<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
ARGO FUND
--------------------------------
ANNUAL REPORT
June 30, 2000
---------------------
WHAT'S INSIDE
---------------------
FROM THE CHAIRMAN
Volatility in the stock
market continues
PORTFOLIO MANAGER'S REVIES
A challenging environment
for value stocks
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
FROM THE CHAIRMAN
[Photo of Gerard P. Maus]
DEAR SHAREHOLDER:
America's cycle of economic prosperity has continued for a record-breaking
nine consecutive years. Gross domestic product (GDP), a measure of goods and
services produced in the U.S., rose at an annual rate of 5.4% in 1999. Despite
the efforts of the Federal Reserve Board to cool down the economy by raising
interest rates, growth continued at around 5.0% for the first half of 2000.
The Fed has raised a key short-term interest rate six times in the past year,
from 4.75% to 6.5% as inflation picked up to 3.7% from 2.0% one year ago.
Unemployment sunk to a 30-year low of 3.9% before edging back up to 4.1% near
the end of the period.
STOCKS
The U.S. stock market delivered modest gains over the 12 months ended June 30,
2000, but the final numbers mask the volatility that roiled the technology
sector and other market leaders in the last quarter of the period. The S&P 500
rose 7.2%, while the technology-heavy Nasdaq gained a stunning 48.0% despite
giving back 13.2% in the second quarter.(1)
BONDS
In 1999, the bond market was hurt by factors associated with Y2K and rising
interest rates. However, long-term U.S. Treasury bonds picked up early in
2000, helped by the federal government's repurchase of bonds -- the first
since the 1930s -- and the perception that the Fed is working to stem
inflation with higher interest rates. In an environment marked with
uncertainty, municipal and mortgage bonds held up better than corporate bonds.
Both delivered attractive single-digit returns. High-yield bonds, which were
relatively strong in 1999, lost ground in 2000. In May, the bond market
adopted the 10-year U.S. Treasury as its benchmark. This replaces the 30-year
Treasury, which has become something of a dinosaur as the result of the
federal government's buyback program and a budget surplus that has reduced the
government's borrowing needs.
INTERNATIONAL
Economic growth around the globe was better than expected. In Asia and the
emerging markets of Latin America, economies rebounded from currency and
economic woes faster than anticipated. Japan began to show signs of progress
in revitalizing its economy after a decade of stagnation and decline. That was
reflected in strong stock market performance in 1999, especially among small
Japanese companies. However, Japanese stocks lost ground in 2000 as economic
fears returned. European stock markets delivered mixed results. European
technology and telecommunications sectors have soared -- and stumbled -- along
with the U.S. market.
OUTLOOK AND OPPORTUNITIES
So far, the year 2000 has been marked by significant volatility in the stock
market and only modest returns in the bond market. For long-term investors, it
has been a good reminder that diversification is still the best way to reduce
the impact of volatility. Now is a good time to consult your financial
professional about the strategies that make sense for your personal portfolio.
And, as always, we thank you for your confidence in State Street Research.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus, Chief Executive Officer
State Street Research Funds
June 30, 2000
(1) The S&P 500 (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell 1000 Value Index
contains those stocks in the Russell 1000 Index with a less than average
growth orientation. The indices do not take transaction charges into
consideration. It is not possible to invest directly in the indices.
(2) -14.33% for Class B(1) shares; -14.31% for Class B shares; -14.30% for
Class C shares; -13.42% 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 rein- vestment of capital
gains distributions and income dividends at net asset value.
(4) 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.
(5) 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, 2000)
--------------------------------------------------------------------------------
TOTAL VALUE OF $10,000 INVESTED ON JUNE 30, 1990(3)
(Class A shares, at maximum applicable sales charge)
Argo Fund - Class A
-------------------
6/90 $ 9,425
6/91 8,850
6/92 10,467
6/93 12,599
6/94 12,716
6/95 15,048
6/96 18,860
6/97 24,690
6/98 31,510
6/99 34,537
6/00 29,811
<TABLE>
AVERAGE ANNUAL TOTAL RETURN (at
maximum applicable sales charge)(3)(4)(5)
<CAPTION>
------------------------------------------------------------------------------------------------------------
LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 11.67% 11.54% 13.30% -18.65%
------------------------------------------------------------------------------------------------------------
Class B(1) 11.75% 11.65% 13.55% -17.73%
------------------------------------------------------------------------------------------------------------
Class B 11.75% 11.66% 13.56% -17.71%
------------------------------------------------------------------------------------------------------------
Class C 11.76% 11.66% 13.83% -14.98%
------------------------------------------------------------------------------------------------------------
Class S 12.32% 12.44% 14.93% -13.42%
------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (does not reflect sales charge)(3)(5)
<CAPTION>
------------------------------------------------------------------------------------------------------------
LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------------------------------------------
Class A 12.15% 12.20% 14.65% -13.68%
------------------------------------------------------------------------------------------------------------
Class B(1) 11.75% 11.65% 13.79% -14.33%
------------------------------------------------------------------------------------------------------------
Class B 11.75% 11.66% 13.80% -14.31%
------------------------------------------------------------------------------------------------------------
Class C 11.76% 11.66% 13.83% -14.30%
------------------------------------------------------------------------------------------------------------
Class S 12.32% 12.44% 14.93% -13.42%
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Argo Fund: A challenging einvironment for value stocks
[Photo of Peter Zuger]
Peter Zuger
Portfolio Manager
We spoke with Peter Zuger, portfolio manager of State Street Research Argo
Fund, about the year ended June 30, 2000 and his views on the year ahead.
Q: HOW DID THE FUND PERFORM LAST YEAR?
A: It was a disappointing year for value stocks and for the fund. Class A
shares of Argo Fund returned -13.68% [without sales charge](2) for the 12
months ended June 30, 2000. The fund underperformed the Russell 1000 Value
Index, which returned -8.92% over the same period.(1) It also underperformed
the Lipper Large-Cap Value Funds Average, which was off -1.11%.
Q: WHAT ACCOUNTED FOR THE FUND'S WEAK PERFORMANCE?
A: The underperformance was primarily the result of stock selection,
especially in the first half of the fund year (the second half of 1999).
Because we focused on stocks with low price/earnings ratios and higher
yielding, low price to book value companies, we missed out on more rapidly
growing, large-company stocks that were in the value universe. The fund was
also hurt by the decline of several key holdings. Accounting issues turned
investors negative on Waste Management and Raytheon. Chubb and Saint Paul were
laggards in the insurance sector.
Q: DID YOU CHANGE THE FUND'S STOCK SELECTION STRATEGY AS A RESULT OF YOUR
EXPERIENCE IN 1999?
A: No. We reviewed our screening process, and we discussed it with the fund's
trustees. We concluded that 1999 had some unusual characteristics associated
with it that we do not believe are sustainable. We are confident that over the
long term, our methodology for stock selection is sound and that it would be a
strategic error to adjust our strategies to accommodate what we believe is a
short-term market anomaly. In fact, we are already beginning to see the
benefit of our position as some of the stocks that we missed last year are
beginning to unwind.
Q: DOES THAT MEAN THE FUND DID BETTER IN THE SECOND HALF OF THE YEAR THAN IN
THE FIRST?
A: Yes. The first half of 2000 (the second half of the fund year) was quite a
bit better. The fund was above median in its peer group: it moved up from the
90th percentile to the 45th percentile. Unfortunately, that wasn't enough to
pull us up for the
12-month period.
Q: WHERE WERE THE FUND'S SUCCESSES?
A: Our focus on low valuations helped us uncover opportunities. For example,
Marsh & McLennan, an insurance stock, benefited from an improving pricing
environment and HCA, a hospital management company, rebounded strongly after
being depressed as the result of the regulatory environment. Also in health
care, we invested in Pharmacia, a drug company formed by a merger with Upjohn
and Monsanto. New product visibility and cost savings that have resulted from
the merger contributed to a rise in the newly-combined company's share price.
Lastly, Citigroup was one of the fund's strong performers for the year. I
believe the market finally recognized the long-term growth prospects of the
company, which bought Travelers Insurance back in 1998.
Q: HOW IS THE FUND POSITIONED FOR THE YEAR AHEAD?
A: The fund remains overweighted in industrial and energy issues, whose
earnings comparisons should benefit from the strong global business
environment. It has significant exposure to telecommunications and electric
utilities, based on solid business prospects and reasonable valuation levels.
The fund is underweighted in technology issues since many do not meet the
fund's rigorous value criteria. We've also underweighted financial stocks,
with the exception of property and casualty insurance stocks where pricing
continues to improve. In other areas of finance -- banks, for example -- we
believe earnings could come under pressure as interest rates rise and credit
quality deteriorates.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND?
A: I believe there is significant opportunity ahead for value stocks, and for
the fund, although the catalyst and the timing remains uncertain. Classic
value strategies, such as the ones we employ, have underperformed growth
strategies for several years while growth stocks have become more and more
expensive. The best way to benefit from a rotation from growth to value is to
be there when it happens.
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 EXXON MOBIL Oil 3.4%
2 AT&T Telecommunications 2.8%
3 SBC COMMUNICATIONS Telecommunications 2.5%
4 INTERNATIONAL PAPER Paper and forest products 2.3%
5 VERIZON COMMUNICATIONS Communications 2.3%
6 FNMA Financial 2.2%
7 U.S. WEST Telecommunications 2.2%
8 BURLINGTON RESOURCES Oil and gas exploration 2.2%
9 CITIGROUP Financial services 2.2%
10 UNOCAL Oil & gas exploration 2.2%
These securities represent an aggregate of 24.3% of the portfolio. Because of
active management, there is no guarantee that the fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
TOP 5 INDUSTRIES
(by percentage of net assets)
TELECOMMUNICATIONS 13.5%
MISCELLANEOUS FINANCIAL 8.7%
INTEGRATED INTERNATIONAL OIL 7.1%
INSURANCE 6.1%
BANKS & SAVINGS & LOANS 6.0%
LARGEST CONTRIBUTORS TO PERFORMANCE
(July 1, 1999 through June 30, 2000)
POSITIVE /\
--------------------------------------------------------------------------------
U.S. WEST
HCA
NABISCO
NEGATIVE \/
--------------------------------------------------------------------------------
WASTE MANAGEMENT
RAYTHEON
BANK ONE
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
--------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------------------------------
June 30, 2000
<CAPTION>
--------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.7%
AUTOMOBILES & TRANSPORTATION 2.3%
AUTOMOTIVE PARTS 1.4%
Delphi Automotive Systems Corp. ................................ 108,539 $ 1,580,599
------------
RAILROADS 0.9%
Burlington Northern Santa Fe Corp. ............................. 39,900 915,206
------------
Total Automobiles & Transportation ............................. 2,495,805
------------
CONSUMER DISCRETIONARY 8.6%
COMMERCIAL SERVICES 3.1%
Cendant Corp.* ................................................. 113,900 1,594,600
Waste Management Inc. .......................................... 98,200 1,865,800
------------
3,460,400
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.4%
Walt Disney Co. ................................................ 41,100 1,595,194
------------
RESTAURANTS 0.5%
McDonald's Corp. ............................................... 17,800 586,288
------------
RETAIL 3.6%
Federated Department Stores Inc.* .............................. 49,000 1,653,750
May Department Stores Co. ...................................... 40,350 968,400
Staples Inc.* .................................................. 87,100 1,339,162
------------
3,961,312
------------
Total Consumer Discretionary ................................... 9,603,194
------------
FINANCIAL SERVICES 21.6%
BANKS & SAVINGS & LOAN 6.0%
Bank of America Corp. .......................................... 35,203 1,513,729
First Union Corp. .............................................. 65,700 1,630,181
FleetBoston Financial Corp. .................................... 57,100 1,941,400
SunTrust Banks Inc. ............................................ 33,200 1,516,825
------------
6,602,135
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.8%
First Data Corp. ............................................... 18,100 898,212
------------
INSURANCE 6.1%
Chubb Corp. .................................................... 16,200 996,300
Hartford Financial Services Group, Inc. ........................ 29,600 1,655,750
Saint Paul Companies, Inc. ..................................... 53,600 1,829,100
XL Capital Ltd. Cl. A .......................................... 42,800 2,316,550
------------
6,797,700
------------
MISCELLANEOUS FINANCIAL 8.7%
Associated First Capital Corp. Cl. A ........................... 20,900 466,331
Citigroup, Inc. ................................................ 40,975 2,468,744
Federal National Mortgage Association .......................... 47,900 2,499,781
Marsh & McLennan Companies, Inc. ............................... 19,700 2,057,419
Mellon Financial Corp. ......................................... 60,900 2,219,044
------------
9,711,319
------------
Total Financial Services ....................................... 24,009,366
------------
HEALTH CARE 7.5%
DRUGS & BIOTECHNOLOGY 5.5%
Abbott Laboratories Inc. ....................................... 42,400 1,889,450
Baxter International Inc. ...................................... 29,200 2,053,125
Pharmacia Corp. ................................................ 42,100 2,176,044
------------
6,118,619
------------
HEALTH CARE FACILITIES 2.0%
HCA Healthcare Corp. ........................................... 73,000 $ 2,217,375
------------
Total Health Care .............................................. 8,335,994
------------
INTEGRATED OILS 11.2%
INTEGRATED DOMESTIC 4.1%
Conoco Inc. Cl. B .............................................. 87,800 2,156,588
Unocal Corp. ................................................... 72,500 2,401,562
------------
4,558,150
------------
INTEGRATED INTERNATIONAL 7.1%
BP Amoco PLC ADR ............................................... 30,264 1,711,808
Exxon Mobil Corp. .............................................. 48,400 3,799,400
Texaco Inc. .................................................... 43,500 2,316,375
------------
7,827,583
------------
Total Integrated Oils .......................................... 12,385,733
------------
MATERIALS & PROCESSING 10.6%
CHEMICALS 5.0%
Dow Chemical Co. ............................................... 62,600 1,889,737
E.I. Du Pont De Nemours & Co. .................................. 44,500 1,946,875
Rohm & Haas Co. ................................................ 50,700 1,749,150
------------
5,585,762
------------
NON-FERROUS METALS 1.6%
Alcoa Inc. ..................................................... 62,000 1,798,000
------------
PAPER & FOREST PRODUCTS 4.0%
Fort James Corp. ............................................... 76,300 1,764,438
International Paper Co. ........................................ 87,600 2,611,575
------------
4,376,013
------------
Total Materials & Processing ................................... 11,759,775
------------
OTHER 4.1%
MULTI-SECTOR 4.1%
Honeywell International Inc. ................................... 45,400 1,529,413
Minnesota Mining & Manufacturing Co. ........................... 9,100 750,750
Seagram Ltd. ................................................... 40,000 2,320,000
------------
Total Other .................................................... 4,600,163
------------
OTHER ENERGY 4.5%
GAS PIPELINES 0.4%
Williams Companies Inc. ........................................ 11,100 462,731
------------
OIL & GAS PRODUCERS 2.2%
Burlington Resources Inc. ...................................... 64,600 2,470,950
------------
OIL WELL EQUIPMENT & SERVICES 1.9%
Halliburton Co. ................................................ 44,400 2,095,125
------------
Total Other Energy ............................................. 5,028,806
------------
PRODUCER DURABLES 2.4%
AEROSPACE 1.6%
Boeing Co. ..................................................... 42,200 1,764,487
------------
MACHINERY 0.8%
Caterpillar Inc. ............................................... 27,900 945,113
------------
Total Producer Durables ........................................ 2,709,600
------------
TECHNOLOGY 4.1%
COMMUNICATIONS TECHNOLOGY 1.9%
General Motors Corp. Cl. H* .................................... 16,200 $ 1,421,550
Motorola Inc. .................................................. 24,400 709,125
------------
2,130,675
------------
COMPUTER TECHNOLOGY 2.2%
Electronic Data Systems Corp. .................................. 29,500 1,216,875
International Business Machines Corp. .......................... 11,200 1,227,100
------------
2,443,975
------------
Total Technology ............................................... 4,574,650
------------
UTILITIES 18.8%
ELECTRICAL 5.3%
Duke Energy Co. ................................................ 35,500 2,001,312
Southern Co. ................................................... 80,800 1,883,650
TXU Corp. ...................................................... 68,700 2,026,650
------------
5,911,612
------------
TELECOMMUNICATIONS 13.5%
AT&T Corp. ..................................................... 98,450 3,113,481
Bellsouth Corp. ................................................ 34,200 1,457,775
SBC Communications Inc. ........................................ 65,400 2,828,550
Sprint Corp. ................................................... 19,400 989,400
U.S. West Inc. ................................................. 29,100 2,495,325
Verizon Communications ......................................... 51,100 2,596,519
Worldcom Inc.* ................................................. 33,400 1,532,225
------------
15,013,275
------------
Total Utilities ................................................ 20,924,887
------------
Total Common Stocks (Cost $100,781,887) ........................ 106,427,973
------------
<CAPTION>
------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 5.2%
American Express Credit Corp., 6.88% ............... $2,000,000 7/03/2000 2,000,000
American Express Credit Corp., 6.72% ............... 3,202,000 7/05/2000 3,202,000
Ford Motor Credit Co., 6.71% ....................... 551,000 7/07/2000 551,000
------------
Total Commercial Paper (Cost $5,753,000) ...................................... 5,753,000
------------
Total Investments (Cost $106,534,887) - 100.9% ................................ 112,180,973
Cash and Other Assets, Less Liabilities - (0.9%) .............................. (972,401)
------------
Net Assets - 100.0% ........................................................... $111,208,572
============
Federal Income Tax Information:
At June 30, 2000, the net unrealized appreciation of investments
based on cost for Federal income tax purposes of $107,753,613
was as follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost ................................... $ 13,190,592
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value ................................... (8,763,232)
------------
$ 4,427,360
============
* Non income-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
The accompanying notes are in integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments, at value (Cost $106,534,887) (Note 1) ............... $112,180,973
Cash ............................................................. 9,504
Receivable for securities sold ................................... 708,675
Dividends and interest receivable ................................ 186,237
Receivable from Distributor (Note 3) ............................. 166,477
Receivable for fund shares sold .................................. 96,597
Other assets ..................................................... 6,655
------------
113,355,118
LIABILITIES
Payable for securities purchased ................................. 854,172
Payable for fund shares redeemed ................................. 793,031
Accrued management fee (Note 2) .................................. 202,349
Accrued transfer agent and shareholder services
(Note 2) ....................................................... 142,992
Accrued distribution and service fees (Note 5) ................... 40,856
Accrued trustees' fees (Note 2) .................................. 17,870
Other accrued expenses ........................................... 95,276
------------
2,146,546
------------
NET ASSETS ....................................................... $111,208,572
============
Net Assets consist of:
Unrealized appreciation of investments ......................... $ 5,646,086
Accumulated net realized loss .................................. (2,674,139)
Paid-in capital ................................................ 108,236,625
------------
$111,208,572
============
Net Asset Value and redemption price per share of Class A shares
($52,086,389 / 3,574,805 shares) ............................... $14.57
======
Maximum Offering Price per share of Class A shares ($14.57 / .9425) $15.46
======
Net Asset Value and offering price per share of
Class B(1) shares ($7,503,727 / 532,622 shares)* ............... $14.09
======
Net Asset Value and offering price per share of
Class B shares ($33,391,672 / 2,364,606 shares)* ............... $14.12
======
Net Asset Value and offering price per share of
Class C shares ($1,189,026 / 84,137 shares)* ................... $14.13
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($17,037,758 / 1,172,001 shares) ............................... $14.54
======
------------------------------------------------------------------------------------
*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.
The accompanying notes are in integral part of the financial statement.
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the year ended June 30, 2000
INVESTMENT INCOME
Dividends, net of foreign taxes of $16,670 ................ $ 3,390,615
Interest (Note 1) ......................................... 199,514
------------
3,590,129
EXPENSES
Management fee (Note 2) ................................... 986,542
Transfer agent and shareholder services (Note 2) .......... 587,941
Custodian fee ............................................. 129,610
Registration fees ......................................... 71,658
Reports to shareholders ................................... 55,384
Audit fee ................................................. 25,276
Trustees' fees (Note 2) ................................... 17,870
Legal fees ................................................ 17,342
Service fee - Class A (Note 5) ............................ 162,341
Distribution and service fees - Class B(1) (Note 5) ....... 64,066
Distribution and service fees - Class B (Note 5) .......... 449,518
Distribution and service fees - Class C (Note 5) .......... 12,025
Miscellaneous ............................................. 9,886
------------
2,589,459
Expenses borne by the Distributor (Note 3) ................ (368,278)
Fees paid indirectly (Note 2) ............................. (15,477)
------------
2,205,704
------------
Net investment income ..................................... 1,384,425
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) .......... 887,647
Net unrealized depreciation of investments ................ (31,179,928)
------------
Net loss on investments ................................... (30,292,281)
------------
Net decrease in net assets resulting from
operations .............................................. $(28,907,856)
============
<TABLE>
------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30
-----------------------------------
1999 2000
------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................... $ 1,149,577 $ 1,384,425
Net realized gain on investments ........................ 38,935,822 887,647
Net unrealized depreciation of investments .............. (23,505,974) (31,179,928)
------------ ------------
Net increase (decrease) resulting from operations ....... 16,579,425 (28,907,856)
------------ ------------
Dividends from net investment income:
Class A ............................................... (331,356) (795,050)
Class B(1) ............................................ (1,635) (47,937)
Class B ............................................... -- (237,586)
Class C ............................................... -- (6,630)
Class S ............................................... (499,905) (508,673)
------------ ------------
(832,896) (1,595,876)
------------ ------------
Distributions from capital gains:
Class A ............................................... (7,384,171) (13,436,842)
Class B(1) ............................................ -- (995,188)
Class B ............................................... (5,516,923) (10,565,711)
Class C ............................................... (158,506) (274,321)
Class S ............................................... (9,054,570) (10,933,557)
------------ ------------
(22,114,170) (36,205,619)
------------ ------------
Distributions in excess of capital gains:
Class A ............................................... -- (1,096,018)
Class B(1) ............................................ -- (109,437)
Class B ............................................... -- (767,783)
Class C ............................................... -- (18,885)
Class S ............................................... -- (623,388)
------------ ------------
-- (2,615,511)
------------ ------------
Net decrease from fund share transactions (Note 6) ...... (21,144,328) (25,080,576)
------------ ------------
Total decrease in net assets ............................ (27,511,969) (94,405,438)
NET ASSETS
Beginning of year ....................................... 233,125,979 205,614,010
------------ ------------
End of year (including undistributed net investment income of
$336,422 and $0, respectively) ........................ $205,614,010 $111,208,572
============ ============
The accompanying notes are in integral part of the financial statement.
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
June 30, 2000
NOTE 1
State Street Research Argo 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 investment objective of the Fund is to provide long-term growth of capital
and, secondarily, income. In seeking to achieve its investment objective, the
Fund invests at least 65% of total assets in large-cap value stocks, which may
include common and preferred stocks, convertible securities and warrants.
The Fund offers five classes of shares. Class A shares are subject to an
initial sales charge of up to 5.75%. From July 1, 1999 to April 30, 2000,
Class A shares paid a service fee equal to 0.25% of average daily net assets.
Beginning May 1, 2000 Class A shares pay an annual distribution and service
fee equal to 0.30% 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 MetLife, Inc. ("MetLife"), and special programs. No sales
charge is imposed at the time of purchase or redemption of Class S shares.
Class S shares do not pay any 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
plans of distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are at
the mean of the closing bid and asked quotations. Short-term securities maturing
within sixty days are valued at amortized cost. Other securities, if any, are
valued at their fair value as determined in accordance with established methods
consistently applied.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. NET INVESTMENT INCOME
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to
it, while indirect expenses are allocated among all funds in the Trust.
D. DIVIDENDS
Dividends from net investment income, if any, are declared and paid or
reinvested quarterly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations. For the year ended June 30, 2000, the Fund has
designated as long-term $25,321,813 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.
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 12-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, 1999 through June 30, 2000, the Fund
incurred net capital losses of approximately $1,455,000 and it intends to defer
and treat such losses as arising in the fiscal year ended June 30, 2001.
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, 2000, there were no loaned securities. During the year ended
June 30, 2000, income from securities lending amounted to $25,641 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, 2000, the fees pursuant
to such agreement amounted to $986,542.
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 MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, MetLife receives a fee for maintenance of the
accounts of certain shareholders who are participants in sponsored
arrangements, 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, 2000, the amount of such shareholder servicing and account maintenance
expenses was $271,105.
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, 2000 the Fund's
transfer agent fees were reduced by $15,477 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$17,870 during the year ended June 30, 2000.
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, 2000, the amount of such expenses assumed
by the Distributor and its affiliates was $368,278.
NOTE 4
For the year ended June 30, 2000, purchases and sales of securities, exclusive
of short-term obligations, aggregated $118,159,574 and $185,059,132,
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,
beginning May 1, 2000, the Fund pays annual distribution fees of 0.05% of
average daily net assets for Class A shares. The Fund pays annual distribution
fees of 0.75% of average daily net assets for Class B(1), 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, 2000, fees pursuant to such plans
amounted to $162,341, $64,066, $449,518, and $12,025 for Class A, Class B(1),
Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$26,092 and $56 094, respectively, on sales of Class A shares of the Fund during
the year ended June 30, 2000, and that MetLife Securities, Inc. earned
commissions aggregating $99,923 and $1,312 on sales of Class B(1) and Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $24,817, $85,918 and $76 on redemptions of Class B(1), Class B and
Class C shares, respectively, during the same period.
NOTE 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------------------------------------------------------
1999 2000
------------------------------- -------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................... 952,096 $ 18,460,508 553,306 $ 8,793,448
Issued upon reinvestment of:
Dividends from net investment income 15,825 317,273 56,164 777,397
Distributions from net realized gains 377,796 7,137,865 847,618 14,028,642
Shares redeemed ....................... (1,245,552) (23,863,674) (1,495,144) (22,427,544)
------------ ------------ ------------ ------------
Net increase (decrease) ............... 100,165 $ 2,051,972 (38,056) $ 1,171,943
============ ============ ============ ============
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Shares sold ........................... 237,803 $ 4,568,242 391,274 $ 5,989,098
Issued upon reinvestment of:
Dividends from net
investment income ..................... 150 1,635 3,157 44,799
Distribution from net realized gains -- -- 68,632 1,088,713
Shares redeemed ....................... (33,497) (677,927) (134,897) (1,901,364)
------------ ------------ ------------ ------------
Net increase .......................... 204,456 $ 3,891,950 328,166 $ 5,221,246
============ ============ ============ ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Shares sold ........................... 798,834 $ 15,458,889 174,042 $ 2,708,339
Issued upon reinvestment of:
Dividend from net
investment income ..................... -- -- 16,125 229,943
Distributions from net realized gains 293,842 5,422,431 690,945 11,040,896
Shares redeemed ....................... (683,683) (12,921,381) (1,382,490) (19,799,578)
------------ ------------ ------------ ------------
Net increase (decrease) ............... 408,993 $ 7,959,939 (501,378) $ (5,820,400)
============ ============ ============ ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Shares sold ........................... 657,186 $ 12,433,576 39,205 $ 578,727
Issued upon reinvestment of:
Dividend from net investment income . -- -- 387 5,516
Distributions from net realized gains 7,870 145,219 17,341 277,453
Shares redeemed ....................... (671,001) (12,786,000) (47,631) (690,706)
------------ ------------ ------------ ------------
Net increase (decrease) ............... (5,945) $ (207,205) 9,302 $ 170,990
============ ============ ============ ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Shares sold ........................... 2,203,797 $ 41,755,985 689,204 $ 10,593,756
Issued upon reinvestment of:
Dividends from net investment income 25,046 492,632 34,527 508,540
Distributions from net realized gains 479,326 9,052,915 699,045 11,555,776
Shares redeemed ....................... (4,486,925) (86,142,516) (3,230,749) (48,482,427)
------------ ------------ ------------ ------------
Net decrease .......................... (1,778,756) $(34,840,984) (1,807,973) $(25,824,355)
============ ============ ============ ============
------------------------------------------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
-------------------------------------------------------------------------------------------------------------------------
FIINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each year:
<CAPTION>
CLASS A
----------------------------------------------------------
YEARS ENDED JUNE 30
----------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 14.28 17.04 19.68 21.68 21.30
----- ----- ----- ----- ------
Net investment income* ($) 0.12 0.09 0.06 0.13 0.18
Net realized and unrealized gain
(loss) on investments ($) 3.38 4.63 4.74 1.64 (2.75)
----- ----- ----- ----- ------
TOTAL FROM INVESTMENT OPERATIONS ($) 3.50 4.72 4.80 1.77 (2.57)
----- ----- ----- ----- ------
Dividends from net investment income ($) (0.11) (0.09) (0.06) (0.09) (0.20)
Distributions from capital gains ($) (0.63) (1.99) (2.74) (2.06) (3.70)
Distribution in excess of net realized gains -- -- -- -- (0.26)
----- ----- ----- ----- ------
TOTAL DISTRIBUTIONS ($) (0.74) (2.08) (2.80) (2.15) (4.16)
----- ----- ----- ----- ------
NET ASSET VALUE, END OF YEAR ($) 17.04 19.68 21.68 21.30 14.57
===== ===== ===== ===== ======
Total return(b) (%) 25.33 30.91 27.62 9.61 (13.68)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 39,300 55,239 76,151 76,943 52,086
Expense ratio (%)* 1.25 1.25 1.25 1.26 1.27
Expense ratio after expense reductions (%)* 1.25 1.25 1.25 1.25 1.26
Ratio of net investment income to average net assets (%)* 0.79 0.54 0.29 0.68 1.11
Portfolio turnover rate (%) 44.44 88.07 81.53 118.91 80.37
*Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.03 0.01 0.01 0.04
<CAPTION>
CLASS B(1)
---------------------
YEARS ENDED JUNE 30
---------------------
1999(a)(c) 2000(a)
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR ($) 18.66 20.76
------ ------
Net investment income ($)* 0.02 0.06
Net realized and unrealized gain (loss) on investments ($) 2.09 (2.67)
------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 2.11 (2.61)
------ ------
Dividends from net investment income ($) (0.01) (0.10)
Distributions from capital gains ($) -- (3.70)
Distribution in excess of net realized gains -- (0.26)
------ ------
TOTAL DISTRIBUTIONS ($) (0.01) (4.06)
------ ------
NET ASSET VALUE, END OF YEAR ($) 20.76 14.09
====== ======
Total return(b) (%) 11.30(d) (14.33)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 4,244 7,504
Expense ratio (%)* 2.01(e) 2.01
Expense ratio after expense reductions (%)* 2.00(e) 2.00
Ratio of net investment income to average net assets (%)* 0.24(e) 0.39
Portfolio turnover rate (%) 118.91 80.37
*Reflects voluntary reduction of expenses per share of these amounts
(Note 3) ($) 0.00 0.05
-------------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-------------------------------------------------------------------------------
YEARS ENDED JUNE 30
-------------------------------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 14.16 16.88 19.42 21.25 20.77
------ ------ ------ ------ ------
Net investment income (loss) ($)* 0.01 (0.03) (0.09) (0.01) 0.06
Net realized and unrealized gain (loss)
on investments ($) 3.34 4.56 4.66 1.59 (2.67)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 3.35 4.53 4.57 1.58 (2.61)
------ ------ ------ ------ ------
Dividends from net investment income ($) -- -- -- -- (0.08)
Distributions from capital gains ($) (0.63) (1.99) (2.74) (2.06) (3.70)
Distribution in excess of net realized gains -- -- -- -- (0.26)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.63) (1.99) (2.74) (2.06) (4.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ($) 16.88 19.42 21.25 20.77 14.12
====== ====== ====== ====== ======
Total return(b) (%) 24.39 29.91 26.67 8.82 (14.33)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 13,129 25,478 52,211 59,527 33,392
Expense ratio (%)* 2.00 2.00 2.00 2.01 2.01
Expense ratio after expense reductions (%)* 2.00 2.00 2.00 2.00 2.00
Ratio of net investment income (loss) to
average net assets (%)* 0.05 (0.20) (0.46) (0.06) 0.37
Portfolio turnover rate (%) 44.44 88.07 81.53 118.91 80.37
*Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.03 0.01 0.01 0.04
<CAPTION>
CLASS C
----------------------------------------------------------
YEARS ENDED JUNE 30
----------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR ($) 14.15 16.87 19.41 21.26 20.78
------ ------ ------ ------ ------
Net investment income (loss) ($)* 0.01 (0.03) (0.09) (0.01) 0.06
Net realized and unrealized gain
(loss) on investments ($) 3.34 4.56 4.68 1.59 (2.66)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 3.35 4.53 4.59 1.58 (2.60)
------ ------ ------ ------ ------
Dividend from net investment income ($) -- -- -- -- (0.09)
Distributions from capital gains ($) (0.63) (1.99) (2.74) (2.06) (3.70)
Distribution in excess of net realized gains -- -- -- -- (0.26)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.63) (1.99) (2.74) (2.06) (4.05)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ($) 16.87 19.41 21.26 20.78 14.13
====== ====== ====== ====== ======
Total return(b) (%) 24.40 29.93 26.80 8.81 (14.30)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 931 1,642 1,718 1,555 1,189
Expense ratio (%)* 2.00 2.00 2.00 2.01 2.01
Expense ratio after expense reductions (%)* 2.00 2.00 2.00 2.00 2.00
Ratio of net investment income (loss) to
average net assets (%)* 0.04 (0.19) (0.43) (0.07) 0.36
Portfolio turnover rate (%) 44.44 88.07 81.53 118.91 80.37
*Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.03 0.01 0.01 0.04
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced a portion of the Fund's expenses.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
-------------------------------------------------------------------------------------------------------------------------
FIANCIAL HIGHLIGHTS (cont'd)
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
----------------------------------------------------------
YEARS ENDED JUNE 30
----------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 14.27 17.03 19.66 21.65 21.26
------ ------ ------ ------ ------
Net investment income ($)* 0.17 0.13 0.11 0.17 0.22
Net realized and unrealized gain
(loss) on investments ($) 3.37 4.62 4.73 1.64 (2.74)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 3.54 4.75 4.84 1.81 (2.52)
------ ------ ------ ------ ------
Dividends from net investment income ($) (0.15) (0.13) (0.11) (0.14) (0.24)
Distributions from capital gains ($) (0.63) (1.99) (2.74) (2.06) (3.70)
Distribution in excess of net realized gains -- -- -- -- (0.26)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.78) (2.12) (2.85) (2.20) (4.20)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ($) 17.03 19.66 21.65 21.26 14.54
====== ====== ====== ====== ======
Total return(b) (%) 25.66 31.19 27.90 9.84 (13.42)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 70,177 83,999 103,046 63,346 17,038
Expense ratio (%)* 1.00 1.00 1.00 1.01 1.01
Expense ratio after expense reductions (%)* 1.00 1.00 1.00 1.00 1.00
Ratio of net investment income to
average net assets (%)* 1.06 0.77 0.55 0.89 1.36
Portfolio turnover rate (%) 44.44 88.07 81.53 118.91 80.37
*Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.03 0.01 0.01 0.03
-------------------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced a portion of the Fund's expenses.
</TABLE>
<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 (a series of State Street Research Equity Trust, hereafter
referred to as the "Trust") at June 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards generally accepted
in the United States, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2000
<PAGE>
STATE STREET RESEARCH ARGO FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
--------------------------------------------------------------------------------
It was a disappointing year for value stocks and for the fund. Class A shares
returned -13.68% [without sales charge] for the 12 months ended June 30, 2000.
The fund underperformed the Russell 1000 Value Index, which returned -8.92%
over the same period. It also underperformed the Lipper Large-Cap Value Funds
Average, which was off -1.11%.
The fund's underperformance was the result of overall weakness among value
stocks and stock selection during the first half of the year. Accounting
issues caused two of the fund's substantial positions -- Waste Management and
Raytheon -- to unravel during the period. We took significant losses in both
stocks. Although we missed some of the best performing value stocks during the
first half of the year, we made no significant changes to the fund's stock-
screening methodology because we believe that it should prove itself to be
sound over the long term. The fund's best performers were in property and
casualty insurance, health care and financial services, including Marsh
McLennan, HCA Healthcare and CitiGroup.
June 30, 2000
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
gains 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
Composite Stock Price Index") is an unmanaged index of 500 U.S. stocks. The
Russell 1000 Value Index contains those stocks in the Russell 1000 Index with
a less than average growth orientation. The indices do not take transaction
charges into consideration. It is not possible to invest directly in the
indices.
CHANGE IN VALUE OF
$10,000 BASED ON THE S&P 500
COMPARED TO CHANGE IN VALUE OF $10,000
INVESTED IN THE FUND
CLASS A SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-18.65% 13.30% 11.54%
Russell 1000
Argo Fund S&P 500 Index Value Index
--------- ------------- -----------
6/90 $ 9,425 $10,000 $10,000
6/91 8,850 10,737 10,534
6/92 10,467 12,175 12,214
6/93 12,599 13,831 14,894
6/94 12,716 14,025 15,136
6/95 15,048 17,676 18,227
6/96 18,860 22,268 22,716
6/97 24,690 29,990 30,255
6/98 31,510 39,039 38,980
6/99 34,537 47,925 45,359
6/00 29,811 51,395 41,313
CLASS B(1) SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-17.73% 13.55% 11.65%
Russell 1000
Argo Fund S&P 500 Index Value Index
--------- ------------- -----------
6/90 $10,000 $10,000 $10,000
6/91 9,390 10,737 10,534
6/92 11,105 12,175 12,214
6/93 13,357 13,831 14,894
6/94 13,407 14,025 15,136
6/95 15,78 17,676 18,227
6/96 19,628 22,268 22,716
6/97 25,500 29,990 30,255
6/98 32,301 39,039 38,980
6/99 35,145 47,925 45,359
6/00 30,107 51,395 41,313
CLASS B SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-17.71% 13.56% 11.66%
Russell 1000
Argo Fund S&P 500 Index Value Index
--------- ------------- -----------
6/90 $10,000 $10,000 $10,000
6/91 9,390 10,737 10,534
6/92 11,105 12,175 12,214
6/93 13,357 13,831 14,894
6/94 13,407 14,025 15,136
6/95 15,780 17,676 18,227
6/96 19,628 22,268 22,716
6/97 25,500 29,990 30,255
6/98 32,301 39,039 38,980
6/99 35,148 47,925 45,359
6/00 30,117 51,395 41,313
CLASS C SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-14.78% 13.83% 11.66%
Russell 1000
Argo Fund S&P 500 Index Value Index
6/90 $10,000 $10,000 $10,000
---- ------- ------- -------
6/91 9,390 10,737 10,534
6/92 11,105 12,175 12,214
6/93 13,357 13,831 14,894
6/94 13,416 14,025 15,136
6/95 15,768 17,676 18,227
6/96 19,616 22,268 22,716
6/97 25,487 29,990 30,255
6/98 32,318 39,039 38,980
6/99 35,165 47,925 45,359
6/00 30,137 51,395 41,313
CLASS S SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-13.42% 14.93% 12.49%
Russell 1000
Argo Fund S&P 500 Index Value Index
--------- ------------- -----------
6/90 $10,000 $10,000 $10,000
6/91 9,390 10,737 10,534
6/92 11,105 12,175 12,214
6/93 13,368 13,831 14,894
6/94 13,555 14,025 15,136
6/95 16,108 17,676 18,227
6/96 20,241 22,268 22,716
6/97 26,555 29,990 30,255
6/98 33,963 39,039 38,980
6/99 37,305 47,925 45,359
6/00 32,297 51,395 41,313
<PAGE>
<TABLE>
STATE STREET RESEARCH ARGO FUND
--------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Argo Fund ("Fund"), a series of State Street Research
Equity Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
<CAPTION>
VOTES (MILLIONS OF SHARES)
---------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 1.9 0.4 0.2
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 1.5 0.2 0.1
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 0.2 0.0 0.0
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEE OF STATE STREET RESEARCH EQUITY TRUST
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
ARGO FUND Chairman of the Board, Interim Chief Operating Officer,
One Financial Center President, Chief Executive Chief Financial Officer,
Boston, MA 02111 Officer and Treasurer Chief Administrative
Officer and Director,
INVESTMENT ADVISER BARTLETT R. GEER State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center F. GARDNER JACKSON, JR. BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer and
DISTRIBUTOR THOMAS P. MOORE, JR. President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center BRIAN P. O'DELL Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES DANIEL J. RICE III State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 JAMES M. WEISS Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (1-877-773-8637) Officer and Director,
PETER A. ZUGER Hewlett-Packard Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company DOUGLAS A. ROMICH Dean, School of Business
225 Franklin Street Assistant Treasurer and Public Management,
Boston, MA 02110 George Washington University;
FRANCIS J. MCNAMARA, III former Member of the Board
LEGAL COUNSEL Secretary and General Counsel of Governors of the Federal
Goodwin, Procter & Hoar LLP Reserve System and Chairman
Exchange Place DARMAN A. WING and Commissioner of the
Boston, MA 02109 Assistant Secretary and Commodity Futures Trading
Assistant General Counsel Commission
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP SUSAN E. BREEN TOBY ROSENBLATT
160 Federal Street Assistant Secretary President, Founders Investments Ltd.
Boston, MA 02110 President, The Glen Ellen Company
AMY L. SIMMONS
Assistant Secretary MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH ARGO FUND ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.StateStreetResearch.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637) or
[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
[Logo] STATE STREET RESEARCH
(C) State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Argo Fund prospectus.
When used after September 30, 2000, 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: (exp0801)SSR-LD AG-2186-0800
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
ALPHA FUND
--------------------------------
ANNUAL REPORT
June 30, 2000
---------------------
WHAT'S INSIDE
---------------------
FROM THE CHAIRMAN
Volatility in the stock
market continues
PORTFOLIO MANAGER'S REVIEW
A challenging environment
for value stocks
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
FROM THE CHAIRMAN
[Photo of Gerard P. Maus]
DEAR SHAREHOLDER:
America's cycle of economic prosperity has continued for a record-breaking
nine consecutive years. Gross domestic product (GDP), a measure of goods and
services produced in the U.S., rose at an annual rate of 5.4% in 1999. Despite
the efforts of the Federal Reserve Board to cool down the economy by raising
interest rates, growth continued at around 5.0% for the first half of 2000.
The Fed has raised a key short-term interest rate six times in the past year,
from 4.75% to 6.5% as inflation picked up to 3.7% from 2.0% one year ago.
Unemployment sunk to a 30-year low of 3.9% before edging back up to 4.1% near
the end of the period.
STOCKS
The U.S. stock market delivered modest gains over the 12 months ended June 30,
2000, but the final numbers mask the volatility that roiled the technology
sector and other market leaders in the last quarter of the period. The S&P 500
rose 7.2%, while the technology-heavy Nasdaq gained a stunning 48.0% despite
giving back 13.2% in the second quarter.(1)
BONDS
In 1999, the bond market was hurt by factors associated with Y2K and rising
interest rates. However, long-term U.S. Treasury bonds picked up early in
2000, helped by the federal government's repurchase of bonds -- the first
since the 1930s -- and the perception that the Fed is working to stem
inflation with higher interest rates. In an environment marked with uncer-
tainty, mortgage bonds held up better than corporate bonds. Both delivered
attractive single-digit returns. High-yield bonds, which were relatively
strong in 1999, lost ground in 2000.
In May, the bond market adopted the 10-year U.S. Treasury as its benchmark.
This replaces the 30-year Treasury, which has become something of a dinosaur
as the result of the federal government's buyback program and a budget surplus
that has reduced the government's borrowing needs.
INTERNATIONAL
Economic growth around the globe was better than expected. In Asia and the
emerging markets of Latin America, economies rebounded from currency and
economic woes faster than anticipated. Japan began to show signs of progress in
revitalizing its economy after a decade of stagnation and decline. That was
reflected in strong stock market performance in 1999, especially among small
Japanese companies. However, Japanese stocks lost ground in 2000 as economic
fears returned. European stock markets delivered mixed results. European
technology and telecommunications sectors have soared -- and stumbled -- along
with the U.S. market.
OUTLOOK AND OPPORTUNITIES
So far, the year 2000 has been marked by significant volatility in the stock
market and only modest returns in the bond market. For long-term investors, it
has been a good reminder that diversification is still the best way to reduce
the impact of volatility. Now is a good time to consult your financial
professional about the strategies that make sense for your personal portfolio.
And, as always, we thank you for your confidence in State Street Research.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus, Chief Executive Officer
State Street Research Funds
June 30, 2000
(1) The S&P 500 (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Russell MidCap Value
Index contains stocks from the Russell MidCap Index with a less than average
growth orientation. The indices do not take transaction charges into
consideration. It is not possible to invest directly in the indices.
(2) -10.59% for Class B(1) shares; -10.59% for Class B shares; -10.57% for
Class C shares; -9.58% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain or
loss when you sell your shares. All returns assume rein- vestment of capital
gains distributions and income dividends at net asset value.
(4) 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.
(5) 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, 2000)
-------------------------------------------------------------------------------
TOTAL VALUE OF $10,000 INVESTED ON JUNE 30, 1990(3)
(Class A shares, at maximum applicable sales charge)
Alpha Fund - Class A
--------------------
6/90 $ 9,425
6/91 8,833
6/92 10,141
6/93 12,347
6/94 12,880
6/95 14,958
6/96 18,310
6/97 23,336
6/98 29,906
6/99 29,895
6/00 26,939
<TABLE>
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(3)(4)(5)
<CAPTION>
------------------------------------------------------------------------------------------------------------
LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 10.28% 10.42% 11.16% -15.07%
------------------------------------------------------------------------------------------------------------
Class B(1) 10.34% 10.51% 11.37% -14.91%
------------------------------------------------------------------------------------------------------------
Class B 10.35% 10.52% 11.40% -14.92%
------------------------------------------------------------------------------------------------------------
Class C 10.37% 10.52% 11.67% -11.42%
------------------------------------------------------------------------------------------------------------
Class S 10.95% 11.32% 12.79% - 9.58%
------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
------------------------------------------------------------------------------------------------------------
LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------------------------------------------
Class A 10.75% 11.05% 12.49% - 9.89%
------------------------------------------------------------------------------------------------------------
Class B(1) 10.34% 10.49% 11.63% -10.59%
------------------------------------------------------------------------------------------------------------
Class B 10.35% 10.50% 11.65% -10.59%
------------------------------------------------------------------------------------------------------------
Class C 10.35% 10.50% 11.67% -10.57%
------------------------------------------------------------------------------------------------------------
Class S 10.92% 11.30% 12.79% - 9.58%
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Alpha Fund: A challenging environment for value stocks
[Photo of Bart Geer]
Bart Geer
Portfolio Manager
We spoke with Bart Geer, portfolio manager of State Street Research Alpha Fund,
about the year ended June 30, 2000 and his views on the year ahead.
Q: HOW DID THE FUND PERFORM LAST YEAR?
A: It was a disappointing year for value stocks and for the fund. Class A shares
of Alpha Fund returned -9.89% [without sales charge] for the 12 months ended
June 30, 2000.(2) The fund underperformed the Russell MidCap Value Index, which
returned -7.91% over the same period.(1) It also underperformed the Lipper
Mid-Cap Value Funds Average, which gained 5.49%.
Q: WHAT ACCOUNTED FOR THE FUND'S WEAK PERFORMANCE?
A: The performance was the result of three factors. First, it was a weak
environment for value stocks. For the first 9 months of the 12-month period, it
was an ignored asset class as investors were attracted to the high growth
prospects of the technology sector. In that type of environment, it's hard to do
well. Second, we were doubly hit because our style is to invest in what we call
"deep value" stocks. Those stocks were hit the hardest of all. However, we are
disciplined value investors and we stuck with our style where we suspect that
some funds in our peer group did not.
Q: DID YOU MAKE ANY CHANGES IN THE FUND'S STRATEGY?
A: No. We concluded -- and independent research from Sanford Bernstein
corroborates -- that 1999 had some unusual characteristics associated with it
that we do not believe are sustainable. In fact, Sanford Bernstein's study of
market factors over the past two years revealed that there has never been
another period where leadership was concentrated in such a narrow band of
growth-oriented stocks. We are confident that our methodology is sound over
the long term and that it would be a strategic error to adjust our strategies
to accommodate what we believe is a short-term market anomaly.
Q: YOU MENTIONED THAT THERE WERE THREE FACTORS CONTRIBUTING TO THE FUND'S
DISAPPOINTING PERFORMANCE. WHAT WAS THE THIRD?
A: Stock selection hurt us. Two of the fund's substantial positions unraveled
during the period. One was Ogden, a company with businesses in leisure, food
service and independent energy. Late last year they missed their earnings
target, slashed their dividend, and announced that the CEO was being let go. The
fund was also hurt by its position in Safety Kleen, which has been rocked by
charges of accounting irregularities. We took significant losses in both stocks.
Q: WHERE WERE THE FUND'S SUCCESSES?
A: Cyclical stocks made a sharp move up at the end of the first quarter, and
that marked a definite improvement for the fund, which is heavily invested in
cyclical stocks. Also, our investment in gaming stocks such as Harrah's and
International Game Technology started working in the last quarter as good
earnings reports helped erase investor concerns that Las Vegas has been
overbuilt. Our investments in the insurance sectors paid off in the last quarter
as companies have finally gained some pricing power. Both gaming and insurance
stocks had given up a lot of ground during the previous year. However, as
investors began to recognize the value they represent, we believe our patience
has been justified.
Q: DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO?
A: We more than doubled our exposure to energy stocks and caught a nice
upswing in performance during the last quarter as oil and natural gas prices
exploded to multi-year highs.
Q: HOW IS THE FUND POSITIONED FOR THE YEAR AHEAD?
A: We believe that the Federal Reserve has gone easy on interest rates, despite
six rate increases in the past year. As a result, we have targeted cyclical
energy and insurance stocks for the period ahead, and we are underweighted in
utilities, banks and technology.
June 30, 2000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 HOLLINGER INTERNATIONAL Newspaper publishing 6.3%
2 ACE Insurance 5.1%
3 VALASSIS COMMUNICATIONS Newspaper promotions 4.3%
4 MARK IV INDUSTRIES Power transfer equipment 4.1%
5 BALL Containers 3.9%
6 WILLIAMS COMPANIES Energy, telecommunications 3.7%
7 XL CAPITAL Insurance 3.5%
8 QUORUM HEALTH GROUP Health care services 3.0%
9 HARRAH'S ENTERTAINMENT Hotel and casino operations 3.0%
10 AMERICAN NATIONAL CAN GROUP Containers, packaging 2.9%
These securities represent an aggregate of 39.8% 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.
TOP 5 EQUITY INDUSTRIES
(by percentage of net assets)
INSURANCE 10.8%
PRINTING & PUBLISHING 6.3%
OIL & GAS PRODUCERS 4.8%
ADVERTISING AGENCIES 4.3%
ELECTRICAL 4.1%
Total: 30.3%
LARGEST CONTRIBUTORS TO PERFORMANCE
(July 1, 1999 through June 30, 2000)
POSITIVE /\
-------------------------------------
LAGARDERE
CYPRESS SEMICONDUCTOR
QUEST DIAGNOSTICS
NEGATIVE /\
-------------------------------------
OGDEN
SAFETY KLEEN
GENCORP
<PAGE>
<TABLE>
STATE STREET RESEARCH ALPHA FUND
------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------
June 30, 2000
<CAPTION>
------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 88.3%
AUTOMOBILES & TRANSPORTATION 1.4%
AUTOMOTIVE PARTS 0.7%
Delphi Automotive Systems Corp. ................................ 20,000 $ 291,250
TRW Inc. ....................................................... 25,000 1,084,375
------------
1,375,625
------------
TRUCKERS 0.7%
CNF Transportation Inc. ........................................ 55,000 1,251,250
------------
Total Automobiles & Transportation .............................. 2,626,875
------------
CONSUMER DISCRETIONARY 19.4%
ADVERTISING AGENCIES 4.3%
Valassis Communications Inc.* .................................. 210,000 8,006,250
------------
CASINOS/GAMBLING, HOTEL/MOTEL 3.8%
Harrah's Entertainment Inc.* ................................... 265,000 5,548,437
International Game Technology Inc.* ............................ 63,597 1,685,321
Motels of America Inc.*+ ....................................... 500 125
------------
7,233,883
------------
COMMERCIAL SERVICES 2.9%
A.C. Nielsen Corp.* ............................................ 230,000 5,060,000
Freedom Payable Inc.(+) ........................................ 107,628 392,842
------------
5,452,842
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 0.2%
Granite Broadcasting Co.* ...................................... 40,000 295,000
------------
PRINTING & PUBLISHING 6.3%
Hollinger International, Inc. Cl. A ............................ 875,292 11,925,854
------------
RESTAURANTS 0.2%
AmeriKing, Inc.* ............................................... 1,000 10,000
Darden Restaurants Inc. ........................................ 20,000 325,000
------------
335,000
------------
RETAIL 1.7%
Federated Department Stores Inc.* .............................. 80,000 2,700,000
TJX Companies, Inc. ............................................ 30,000 562,500
------------
3,262,500
------------
Total Consumer Discretionary ................................... 36,511,329
------------
CONSUMER STAPLES 0.5%
BEVERAGES 0.0%
Whitman Corp. .................................................. 10,000 123,750
------------
HOUSEHOLD PRODUCTS 0.0%
Dial Corp. ..................................................... 5,000 51,875
------------
TOBACCO 0.5%
UST Inc. ....................................................... 60,000 881,250
------------
Total Consumer Staples ......................................... 1,056,875
------------
FINANCIAL SERVICES 17.1%
BANKS & SAVINGS & LOAN 3.5%
Banknorth Group Inc. ........................................... 280,000 4,287,500
Golden State Bancorp Inc.* ..................................... 45,400 817,200
Mercantile Bankshares Corp. .................................... 35,000 1,043,437
SouthTrust Corp. ............................................... 20,000 452,500
------------
6,600,637
------------
INSURANCE 10.8%
Ace Ltd. ....................................................... 345,000 9,660,000
Saint Paul Companies, Inc. ..................................... 120,000 4,095,000
XL Capital Ltd. Cl. A .......................................... 121,935 6,599,732
------------
20,354,732
------------
MISCELLANEOUS FINANCIAL 2.8%
Ambac Financial Group, Inc. .................................... 95,000 5,207,188
------------
Total Financial Services ....................................... 32,162,557
------------
HEALTH CARE 3.9%
HEALTH CARE FACILITIES 0.9%
Quest Diagnostics, Inc.* ....................................... 15,000 1,073,437
Tenet Healthcare Corp. ......................................... 20,000 540,000
------------
1,613,437
------------
HEALTH CARE SERVICES 3.0%
Quorum Health Group Inc.* ...................................... 550,000 5,671,875
------------
Total Health Care .............................................. 7,285,312
------------
INTEGRATED OILS 3.8%
INTEGRATED DOMESTIC 3.0%
Unocal Corp. ................................................... 110,000 3,643,750
USX-Marathon Group ............................................. 80,000 2,005,000
------------
5,648,750
------------
INTEGRATED INTERNATIONAL 0.8%
Petro-Canada* .................................................. 75,000 1,429,688
------------
Total Integrated Oils .......................................... 7,078,438
------------
MATERIALS & PROCESSING 12.7%
BUILDING & CONSTRUCTION 0.6%
York International Corp. ....................................... 45,000 1,136,250
------------
CHEMICALS 1.4%
Omnova Solutions Inc. .......................................... 25,000 156,250
Solutia Inc. ................................................... 175,000 2,406,250
------------
2,562,500
------------
CONTAINERS & PACKAGING 3.2%
American National Can Group Inc. ............................... 328,000 5,535,000
Jefferson Smurfit Group PLC ADR ................................ 20,000 352,500
Smurfit Stone Container Corp.* ................................. 10,000 128,750
------------
6,016,250
------------
DIVERSIFIED MANUFACTURING 3.9%
Ball Corp. ..................................................... 230,000 7,403,125
------------
MISCELLANEOUS MATERIALS & PROCESSING 0.0%
NS Group Inc.* ................................................. 2,925 61,237
------------
PAPER & FOREST PRODUCTS 1.8%
Fort James Corp. ............................................... 116,200 2,687,125
Westvaco Corp. ................................................. 25,700 637,681
------------
3,324,806
------------
STEEL 1.8%
Alaska Steel Holding Corp. ..................................... 145,000 1,160,000
Harsco Corp. ................................................... 90,000 2,295,000
------------
3,455,000
------------
Total Materials & Processing ................................... 23,959,168
------------
OTHER 3.7%
MULTI-SECTOR 3.7%
Gencorp Inc. ................................................... 320,000 2,560,000
Ogden Corp.* ................................................... 485,000 4,365,000
------------
Total Other .................................................... 6,925,000
------------
OTHER ENERGY 11.0%
GAS PIPELINES 3.7%
Williams Companies Inc. ........................................ 165,000 6,878,437
------------
OIL & GAS PRODUCERS 4.8%
Burlington Resources Inc. ...................................... 10,000 382,500
Ocean Energy Inc.* ............................................. 160,000 2,270,000
Ultramar Diamond Shamrock Co. .................................. 110,000 2,729,375
Union Pacific Resources Group Inc. ............................. 170,000 3,740,000
------------
9,121,875
------------
OIL WELL EQUIPMENT & SERVICES 2.5%
Baker Hughes Inc. .............................................. 70,000 2,240,000
Valero Energy Corp. ............................................ 75,000 2,381,250
------------
4,621,250
------------
Total Other Energy ............................................. 20,621,562
------------
PRODUCER DURABLES 5.1%
ELECTRICAL EQUIPMENT & COMPONENTS 4.1%
Mark IV Industries Inc. ........................................ 365,000 7,619,375
------------
MISCELLANEOUS EQUIPMENT 1.0%
Thomas & Betts Corp. ........................................... 100,000 1,912,500
------------
Total Producer Durables ........................................ 9,531,875
------------
TECHNOLOGY 2.3%
COMMUNICATIONS TECHNOLOGY 0.4%
NCR Corp.* ..................................................... 20,000 778,750
------------
COMPUTER TECHNOLOGY 0.5%
Silicon Graphics Inc.* ......................................... 25,000 93,750
Unisys Corp.* .................................................. 60,000 873,750
------------
967,500
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 1.4%
Cypress Semiconductor Corp.* ................................... 55,000 2,323,750
MIPS Technologies Inc. Cl B* ................................... 6,929 266,767
------------
2,590,517
------------
Total Technology ............................................... 4,336,767
------------
UTILITIES 7.4%
ELECTRICAL 4.1%
Energy East Corp. .............................................. 40,000 762,500
OGE Energy Corp. ............................................... 75,000 1,387,500
Pinnacle West Capital Corp. .................................... 80,000 2,710,000
Scana Corp. .................................................... 115,000 2,774,375
------------
7,634,375
------------
GAS DISTRIBUTION 1.5%
National Fuel Gas Co. .......................................... 5,000 243,750
Questar Corp. .................................................. 100,000 1,937,500
UGI Corp. ...................................................... 28,200 578,100
------------
2,759,350
------------
TELECOMMUNICATIONS 1.8%
Celcaribe SA*+ ................................................. 69,918 $ 104,877
NEXTLINK Communications Inc. Cl. A* ............................ 24,478 928,616
RSL Communications Ltd. Cl. A* ................................. 125,000 1,429,687
Viatel Inc.* ................................................... 35,000 999,687
Weblink Wireless Inc.* ......................................... 1,750 23,188
------------
3,486,055
------------
Total Utilities ................................................ 13,879,780
------------
Total Common Stocks (Cost $151,181,890) ........................ 165,975,538
------------
CONVERTIBLE PREFERRED STOCKS & OTHER 2.6%
Advanced Radio Telecom Corp. Wts.* ............................. 3,750 65,497
Clark U.S.A. Inc. Sr. Exch. Pfd.> .............................. 661 132,200
Clearnet Communications Inc. Wts.* ............................. 3,300 19,800
Cluett American Corp. Sr. Exch. Pfd.> .......................... 22,916 389,572
Loral Orion Network Systems Inc. Wts.* ......................... 1,250 5,625
Nextel Communications Inc. Series D Exch. Pfd.> ................ 90 94,500
North Atlantic Trading Inc. Sr. Pfd.> .......................... 70,573 1,217,384
Nucentrix Broadband Networks, Inc. Wts.* ....................... 1,500 15
Pagemart Inc. Wts.*+ ........................................... 3,450 12,938
Primus Telecommunications Group Wts.* .......................... 500 15,500
Real Time Data Inc. Series B Pfd.@(+) .......................... 4,498 410,623
RSL Communications Ltd. Wts.*+ ................................. 500 20,000
Startec Global Communications Corp. Wts.*+ ..................... 1,150 403
Winstar Communications Cv. Pfd. ................................ 46,419 2,512,428
Wireless One Inc. Wts.* ........................................ 1,500 15
------------
Total Convertible Preferred Stocks & Other
(Cost $9,292,857) ............................................ 4,896,500
------------
<CAPTION>
------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS 6.7%
Advanced Radio Telecom Corp. Sr. Note, 14.00% . $ 680,000 2/15/2007 584,800
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 145,000
Drypers Corp. Sr. Note Series B, 10.25% ....... 1,200,000 6/15/2007 816,000
Econophone Inc. Sr. Note, 13.50% .............. 1,750,000 7/15/2007 1,566,250
Empire Gas Corp. Sr. Sec. Note, 12.88% ........ 600,000 7/15/2004 423,000
Envirosource Inc. Note, 9.75% ................. 1,250,000 6/15/2003 662,500
GNI Group Inc. Sr. Note, 10.88% ............... 500,000 7/15/2005 100,000
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ... 4,000,000 8/31/2001 820,000
J. Crew Group Inc. Sr. Deb. 0.00% to
10/14/2002, 13.125% from 10/15/2002 to
maturity .................................... 250,000 10/15/2008 136,250
J. Crew Operating Corp. Sr. Sub. Note, 10.38% . 400,000 10/15/2007 348,000
J.B. Poindexter Inc. Sr. Note, 12.50% ......... 1,500,000 5/15/2004 1,425,000
NE Restaurant Inc. Sr. Note, 10.75% ........... 1,000,000 7/15/2008 785,000
North Atlantic Trading Inc. Sr. Note, 11.00% 650,000 6/15/2004 581,750
Pagemart Nationwide Inc. Sr. Note, 0.00% to
1/31/2005, 15.00% from 2/1/2005 to maturity . 825,000 1/31/2005 787,875
Pagemart Wireless Inc. Sr. Sub. Note, 0.00%
to 1/31/2003, 11.25% from 2/1/2003 to
maturity .................................... 2,025,000 2/01/2008 810,000
Phase Metrics Inc. Sr. Note, 10.75%[ ] ........ 1,500,000 2/01/2005 150,000
Rose Hills Co. Sr. Sub. Note, 9.50% ........... $1,500,000 11/15/2004 1,020,000
RSL Communications Ltd. Sr. Note, 12.25% ...... 750,000 11/15/2006 615,000
Startec Global Communications Sr. Note, 12.00% 1,150,000 5/15/2008 920,000
------------
Total Non-Convertible Bonds (Cost $19,991,766) ................................ 12,696,425
------------
CONVERTIBLE BONDS 0.5%
Crown Resources Corp. Cv. Sub. Deb., 5.75% .... 2,000,000 8/27/2001 900,000
------------
Total Convertible Bonds (Cost $1,558,418) ..................................... 900,000
------------
COMMERCIAL PAPER 2.4%
American Express Credit Corp., 6.78% .......... 1,362,000 7/05/2000 1,362,000
Ford Motor Credit Co., 6.77% .................. 1,144,000 7/05/2000 1,144,000
Household Finance Corp., 6.88% ................ 2,101,000 7/03/2000 2,101,000
------------
Total Commercial Paper (Cost $4,607,000) ...................................... 4,607,000
------------
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 3.8%
State Street Navigator Securities Lending
Prime Portfolio .............................................. 7,116,540 7,116,540
------------
Total Short-Term Investments (Cost $7,116,540) ................. 7,116,540
------------
Total Investments (Cost $193,748,471) - 104.3% ................. 196,192,003
Cash and Other Assets, Less Liabilities - (4.3%) ............... (8,166,862)
------------
Net Assets - 100.0% ............................................ $188,025,141
============
------------------------------------------------------------------------------------------
Federal Income Tax Information:
At June 30, 2000, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $194,088,425 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is
an excess of value over tax cost ............................................. $ 32,035,213
Aggregate gross unrealized depreciation for all investments in which there is
an excess of tax cost over value ............................................. (29,931,635)
------------
$ 2,103,578
============
---------------------------------------------------------------------------------------------------------------------
* Non income-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
> Payments of income may be made in cash or in the form of additional securities.
[ ] Security 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, 2000 was $143,959 and $138,343 (0.07% of net assets),
respectively.
(+) Security restricted as to public resale. At June 30, 2000, 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, 2000 were $2,737,284 and $803,465 (0.43% of net assets), respectively.
The accompanying notes are in integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
-------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
June 30, 2000
ASSETS
Investments, at value (Cost $193,748,471) (Note 1) .............. $196,192,003
Cash ............................................................ 513
Receivable for securities sold .................................. 1,256,808
Dividends and interest receivable ............................... 813,831
Receivable from Distributor (Note 3) ............................ 274,325
Receivable for fund shares sold ................................. 159,571
Other assets .................................................... 19,106
------------
198,716,157
LIABILITIES
Payable for collateral received on securities loaned ............ 7,116,540
Payable for securities purchased ................................ 2,495,564
Accrued transfer agent and shareholder services (Note 2) ........ 290,748
Accrued management fee (Note 2) ................................. 223,533
Accrued distribution and service fees (Note 5) .................. 214,868
Payable for fund shares redeemed ................................ 168,288
Accrued trustees' fees (Note 2) ................................. 19,770
Other accrued expenses .......................................... 161,705
------------
10,691,016
------------
NET ASSETS ...................................................... $188,025,141
============
Net Assets consist of:
Undistributed net investment income ........................... $ 1,340,181
Unrealized appreciation of investments ........................ 2,443,532
Unrealized appreciation of foreign currency and
forward contracts ........................................... 48
Accumulated net realized gain ................................. 4,510,374
Paid-in capital ............................................... 179,731,006
------------
$188,025,141
============
Net Asset Value and redemption price per share of Class A
shares ($68,018,779 / 4,971,368 shares) ....................... $13.68
======
Maximum Offering Price per share of Class A shares
($13.68 / .9425) .............................................. $14.51
======
Net Asset Value and offering price per share of Class B(1) shares
($10,043,279 / 739,537 shares)* ............................... $13.58
======
Net Asset Value and offering price per share of Class B shares
($76,308,233 / 5,597,493 shares)* ............................. $13.63
======
Net Asset Value and offering price per share of Class C shares
($10,660,572 / 783,229 shares)* ............................... $13.61
======
Net Asset Value, offering price and redemption price per share of
Class S shares ($22,994,278 / 1,681,467 shares) ............... $13.68
======
-------------------------------------------------------------------------------
* 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.
The accompanying notes are in integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ALPHA FUND
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
For the year ended June 30, 2000
INVESTMENT INCOME
Dividends, net of foreign taxes of $2,382 ....................... $ 3,798,404
Interest (Note 1) ............................................... 3,437,672
------------
7,236,076
EXPENSES
Management fee (Note 2) ......................................... 1,637,785
Transfer agent and shareholder services (Note 2) ................ 1,138,005
Custodian fee ................................................... 153,898
Reports to shareholders ......................................... 85,472
Registration fees ............................................... 38,974
Audit fee ....................................................... 30,602
Trustees' fees (Note 2) ......................................... 19,770
Legal fees ...................................................... 17,518
Distribution and service fees - Class A (Note 5) ................ 228,422
Distribution and service fees - Class B(1) (Note 5) ............. 94,856
Distribution and service fees - Class B (Note 5) ................ 1,053,705
Distribution and service fees - Class C (Note 5) ................ 169,753
Miscellaneous ................................................... 17,102
------------
4,685,862
Fees paid indirectly (Note 2) ................................... (30,655)
Expenses borne by the Distributor (Note 3) ...................... (588,800)
------------
4,066,407
------------
Net investment income ........................................... 3,169,669
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized gain on investments (Notes 1 and 4) ................ 20,039,092
Net realized gain on foreign currency and forward contracts
(Note 1) ...................................................... 111,083
------------
Total net realized gain ..................................... 20,150,175
------------
Net unrealized depreciation of investments ...................... (57,445,979)
Net unrealized depreciation of foreign currency and forward
contracts ..................................................... (183,856)
------------
Total net unrealized depreciation ........................... (57,629,835)
------------
Net loss on investments, foreign currency and forward contracts . (37,479,660)
------------
Net decrease in net assets resulting from operations ............ $(34,309,991)
============
The accompanying notes are in integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH ALPHA FUND
------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30
------------------------------------
1999 2000
------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................... $ 7,028,669 $ 3,169,669
Net realized gain (loss) on investments, foreign currency
and forward contracts ................................. (10,791,405) 20,150,175
Net unrealized depreciation of investments, foreign
currency and forward contracts ........................ (5,842,718) (57,629,835)
------------ ------------
Net decrease resulting from operations .................. (9,605,454) (34,309,991)
------------ ------------
Dividends from net investment income:
Class A ............................................... (2,160,169) (1,960,622)
Class B(1) ............................................ (38,185) (160,436)
Class B ............................................... (1,709,386) (1,532,487)
Class C ............................................... (300,621) (241,491)
Class S ............................................... (1,319,451) (773,992)
------------ ------------
(5,527,812) (4,669,028)
------------ ------------
Distributions from capital gains:
Class A ............................................... (4,849,837) (1,380,863)
Class B(1) ............................................ -- (154,082)
Class B ............................................... (6,856,725) (1,670,793)
Class C ............................................... (1,115,493) (278,556)
Class S ............................................... (3,216,541) (496,967)
------------ ------------
(16,038,596) (3,981,261)
------------ ------------
Net decrease from fund share transactions (Note 6) ...... (57,163,257) (97,038,977)
------------ ------------
Total decrease in net assets ............................ (88,335,119) (139,999,257)
NET ASSETS
Beginning of year ....................................... 416,359,518 328,024,398
------------ ------------
End of year (including undistributed net investment
income of $2,702,099 and $1,340,181, respectively) .... $328,024,399 $188,025,141
============ ============
The accompanying notes are in integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
June 30, 2000
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 long-term growth of capital. Under normal market
conditions, the Fund invests at least 65% of total assets in mid-cap value
stocks, which may include common and preferred stocks, convertible securities
and warrants.
The Fund offers five classes of shares. Class A shares are subject to an initial
sales charge of up to 5.75%. From July 1, 1999 to April 30, 2000, Class A shares
paid a service fee equal to 0.25% of average daily net assets. Beginning May 1,
2000, Class A shares pay an annual distribution and service fee equal to 0.30%
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 MetLife, Inc.
("MetLife"), and special programs. No sales charge is imposed at the time of
purchase or redemption of Class S shares. Class S shares do not pay any
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 plans of distribution, related specifically to
that class. The Trustees declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are at
the mean of the closing bid and asked quotations. Fixed income securities are
valued by a pricing service, approved by the Trustees, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Other securities, if any, are valued at their
fair value as determined in accordance with established methods consistently
applied.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. NET INVESTMENT INCOME
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. Discount on debt obligations is amortized under the effective
yield method. Certain preferred securities held by the Fund pay dividends in the
form of additional securities (payment-in-kind securities). Dividend income on
payment-in-kind preferred securities is recorded at the market value of
securities received. Differences between the market value of securities received
and the corresponding amounts of income accrued are recorded as adjustments to
income. The Fund is charged for expenses directly attributable to it, while
indirect expenses are allocated among all funds in the Trust.
D. DIVIDENDS
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations. For the year ended June 30, 2000, the Fund has designated as
long-term $3,981,261 of the distributions from net realized capital 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. 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, 2000, the value of the securities loaned and the value of
collateral were $6,959,143 and $7,116,540, respectively. During the year ended
June 30, 2000, income from securities lending amounted to $68,072 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, 2000, the fees pursuant to such
agreement amounted to $1,637,785.
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 MetLife, provides certain
shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, MetLife receives a fee for maintenance of the
accounts of certain shareholders who are participants in sponsored arrangements,
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, 2000, the
amount of such shareholder servicing and account maintenance expenses was
$530,194.
The Fund has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances and directed
brokerage commissions, respectively, were used to reduce a portion of the Fund's
expenses. During the year ended June 30, 2000, the Fund's transfer agent and
custodian fees were reduced by $26,455 and $4,200, respectively, under these
arrangements.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$19,770 during the year ended June 30, 2000.
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, 2000, the amount of such expenses assumed by the
Distributor and its affiliates was $588,800.
NOTE 4
For the year ended June 30, 2000, purchases and sales of securities, exclusive
of short-term obligations, aggregated $74,655,802 and $173,513,101,
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,
beginning May 1, 2000, the Fund pays annual distribution fees of 0.05% of
average daily net assets for Class A shares. The Fund pays annual distribution
fees of 0.75% of average daily net assets for Class B(1), 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, 2000, fees pursuant to such plans amounted to
$228,422, $94,856, $1,053,705 and $169,753 for Class A, Class B (1), Class B and
Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$33,168 and $62,429, respectively, on sales of Class A shares of the Fund during
the year ended June 30, 2000, and that MetLife Securities, Inc. earned
commissions aggregating $108,489 and $6,440 on sales of Class B(1) and Class B
shares, and that the Distributor collected contingent deferred sales charges of
$23,238, $274,407 and $2,075 on redemptions of Class B(1), Class B and Class C
shares, respectively, during the same period.
NOTE 6
<TABLE>
The Trustees have the authority to issue an unlimited number of shares of beneficial interest, $.001
par value per share. At June 30, 2000, MetLife owned 324,009 shares of Class S of the Fund.
These transactions break down by share class as follows:
<CAPTION>
YEARS ENDED JUNE 30
------------------------------------------------------------------
1999 2000
------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 1,872,980 $ 27,773,497 990,258 $ 14,093,821
Issued upon reinvestment of:
Dividends from net investment
income .................... 312,465 4,596,362 101,019 1,380,526
Distributions from capital
gains ..................... 138,693 2,006,101 97,531 1,315,686
Shares redeemed ............... (2,556,541) (37,261,318) (3,448,120) (48,141,077)
---------- ------------ ---------- ------------
Net decrease .................. (232,403) $ (2,885,358) (2,259,312) $(31,351,044)
========== ============ ========== ============
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 561,224 $ 8,434,485 469,504 $ 6,675,050
Issued upon reinvestment of:
Dividends from net investment
income .................... 2,256 34,508 9,444 128,225
Distribution from capital
gains ..................... -- -- 11,251 150,759
Shares redeemed ............... (88,763) (1,366,884) (225,379) (3,068,289)
---------- ------------ ---------- ------------
Net increase .................. 474,717 $ 7,102,109 264,820 $ 3,885,745
========== ============ ========== ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 2,188,749 $ 32,437,372 153,443 $ 2,186,213
Issued upon reinvestment of:
Dividends from net investment
income .................... 438,063 6,408,860 84,886 1,155,056
Distributions from capital
gains ..................... 116,587 1,643,800 117,145 1,574,428
Shares redeemed ............... (4,192,753) (60,996,254) (3,754,101) (52,024,977)
---------- ------------ ---------- ------------
Net decrease .................. (1,449,354) $(20,506,222) (3,398,627) $(47,109,280)
========== ============ ========== ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 832,769 $ 12,348,336 174,470 $ 2,500,077
Issued upon reinvestment of:
Dividends from net investment
income .................... 70,468 1,028,840 13,448 181,382
Distributions from capital
gains ..................... 19,057 273,103 18,918 253,876
Shares redeemed ............... (995,360) (14,475,298) (953,253) (13,207,597)
---------- ------------ ---------- ------------
Net decrease .................. (73,066) $ (825,019) (746,417) $(10,272,262)
========== ============ ========== ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 1,755,098 $ 25,878,565 877,016 $ 12,327,614
Issued upon reinvestment of:
Dividends from net investment
income .................... 218,567 3,215,116 41,525 566,927
Distributions from capital
gains ..................... 92,102 1,318,800 36,831 496,482
Shares redeemed ............... (4,804,307) (70,461,248) (1,854,894) (25,583,159)
---------- ------------ ---------- ------------
Net decrease .................. (2,738,540) $(40,048,767) (899,522) $(12,192,136)
========== ============ ========== ============
-------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For a share outstanding throughout each year:
CLASS A
-------------------------------------------------------------------------------
YEARS ENDED JUNE 30
-------------------------------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 11.70 13.85 14.86 16.80 15.80
---- ---- ---- ---- ----
Net investment income ($)* 0.23 0.33 0.33 0.34 0.23
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts ($) 2.36 2.90 3.56 (0.43) (1.80)
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 2.59 3.23 3.89 (0.09) (1.57)
---- ---- ---- ---- ----
Dividends from net investment income ($) (0.28) (0.28) (0.28) (0.28) (0.33)
Distributions from capital gains ($) (0.16) (1.94) (1.67) (0.63) (0.22)
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.44) (2.22) (1.95) (0.91) (0.55)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF YEAR ($) 13.85 14.86 16.80 15.80 13.68
===== ===== ===== ===== =====
Total return(b) (%) 22.41 27.45 28.15 (0.04) (9.89)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 44,464 71,087 125,402 114,235 68,019
Expense ratio (%)* 1.25 1.25 1.24 1.22 1.27
Expense ratio after expense reductions (%)* 1.25 1.25 1.24 1.21 1.26
Ratio of net investment income to
average net assets (%)* 1.78 2.43 2.06 2.29 1.62
Portfolio turnover rate (%) 111.13 63.33 52.99 56.04 30.83
* Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.02 0.00 0.01 0.03
<CAPTION>
CLASS B(1)
-------------------------
YEARS ENDED JUNE 30
-------------------------
1999(a)(c) 2000(a)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 14.94 15.70
----- -----
Net investment income ($)* 0.11 0.13
Net realized and unrealized gain (loss) on investments, foreign currency and forward
contracts ($) 0.75 (1.80)
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.86 (1.67)
----- -----
Dividends from net investment income ($) (0.10) (0.23)
Distribution from capital gains ($) -- (0.22)
----- -----
TOTAL DISTRIBUTIONS ($) (0.10) (0.45)
----- -----
NET ASSET VALUE, END OF YEAR ($) 15.70 13.58
===== =====
Total return(b) (%) 5.81(d) (10.59)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 7,454 10,043
Expense ratio (%)* 1.86(e) 2.01
Expense ratio after expense reductions (%)* 1.85(e) 2.00
Ratio of net investment income to average net assets (%)* 1.46(e) 0.92
Portfolio turnover rate (%) 56.04 30.83
*Reflects voluntary reduction of expenses per share of these amounts (Note 3) ($) 0.00 0.03
-----------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
--------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------
YEARS ENDED JUNE 30
------------------------------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 11.68 13.82 14.81 16.74 15.74
----- ----- ----- ----- -----
Net investment income ($)* 0.13 0.22 0.21 0.23 0.12
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts ($) 2.36 2.89 3.55 (0.43) (1.79)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 2.49 3.11 3.76 (0.20) (1.67)
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.19) (0.18) (0.16) (0.17) (0.22)
Distributions from capital gains ($) (0.16) (1.94) (1.67) (0.63) (0.22)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.35) (2.12) (1.83) (0.80) (0.44)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ($) 13.82 14.81 16.74 15.74 13.63
===== ===== ===== ===== =====
Total return(b) (%) 21.60 26.45 27.23 (0.80) (10.59)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($
thousands) 25,543 71,986 174,835 141,559 76,308
Expense ratio (%)* 2.00 2.00 1.99 1.97 2.01
Expense ratio after expense reductions (%)* 2.00 2.00 1.99 1.96 2.00
Ratio of net investment income to
average net assets (%)* 1.05 1.65 1.32 1.54 0.87
Portfolio turnover rate (%) 111.13 63.33 52.99 56.04 30.83
* Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.02 0.00 0.01 0.03
<CAPTION>
CLASS C
------------------------------------------------------------------------------
YEARS ENDED JUNE 30
------------------------------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 11.67 13.82 14.79 16.71 15.71
----- ----- ----- ----- -----
Net investment income ($)* 0.13 0.21 0.21 0.23 0.12
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts ($) 2.37 2.90 3.54 (0.43) (1.79)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 2.50 3.11 3.75 (0.20) (1.67)
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.19) (0.20) (0.16) (0.17) (0.21)
Distributions from capital gains ($) (0.16) (1.94) (1.67) (0.63) (0.22)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.35) (2.14) (1.83) (0.80) (0.43)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ($) 13.82 14.79 16.71 15.71 13.61
===== ===== ===== ===== =====
Total return(b) (%) 21.68 26.42 27.23 (0.78) (10.57)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 1,386 9,592 26,777 24,027 10,661
Expense ratio (%)* 2.00 2.00 1.99 1.97 2.01
Expense ratio after expense reductions (%)* 2.00 2.00 1.99 1.96 2.00
Ratio of net investment income to
average net assets (%)* 1.03 1.59 1.32 1.54 0.86
Portfolio turnover rate (%) 111.13 63.33 52.99 56.04 30.83
* Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.01 0.00 0.01 0.03
--------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
------------------------------------------------------------------------------
YEARS ENDED JUNE 30
------------------------------------------------------------------------------
1996(a) 1997(a) 1998(a) 1999(a) 2000(a)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 11.70 13.85 14.86 16.80 15.79
----- ----- ----- ----- -----
Net investment income ($)* 0.26 0.36 0.37 0.38 0.27
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts ($) 2.36 2.90 3.56 (0.44) (1.79)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 2.62 3.26 3.93 (0.06) (1.52)
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.31) (0.31) (0.32) (0.32) (0.37)
Distributions from capital gains ($) (0.16) (1.94) (1.67) (0.63) (0.22)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.47) (2.25) (1.99) (0.95) (0.59)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ($) 13.85 14.86 16.80 15.79 13.68
===== ===== ===== ===== =====
Total return(b) (%) 22.82 27.75 28.45 0.15 (9.58)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 39,298 59,453 89,345 40,750 22,994
Expense ratio (%)* 1.00 1.00 0.99 0.97 1.01
Expense ratio after expense reductions (%)* 1.00 1.00 0.99 0.96 1.00
Ratio of net investment income to
average net assets (%)* 2.03 2.68 2.30 2.56 1.87
Portfolio turnover rate (%) 111.13 63.33 52.99 56.04 30.83
* Reflects voluntary reduction of
expenses per share of these amounts
(Note 3) ($) 0.03 0.02 0.00 0.01 0.03
--------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
</TABLE>
<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, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2000
<PAGE>
STATE STREET RESEARCH ALPHA FUND
-------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-------------------------------------------------------------------------------
It was a disappointing year for value stocks and for the fund. Class A shares of
Alpha Fund returned -9.89% [without sales charge] for the 12 months ended June
30, 2000. The fund underperformed the Russell MidCap Value Index, which returned
-7.91% over the same period. It also underperformed the Lipper Mid- Cap Value
Funds Average, which gained 5.49%.
The fund's underperformance was the result of overall weakness among value
stocks and stock selection during the first half of the year. Two of the fund's
substantial positions -- Ogden and Safety Kleen -- unraveled during the period.
We took significant losses in both stocks. We made no significant changes to the
fund's value approach because we believe that it should prove itself to be sound
over the long term. The fund's best performers were in gaming, insurance and
energy, including Harrah's and International Gaming Technology. We added to our
investment in energy stocks during the period.
June 30, 2000
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 gains
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 Composite Stock Price Index") is an
unmanaged index of 500 U.S. stocks. The Russell MidCap Value Index contains
stocks from the Russell MidCap Index with a less than average growth
orientation. The indices do not take transaction charges into consideration. It
is not possible to invest directly in the indices.
CHANGE IN VALUE OF
$10,000 BASED ON THE S&P 500 AND
THE RUSSELL MIDCAP VALUE INDEX
COMPARED TO CHANGE IN VALUE OF $10,000
INVESTED IN THE FUND
CLASS A SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-15.07% 11.16% 10.42%
Russell
Alpha Fund S&P 500 Index MidCap Value
"6/90" $ 9,425 $10,000 $10,000
"6/91" 8,833 10,737 10,596
"6/92" 10,141 12,175 12,992
"6/93" 12,347 13,831 16,327
"6/94" 12,880 14,025 16,460
"6/95" 14,958 17,676 19,878
"6/96" 18,310 22,268 24,138
"6/97" 23,336 29,990 30,888
"6/98" 29,906 39,039 38,843
"6/99" 29,895 47,925 41,028
"6/00" 26,939 51,395 37,783
CLASS B(1) SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-14.91% 11.37% 10.51%
Russell
Alpha Fund S&P 500 Index MidCap Value
"6/90" $10,000 $10,000 $10,000
"6/91" 9,366 10,737 10,596
"6/92" 10,755 12,175 12,992
"6/93" 13,083 13,831 16,327
"6/94" 13,578 14,025 16,460
"6/95" 15,673 17,676 19,878
"6/96" 19,058 22,268 24,138
"6/97" 24,100 29,990 30,888
"6/98" 30,663 39,039 38,843
"6/99" 30,385 47,925 41,028
"6/00" 27,168 51,395 37,783
CLASS B SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-14.92% 11.40% 10.52%
Russell
Alpha Fund S&P 500 Index MidCap Value
"6/90" $10,000 $10,000 $10,000
"6/91" 9,366 10,737 10,596
"6/92" 10,755 12,175 12,992
"6/93" 13,083 13,831 16,327
"6/94" 13,578 14,025 16,460
"6/95" 15,673 17,676 19,878
"6/96" 19,058 22,268 24,138
"6/97" 24,100 29,990 30,888
"6/98" 30,663 39,039 38,843
"6/99" 30,418 47,925 41,028
"6/00" 27,196 51,395 37,783
CLASS C SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-11.42% 11.67% 10.52%
Russell
Alpha Fund S&P 500 Index MidCap Value
"6/90" $10,000 $10,000 $10,000
"6/91" 9,366 10,737 10,596
"6/92" 10,755 12,175 12,992
"6/93" 13,082 13,831 16,327
"6/94" 13,577 14,025 16,460
"6/95" 15,658 17,676 19,878
"6/96" 19,053 22,268 24,138
"6/97" 24,088 29,990 30,888
"6/98" 30,648 39,039 38,843
"6/99" 30,408 47,925 41,028
"6/00" 27,195 51,395 37,783
CLASS S SHARES
Average Annual Total Return
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
-9.58% 12.79% 11.32%
Russell
Alpha Fund S&P 500 Index MidCap Value
"6/90" $10,000 $10,000 $10,000
"6/91" 9,366 10,737 10,596
"6/92" 10,755 12,175 12,992
"6/93" 13,095 13,831 16,327
"6/94" 13,728 14,025 16,460
"6/95" 16,012 17,676 19,878
"6/96" 19,666 22,268 24,138
"6/97" 25,123 29,990 30,888
"6/98" 32,271 39,039 38,843
"6/99" 32,321 47,925 41,028
"6/00" 29,224 51,395 37,783
<PAGE>
<TABLE>
STATE STREET RESEARCH ALPHA FUND
--------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Alpha Fund ("Fund"), a series of State Street Research
Equity Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
<CAPTION>
VOTES (MILLIONS OF SHARES)
---------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 3.1 0.4 0.2
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 3.4 0.5 0.4
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................ 0.3 0.0 0.0
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEE OF STATE STREET RESEARCH EQUITY TRUST
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
ALPHA FUND Chairman of the Board, Interim Chief Operating Officer,
One Financial Center President, Chief Executive Chief Financial Officer,
Boston, MA 02111 Officer and Treasurer Chief Administrative
Officer and Director,
INVESTMENT ADVISER BARTLETT R. GEER State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center F. GARDNER JACKSON, JR. BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer and
DISTRIBUTOR THOMAS P. MOORE, JR. President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center BRIAN P. O'DELL Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES DANIEL J. RICE III State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 JAMES M. WEISS Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (1-877-773-8637) Officer and Director,
PETER A. ZUGER Hewlett-Packard Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company DOUGLAS A. ROMICH Dean, School of Business
225 Franklin Street Assistant Treasurer and Public Management,
Boston, MA 02110 George Washington University;
FRANCIS J. MCNAMARA, III former Member of the Board
LEGAL COUNSEL Secretary and General Counsel of Governors of the Federal
Goodwin, Procter & Hoar LLP Reserve System and Chairman and
Exchange Place DARMAN A. WING Commissioner of the Commodity
Boston, MA 02109 Assistant Secretary and Futures Trading Commission
Assistant General Counsel
INDEPENDENT ACCOUNTANTS TOBY ROSENBLATT
PricewaterhouseCoopers LLP SUSAN E. BREEN President, Founders Investments Ltd.
160 Federal Street Assistant Secretary President, The Glen Ellen Company
Boston, MA 02110
AMY L. SIMMONS MICHAEL S. SCOTT MORTON
Assistant Secretary Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH ALPHA FUND ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.StateStreetResearch.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637) or
[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
[Logo] STATE STREET RESEARCH
(C) 2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Alpha Fund prospectus.
When used after September 30, 2000, 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: (exp0801)SSR-LD AL-2185-0800
<PAGE>
[LOGO] STATE STREET RESEARCH
GLOBAL RESOURCES FUND
ANNUAL REPORT TO SHAREHOLDERS
June 30, 2000
In this Report ENERGY POWERS UP
plus
Mixed Signals on the U.S. Economy
Small Companies: Big Beneficiaries of
Rising Energy Prices
Fund Portfolio and Financials
<PAGE>
Contents
2 12 MONTH REVIEW
A look at the fund and its market environment
over the past 12 months
6 PERFORMANCE IN PERSPECTIVE
The most recent performance in context of the
fund's track record
8 THE FUND IN DETAIL
Portfolio holdings, financials, and notes
FROM THE CHAIRMAN
It would be nice if there were a compass to point investors in the right
direction in a volatile market. But if you have an anchor to keep you grounded,
you won't have to worry about what to do next. Focus on your plan, continue to
invest regularly, and don't let short-term factors derail your long-term goals.
Pay attention to the recent rumblings about inflation, rising interest rates and
concerns about valuation. But consider the opportunities yet to be mined in a
robust economy with prospects for continued innovation in technology,
telecommunications, biotechnology and elsewhere. Read up on how your mutual
funds have performed, what your fund manager thinks and how that affects the
fund's performance. That's what you'll find in these pages. With our new report
format, they are easier to follow. No compass required.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus
Chief Executive Officer
State Street Research Funds
12 MONTH REVIEW MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE PART 1
HOW STATE STREET RESEARCH
GLOBAL RESOURCES FUND PERFORMED
State Street Research Global Resources Fund delivered strong performance despite
a generally volatile market. The fund returned 38.19% for the 12-month period
ended June 30, 2000. That was significantly better than the Lipper Natural
Resources Funds Average, which returned 15.27% over the same time period. It
also outperformed the S&P 500 Index, which returned 7.24%.(2)
REASONS FOR THE FUND'S STRONG PERFORMANCE
The fund's emphasis on small- and mid-cap energy stocks during a period of
rising commodity prices accounted for the fund's strong performance during the
year. 95% of the fund's assets are invested in small- to mid-cap energy
companies.
The fund's heavy exposure to the natural gas sector was also a positive factor
for performance. The demand for natural gas has grown dramatically as a result
of rising demand for electricity associated with telecommunications and the
Internet. In fact, the primary source of new electricity is from gas-fired
turbines. However, the supply of natural gas has not been able to keep up with
growing demand, and that has given an extraordinary boost to the prices of
natural gas. About 70% of the fund's assets are invested in natural gas, 27% in
crude oil and 4% in gold.
LOOKING AHEAD
We believe that energy will remain in a very tight demand/supply situation for
the next several years, thanks to strong economic prospects in the U.S. and
around the world. Although the sector has already had a year of outstanding
performance, we believe that there is considerably more potential in an
environment of sustained strong commodity prices. However, shareholders should
keep in mind that the fund's emphasis on small-and mid-cap companies heightens
its volatility. A significant change in the environment could be a challenge for
these types of companies represented in the portfolio.
More Management's Discussion of Fund Performance on pages 6 and 7. |_|
Because financial markets and mutual fund strategies are constantly evolving,
it's possible that the fund's holdings, market stance, outlook for various
industries or securities, and other matters discussed in this report have
changed since this information was prepared. Portfolio changes should not be
considered recommendations for action by individual investors.
CLASS A SHARES(1)
38.19%
Telecommunications
and the Internet
have driven demand
for natural gas to
fuel gas turbines
which generate
electricity.
[Photo]
Dan Rice
Portfolio Manager,
State Street Research
Global Resources Fund
S&P 500(2)
7.24%
State Street Research GLOBAL RESOURCES FUND
<PAGE>
--------------------------------------------------------------------------------
[Graphic Omitted] THE FUND AT A GLANCE as of 6/30/00
--------------------------------------------------------------------------------
State Street Research Global Resources Fund: an aggressive growth fund investing
in energy and natural resources companies.
CLAYTON WILLIAMS ENERGY
We invested in this oil and gas producer
which has benefited from significant gas
discoveries in Texas. It was the top
performing stock in the fund for the
year. It is the fund's second largest holding.
[Graphic Omitted]
HITS & MISSES
[Graphic Omitted]
SEVEN SEAS
The company disappointed investors by
announcing delays to production out of
Columbia, and its stock price suffered.
However, we continue to own the stock
because we believe it has significant
potential for the long term.
--------------------------------------------------------------------------------
TOTAL NET ASSETS: $159 MILLION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOP 10 HOLDINGS
--------------------------------------------------------------------------------
Issuer/Security % of fund assets
1 Western Gas Resources 11.1%
2 Clayton Williams Energy 7.5%
3 Baytex Energy 6.8%
4 Ocean Energy 5.4%
5 Pure Resources 4.0%
6 Plains Resources 4.0%
7 Canadian 88 Energy 3.8%
8 Newpark Resources 3.6%
9 Basin Exploration 3.4%
10 R & B Falcon 3.3%
Total 52.9%
See page 11 for more detail.
--------------------------------------------------------------------------------
Performance: Class A
--------------------------------------------------------------------------------
FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
(at maximum applicable sales charge)(3,4)
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
30.24% 9.94% 5.75%
FUND AVERAGE ANNUAL TOTAL RETURNS
AS OF 6/30/00
(does not reflect sales charge)(3)
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
38.19% 11.25% 6.38%
See pages 6 and 7 for data on other share classes.
S&P 500 INDEX AS OF 6/30/00(2)
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
7.24% 23.80% 17.79%
--------------------------------------------------------------------------------
Top 5 Industries
--------------------------------------------------------------------------------
% of fund assets
June 30, 1999
Exploration & Production
-----------------------------------
63.6%
Contract Drilling 11.2%
Oil Service 10.0%
Utility 9.4%
Mining 4.6%
June 30, 2000
Exploration & Production
-----------------------------------
68.2%
Utility 11.1%
Contract Drilling 8.8%
Oil Service 7.4%
Misc. 2.4%
--------------------------------------------------------------------------------
TICKER SYMBOLS
--------------------------------------------------------------------------------
STATE STREET RESEARCH GLOBAL RESOURCES FUND
CLASS A: SSGRX
CLASS B(1): SSGPX*
CLASS B: SSBGX
CLASS C: SSGDX
CLASS S: SSGCX*
--------------------------------------------------------------------------------
1 Does not reflect sales charge.
2 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.
3 Keep in mind that past performance is no guarantee of future results. The
fund's share price and return will fluctuate and you may have a gain or loss
when you sell your shares. All returns assume reinvestment of capital gains
distributions and income dividends at net asset value.
4 Performance reflects a maximum 5.75% Class A front-end sales charge.
* Proposed
<PAGE>
[Graphic Omitted] The Way We Think
ENERGY POWERS UP
SUPPLY AND DEMAND DRIVE THIS SECTOR;
GETTING THEM RIGHT IS ANYTHING BUT SIMPLE.
While consumers are fed up with the high cost of home heating oil and grumbling
about prices at the pump, investors who own energy stocks have had something to
cheer about in the past year. Crude oil prices rose as high as $34 per barrel in
March before settling back then surging above $30 again this summer. Meanwhile,
natural gas prices have jumped about 50%. That price was not immediately felt by
consumers, who are protected somewhat by regulatory measures that keep them from
having to absorb big increases at one time.
Why such a dramatic turnaround in this old economy commodity business where the
simple fundamentals of supply and demand largely determine prices--and prices
account largely for the profitability of the sector?
CONVERGING FACTORS
Today's energy boom was born out of a bear market for crude oil at the end of
1998. Too much oil flooded the world's markets just as Asia hit the skids. Crude
oil prices fell to a low of $10.72 per barrel, forcing many energy companies to
reduce or abandon drilling for new oil or gas and to keep their inventories low;
meanwhile, it was becoming harder to squeeze production from maturing U.S. oil
fields. New clean-fuel regulations were adding to production costs, and a couple
of warmer-than-expected winters kept prices low. Even after a surge in
demand--thanks to a stronger-than-expected global economic rebound--sent prices
soaring in 1999, most market watchers predicted that prices wouldn't hold.
MIXED SIGNALS ON THE U.S. ECONOMY
As the current cycle of U.S. economic prosperity headed into the record books as
the longest expansion in a hundred years, the Federal Reserve Board wielded its
most powerful weapon to put on the brakes: six increases over the past 12 months
raised a key short-term interest rate to 6.5% and finally showed signs of
success early in the second quarter of 2000. Sales of autos and housing slowed,
the unemployment rate edged up from 3.9% to 4.0%, and consumer debt rose--a sign
that consumers may be ready to pull back on spending. As a result, the Fed
passed on an opportunity to raise rates again in July, but warned that it had
not backed off of its anti-inflation campaign.
GROWTH UNEXPECTEDLY STRONG
An initial report showed that Gross Domestic Product (GDP) had slowed somewhat
from the first quarter, but revised figures said otherwise: the second quarter
increase of 5.2% was more than one full point above expectations. Business
spending remained strong and inventories jumped; yet productivity gains were a
robust 4%, suggesting that wage increases were not yet a factor to be reckoned
with.
However, inflation has continued to advance. Although it still remains on the
low end of its historical range, it's the pace that most troubles monetary
policymakers and raises speculation that another interest rate hike could be in
the offing. The Consumer Price Index has risen 3.7% over the past year--no real
surprise considering that energy prices have risen nearly 10% over the same
period.
ALL EYES ON THE FED
While the market has reacted favorably to economic news over the past quarter,
there is a growing expectation that rates are due to rise again. Meanwhile, the
financial markets seemed stalled and investors--so far--have been content to
wait and see.
STILL WAITING FOR A SLOWDOWN PERIOD
U.S. Gross Domestic Product
Q3 '99 5.7%
Q4 '99 8.3%
Q1 '00 4.8%
Q2 '00 5.2%
U.S. Gross Domestic Product--a common measure of goods and services produced in
the U.S.--has remained strong despite six consecutive interest rate increases
over the past year.
Source: U.S. Department of Commerce
<PAGE>
[Graphic Omitted]
But they have. And the prospect that demand will continue to outstrip
supply--thus keeping prices up--are favorable. The U.S. Energy Department
estimates that world demand for crude oil will rise 1.8% in 2000 and 2.5% in
2001, compared to 1.4% in 1999. Even if OPEC raises production, it is unlikely
to tamper too much with the delicate equation. On one hand, they don't want to
see soaring prices bring the world's economies to their knees again. On the
other hand, they like the idea of relatively high prices because it boosts their
wealth.
And they don't like the idea of giving up too much to the natural gas market,
which is booming thanks to innovative technologies as well as obvious
environmental benefits: gas is a cleaner-burning fuel than oil. The Energy
Information Administration estimates that natural gas demand will grow nearly 5%
this year and 3% next year while inventories are near their lowest levels in
four years, and production shortfalls are projected at least through 2001. In
most commodity markets, soaring prices eventually bring an adjustment in demand
or supply. However, gas is a special situation because it is difficult and
costly to handle, to transport, and to store. You can't just divert supplies
from places where prices are lower. That could keep prices high for years to
come.
BOTTOM LINE BENEFITS
For the energy industry, the effects of rising prices have been noticeable at
the bottom line. Thanks to higher prices and refining margins, analysts expect
the average large oil company to double its earnings this year. Smaller
companies could do even better. In the second quarter, U.S. refining profits per
barrel doubled--one of the highest quarterly averages in a decade.
At these prices, companies and refineries have an incentive to look for ways to
raise supply. According to a Lehman Brothers midyear survey of spending on
exploration and production, companies are planning to raise expenditures 18.2%
this year.
What could change the picture? An economic slump--especially in the U.S.--would
hurt demand for oil, but don't count on it. There are more reasons to believe
that the forces fueling the energy sector still have a ways to go, and that
stock prices have yet to reflect the sector's full potential.
A CLOSER LOOK [Graphic Omitted]
SMALL COMPANIES:
BIG BENEFICIARIES OF RISING ENERGY PRICES
When people think of the energy sector, they usually think of "big oil"--those
blue chip companies with international operations from top to bottom: they
explore, produce, refine and market. "Most have chemical operations that help
with the bottom line when oil prices are soft," says Dan Rice, portfolio manager
of State Street Research Global Resources Fund, "but those same operations
become a drag on profits when prices rise because they use energy as a feed
stock, and their margins get squeezed."
According to Rice, it's the small companies that perform the best when commodity
prices rise. Since their businesses are typically focused on one
thing--production or service--their profits are leveraged to underlying
commodity prices because that is all they do.
That's why Rice has about 95% of State Street Research Global Resources Fund
invested in small- to mid-cap companies. "It makes the fund more volatile," says
Rice, "but it also gives shareholders an opportunity for some significant gains
when prices are strong, as they are now." Rice also favors natural gas over oil.
"Demand for natural gas is up sharply. It is the primary source of new
electricity, and by our estimates, demand will continue to outstrip supply for
several years to come."
TIGHT SUPPLY, SOARING DEMAND LIFT OIL AND GAS PRICES
Crude Oil $/Barrel
11/98 $16.04
1/99 14.66
2/99 13.86
3/99 15.80
5/99 16.22
7/99 18.44
9/99 19.96
11/99 19.75
1/00 23.71
3/00 25.48
4/00 24.86
5/00 27.89
6/00 31.13
Natural Gas $/BTUs*
11/98 $2.160
1/99 2.179
3/99 2.188
5/99 2.359
7/99 2.355
9/99 2.565
11/99 2.390
1/00 2.580
3/00 2.977
5/00 4.328
6/00 4.442
*BTUs = British Thermal Units
Source: Bloomberg, Wall Street Journal
<PAGE>
PERFORMANCE IN PERSPECTIVE MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE PART 2
PERFORMANCE FIGURES as of June 30, 2000
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is never a guarantee of future results, long-term
returns can serve as an important context for evaluating recent performance.
Three ways of measuring long-term performance are cumulative returns, average
annual returns, and the change in dollar value of a given investment over time.
Information about these measures follows, while the share class boxes contain
the results of these measures for each share class.
CUMULATIVE TOTAL RETURN
This represents the total percentage you would have earned or lost if you had
invested a lump sum in the fund and left it there until the end of the period
indicated. Performance would be lower if sales charges were reflected.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return percentage is the rate you would have had to earn
during each year of a given time period --say, five years--in order to end up
with the fund's actual cumulative return for those five years.In reality, of
course, fund performance varies from year to year. Because of this, a fund's
actual performance for a given year may be higher or lower than an average
annual performance figure.
$10,000 OVER 10 YEARS
This example is similar to cumulative total return, but uses dollars rather than
percentages, and assumes that the lump sum you invested was $10,000. It also
compares fund performance to the performance of a market index.
Class A Front Load
o Initial sales charge of 5.75% or less, with lower sales charges for larger
investments (see a prospectus for details)
o Lower annual expenses than Class B(1) or Class C shares because of lower
service (12b-1) fee of 0.30% (effective May 1, 2000, the fee was increased
from 0.25%)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
CUMULATIVE TOTAL RETURN 38.19% 70.40% 85.66%
(does not reflect
sales charge)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 30.24% 9.94% 5.75%
(at maximum applicable
sales charge)
$10,000 Over 10 years
CLASS A S&P 500
"90" 9425 10000
"91" 7702 10737
"92" 6773 12175
"93" 11409 13831
"94" 9999 14025
"95" 10269 17676
"96" 14728 22268
"97" 19582 29990
"98" 16786 39039
"99" 12663 47925
"00" 17498 51395
Class B(1) Back Load for accounts opened after 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within six years
o Annual distribution/service (12b-1) fee of 1.00%
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
CUMULATIVE TOTAL RETURN 37.11% 63.79% 76.55%
(does not reflect
sales charge)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 32.11% 10.10% 5.85%
(at maximum applicable
sales charge)
$10,000 Over 10 years
CLASS B(1) S&P 500
"90" 10000 10000
"91" 8172 10737
"92" 7186 12175
"93" 12105 13831
"94" 10555 14025
"95" 10779 17676
"96" 15340 22268
"97" 20246 29990
"98" 17221 39039
"99" 12876 47925
"00" 17655 51395
Class B Back Load for accounts opened before 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within five years
o Annual distribution/service (12b-1) fee of 1.00%
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
CUMULATIVE TOTAL RETURN 37.05% 64.00% 76.77%
(does not reflect
sales charge)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 32.05% 10.13% 5.86%
(at maximum applicable
sales charge)
$10,000 OVER 10 YEARS
CLASS B S&P 500
"90" 10000 10000
"91" 8172 10737
"92" 7186 12175
"93" 12105 13831
"94" 10555 14025
"95" 10779 17676
"96" 15340 22268
"97" 20246 29990
"98" 17221 39039
"99" 12899 47925
"00" 17677 51395
Class C Level Load
o No initial sales charge
o Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
o Lower deferred sales charge than Class B(1) shares
o Annual distribution/service (12b-1) fee of 1.00%
o No conversion to Class A shares after eight years, so annual expenses do not
decrease
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
CUMULATIVE TOTAL RETURN 37.26% 63.90% 76.52%
(does not reflect
sales charge)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 36.26% 10.39% 5.85%
(at maximum applicable
sales charge)
$10,000 OVER 10 YEARS
CLASS C S&P 500
"90" 10000 10000
"91" 8172 10737
"92" 7186 12175
"93" 12105 13831
"94" 10546 14025
"95" 10770 17676
"96" 15322 22268
"97" 20210 29990
"98" 17185 39039
"99" 12860 47925
"00" 17652 51395
Class S Special Programs
o Available through certain retirement accounts, advisory accounts of the
investment manager and other programs that usually involve special conditions
and separate fees (see a prospectus for details)
o No sales charges of any kind
o No distribution/service (12b-1) fees; annual expenses are lower than for other
share classes
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
CUMULATIVE TOTAL RETURN 38.46% 72.48% 89.63%
(does not reflect
sales charge)
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 38.46% 11.52% 6.61%
(at maximum applicable
sales charge)
$10,000 OVER 10 YEARS
CLASS S S&P 500
"90" 10000 10000
"91" 8172 10737
"92" 7186 12175
"93" 12114 13831
"94" 10662 14025
"95" 10994 17676
"96" 15805 22268
"97" 21073 29990
"98" 18100 39039
"99" 13696 47925
"00" 18963 51395
All of the performance figures on these pages assume reinvestment of dividends
and distributions.
The average annual total returns for the fund also include the effects of any
fees and sales charges that would apply for each share class.
The S&P 500 (officially, the "Standard & 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.
Keep in mind that past performance is no guarantee of future results. The fund's
share price and return will fluctuate and you may have a gain or loss when you
sell your shares.
Class B(1) was introduced January 1, 1999.
A CLOSER LOOK [Graphic Omitted]
12b-1 fees
12b-1 fees are named after the SEC rule that permits them.
The fund pays 12b-1 fees to cover service and distribution costs. The
fees cover personal services and the maintenance of shareholder accounts. The
fees also cover selling and marketing expenditures for the sale of fund shares.
The fund pays 12b-1 fees out of its assets, so shareholders see them as an
indirect charge rather than a direct charge.
<PAGE>
THE FUND IN DETAIL
The following pages describe the fund in
detail as of the date of this report.
They provide a "snapshot" of the fund's [Graphic Omitted]
holdings at one moment in time (the
report date), describe the financial
dimensions of its operations for the past fiscal year, and give a summary of
operations on a per-share basis for the past five fiscal years. There's also an
overview of the fund and its business structure, as well as information on the
accounting policies the fund uses in arriving at the figures it presents here.
Together, the words and numbers in this section offer a comprehensive picture of
the fund and its recent activities. In fact, the text and notes on pages 9 to 20
are an integral part of the financial statements, which wouldn't be complete
without them.
For more information about the fund's strategies, risks, and expenses, check the
fund's prospectus; you'll need to read it before making any investments. The
prospectus also has more details on the fund's share classes and its policies
for shareholder accounts. To get a copy of any State Street Research prospectus,
see the back cover of this report.
Keep in mind that in annual reports, the portfolio holdings and financial
statements are AUDITED, while in semiannual reports they are UNAUDITED.
<PAGE>
ABOUT THE FUND
------------------------------------------------------------------------------
BUSINESS STRUCTURE
State Street Research Global Resources Fund is a mutual fund that allows
shareholders to pool their assets for investment in a portfolio of securities.
This fund is a series of State Street Research Equity Trust, a Massachusetts
business trust, and is an open-end management investment company.
Four entities administer the fund's main business functions:
o The board of trustees oversee the fund with its shareholders' interests in
mind and have ultimate responsibility for the fund's activities (see back
pages of report for trustee information).
o The investment manager, State Street Research & Management Company, is
responsible for the fund's investment and business activities and receives
the management fee as compensation.
o The distributor, State Street Research Investment Services, Inc., sells
shares of the fund, handles investor inquiries and transaction orders and
provides other shareholder services.
o The custodian, State Street Bank and Trust Company, holds fund securities,
provides data on their market value, and handles related services.
The investment manager and the distributor are subsidiaries of MetLife, Inc.
State Street Bank and Trust Company is not affiliated with MetLife (the
similarity between its name and the names of the investment manager and
distributor is coincidental). A majority of the trustees consists of people who
are not affiliated with MetLife or any of its subsidiaries. The distributor pays
a portion of its fees to MetLife for services it provides, including maintaining
the accounts of some investors who hold shares through their firm's employee
benefit plans and other sponsored arrangements.
GOAL AND STRATEGY
The fund seeks 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.
SHARE CLASSES
The fund generally offers four share classes, each with its own sales charge
and expense structure. The fund also offers an additional class of shares
(Class B) but only to current Class B shareholders through reinvestment of
dividends and distributions or through exchanges from existing Class B
accounts of other State Street Research funds.
Class A shares are subject to an initial sales charge of up to 5.75%. From
July 1, 1999 to April 30, 2000, Class A shares paid a service fee equal to
0.25% of average daily net assets. Beginning May 1, 2000, Class A shares pay
an annual distribution and service fee equal to 0.30% of average daily net
assets. Class B(1) and Class B shares pay annual distribution and service fees
of 1.00%. Class B(1) and Class B shares automatically convert into Class A
shares (which pay lower ongoing expenses) at the end of eight years. Class
B(1) and Class B shares are subject to a contingent deferred sales charge on
certain redemptions made within six years and five years of purchase,
respectively. Class C shares are subject to a contingent deferred sales charge
of 1.00% on any shares redeemed within one year of their purchase, and shares
also pay annual distribution and service fees of 1.00%. Class S shares are
only offered through certain retirement accounts, advisory accounts of the
investment manager, 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 text and notes are an integral part of the financial statements.
<PAGE>
THE FUND'S ACCOUNTING POLICIES
--------------------------------------------------------------------------------
In keeping with accounting principles generally accepted in the United States,
the fund has used the following policies in preparing the portfolio holdings and
financial statements in this report:
The fund values all portfolio securities as of the date of this report (or, if
that day wasn't a business day, then the most recent business day). The fund
uses the following methods for determining the values of various types of
securities:
o Listed securities -- The fund uses the price of the last sale on a national
securities exchange that was quoted before the close of the New York Stock
Exchange.
o Over-the-counter securities -- The fund uses the closing prices quoted on
the NASDAQ system. If a security hasn't traded that day, or if it is not
quoted on the NASDAQ system, the value is set at halfway between the closing
bid and asked quotations.
o Securities maturing within 60 days -- The fund adjusts the value of these
securities daily, moving them closer to the amount due on maturity as the
maturity date approaches.
o Other securities -- The fund prices these securities at fair value under
procedures established and supervised by the trustees.
The fund accounts for each purchase and sale of portfolio securities on the
trade date. In calculating realized gains or losses, the fund takes as its cost
basis the identified cost of securities sold.
The fund records investment income from portfolio securities as follows:
o Interest -- The fund accrues interest daily as it earns it.
o Cash dividends -- The fund accrues these on the ex-dividend date.
The fund may seek additional income by lending portfolio securities to qualified
institutions. The fund will receive cash or securities as collateral in the
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 or losses. If the
borrower fails to return the securities and the collateral has declined in
value, the fund could lose money. The fund accounts for income from the lending
of its securities by including it in interest income.
The fund distributes its net earnings to its shareholders. The fund calculates
these distributions using federal income tax regulations. As a result, they may
be different than if the fund used generally accepted accounting principles. The
fund distributes its earnings on the following schedule:
o Dividends from net investment income -- The fund ordinarily declares and
pays these annually, if any, and may make an additional distribution if tax
regulations make it necessary.
o Net realized capital gains -- The fund distributes these annually, if any,
and may make an additional distribution if tax regulations make it
necessary.
If the fund has no earnings to distribute, it won't make a distribution.
The fund does not intend to pay federal income tax. This is because it has
elected to be exempt from taxes under Subchapter M of the Internal Revenue Code,
in part because it makes distributions as described above.
The fund pays expenses as follows:
o Expenses attributed to the fund -- The fund pays these directly. Examples of
these expenses include the management fee, transfer agent fee, custodian
fee, and distribution and service fees.
o Expenses attributed to the trust of which the fund is a series -- These
expenses are divided up among all funds in the trust. Each fund pays a
proportional share. Examples of these expenses include the legal fees and
trustees' fees.
The fund has used certain estimates and assumptions in preparing this report.
Although they are necessary in order to follow generally accepted accounting
principles, these estimates and assumptions affect several key areas, including
the reported amounts of assets and liabilities, and income and expenses. Actual
results could differ from those estimates.
The fund's securities and investment practices carry certain risks.
The text and notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO HOLDINGS June 30, 2000
--------------------------------------------------------------------------------
The listings that begin on this page detail the fund's investment holdings as of
the report date. We have grouped the holdings by asset class and then by
specific industry.
The solid colored circles (1) show the fund's ten largest holdings, with the
number in the circle showing where the holding ranks in the top ten.
/\
--------------------------------------------------------------------------------
Notes about specific elements of the financials are called out in boxes such as
this.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Key to symbols
* Denotes a security which has not paid a dividend during the last year.
^ Denotes a Global Depositary Receipt, a form of ownership of foreign
securities that is traded in the United States and denominated in U.S.
dollars.
+ Denotes a Rule 144A restricted security, meaning that it trades only among
certain qualified institutional buyers. As of the report date, the fund had
1.39% of net assets in Rule 144A securities.
++ Denotes a security restricted as to public resale. As of the report date, the
fund had 0.14% of net assets in restricted securities.
----------------------------------------------------------------------------
MARKET
ISSUER SHARES VALUE
-------------------------------------------------------------------------
EQUITY SECURITIES 100.3% OF NET ASSETS
CONTRACT DRILLING 8.8% OF NET ASSETS
-------------------------------------------------------------------------
Drillers Technology Corp.*++ 200,000 $ 216,216
Drillers Technology Corp. Wts.*++ 100,000 6,757
Patterson Energy Inc.* 60,000 1,710,000
Precision Drilling Corp.* 75,000 2,896,875
(10) R & B Falcon Corp.* 225,000 5,301,562
OIL AND GAS EXPLORATION
TMBR / Sharp Drilling Inc.* 136,800 1,504,800
UTI Energy Corp.* 60,000 2,407,500
------------
Total Contract Drilling 14,043,710
------------
EXPLORATION & PRODUCTION 68.2% OF NET ASSETS
-------------------------------------------------------------------------
3Tec Energy Corp.* 300,000 3,000,000
Barrett Resources Corp.* 25,000 716,260
(9) Basin Exploration Inc.* 300,000 5,362,500
OIL AND GAS EXPLORATION
(3) Baytex Energy Ltd. Cl. A* 1,142,748 10,809,778
OIL AND GAS EXPLORATION
Brigham Exploration Co.* 34,400 86,000
Cabot Oil & Gas Corp. Cl. A 196,500 4,163,344
Callon Petroleum Co.* 325,500 4,841,812
(7) Canadian 88 Energy Corp.* 2,934,100 6,051,581
OIL AND GAS EXPLORATION
(2) Clayton Williams Energy Inc.* 371,330 11,859,352
OIL AND GAS EXPLORATION
Comstock Resources Inc.* 100,000 800,000
Cross Timbers Oil Co. 175,000 3,871,875
Elk Point Resources Inc. Cl. A* 490,500 1,325,676
Esenjay Exploration Inc.* 101,669 324,070
Gulf Canada Resources Ltd.* 513,000 2,468,812
Gulfstream Resources Ltd. 124,700 164,301
HS Resources Inc.* 105,000 3,150,000
KCS Energy Inc.* 540,000 742,500
Ketch Energy Ltd.* 60,000 158,108
Keywest Energy Corp.* 740,900 565,687
Magin Energy Inc.* 344,300 860,750
Maxx Petroleum Ltd.* 200,975 715,973
Nuevo Energy Co.* 86,800 1,638,350
(4) Ocean Energy Inc.* 600,000 8,512,500
OIL AND GAS EXPLORATION
Patina Oil & Gas Corp. 94,700 1,965,025
Pease Oil & Gas Co.* 20,000 4,100
Pease Oil & Gas Co. Pfd.* 8,750 1,654
Pendaries Petroleum Ltd.* 167,000 563,625
Pennaco Energy Inc.* 103,000 1,686,625
(6) Plains Resources Inc.* 400,000 6,400,000
OIL AND GAS EXPLORATION
Post Energy Corp.* 400,000 1,837,838
(5) Pure Resources Inc.* 359,898 6,433,177
OIL AND GAS EXPLORATION
PYR Energy Corp.* 112,900 536,275
Ranger Oil Ltd.* 628,900 3,458,950
Remington Oil & Gas Corp.* 150,000 1,125,000
Richland Petroleum Corp.* 332,900 821,003
Seven Seas Petroleum Inc.* 657,600 780,900
Southwestern Energy Co. 359,300 2,245,625
Swift Energy Co.* 16,300 462,513
Tom Brown, Inc.* 205,900 4,748,569
Triumph Energy Corp.* 1,085,500 1,063,497
Ultra Petroleum Corp.* 586,100 1,108,838
Vermilion Resources Ltd.*+ 200,000 959,459
Wolverine Energy Corp.* 165,000 20,068
------------
Total Exploration & Production 108,411,970
------------
MINING 1.2% OF NET ASSETS
-------------------------------------------------------------------------
Ashanti Goldfields Co. Ltd.^ 224,600 393,050
Nevsun Resources Ltd.* 400,000 89,189
Romarco Minerals Inc.* 223,000 75,338
Romarco Minerals Inc. Wts.* 77,000 6,503
Southwestern Gold Corp.* 243,300 723,324
Tombstone Exploration Co. Ltd.* 200,000 19,595
Viceroy Resource Corp.* 183,000 59,351
Virginia Gold Mines Inc.* 500,000 243,243
X-Cal Resources Ltd.* 1,755,500 278,745
Zimbabwe Platinum Mines Ltd.* 150,000 18,211
------------
Total Mining 1,906,549
------------
MISCELLANEOUS 2.4% OF NET ASSETS
-------------------------------------------------------------------------
Mosvold Shipping Ltd.+ 2,839,534 827,322
OMI Corp.* 559,500 3,042,281
------------
Total Miscellaneous 3,869,603
------------
OIL SERVICE 7.4% OF NET ASSETS
-------------------------------------------------------------------------
Badger Daylighting Inc.* 375,000 544,764
Global Industries Inc.* 50,000 943,750
(8) Newpark Resources Inc.* 600,000 5,662,500
OIL AND GAS EXPLORATION
NS Group Inc.* 100,000 2,093,750
Pason Systems Inc.* 300,000 1,824,324
Stellarton Energy Corp. Cl. A+ 150,000 430,743
Willbros Group Inc.* 29,100 200,063
------------
Total Oil Service 11,699,894
------------
REFINING 1.2% OF NET ASSETS
-------------------------------------------------------------------------
Interoil Corp.* 156,500 594,700
Syntroleum Corp.* 77,100 1,320,338
------------
Total Refining 1,915,038
------------
UTILITY 11.1% OF NET ASSETS
-------------------------------------------------------------------------
(1) Western Gas Resources Inc. 839,300 $ 17,625,300
NATURAL GAS PROCESSING
Total Utilities 17,625,300
------------
TOTAL EQUITY SECURITIES 159,472,064
------------
The fund paid a total of $147,712,664 for these securities.
The text and notes are an integral part of the financial statements.
<PAGE>
MARKET
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 1.4% OF NET ASSETS
AIM Liquid Assets Portfolio 2,262,538 $2,262,538
----------
TOTAL SHORT-TERM INVESTMENTS 2,262,538
----------
The fund paid a total of $2,262,538 for these securities.
% of
Net Assets
--------------------------------------------------------------------------------
Summary of Portfolio Assets
--------------------------------------------------------------------------------
Investments 101.7% $161,734,602
--------------------------------------------------------------------------------
Cash and Other Assets, Less Liabilities (1.7%) (2,710,655)
--------------------------------------------------------------------------------
Net Assets 100.0% $159,023,947
====== ============
--------------------------------------------------------------------------------
The fund paid a total of $149,975,202 for these securities.
Federal Income Tax Information
At June 30, 2000, the net unrealized appreciation of investments
based on cost for Federal income tax purposes of $150,369,941
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 48,988,838
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (37,624,177)
------------
$ 11,364,661
============
At June 30, 2000, the fund had a capital loss carryforward of $45,135,755
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $6,860,770 and $38,274,985 expire on June 30, 2007 and
2008, respectively.
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 12-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 $37,552,832 and has deferred and treated such
losses as arising in the fiscal year ended June 30, 2000. From November 1, 1999
through June 30, 2000, the fund incurred net capital losses of approximately
$23,397,000 and intends to defer and treat such losses as arising in the fiscal
year ended June 30, 2001.
The text and notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF
ASSETS AND LIABILITIES June 30, 2000
--------------------------------------------------------------------------------
This is the fund's balance sheet as of the report date. It shows the fund's
assets, its liabilities and, by subtraction, its net assets. It also shows the
share price for each share class as of the report date.
The fund paid a total of $149,975,202 for these securities.
ASSETS
Investments, at market value $161,734,602
Cash 1,300,827
Receivable for securities sold 5,723,686
Receivable for fund shares sold 2,796,729
Dividends and interest receivable 99,779
------------
171,655,623
LIABILITIES
Payable for securities purchased 6,681,395
Payable for fund shares redeemed 3,037,760
Payable for collateral received on securities loaned 2,262,538
Accrued transfer agent and shareholder services 229,014
Accrued management fee 189,722
Accrued distribution and service fees 162,651
Accrued trustees' fees 15,595
Other accrued expenses 53,001
------------
12,631,676
------------
NET ASSETS $159,023,947
============
Net Assets consist of:
Unrealized appreciation of investments $ 11,759,400
Unrealized depreciation of foreign currency (4,090)
Accumulated net realized loss (68,927,170)
Paid-in capital 216,195,807
------------
$159,023,947
============
NET ASSET VALUE (NAV) OF EACH SHARE CLASS
Except where noted, the NAV is the offering and the redemption price for each
class.
Net Assets / Number of Shares = NAV
A $70,151,798 4,179,345 $16.79*
B(1) $ 8,608,051 543,091 $15.85**
B $48,351,712 3,047,411 $15.87**
C $23,313,102 1,472,225 $15.84**
S $ 8,599,284 499,716 $17.21
* Maximum offering price per share $17.81 ($16.79 / .9425)
** 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.
The text and notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF
OPERATIONS For the year ended June 30, 2000
--------------------------------------------------------------------------------
This shows what the fund earned and lost over the report period, and what its
expenses were.
INVESTMENT INCOME
Dividends, net of foreign taxes $ 457,724
Interest 77,132
------------
534,856
EXPENSES
Management fee 1,053,292
Transfer agent and shareholder services 715,190
Custodian fee 105,552
Reports to shareholders 80,866
Registration fees 48,581
Audit fee 28,201
Trustees' fees 19,292
Legal fees 16,069
Distribution and service fees - Class A 146,431
Distribution and service fees - Class B(1) 62,432
Distribution and service fees - Class B 490,800
Distribution and service fees - Class C 224,947
Miscellaneous 13,950
------------
3,005,603
Fees paid indirectly (20,726)
------------
2,984,877
------------
Net investment loss (2,450,021)
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized loss on investments (22,887,534)
Net unrealized appreciation of investments 64,070,432
Net unrealized depreciation of foreign currency (4,090)
------------
Net gain on investments 41,178,808
------------
Net increase in net assets resulting
from operations $ 38,728,787
============
The fund paid foreign taxes of $9,501.
Includes $83,532 in income from the lending of portfolio securities. As of the
report date, the fund had a total of $2,311,925 of securities out on loan and
was holding a total of $2,262,538 in collateral related to those loans.
The management fee is 0.75% of fund net assets, annually.
Includes a total of $239,930 paid to the distributor for the services it
provided, and to MetLife for similar services it provided, including maintaining
the accounts of some investors who hold shares through that firm's employee
benefit plans and other sponsored arrangements.
Paid only to trustees who aren't currently affiliated with the adviser (the fund
doesn't pay trustees' fees to affiliated trustees).
Payments made to the distributor under the fund's 12b-1 plans. The fees cover
personal services and the maintenance of shareholder accounts. The fees also
cover distribution and marketing expenditures for the sale of fund shares.
Represents transfer agent credits earned from uninvested cash balances.
To earn this, the fund sold $105,345,856 of securities. During
this same period, the fund also bought $66,685,510 worth of securities. These
figures don't include short-term obligations or U.S. government securities.
The text and notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF
CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
This shows how the fund's size changed over the report period, including changes
that resulted from investment performance as well as those that resulted from
shareholders buying and selling fund shares.
Years ended June 30
--------------------------------------------------------------------------------
1999 2000
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment loss $ (2,078,315) $ (2,450,021)
Net realized loss on investments,
foreign currency and forward
contracts (46,014,337) (22,887,534)
Net unrealized appreciation
(depreciation) of investments and
foreign currency (6,567,556) 64,066,342
--------------------------------
Net increase (decrease) resulting
from operations (54,660,208) 38,728,787
--------------------------------
DISTRIBUTION FROM CAPITAL GAINS:
Class A (3,619,542) --
Class B(1) -- --
Class B (3,887,699) --
Class C (1,503,483) --
Class S (209,120) --
--------------------------------
(9,219,844) --
--------------------------------
Net increase (decrease) from
fund share transactions 8,549,006 (39,749,208)
Total decrease in net assets (55,331,046) (1,020,421)
--------------------------------
NET ASSETS
Beginning of year 215,375,414 160,044,368
--------------------------------
End of year $160,044,368 $159,023,947
================================
The text and notes are an integral part of the financial statements.
<PAGE>
<TABLE>
These transactions break down by share class as follows:
<CAPTION>
YEARS ENDED JUNE 30
--------------------------------------------------------------------------
1999 2000
--------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,547,596 $106,672,440 5,507,375 $ 75,898,189*
Issued upon reinvestment of
distribution from capital gains 347,217 3,362,264 -- --
Shares redeemed (9,116,127) (101,535,221) (6,853,632) (88,329,954)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) 778,686 $ 8,499,483 (1,346,257) ($12,431,765)
==========================================================================
<CAPTION>
CLASS B(1) SHARES(A) AMOUNT(A) SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Shares sold 552,033 $ 5,148,104 382,807 $ 4,790,641**
Shares redeemed (114,865) (1,235,708) (276,884) (3,348,391)***
--------------------------------------------------------------------------
NET INCREASE 437,168 $ 3,912,396 105,923 $ 1,442,250
==========================================================================
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Shares sold 1,834,773 $ 20,961,694 353,834 $ 4,347,389**
Issued upon reinvestment of
distribution from capital gains 392,245 3,628,438 -- --
Shares redeemed (2,697,037) (28,620,805) (2,205,311) (25,724,585)***
--------------------------------------------------------------------------
NET DECREASE (470,019) ($ 4,030,673) (1,851,477) ($21,377,196)
==========================================================================
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Shares sold 1,115,539 $ 11,753,691 587,132 $ 7,801,087**
Issued upon reinvestment of
distribution from capital gains 148,917 1,374,717 -- --
Shares redeemed (1,305,845) (13,956,016) (1,327,115) (16,095,107)****
--------------------------------------------------------------------------
NET DECREASE (41,389) ($ 827,608) (739,983) ($ 8,294,020)
==========================================================================
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Shares sold 510,007 $ 5,687,504 897,149 $ 11,629,254
Issued upon reinvestment of
distribution from capital gains 21,123 208,699 -- --
Shares redeemed (406,508) (4,900,795) (847,083) (10,717,731)
--------------------------------------------------------------------------
NET INCREASE 124,622 $ 995,408 50,066 $ 911,523
==========================================================================
The trustees have the authority to issue an unlimited number of shares of beneficial interest, with a $.001
par value per share.
* Includes $30,726 and $18,729 in sales charges collected by the distributor and MetLife.
** Like all broker-dealers, MetLife received commissions that were calculated as a percentage of these sales but
the commissions of $37,505, $993, and $20 for Class B(1), Class B and Class C, were paid by the distributor,
not the fund.
*** Includes $28,996 and $183,872 in deferred sales charges collected by the distributor for Class B(1) and Class
B.
**** Includes $8,323 in deferred sales charges collected by the distributor.
(a) January 1, 1999 (commencement of share class) to June 30, 1999.
The text and notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
----------------------------------------------------------------------------------------------------------------------------------
These provide a summary of each share class's financial performance, for the past five fiscal years.
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
-----------------------------------------------------------------
Years ended June 30
PER SHARE DATA 1996(A) 1997(A) 1998(A) 1999(A) 2000(A)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 12.16 17.44 22.39 17.35 12.15
Net investment loss ($)* (0.20) (0.15) (0.18) (0.11) (0.17)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 5.48 5.86 (2.52) (4.34) 4.81
----- ----- ------ ------ -----
TOTAL FROM INVESTMENT OPERATIONS ($) 5.28 5.71 (2.70) (4.45) 4.64
----- ----- ------ ------ -----
Distribution from capital gains ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
TOTAL DISTRIBUTIONS ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
NET ASSET VALUE, END OF YEAR ($) 17.44 22.39 17.35 12.15 16.79
===== ===== ====== ====== =====
Total return (%) (b) 43.42 32.96 (14.28) (24.56) 38.19
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 30,943 80,029 82,376 67,155 70,152
Expense ratio (%)* 1.75 1.42 1.46 1.59 1.74
Expense ratio after expense reductions (%)* 1.75 1.42 1.46 1.57 1.72
Ratio of net investment loss
to average net assets (%)* (1.47) (0.73) (0.82) (0.97) (1.34)
Portfolio turnover rate (%) 92.33 51.67 68.69 55.89 47.49
* Reflects voluntary reduction of expenses per share
of these amounts ($) 0.05 0.00 -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B(1)
-------------------------
Years ended June 30
-------------------------
PER SHARE DATA 1999(A)(C) 2000(A)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 9.44 11.56
Net investment loss ($) (0.08) (0.26)
Net realized and unrealized gain on investments and foreign currency ($) 2.20 4.55
----- -----
TOTAL FROM INVESTMENT OPERATIONS($) 2.12 4.29
----- -----
NET ASSET VALUE, END OF YEAR ($) 11.56 15.85
===== =====
Total return (%) (b) 22.46(d) 37.11
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 5,053 8,608
Expense ratio (%) 2.19 (e) 2.48
Expense ratio after expense reductions (%) 2.17 (e) 2.46
Ratio of net investment loss to average net assets (%) (1.64)(e) (2.12)
Portfolio turnover rate (%) 55.89 47.49
The text and notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------
Years ended June 30
------------------------------------------------------------------
PER SHARE DATA 1996(A) 1997(A) 1998(A) 1999(A) 2000(A)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 12.03 17.12 21.80 16.71 11.58
----- ----- ------ ------ -----
Net investment loss ($)* (0.30) (0.30) (0.33) (0.19) (0.26)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 5.39 5.74 (2.42) (4.19) 4.55
----- ----- ------ ------ -----
TOTAL FROM INVESTMENT OPERATIONS ($) 5.09 5.44 (2.75) (4.38) 4.29
----- ----- ------ ------ -----
Distribution from capital gains ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
TOTAL DISTRIBUTIONS ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
NET ASSET VALUE, END OF YEAR ($) 17.12 21.80 16.71 11.58 15.87
===== ===== ====== ====== =====
Total return (%) (b) 42.31 31.98 (14.94) (25.10) 37.05
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 12,828 78,701 89,689 56,708 48,352
Expense ratio (%)* 2.50 2.17 2.21 2.34 2.48
Expense ratio after expense reductions (%)* 2.50 2.17 2.21 2.32 2.46
Ratio of net investment loss to average net assets (%)* (2.20) (1.47) (1.57) (1.73) (2.10)
Portfolio turnover rate (%) 92.33 51.67 68.69 55.89 47.49
* Reflects voluntary reduction of expenses per share of
these amounts ($) 0.04 0.00 -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
Years ended June 30
-----------------------------------------------------------------
PER SHARE DATA 1996(A) 1997(A) 1998(A) 1999(A) 2000(A)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 12.02 17.10 21.76 16.67 11.54
----- ----- ------ ------ -----
Net investment loss ($)* (0.30) (0.30) (0.33) (0.19) (0.25)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 5.38 5.72 (2.42) (4.19) 4.55
----- ----- ------ ------ -----
TOTAL FROM INVESTMENT OPERATIONS ($) 5.08 5.42 (2.75) (4.38) 4.30
----- ----- ------ ------ -----
Distribution from capital gains ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
TOTAL DISTRIBUTIONS ($) -- (0.76) (2.34) (0.75) --
NET ASSET VALUE, END OF YEAR ($) 17.10 21.76 16.67 11.54 15.84
===== ===== ====== ====== =====
Total return (%) (b) 42.26 31.90 (14.97) (25.17) 37.26
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 5,154 27,528 37,566 25,538 23,313
Expense ratio (%)* 2.50 2.17 2.21 2.34 2.48
Expense ratio after expense reductions (%)* 2.50 2.17 2.21 2.32 2.46
Ratio of net investment loss to average net assets (%)* (2.20) (1.45) (1.57) (1.72) (2.06)
Portfolio turnover rate (%) 92.33 51.67 68.69 55.89 47.49
* Reflects voluntary reduction of expenses per share of
these amounts ($) 0.05 0.00 -- -- --
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced the fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
The text and notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS CONTINUED
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
-----------------------------------------------------------------
Years ended June 30
-----------------------------------------------------------------
PER SHARE DATA 1996(A) 1997(A) 1998(A) 1999(A) 2000(A)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 12.27 17.64 22.72 17.67 12.43
----- ----- ------ ------ -----
Net investment loss ($)* (0.17) (0.10) (0.13) (0.08) (0.15)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) 5.54 5.94 (2.58) (4.41) 4.93
----- ----- ------ ------ -----
TOTAL FROM INVESTMENT OPERATIONS ($) 5.37 5.84 (2.71) (4.49) 4.78
----- ----- ------ ------ -----
Distribution from capital gains ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
TOTAL DISTRIBUTIONS ($) -- (0.76) (2.34) (0.75) --
----- ----- ------ ------ -----
NET ASSET VALUE, END OF YEAR ($) 17.64 22.72 17.67 12.43 17.21
===== ===== ====== ====== =====
Total return (%) (b) 43.77 33.33 (14.11) (24.33) 38.46
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 5,632 10,747 5,745 5,590 8,599
Expense ratio (%)* 1.50 1.17 1.21 1.34 1.48
Expense ratio after expense reductions (%)* 1.50 1.17 1.21 1.32 1.46
Ratio of net investment loss
to average net assets (%)* (1.20) (0.48) (0.55) (0.70) (1.11)
Portfolio turnover rate (%) 92.33 51.67 68.69 55.89 47.49
*Reflects voluntary reduction of expenses per share of
these amounts ($) 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 the fund's expenses.
The text and notes are an integral part of the financial statements.
</TABLE>
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 portfolio holdings--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, 2000, and the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2000
<PAGE>
Board of Trustees
GERARD P. MAUS
Chief Financial Officer,
Chief Administrative Officer,
Director and Interim Chief Operating Officer
State Street Research & Management Company
BRUCE R. BOND
Former 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
DEAN O. MORTON
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
SUSAN M. PHILLIPS
Dean, School of Business and Public Management, George Washington University;
former Member of the Board of Governors of the Federal Reserve System and
Chairman and Commissioner of the Commodity Futures Trading Commission
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
STATE STREET RESEARCH GLOBAL RESOURCES FUND
--------------------------------------------------------------------------------
REPORT ON SPECIAL MEETINGS OF SHAREHOLDERS
Two Special Meetings of Shareholders of the State Street Research Global
Resources Fund ("Fund"), a series of State Street Research Equity Trust, were
convened. The first meeting was convened on September 14, 1999, and continued
thereafter; the second meeting was convened on February 25, 2000, and continued
thereafter (each, a "Meeting"). The results of the Meetings are set forth below.
SEPTEMBER 14, 1999 MEETING
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES OF THE TRUST)
ACTION ON PROPOSAL FOR WITHHELD
----------------------------------------------------------------------------
1. The following persons were elected as Trustees:
Bruce R. Bond 31.9 0.8
Steve A. Garban 31.9 0.8
Malcolm T. Hopkins 31.9 0.8
Susan M. Phillips 31.9 0.8
VOTES (MILLIONS OF SHARES)
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
----------------------------------------------------------------------------
2. The fundamental policy
on industry concentration
was amended. 6.4 0.2 0.4
3. The fundamental policy on
diversification of investments
was amended. 6.3 0.2 0.4
FEBRUARY 25, 2000 MEETING
CLASS A SHARES
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares. 1.7 0.4 0.1
CLASS B SHARES
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares. 1.8 0.3 0.2
CLASS B(1) SHARES
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares. 0.2 0.1 0.0
<PAGE>
GLOSSARY
12B-1 FEES -- Fees paid from mutual fund assets for personal services and for
the maintenance of shareholder accounts and distribution and marketing expenses.
The fees are named after the SEC rule that permits them.
AVERAGE SHARES METHOD -- The practice of basing a fund's calculations for a
given period on the average number of shares that were outstanding during that
period.
NASDAQ -- The stock price quotation system operated by the National Association
of Securities Dealers. The NASDAQ system operates as a clearing house for
transaction data about stocks that are traded "over the counter" around the U.S.
NEW YORK STOCK EXCHANGE -- The largest stock exchange in the United States, and
the place where many of the largest company stocks are listed. Unlike the NASDAQ
system, the NYSE is a physical exchange, with all trading occurring on the
exchange's trading floor on Wall Street.
<PAGE>
--------------
[Logo] STATE STREET RESEARCH Bulk Rate
One Financial Center o Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
--------------
CONTACT INFORMATION FOR
INVESTORS SERVICES
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
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Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637),
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--------------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1999
--------------------------
for excellence in service
--------------------------------------------------------------------------------
This report must be accompanied or preceded by a current State Street
Research Global Resources Fund prospectus. When used after September 30,
2000 this report must be accompanied by a current Quarterly Performance
Update.
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OverView
---------------------------------------
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and services mentioned in OverView,
our shareholder newsletter, visit our
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State Street Research
SPECTRUM OF FUNDS
---------------------------------------
Growth
AGGRESIVE
Global Resources Fund
Emerging Growth Fund
Mid-Cap Growth Fund(1)
Aurora Fund
Concentrated International Fund
International Equity Fund
Concentrated Growth Fund
Growth Fund
Galileo Fund
Legacy Fund
Growth & Income
Argo Fund
Investment Trust
Alpha Fund
Strategic Growth & Income Fund
Strategic Income Plus Fund(2)
Income
CONSERVATIVE
High Income Fund
Strategic Income Fund
New York Tax-Free Fund
Tax-Exempt Fund
Government Income Fund
Money Market Fund(3)
(1) Formerly State Street Research
(2) Formerly State Street Research Strategic Portfolios: Conservative.
(3) An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
(c) 2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
Control Number:(exp0801)SSR-LD GR-2187-0800
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
ATHLETES FUND
--------------------------------
ANNUAL REPORT
June 30, 2000
---------------------
WHAT'S INSIDE
---------------------
FROM THE CHAIRMAN
Volatility in the stock
market continues
PORTFOLIO MANAGER'S REVIES
A good year for the fund despite
market volatility
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
FROM THE CHAIRMAN
[Photo of Gerard P. Maus]
DEAR SHAREHOLDER:
America's cycle of economic prosperity has continued for a record-breaking nine
consecutive years. Gross domestic product (GDP), a measure of goods and services
produced in the U.S., rose at an annual rate of 5.4% in 1999. Despite the
efforts of the Federal Reserve Board to cool down the economy by raising
interest rates, growth continued at around 5.0% for the first half of 2000. The
Fed has raised a key short-term interest rate six times in the past year, from
4.75% to 6.5% as inflation picked up to 3.7% from 2.0% one year ago.
Unemployment sunk to a 30-year low of 3.9% before edging back up to 4.1% near
the end of the period.
STOCKS
The U.S. stock market delivered modest gains over the 12 months ended June 30,
2000, but the final numbers mask the volatility that roiled the technology
sector and other market leaders in the last quarter of the period. The S&P 500
rose 7.2% while the technology-heavy Nasdaq gained a stunning 48.0% despite
giving back 13.2% in the second quarter.(1)
BONDS
In 1999, the bond market was hurt by factors associated with Y2K and rising
interest rates. However, long-term U.S. Treasury bonds picked up early in 2000,
helped by the federal government's repurchase of bonds -- the first since the
1930s -- and the perception that the Fed is working to stem inflation with
higher interest rates. In an environment marked with uncertainty, municipal and
mortgage bonds held up better than corporate bonds. Both delivered attractive
single-digit returns. High-yield bonds, which were relatively strong in 1999,
lost ground in 2000.
In May, the bond market adopted the 10-year U.S. Treasury as its benchmark. This
replaces the 30-year Treasury, which has become something of a dinosaur as the
result of the federal government's buyback program and a budget surplus that has
reduced the government's borrowing needs.
INTERNATIONAL
Economic growth around the globe was better than expected. In Asia and the
emerging markets of Latin America, economies rebounded from currency and
economic woes faster than anticipated. Japan began to show signs of progress in
revitalizing its economy after a decade of stagnation and decline. That was
reflected in strong stock market performance in 1999, especially among small
Japanese companies. However, Japanese stocks lost ground in 2000 as economic
fears returned. European stock markets delivered mixed results. European
technology and telecommunications sectors have soared -- and stumbled -- along
with the U.S. market.
OUTLOOK AND OPPORTUNITIES
So far, the year 2000 has been marked by significant volatility in the stock
market and only modest returns in the bond market. For long-term investors, it
has been a good reminder that diversification is still the best way to reduce
the impact of volatility. Now is a good time to consult your financial
professional about the strategies that make sense for your personal portfolio.
And, as always, we thank you for your confidence in State Street Research.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus, Chief Executive Officer
State Street Research Funds
June 30, 2000
(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) 19.46% for Class B(1) shares; 19.57% for Class B shares; 19.44% for Class C
shares; 20.62% 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 rein- vestment of
capital gains distributions and income dividends at net asset value.
(4) 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.
(5) 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, 2000)
-------------------------------------------------------------------------------
TOTAL VALUE OF $10,000 INVESTED
SINCE INCEPTION 3/27/98(3)
(Class A shares, at maximum applicable sales charge)
Athletes Fund - Class A
"3/98" $ 9,425
"6/98" 9,910
"9/98" 9,075
"12/98" 11,292
"3/99" 12,087
"6/99" 12,518
"9/99" 12,006
"12/99" 15,118
"3/00" 15,779
"6/00" 15,065
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(3)(4)(5)
---------------------------------------------------------
LIFE OF FUND
(since 3/27/98) 1 YEAR
---------------------------------------------------------
Class A 19.82% 13.42%
---------------------------------------------------------
Class B(1) 20.99% 14.46%
---------------------------------------------------------
Class B 21.04% 14.57%
---------------------------------------------------------
Class C 22.08% 18.44%
---------------------------------------------------------
Class S 23.25% 20.62%
---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(3)(5)
(does not reflect sales charge)
LIFE OF FUND
(since 3/27/98) 1 YEAR
---------------------------------------------------------
Class A 23.00% 20.34%
---------------------------------------------------------
Class B(1) 22.03% 19.46%
---------------------------------------------------------
Class B 22.08% 19.57%
---------------------------------------------------------
Class C 22.08% 19.44%
---------------------------------------------------------
Class S 23.25% 20.62%
---------------------------------------------------------
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Athletes Fund: A good year for the fund despite market volatility
[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, 2000 and his views on the year
ahead.
Q: HOW DID THE FUND PERFORM LAST YEAR?
A: It was a strong year for large- company growth stocks and also for Athletes
Fund. Class A shares returned 20.34% [without sales charge] for the 12 months
ended June 30, 2000.(2) The fund easily outperformed the S&P 500 Index, which
returned 7.24% over the same period.
Q: WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE?
A: During the second half of 1999, we were heavily invested in technology stocks
during one of the strongest periods ever for technology. Technology accounted
for both our best and worst performers. Cisco Systems, Sun Microsystems and EMC
were the fund's best performing stocks. Honeywell and Electronic Data Systems
were among the fund's weakest performers. It also helped that we were light in
our investments in financial and health care stocks early in the period. They
were underperformers for most of 1999.
Q: DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO DURING THE YEAR?
A: In the first quarter of 2000, we began to cut back our technology exposure
because we believed the risks no longer justified our heavy emphasis on the
technology sector. Our strategy was rewarded as technology stocks took a beating
in March and the sector struggled through most of the rest of the period. That
said, the fund continues to have a relatively large position in technology.
Q: WHERE DID YOU REALLOCATE THE MONEY YOU WITHDREW FROM THE TECHNOLOGY SECTOR?
A: We used it to build our positions in financial and health care stocks, where
we had a higher degree of confidence in future earnings growth. In the finance
sector, for example, we found opportunities in property and casualty insurance
stocks. It's one of the few areas of the economy where pricing is actually
getting stronger. We also added to our investments in brokerage stocks, which
have benefited from continued merger and acquisition activity and restructuring.
Morgan Stanley Dean Witter, Ace and Marsh & McLennan were among our best
performing stocks in financial services.
In health care, the fund benefited from its investment in Warner-Lambert, which
merged with Pfizer. We believed that management was serious about its commitment
to cost cutting and that the company deserved a higher valuation than some of
its competitors. In fact, cost reduction helped drive earnings growth to
approximately 25% -- significantly higher than other drug companies, and the
stock did well. We also added to the fund's investment in oil service stocks
which we believe will benefit from a strong energy environment.
Q: WHAT IS YOUR OUTLOOK FOR THE PERIOD AHEAD AND HOW HAVE YOU POSITIONED THE
FUND TO MEET THE CHALLENGES OF THE ENVIRONMENT?
A: We do not believe we have seen the last of the Federal Reserve Board's
interest rate increases. In fact, with new economic data suggesting that there
was no meaningful slowdown in the second quarter, we believe that the Fed will
strike again and continue to raise rates until the economy slows. As a result,
we have reduced the fund's exposure to consumer stocks and we have emphasized
sectors and companies that have the ability to raise prices and to continue to
report sales and earnings gains.
June 30, 2000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 EMC Computer technology 4.2%
2 CISCO SYSTEMS Computer network products 4.2%
3 GENERAL ELECTRIC Consumer/industrial products 3.9%
4 VIACOM Media 3.6%
5 CITIGROUP Financial services 3.5%
6 TYCO INTERNATIONAL Diversified manufacturer 3.5%
7 PFIZER Pharmaceutical 3.5%
8 NORTEL NETWORKS Electrical equipment & components 3.2%
9 INTEL Electronic components 2.9%
10 MORGAN STANLEY DEAN WITTER Financial services 2.9%
These securities represent an aggregate of 35.4% of the portfolio. Because of
active management, there is no guarantee that the fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
TOP 5 EQUITY INDUSTRIES
(by percentage of net assets)
COMMUNICATIONS TECHNOLOGY 12.2%
DRUGS & BIOTECHNOLOGY 9.7%
MISCELLANEOUS FINANCIAL 8.1%
MULTI-SECTOR 7.5%
SEMI-CONDUCTORS/COMPONENTS 6.5%
Total: 44.0%
LARGEST CONTRIBUTORS TO PERFORMANCE
(July 1, 1999 through June 30, 2000)
POSITIVE /\
-------------------------------------
CISCO SYSTEMS
SUN MICROSYSTEMS
EMC
NEGATIVE /\
-------------------------------------
HONEYWELL INTERNATIONAL
CIRCUIT CITY
ELECTRONIC DATA SYSTEMS
<PAGE>
<TABLE>
STATE STREET RESEARCH ATHLETES FUND
------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------
June 30, 2000
<CAPTION>
------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 98.3%
CONSUMER DISCRETIONARY 9.6%
ADVERTISING AGENCIES 1.5%
Omnicom Group Inc. ............................................. 4,600 $ 409,687
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 5.3%
Viacom Inc. Cl. B* ............................................. 14,562 992,946
Walt Disney Co. ................................................ 11,680 453,330
------------
1,446,276
------------
RETAIL 2.8%
Circuit City Stores Inc. ....................................... 10,120 335,858
Home Depot Inc. ................................................ 3,550 177,278
Wal-Mart Stores, Inc. .......................................... 4,600 265,075
------------
778,211
------------
Total Consumer Discretionary ................................... 2,634,174
------------
CONSUMER STAPLES 4.2%
BEVERAGES 1.1%
Anheuser-Busch Companies, Inc. ................................. 4,200 313,688
------------
DRUG & GROCERY STORE CHAINS 1.4%
CVS Corp. ...................................................... 9,600 384,000
------------
HOUSEHOLD PRODUCTS 1.7%
Colgate-Palmolive Co. .......................................... 7,700 461,037
------------
Total Consumer Staples ......................................... 1,158,725
------------
FINANCIAL SERVICES 13.6%
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 2.4%
First Data Corp. ............................................... 13,200 655,050
------------
INSURANCE 3.1%
Ace Ltd. ....................................................... 18,000 504,000
American International Group Inc. .............................. 2,962 348,035
------------
852,035
------------
MISCELLANEOUS FINANCIAL 8.1%
Citigroup, Inc. ................................................ 16,150 973,037
Marsh & McLennan Companies, Inc. ............................... 4,500 469,969
Morgan Stanley Dean Witter & Co. ............................... 9,600 799,200
------------
2,242,206
------------
Total Financial Services ....................................... 3,749,291
------------
HEALTH CARE 11.9%
DRUGS & BIOTECHNOLOGY 9.7%
Amgen Inc.* .................................................... 9,000 632,250
Genentech, Inc.* ............................................... 1,800 309,600
Pfizer Inc. .................................................... 20,075 963,600
Pharmacia Corp. ................................................ 15,000 775,312
------------
2,680,762
------------
HOSPITAL SUPPLY 2.2%
Medtronic Inc. ................................................. 12,000 597,750
------------
Total Health Care .............................................. 3,278,512
------------
INTEGRATED OILS 4.0%
INTEGRATED INTERNATIONAL 4.0%
Royal Dutch Petroleum Co. ...................................... 7,000 430,937
Total Fina SA ADR .............................................. 8,800 675,950
------------
1,106,887
------------
Total Integrated Oils .......................................... 1,106,887
------------
MATERIALS & PROCESSING 0.9%
CHEMICALS 0.9%
Dow Chemical Co. ............................................... 8,100 244,519
------------
Total Materials & Processing ................................... 244,519
------------
OTHER 7.5%
MULTI-SECTOR 7.5%
General Electric Co. ........................................... 20,100 1,065,300
Honeywell International Inc. ................................... 900 30,319
Tyco International Ltd. ........................................ 20,400 966,450
------------
Total Other .................................................... 2,062,069
------------
OTHER ENERGY 5.9%
OFFSHORE DRILLING 1.5%
Transocean Sedco Forex Inc.* ................................... 8,000 427,500
------------
OIL & GAS PRODUCERS 1.9%
Anadarko Petroleum Corp. ....................................... 10,600 522,713
------------
OIL WELL EQUIPMENT & SERVICES 2.5%
Halliburton Co. ................................................ 9,710 458,190
Weatherford International Inc.* ................................ 5,500 218,969
------------
677,159
------------
Total Other Energy ............................................. 1,627,372
------------
PRODUCER DURABLES 4.6%
ELECTRICAL EQUIPMENT & COMPONENTS 3.2%
Nortel Networks Corp ........................................... 12,800 873,600
------------
TELECOMMUNICATIONS EQUIPMENT 1.4%
American Tower Corp. Cl. A* .................................... 9,300 387,694
------------
Total Producer Durables ........................................ 1,261,294
------------
TECHNOLOGY 32.0%
COMMUNICATIONS TECHNOLOGY 12.2%
Cisco Systems Inc.* ............................................ 17,990 1,143,489
Comverse Technology Inc.* ...................................... 8,000 744,000
Corning Inc. ................................................... 2,000 539,750
General Motors Corp. Cl. H* .................................... 3,000 263,250
Inktomi Corp.* ................................................. 2,670 315,728
Motorola Inc. .................................................. 12,000 348,750
------------
3,354,967
------------
COMPUTER SOFTWARE 2.2%
Microsoft Corp.* ............................................... 7,500 600,000
------------
COMPUTER TECHNOLOGY 6.4%
EMC Corp.* ..................................................... 15,200 1,169,450
Sun Microsystems Inc.* ......................................... 6,500 591,094
------------
1,760,544
------------
ELECTRONICS 4.7%
Nokia Corp. ADR ................................................ 16,000 799,000
Solectron Corp.* ............................................... 12,000 502,500
------------
1,301,500
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 6.5%
Analog Devices Inc.* ........................................... 4,500 342,000
Intel Corp. .................................................... 6,000 802,125
Texas Instruments Inc. ......................................... 9,600 659,400
------------
1,803,525
------------
Total Technology ............................................... 8,820,536
------------
UTILITIES 4.1%
TELECOMMUNICATIONS 4.1%
Qwest Communications International Inc.* ....................... 11,760 584,325
Voicestream Wireless Corp.* .................................... 2,200 255,853
Worldcom Inc.* ................................................. 6,650 305,069
------------
1,145,247
------------
Total Utilities ................................................ 1,145,247
------------
Total Common Stocks (Cost $20,185,153) ......................... 27,088,626
------------
SHORT-TERM INVESTMENTS 25.9%
State Street Navigator Securities Lending Prime Portfolio ...... 7,141,463 7,141,463
------------
Total Short-Term Investments (Cost $7,141,463) ................. 7,141,463
------------
<CAPTION>
------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 1.6%
American Express Credit Corp., 6.78% ............ $425,000 7/05/2000 425,000
-------------
Total Commercial Paper (Cost $425,000) ........................................ 425,000
-------------
Total Investments (Cost $27,751,616) - 125.8% ................................. 34,655,089
Cash and Other Assets, Less Liabilities - (25.8%).............................. (7,101,951)
-------------
Net Assets - 100.0% ........................................................... $ 27,553,138
=============
Federal Income Tax Information:
At June 30, 2000, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $27,758,449 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is
an excess of value over tax cost ............................................ $ 7,579,508
Aggregate gross unrealized depreciation for all investments in which there is
an excess of tax cost over value ............................................ (682,868)
------------
$ 6,896,640
============
-----------------------------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
The accompanying notes are in integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
-------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
June 30, 2000
ASSETS
Investments, at value (Cost $27,751,616) (Note 1) ............... $34,655,089
Cash ............................................................ 965
Receivable from Distributor (Note 3) ............................ 84,076
Dividends and interest receivable ............................... 18,193
Receivable for fund shares sold ................................. 2,509
Deferred organization costs and other assets (Note 1) ........... 52,456
-----------
34,813,288
LIABILITIES
Payable for collateral received on securities loaned ............ 7,141,463
Accrued transfer agent and shareholder services (Note 2) ........ 42,518
Accrued management fee (Note 2) ................................. 31,473
Accrued trustees' fees (Note 2) ................................. 11,783
Payable for fund shares redeemed ................................ 6,431
Accrued distribution and service fees (Note 5) .................. 5,561
Other accrued expenses .......................................... 20,921
-----------
7,260,150
-----------
NET ASSETS ...................................................... $27,553,138
===========
Net Assets consist of:
Unrealized appreciation of investments ........................ $ 6,903,473
Accumulated net realized gain ................................. 1,244,472
Paid-in capital ............................................... 19,405,193
-----------
$27,553,138
===========
Net Asset Value and redemption price per share of Class A shares
($1,549,220 / 138,539 shares) ................................. $11.18
======
Maximum Offering Price per share of Class A shares
($11.18 / .9425) .............................................. $11.86
======
Net Asset Value and offering price per share of Class B(1) shares
($906,119 / 82,428 shares)* ................................... $10.99
======
Net Asset Value and offering price per share of Class B shares
($930,280 / 84,598 shares)* ................................... $11.00
======
Net Asset Value and offering price per share of Class C shares
($803,684 / 73,058 shares)* ................................... $11.00
======
Net Asset Value, offering price and redemption price per share
of Class S shares ($23,363,835 / 2,079,871 shares) ............ $11.23
======
-------------------------------------------------------------------------------
* 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.
The accompanying notes are in integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
For the year ended June 30, 2000
INVESTMENT INCOME
Dividends, net of foreign taxes of $2,508 ....................... $ 126,536
Interest ........................................................ 39,600
-----------
166,136
EXPENSES
Management fee (Note 2) ......................................... 153,361
Transfer agent and shareholder services (Note 2) ................ 123,321
Custodian fee ................................................... 92,725
Registration fees ............................................... 70,960
Reports to shareholders ......................................... 30,682
Audit fee ....................................................... 19,268
Amortization of organization costs (Note 1) ..................... 18,010
Trustees' fees (Note 2) ......................................... 11,783
Distribution and service fees - Class A (Note 5) ................ 6,683
Distribution and service fees - Class B(1) (Note 5) ............. 8,342
Distribution and service fees - Class B (Note 5) ................ 9,151
Distribution and service fees - Class C (Note 5) ................ 7,535
Miscellaneous ................................................... 4,863
-----------
556,684
Fees paid indirectly (Note 2) ................................... (4,016)
Expenses borne by the Distributor (Note 3) ...................... (285,004)
-----------
267,664
-----------
Net investment loss ............................................. (101,528)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) ................ 1,312,453
Net unrealized appreciation of investments ...................... 2,892,392
-----------
Net gain on investments ......................................... 4,204,845
-----------
Net increase in net assets resulting from operations ............ $ 4,103,317
===========
The accompanying notes are in integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
---------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------
1999 2000
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss ..................................... $ (38,026) $ (101,528)
Net realized gain on investments ........................ 32,951 1,312,453
Net unrealized appreciation of investments .............. 3,410,523 2,892,392
----------- -----------
Net increase resulting from
operations ............................................ 3,405,448 4,103,317
----------- -----------
Dividend from net investment income:
Class A ............................................... (1,375) --
Class S ............................................... (10,313) --
----------- -----------
(11,688) --
----------- -----------
Net increase from fund share
transactions (Note 6) ................................. 5,465,500 4,668,816
----------- -----------
Total increase in net assets ............................ 8,859,260 8,772,133
NET ASSETS
Beginning of year ....................................... 9,921,745 18,781,005
----------- -----------
End of year ............................................. $18,781,005 $27,553,138
=========== ===========
The accompanying notes are in integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
June 30, 2000
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. Class A are subject to an initial sales
charge of up to 5.75%. From July 1, 1999 to April 30, 2000, Class A shares paid
a service fee equal to 0.25% of average daily net assets. Beginning May 1, 2000,
Class A shares pay an annual distribution and service fee equal to 0.30% 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 MetLife, Inc. ("MetLife"), and special
programs. No sales charge is imposed at the time of purchase or redemption of
Class S shares. Class S shares do not pay any 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
plans of distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at the closing price supplied
through such system. In the absence of recorded sales and for those over-the-
counter securities not quoted on the NASDAQ system, valuations are at the mean
of the closing bid and asked quotations. Short-term securities maturing within
sixty days are valued at amortized cost. Other securities, if any, are valued at
their fair value as determined in accordance with established methods
consistently applied.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. NET INVESTMENT INCOME
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to it,
while indirect expenses are allocated among all funds in the Trust.
D. DIVIDENDS
Dividends from net investment income, if any, are declared and paid or
reinvested annually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund 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. 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. At June 30,
2000, the value of the securities loaned and the value of collateral were
$7,023,476 and $7,141,463, respectively.
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, 2000, the fees pursuant to such
agreement amounted to $153,361.
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 MetLife, 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, 2000, the amount of such
expenses was $24,657.
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, 2000 the Fund's transfer
agent fees were reduced by $4,016 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$11,783 during the year ended June 30, 2000.
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, 2000, the amount of such expenses assumed by the
Distributor and its affiliates was $285,004.
NOTE 4
For the year ended June 30, 2000, purchases and sales of securities, exclusive
of short-term obligations, aggregated $24,804,846 and $20,107,690, 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,
beginning May 1, 2000, the Fund pays annual distribution fees of 0.05% of
average daily net assets for Class A shares. The Fund pays annual distribution
fees of 0.75% of average daily net assets for Class B(1), 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, 2000, fees pursuant to such
plans amounted to $6,683, $8,342, $9,151 and $7,535 for Class A, Class B(1),
Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$2,083 and $1,059, respectively, on sales of Class A shares of the Fund during
the year ended June 30, 2000, and that MetLife Securities, Inc. earned
commissions aggregating $1,060 on sales of Class B(1) shares, and the
Distributor collected contingent deferred sales charges aggregating $92 on
redemptions of Class B shares during the same period.
NOTE 6
<TABLE>
The Trustees have the authority to issue an unlimited number of shares of beneficial interest, $.001
par value per share. At June 30, 2000, MetLife owned 71,429 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:
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------------------------------------
1999 2000
----------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 144,360 $ 1,138,520 36,420 $ 385,601
Issued upon reinvestment of
dividend ...................... 106 842 -- --
Shares redeemed ................. (1,259) (11,157) (149,459) (1,686,038)
-------- ----------- -------- -----------
Net increase (decrease) ......... 143,207 $ 1,128,205 (113,039) $(1,300,437)
======== =========== ======== ===========
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 68,939 $ 578,077 17,635 $ 173,464
Shares redeemed ................. -- -- (4,146) (46,345)
-------- ----------- -------- -----------
Net increase .................... 68,939 $ 578,077 13,489 $ 127,119
======== =========== ======== ===========
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 14,242 $ 112,402 5,767 $ 55,746
Shares redeemed ................. (36) (305) (7,534) (83,078)
-------- ----------- -------- -----------
Net increase (decrease) ......... 14,206 $ 112,097 (1,767) $ (27,332)
======== =========== ======== ===========
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 1,617 $ 14,091 -- $ --
-------- ----------- -------- -----------
Net increase .................... 1,617 $ 14,091 -- $ --
======== =========== ======== ===========
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 673,473 $ 5,476,910 748,881 $ 8,031,791
Shares redeemed ................. (229,336) (1,843,880) (209,021) (2,162,325)
-------------- --------------- -------------- ---------------
Net increase .................... 444,137 $ 3,633,030 539,860 $ 5,869,466
======== =========== ======== ===========
------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
---------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each year:
<CAPTION>
CLASS A
--------------------------------------------------------------------
MARCH 27, 1998
(COMMENCEMENT OF YEAR ENDED JUNE 30
OPERATIONS) TO ------------------------------------
JUNE 30, 1998(a) 1999(a) 2000(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.36 9.29
---- ---- -----
Net investment income (loss) ($)* 0.00 (0.03) (0.06)
Net realized and unrealized gain on
investments ($) 0.36 1.97 1.95
---- ---- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.94 1.89
---- ---- -----
Dividend from net investment income ($) -- (0.01) --
---- ---- -----
TOTAL DISTRIBUTIONS ($) -- (0.01) --
---- ---- -----
NET ASSET VALUE, END OF YEAR ($) 7.36 9.29 11.18
==== ==== =====
Total return(b) (%) 5.14(d) 26.32 20.34
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 797 2,336 1,549
Expense ratio (%)* 1.25(e) 1.25 1.28
Expense ratio after expense reductions (%)* 1.25(e) 1.25 1.26
Ratio of net investment income (loss) to average
net assets (%)* 0.25(e) (0.41) (0.56)
Portfolio turnover rate (%) 30.76 141.92 89.55
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.07 0.06 0.12
<CAPTION>
CLASS B(1)
---------------------------------
YEARS ENDED JUNE 30
---------------------------------
1999(a)(c) 2000(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 8.34 9.20
---- -----
Net investment loss ($)* (0.05) (0.14)
Net realized and unrealized gain on investments ($) 0.91 1.93
---- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.86 1.79
---- -----
NET ASSET VALUE, END OF YEAR ($) 9.20 10.99
==== =====
Total return(b) (%) 10.31(d) 19.46
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 634 906
Expense ratio (%)* 2.00(e) 2.02
Expense ratio after expense reductions (%)* 2.00(e) 2.00
Ratio of net investment loss to average net assets (%)* (1.27)(e) (1.30)
Portfolio turnover rate (%) 141.92 89.55
* Reflects voluntary reduction of expenses per share of these
amounts (Note 3) ($) 0.08 0.12
----------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the
Distributor and its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
------------------------------------------------------------------
MARCH 27, 1998
(COMMENCEMENT OF YEARS ENDED JUNE 30
OPERATIONS) TO --------------------------------------
JUNE 30, 1998(a) 1999(a) 2000(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.34 9.20
---- ---- -----
Net investment loss ($)* (0.01) (0.09) (0.13)
Net realized and unrealized gain on
investments ($) 0.35 1.95 1.93
---- ---- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.34 1.86 1.80
---- ---- -----
NET ASSET VALUE, END OF YEAR ($) 7.34 9.20 11.00
==== ==== =====
Total return(b) (%) 4.86(d) 25.34 19.57
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 530 795 930
Expense ratio (%)* 2.00(e) 2.00 2.02
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00
Ratio of net investment loss to average net
assets (%)* (0.44)(e) (1.12) (1.30)
Portfolio turnover rate (%) 30.76 141.92 89.55
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.07 0.15 0.12
<CAPTION>
CLASS C
------------------------------------------------------------------
MARCH 27, 1998
(COMMENCEMENT OF YEARS ENDED JUNE 30
OPERATIONS) TO --------------------------------------
JUNE 30, 1998(a) 1999(a) 2000(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.34 9.21
--- --- ----
Net investment loss ($)* (0.01) (0.09) (0.13)
Net realized and unrealized gain on
investments ($) 0.35 1.96 1.92
--- --- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.34 1.87 1.79
--- --- ----
NET ASSET VALUE, END OF YEAR ($) 7.34 9.21 11.00
--- --- ----
--- --- ----
Total return(b) (%) 4.86(d) 25.48 19.44
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 525 673 804
Expense ratio (%)* 2.00(e) 2.00 2.02
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00
Ratio of net investment loss to average net
assets (%)* (0.43)(e) (1.12) (1.29)
Portfolio turnover rate (%) 30.76 141.92 89.55
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.07 0.16 0.12
---------------------------------------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the
Distributor and its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to June 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
---------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
---------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
------------------------------------------------------------------
MARCH 27, 1998
(COMMENCEMENT OF YEARS ENDED JUNE 30
OPERATIONS) TO --------------------------------------
JUNE 30, 1998(a) 1999(a) 2000(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.36 9.31
---- ---- -----
Net investment income (loss) ($)* 0.01 (0.01) (0.03)
Net realized and unrealized gain on
investments ($) 0.35 1.97 1.95
---- ---- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.96 1.92
---- ---- -----
Dividend from net investment income ($) -- (0.01) --
---- ---- -----
TOTAL DISTRIBUTIONS ($) -- (0.01) --
---- ---- -----
NET ASSET VALUE, END OF YEAR ($) 7.36 9.31 11.23
==== ==== =====
Total return(b) (%) 5.14(d) 26.62 20.62
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 8,070 14,343 23,364
Expense ratio (%)* 1.00(e) 1.00 1.02
Expense ratio after expense reductions (%)* 1.00(e) 1.00 1.00
Ratio of net investment income (loss) to
average net assets (%)* 0.46(e) (0.14) (0.30)
Portfolio turnover rate (%) 30.76 141.92 89.55
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.06 0.13 0.13
--------------------------------------------------------------------------------------------------------------
(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.
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
TO THE TRUSTEES OF STATE STREET RESEARCH
EQUITY TRUST AND THE 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, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2000
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
-------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-------------------------------------------------------------------------------
It was a strong year for large-company growth stocks and also for Athletes Fund.
Class A shares returned 20.34% [without sales charge] for the 12 months ended
June 30, 2000. The fund easily outperformed the S&P 500 Index, which returned
7.24% over the same period.
The fund's performance was primarily the result of technology gains in the first
half of the year -- and a reduction in technology exposure in the second half of
the year. During the second half, we added to our investments in financial
services, namely insurance, and health care, where we have a higher degree of
confidence going forward. In general, we have positioned the fund for an
environment of higher interest rates and slower economic growth.
June 30, 2000
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 gains
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 &
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.
CHANGE IN VALUE OF $10,000
BASED ON THE S&P 500
COMPARED TO CHANGE IN VALUE OF $10,000
INVESTED IN ATHLETES FUND
CLASS A SHARES
Average Annual Total Return
---------------------------------
1 Year Life of Fund
------ ------------
13.42% 19.82%
Athletes Fund S&P 500 Index
"3/98" $ 9,425 $10,000
"6/98" 9,910 10,332
"9/98" 9,075 9,307
"12/98" 11,292 11,287
"3/99" 12,087 11,849
"6/99" 12,518 12,682
"9/99" 12,006 11,892
"12/99" 15,118 13,661
"3/00" 15,779 13,973
"6/00" 15,065 13,602
CLASS B(1) SHARES
Average Annual Total Return
---------------------------------
1 Year Life of Fund
------ ------------
14.46% 20.99%
Athletes Fund S&P 500 Index
"3/98" $10,000 $10,000
"6/98" 10,486 10,332
"9/98" 9,586 9,307
"12/98" 11,914 11,287
"3/99" 12,714 11,849
"6/99" 13,143 12,682
"9/99" 12,571 11,892
"12/99" 15,814 13,661
"3/00" 16,471 13,973
"6/00" 15,700 13,602
CLASS B SHARES
Average Annual Total Return
---------------------------------
1 Year Life of Fund
------ ------------
14.57% 21.04%
Athletes Fund S&P 500 Index
"3/98" $10,000 $10,000
"6/98" 10,486 10,332
"9/98" 9,586 9,307
"12/98" 11,914 11,287
"3/99" 12,729 11,849
"6/99" 13,143 12,682
"9/99" 12,586 11,892
"12/99" 15,829 13,661
"3/00" 16,486 13,973
"6/00" 15,414 13,602
CLASS C SHARES
Average Annual Total Return
---------------------------------
1 Year Life of Fund
------ ------------
18.44% 22.08%
Athletes Fund S&P 500 Index
"3/98" $10,000 $10,000
"6/98" 10,486 10,332
"9/98" 9,586 9,307
"12/98" 11,914 11,287
"3/99" 12,729 11,849
"6/99" 13,157 12,682
"9/99" 12,586 11,892
"12/99" 15,829 13,661
"3/00" 16,486 13,973
"6/00" 15,714 13,602
CLASS S SHARES
Average Annual Total Return
---------------------------------
1 Year Life of Fund
------ ------------
20.62% 23.25%
Athletes Fund S&P 500 Index
"3/98" $10,000 $10,000
"6/98" 10,514 10,332
"9/98" 9,629 9,307
"12/98" 12,012 11,287
"3/99" 12,856 11,849
"6/99" 13,313 12,682
"9/99" 12,784 11,892
"12/99" 16,102 13,661
"3/00" 16,817 13,973
"6/00" 16,059 13,602
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Athletes Fund ("Fund"), a series of State Street Research
Equity Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
<CAPTION>
VOTES (MILLIONS OF SHARES)
---------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares .............................. 168.2 5.8 0.0
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares .............................. 71.4 0.0 0.0
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares .............................. 61.4 0.0 0.0
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND
<TABLE>
--------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEE OF STATE STREET RESEARCH EQUITY TRUST
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
ATHLETES FUND Chairman of the Board, Interim Chief Operating Officer,
One Financial Center President, Chief Executive Chief Financial Officer,
Boston, MA 02111 Officer and Treasurer Chief Administrative
Officer and Director,
INVESTMENT ADVISER BARTLETT R. GEER State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center F. GARDNER JACKSON, JR. BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer and
DISTRIBUTOR THOMAS P. MOORE, JR. President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center BRIAN P. O'DELL Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES DANIEL J. RICE III State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 JAMES M. WEISS Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (1-877-773-8637) Officer and Director,
PETER A. ZUGER Hewlett-Packard Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company DOUGLAS A. ROMICH Dean, School of Business
225 Franklin Street Assistant Treasurer and Public Management,
Boston, MA 02110 George Washington University;
FRANCIS J. MCNAMARA, III former Member of the Board
LEGAL COUNSEL Secretary and General Counsel of Governors of the Federal
Goodwin, Procter & Hoar LLP Reserve System and Chairman
Exchange Place DARMAN A. WING and Commissioner of the
Boston, MA 02109 Assistant Secretary and Commodity Futures Trading
Assistant General Counsel Commission
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP SUSAN E. BREEN TOBY ROSENBLATT
160 Federal Street Assistant Secretary President, Founders Investments Ltd.
Boston, MA 02110 President, The Glen Ellen Company
AMY L. SIMMONS
Assistant Secretary MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH ATHLETES FUND ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.StateStreetResearch.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637) or
[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
[Logo] STATE STREET RESEARCH
(C) 2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Athletes Fund prospectus.
When used after September 30, 2000, 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: (exp0801)SSR-LD AT-2188-0800
