LD AT-022G-0899
