<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3838
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State Street Research Capital Trust
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, MA 02111
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(Address of principal executive offices) (Zip code)
Richard S. Davis, President and Chief Executive Officer
State Street Research & Management Company
One Financial Center, Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 617-357-1200
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Date of fiscal year end: 9/30/04
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Date of reporting period: 10/1/03 - 9/30/04
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
ITEM 1 (REPORT TO SHAREHOLDERS): The Annual Report is attached.
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[LOGO] STATE STREET RESEARCH
[GRAPHIC]
Mid-Cap Growth Fund
September 30, 2004
Annual Report to Shareholders
Table of Contents
3 Performance Discussion
6 About Your Fund Expenses
7 Portfolio Holdings
9 Financial Statements
13 Financial Highlights
15 Independent Auditors'
Report
16 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
Optimism in the Economy
The pace of U.S. economic growth was robust over the past 12 months as the
economy advanced on all fronts. Gross domestic product (GDP) growth, a common
measure of economic growth, averaged just short of 4.0% for the period, solidly
above the economy's long-term trend rate of 3.0%. Our analysts expect the
economy to grow between 3.5% and 4.0% for the remainder of 2004 and into 2005.
Consumers continued to play a key role in the economy. Spending on retail goods,
autos and housing remained generally strong throughout the period. Retail sales
slowed during the summer months of 2004 as a result of higher energy prices and
weather-related events. But the pace of consumer spending picked up again in
September, as did consumer confidence, which see-sawed along with the outlook
for the labor market throughout the period.
The number of new jobs continued to fall short of expectations. In the spring,
more than one million new jobs were added to the economy. But job growth was
disappointing again during the summer months. The economy has yet to replace all
the jobs lost in the downturn of 2000-2001.
A pick-up in business spending was the bright spot in the economy. Industrial
production moved steadily higher, as did manufacturing capacity utilization.
Outlays for new equipment and construction enjoyed double-digit growth in the
second half of the period. Strong spending by business helped offset some of the
slowdown in consumer spending.
Stocks Stumble, Bonds Edge Higher
The U.S. stock market began the period on a strong note. However, the
double-digit gains it achieved over the twelve months covered by this report
were accumulated early in the period and the broad stock market indexes have
been essentially flat in 2004. By contrast, the bond market has held up in the
face of three increases in the Federal funds rate (a key short-term interest
rate) that occurred late in the period. The yield on the 10-year benchmark U.S.
Treasury ended the period only slightly higher than where it began, and bond
prices moved higher across all sectors.
Investing Despite Uncertainty
By all accounts, news on the economy and the markets has been overshadowed over
the past year by external events. As a result, many investors have remained on
the sidelines. With so much uncertainty, it may feel safer to wait out the
storm. Yet, it can be even more risky to try to time your entrances and exits as
the markets move through their natural cycles. If you're feeling uncertain about
your financial strategy, talk to your financial professional. With the advice
and guidance of a financial professional, you can keep your financial goals on
track.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
September 30, 2004
2
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PERFORMANCE
- ------------------
Discussion as of September 30, 2004
How State Street Research Mid-Cap Growth Fund Performed State Street Research
Mid-Cap Growth Fund (Class A shares, without sales charge) returned 11.59% for
the 12-month period ended September 30, 2004. The fund underperformed the
Russell Midcap[RegTM] Growth Index, which returned 13.68% over the same period.
However, the fund outperformed the Lipper Mid-Cap Growth Funds Average, which
was 10.42% for the period.
Performance: Class A
- --------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04 (does not reflect sales charge)
1 Year 5 Years 10 Years
11.59% -1.64% 4.43%
- --------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04 (at maximum applicable sales
charge)
1 Year 5 Years 10 Years
5.17% -2.80% 3.82%
- -------------------------------------------------------------------------------
Russell Midcap Growth Index as of 9/30/04
1 Year 5 Years 10 Years
13.68% 0.63% 9.64%
- --------------------------------------------------------------------------------
See pages 4 and 5 for additional performance data for Class A shares and for
performance data on other share classes.
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
Average annual total return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
Average annual total return at maximum applicable sales charge reflects a
maximum 5.75% Class A share front-end sales charge.
The Russell Midcap Growth Index contains those stocks within the complete
Russell MidcapT Index (800 of the smallest securities in the Russell 1000T
Index) that show above-average growth. The index is unmanaged and does not take
transaction charges into consideration. It is not possible to invest directly in
an index.
The Lipper Mid-Cap Growth Funds Average shows the performance of a category of
mutual funds with similar goals. The Lipper average shows you how well the fund
has done compared to competing funds.
- --------------------------------------------------------------------------------
Reasons for the Fund's Performance
Although the fund lagged its benchmark during the year, it posted attractive
gains. Its strong absolute return was the result of stock selection in the autos
& transportation, energy and health care sectors. An emphasis on the
top-performing energy sector also helped boost returns. The fund's shortfall
relative to its benchmark was the result of weak stock selection in the
technology, producer durables and materials & processing sectors.
Within the automobiles & transportation sector, labor costs, rising fuel prices
and increasing competition continued to weigh on the airline industry. In
energy, our holdings in coal and crude oil producers Consol Energy and EOG
Resources benefited from rising prices. Both companies' stock prices are highly
dependent on the underlying commodity prices. Within the technology sector,
American Power Conversion and Cypress Semiconductor were among the largest
detractors from the fund's return during the period.
Looking Ahead
We believe that continued signs of economic strength, an accommodative Federal
Reserve Board policy and the resolution of the uncertainty surrounding the
presidential election could provide the catalysts for positive momentum in the
stock market going forward. In this environment, we believe that stock selection
is likely to drive returns. We will continue to focus our efforts on fundamental
research and bottom-up stock selection.
A Word about Risk
The major risks of stock investing include sudden and unpredictable drops in
value and period of lackluster performance. Growth stocks of any size company
often have an above-average sensitivity to market fluctuations as their market
prices tend to reflect future expectations. At times when it appears that these
expectations may not be met, growth stock prices typically fall. Mid-cap
companies entail greater risk and are usually more volatile than larger
companies. Growth stocks can be volatile, as they usually reinvest a high
proportion of their earnings in their own business and lack the dividends
associated with value stocks.
Summary Portfolio Schedule
- --------------------------------------------------------------------------------
Summary Portfolio Schedule
- --------------------------------------------------------------------------------
Industries % of Fund Net Assets
Consumer Discretionary 22.1%
- --------------------------------------------------------------------------------
Health Care 21.7%
- --------------------------------------------------------------------------------
Technology 15.1%
- --------------------------------------------------------------------------------
Financial Services 11.7%
- --------------------------------------------------------------------------------
Other Energy 9.1%
- --------------------------------------------------------------------------------
Producer Durables 8.5%
- --------------------------------------------------------------------------------
Materials & Processing 3.0%
- --------------------------------------------------------------------------------
Consumer Staples 2.5%
- --------------------------------------------------------------------------------
Utilities 2.3%
- --------------------------------------------------------------------------------
Automobiles & Transportation 1.1%
- --------------------------------------------------------------------------------
Other 1.0%
- --------------------------------------------------------------------------------
Net Cash 1.9%
- --------------------------------------------------------------------------------
Total 100.0%
Because financial markets and mutual fund strategies are constantly evolving, it
is 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.
State Street Research Mid-Cap Growth Fund 3
- ------------------
PERFORMANCE
- ------------------
Discussion as of September 30, 2004
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is not a guarantee of future results, long-term returns
can serve as an important context for evaluating recent performance. There are
three ways of measuring long-term performance: cumulative total returns, average
annual total returns and the change in dollar value over time of a given
investment. Information about these measures follows, while the share class
boxes contain the results of these measures for each share class.
Cumulative Total Return
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.
Average Annual Total Return
Represents the rate you would have had to earn during each year of a given time
period in order to end up with the fund's actual cumulative return for those
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
Similar to cumulative total return, but uses dollars rather than percentages,
and assumes that the lump sum you invested was $10,000 (less the applicable
maximum sales charge, if any) and compares fund performance to the performance
of a market index.
- --------------------------------------------------------------------------------
Class A
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 11.59% -7.95% 54.30%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 5.17% -13.24% 45.42%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 5.17% -2.80% 3.82%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell Midcap
Class A Growth Index
------- ---------------
94 9425 10000
95 12908 12967
96 14214 15085
97 15226 19556
98 12464 17722
99 15799 24316
00 24473 38995
01 12277 18809
02 9817 15893
03 13032 22076
04 14542 25098
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B(1)
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 10.94% -10.96% 43.57%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 5.94% -11.75% 43.57%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 5.94% -2.47% 3.68%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell Midcap
Class B(1) Growth Index
--------- ---------------
94 10000 10000
95 13590 12967
96 14858 15085
97 15790 19556
98 12824 17722
99 16125 24316
00 24815 38995
01 12347 18809
02 9826 15893
03 12941 22076
04 14357 25098
- --------------------------------------------------------------------------------
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions, or the
redemption of fund shares.
Cumulative Total Return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
4
- --------------------------------------------------------------------------------
Class B (only available through exchanges from another Class B account)
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 12.53% -8.43% 47.65%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 7.53% -9.24% 47.65%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 7.53% -1.92% 3.97%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell Midcap
Class B Growth Index
------- ---------------
94 10000 10000
95 13590 12967
96 14858 15085
97 15790 19556
98 12824 17722
99 16125 24316
00 24804 38995
01 12356 18809
02 9862 15893
03 13121 22076
04 14765 25098
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 10.68% -11.25% 43.23%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 9.68% -11.25% 43.23%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 9.68% -2.36% 3.66%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell Midcap
Class C Growth Index
------- ---------------
94 10000 10000
95 13607 12967
96 14863 15085
97 15794 19556
98 12832 17722
99 16139 24316
00 24831 38995
01 12377 18809
02 9812 15893
03 12941 22076
04 14323 25098
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class S
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 11.97% -6.56% 58.49%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 11.97% -6.56% 58.49%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 11.97% -1.35% 4.71%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell Midcap
Class S Growth Index
------- ---------------
94 10000 10000
95 13730 12967
96 15159 15085
97 16268 19556
98 13350 17722
99 16961 24316
00 26344 38995
01 13257 18809
02 10616 15893
03 14154 22076
04 15849 25098
- --------------------------------------------------------------------------------
Cumulative and Average Annual Total Return at maximum applicable sales charge
reflect 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. Performance for Class B(1) shares reflects Class B share performance
through December 31, 1998, and Class B(1) performance thereafter. If the returns
for Class B(1) shares had reflected their current service/distribution [Rule
12b-1] fees for the entire period, returns would have been lower. Class S
shares, offered without sales charge, are available through certain retirement
plans and special programs.
The Russell Midcap Growth Index contains those stocks within the complete
Russell Midcap Index (800 of the smallest securities in the Russell 1000 Index)
that show above-average growth. The index is unmanaged and does not take
transaction charges into consideration. It is not possible to invest directly in
an index.
State Street Research Mid-Cap Growth Fund 5
About Your Fund Expenses
As a fund shareholder, you incur two types of costs: (1) Transaction costs,
which include sales charges, and (2) ongoing expenses, which include management
fees, service/distribution fees (12b-1) and "other" expenses. The examples below
illustrate the ongoing cost in dollars of investing in the fund and allow you to
compare these costs with the expenses of other funds. The examples are based on
a $1,000 investment at the beginning of the period and held for the entire
period from March 31, 2004, to September 30, 2004.
Actual Fund Return is based on the fund's actual return and expenses. To
estimate the ongoing expenses you paid during the entire period shown, simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number shown for your
fund under the column "Expenses Paid during the Period."
Hypothetical 5% Return is based on the fund's actual expense ratio and an
assumed rate of 5% per year before expenses. Please note that the return used is
not the fund's actual return; therefore, this information may not be used to
estimate your actual ending account balance and expenses paid during the period.
To compare your fund's ongoing expenses with those of other funds, simply
compare this 5% hypothetical example with the 5% hypothetical examples shown in
the shareholder reports of other funds.
Beginning Ending Expenses
Account Account Paid Annualized
Six months ended Value Value during Expense
9/30/04 3/31/04 9/30/04 Period* Ratio
- ---------------------------------------------------------------------------------
Actual Fund Return
- ---------------------------------------------------------------------------------
Class A $1,000 $ 960.76 $ 8.24 1.68%
- ---------------------------------------------------------------------------------
Class B(1) $1,000 $ 953.81 $ 11.63 2.38%
- ---------------------------------------------------------------------------------
Class B (closed) $1,000 $ 965.10 $ 6.80 1.38%
- ---------------------------------------------------------------------------------
Class C $1,000 $ 952.04 $ 11.62 2.38%
- ---------------------------------------------------------------------------------
Class S $1,000 $ 964.09 $ 6.78 1.38%
- ---------------------------------------------------------------------------------
Hypothetical 5% Return
- ---------------------------------------------------------------------------------
Class A $1,000 $ 1,016.60 $ 8.47 1.68%
- ---------------------------------------------------------------------------------
Class B(1) $1,000 $ 1,013.10 $ 11.98 2.38%
- ---------------------------------------------------------------------------------
Class B (closed) $1,000 $ 1,018.08 $ 6.98 1.38%
- ---------------------------------------------------------------------------------
Class C $1,000 $ 1,013.10 $ 11.98 2.38%
- ---------------------------------------------------------------------------------
Class S $1,000 $ 1,018.10 $ 6.98 1.38%
- ---------------------------------------------------------------------------------
* Expenses are equal to the fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in
the period and then divided by the number of days in the year.
Please note that the expenses shown in the table are meant to highlight and help
you compare ongoing costs only and do not reflect transactional expenses such as
sales charges, which would result in higher total expenses. It should also be
noted that, for certain funds, expenses have been subsidized or reduced through
expense offset arrangements, which reduces costs for shareholders. Generally,
the fund expects that the expense subsidy or expense offset arrangement will
continue although there is no guarantee that it will. Please see the fund's
prospectus for more information.
6
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PORTFOLIO
- ------------
Holdings
September 30, 2004
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Common Stocks 98.1%
Automobiles & Transportation 1.1%
Air Transport 1.1%
Expeditors International of Washington Inc. 78,200 $ 4,042,940
------------
Total Automobiles & Transportation ....................................... 4,042,940
------------
Consumer Discretionary 22.1%
Advertising Agencies 1.2%
Lamar Advertising Co.* ................................................... 103,800 4,319,118
------------
Casinos/Gambling, Hotel/Motel 3.8%
Four Seasons Hotels Inc.^ ................................................ 30,200 1,935,820
International Game Technology Inc. ....................................... 58,000 2,085,100
Marriott International Inc. .............................................. 79,700 4,141,212
Starwood Hotels & Resorts Inc. ........................................... 113,400 5,264,028
------------
13,426,160
------------
Commercial Services 4.8%
ChoicePoint Inc.* ........................................................ 149,566 6,378,990
Corporate Executive Board Co.*^ .......................................... 89,300 5,468,732
Manpower Inc. ............................................................ 115,700 5,147,493
------------
16,995,215
------------
Consumer Electronics 1.4%
Electronic Arts Inc.* .................................................... 23,400 1,076,166
Harman International Inc. ................................................ 17,100 1,842,525
Yahoo! Inc.* ............................................................. 57,100 1,936,261
------------
4,854,952
------------
Consumer Products 1.1%
Yankee Candle Company Inc.^ .............................................. 133,500 3,866,160
------------
Retail 8.9%
CDW Corp. ................................................................ 106,200 6,162,786
Chico's FAS Inc.*^ ....................................................... 88,600 3,030,120
Linens 'n Things Inc.* ................................................... 121,900 2,824,423
MSC Industrial Direct Inc. ............................................... 167,300 5,701,584
PETsMART Inc. ............................................................ 129,000 3,662,310
Staples Inc.* ............................................................ 164,648 4,909,803
Williams-Sonoma Inc.* .................................................... 144,300 5,418,465
------------
31,709,491
------------
Textile Apparel Manufacturers 0.9%
Coach Inc.* .............................................................. 74,500 3,160,290
------------
Total Consumer Discretionary ............................................. 78,331,386
------------
Consumer Staples 2.5%
Beverages 0.8%
Pepsi Bottling Group Inc. ................................................ 110,000 2,986,500
------------
Household Products 1.7%
Clorox Co. ............................................................... 113,400 6,044,220
------------
Total Consumer Staples ................................................... 9,030,720
------------
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Financial Services 11.7%
Banks & Savings & Loan 1.7%
City National Corp.^ ..................................................... 29,400 $ 1,909,530
North Fork Bancorp. Inc.^ ................................................ 91,900 4,084,955
------------
5,994,485
------------
Financial Data Processing Services & Systems 2.7%
Alliance Data Systems Corp. .............................................. 103,200 4,185,792
CheckFree Corp.* ......................................................... 65,100 1,801,317
DST Systems Inc. ......................................................... 82,900 3,686,563
------------
9,673,672
------------
Insurance 1.0%
WellChoice Inc.* ......................................................... 93,000 3,471,690
------------
Miscellaneous Financial 3.0%
Ambac Financial Group Inc. ............................................... 45,800 3,661,710
Chicago Mercantile Exchange
Holdings, Inc. ......................................................... 11,600 1,871,080
Providian Financial Corp.* ............................................... 330,300 5,132,862
------------
10,665,652
------------
Securities Brokerage & Services 3.3%
Ameritrade Holding Corp.* ................................................ 265,200 3,185,052
Lehman Brothers Holdings Inc. ............................................ 70,900 5,652,148
T. Rowe Price Group Inc. ................................................. 57,600 2,934,144
------------
11,771,344
------------
Total Financial Services ................................................. 41,576,843
------------
Health Care 21.7%
Drugs & Biotechnology 14.4%
Allergan Inc. ............................................................ 48,200 3,496,910
Biogen Inc.* ............................................................. 133,165 8,145,703
Celgene Corp. ............................................................ 33,700 1,962,351
Charles River Laboratories
International Inc.^ .................................................... 131,900 6,041,020
Chiron Corp.*^ ........................................................... 64,900 2,868,580
Cytyc Corp.* ............................................................. 206,100 4,977,315
Elan Corp. plc ADR*^ ..................................................... 124,400 2,910,960
Gilead Sciences Inc.* .................................................... 99,800 3,730,524
ICOS Corp.*^ ............................................................. 110,100 2,657,814
IVAX Corp.*^ ............................................................. 177,275 3,394,816
Medicis Pharmaceutical Corp. ............................................. 107,300 4,188,992
Millennium Pharmaceuticals Inc.*^ ........................................ 114,800 1,573,908
Millipore Corp.* ......................................................... 59,100 2,827,935
OSI Pharmaceuticals Inc.* ................................................ 38,300 2,353,918
------------
51,130,746
------------
Health Care Services 5.7%
Aetna Inc. ............................................................... 55,200 5,516,136
Caremark Rx Inc.* ........................................................ 325,500 10,438,785
Community Health Systems Inc.* ........................................... 155,800 4,156,744
------------
20,111,665
------------
Hospital Supply 1.6%
Guidant Corp. ............................................................ 27,900 1,842,516
Kinetic Concepts Inc.* ................................................... 77,100 4,051,605
------------
5,894,121
------------
Total Health Care ........................................................ 77,136,532
------------
Materials & Processing 3.0%
Chemicals 1.7%
EcoLab Inc. .............................................................. 195,400 6,143,376
------------
Containers & Packaging 1.3%
Sealed Air Corp.* ........................................................ 99,400 4,607,190
------------
Total Materials & Processing ............................................. 10,750,566
------------
The notes are an integral part of the financial statements.
State Street Research Mid-Cap Growth Fund 7
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------
Other 1.0%
Multi-Sector 1.0%
Nasdaq 100 Shares*^ ...................................................... 102,900 $ 3,616,935
------------
Total Other .............................................................. 3,616,935
------------
Other Energy 9.1%
Gas Pipelines 2.8%
EOG Resources Inc. ....................................................... 150,400 9,903,840
------------
Miscellaneous Energy 2.1%
Consol Energy Inc.^ ...................................................... 137,900 4,811,331
Peabody Energy Corp. ..................................................... 42,700 2,540,650
------------
7,351,981
Oil & Gas Producers 1.8%
Newfield Exploration Co.* ................................................ 104,900 6,424,076
------------
Oil Well Equipment & Services 2.4%
BJ Services Co.* ......................................................... 61,500 3,223,215
Noble Corp.* ............................................................. 59,700 2,683,515
Weatherford International Ltd.* .......................................... 54,600 2,785,692
------------
8,692,422
------------
Total Other Energy ....................................................... 32,372,319
------------
Producer Durables 8.5%
Aerospace 1.2%
Alliant Technology Systems Inc.* ......................................... 70,000 4,235,000
------------
Industrial Products 1.1%
Waters Corp.* ............................................................ 88,900 3,920,490
------------
Miscellaneous Equipment 1.8%
Pentair Inc. ............................................................. 180,800 6,311,728
------------
Office Furniture & Business Equipment 1.3%
Diebold Inc.^ ............................................................ 63,400 2,960,780
Lexmark International Group Inc. ......................................... 21,200 1,781,012
------------
4,741,792
------------
Production Technology Equipment 1.4%
Lam Research Corp.* ...................................................... 219,800 4,809,224
------------
Telecommunications Equipment 1.7%
American Tower Corp.*^ ................................................... 230,300 3,535,105
Polycom Inc.* ............................................................ 128,700 2,550,834
------------
6,085,939
------------
Total Producer Durables .................................................. 30,104,173
------------
Technology 15.1%
Communications Technology 1.0%
Juniper Networks Inc.*^ .................................................. 150,000 3,540,000
------------
Computer Software 8.6%
Adobe Systems Inc. ....................................................... 74,900 3,705,303
Amdocs Ltd.* ............................................................. 197,800 4,317,974
Ceridian Corp.* .......................................................... 187,300 3,448,193
Mercury Interactive Corp.*^ .............................................. 106,900 3,728,672
NAVTEQ Corp.* ............................................................ 200,000 7,128,000
Siebel Systems Inc.* ..................................................... 312,500 2,356,250
Symantec Corp.* .......................................................... 103,500 5,680,080
------------
30,364,472
------------
Electronics 2.6%
Amphenol Corp.* .......................................................... 107,000 3,665,820
Avid Technology, Inc.*^ .................................................. 122,100 5,722,827
------------
9,388,647
------------
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------------
Electronics: Semiconductors/Components 2.9%
Altera Corp.* ............................................................ 166,900 $ 3,266,233
Linear Technology Corp. .................................................. 99,800 3,616,752
PerkinElmer Inc. ......................................................... 190,000 3,271,800
------------
10,154,785
------------
Total Technology ......................................................... 53,447,904
------------
Utilities 2.3%
Telecommunications 2.3%
Nextel Partners Inc.*^ ................................................... 369,400 6,124,652
Nil Holdings Inc.^ ....................................................... 45,100 1,858,571
------------
Total Utilities .......................................................... 7,983,223
------------
Total Common Stocks (Cost $301,830,183) .................................. 348,393,541
------------
Short-Term Investments 13.0%
State Street Navigator Securities Lending
Prime Portfolio ......................................................... 46,290,672 46,290,672
------------
Amount
Maturity of
Coupon Rate Date Principal
- ---------------------------------------------------------------------------------------------------------------
Commercial Paper 1.8%
Federal National Mortgage
Association, 1.71% ............................................ 10/06/2004 $5,088,000 5,086,792
UBS Finance Inc. 1.88%.......................................... 10/01/2004 1,361,000 1,361,000
---------
Total Commercial Paper (Cost $6,447,792) ....................... 6,447,792
---------
% of
Net Assets
- ---------------------------------------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $354,568,647) ................................ 112.9% $401,132,005
Other Assets, Less Liabilities ................................. (12.9%) (45,798,067)
------ -------------
Net Assets ..................................................... 100.00 $355,333,938
====== =============
KEY TO SYMBOLS
ADR Stands for American Depositary Receipt
* Denotes a security which has not paid a dividend during the last year.
^ A portion or all of the security was held on loan. At September 30, 2004,
the value of securities loaned was $45,267,637.
Federal Income Tax Information At September 30, 2004, the net unrealized
appreciation of investments based on cost for federal income tax purposes of
$354,635,514 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $55,585,372
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (9,088,881)
-----------
$46,496,491
===========
Options open at September 30, 2004, are as follows:
Unrealized
Number of Expiration Appreciation
Type Contracts Premium Month (Depreciation)
- ---------------------------------------------------------------------------------------------------------------
Peabody Energy Corp. Call ....................... (427) $ (42,123) December 2004 $ (13,387)
Symantec Corp. Call ............................. (690) (84,180) January 2005 (43,470)
--------- ---------
$(126,303) $ (56,857)
========= =========
8 The notes are an integral part of the financial statements.
- -----------
FINANCIAL
- -----------
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
Assets
Investments, at value (Cost $354,568,647) (Note 1) ........... $401,132,005
Receivable for securities sold ............................... 2,093,461
Dividends receivable ......................................... 42,426
Receivable for fund shares sold .............................. 33,496
Other assets ................................................. 72,113
------------
403,373,501
------------
Liabilities
Payable for collateral received on securities loaned ......... 46,290,672
Accrued transfer agent and shareholder services .............. 560,045
Payable for fund shares redeemed ............................. 493,391
Accrued management fee ....................................... 261,201
Options written, at value (premium $126,303) ................. 183,160
Accrued distribution and service fees ........................ 93,290
Accrued trustees' fees ....................................... 25,468
Accrued administration fee ................................... 7,888
Payable to custodian ......................................... 327
Other accrued expenses ....................................... 124,121
------------
48,039,563
------------
Net Assets ................................................... $355,333,938
============
Net Assets consist of:
Unrealized appreciation of investments ..................... $ 46,563,358
Unrealized depreciation of options ......................... (56,857)
Accumulated net realized loss .............................. (299,335,565)
Pain-in capital ............................................ 608,163,002
------------
$355,333,938
============
Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Class Net Assets [divided by] Number of Shares = NAV
A $236,346,311 39,603,940 $ 5.97*
B(1) $ 31,343,308 6,186,224 $ 5.07**
B $ 39,653,604 7,617,075 $ 5.21**
C $ 11,740,364 2,309,280 $ 5.08**
S $ 36,250,351 5,703,852 $ 6.36
* Maximum offering price per share = $6.34 ($5.97 [divided by] 0.9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
Statement of Operations
- --------------------------------------------------------------------------------
For the year ended September 30, 2004
Investment Income
Dividends, net of foreign taxes of $2,710 (Note 1) ........... $ 1,173,541
Securities lending income (Note 1) ........................... 96,355
Interest (Note 1) ............................................ 93,661
-----------
1,363,557
-----------
Expenses
Management fee (Note 2) ...................................... 2,805,522
Transfer agent and shareholder services (Note 2) ............. 1,871,914
Administration fee (Note 2) .................................. 106,536
Custodian fee ................................................ 102,608
Reports to shareholders ...................................... 90,296
Distribution and service fees - Class A (Note 4) ............. 669,777
Distribution and service fees - Class B(1) (Note 4) .......... 320,033
Distribution and service fees - Class C (Note 4) ............. 126,457
Registration fees ............................................ 63,000
Audit fee .................................................... 31,448
Trustees' fees (Note 2) ...................................... 21,924
Legal fees ................................................... 5,247
Miscellaneous ................................................ 19,500
-----------
6,234,262
Fees paid indirectly (Note 2) ................................ (1,281)
-----------
6,232,981
-----------
(4,869,424)
Reimbursement of distribution fees (Note 4) .................. 270,857
-----------
Net investment loss .......................................... (4,598,567)
-----------
Realized and Unrealized Gain (Loss) on
Investments and Options
Net increase from payment by affiliate (Note 1) .............. 9,526
-----------
Net realized gain on investments (Notes 1 and 3) ............. 56,868,980
-----------
Change in unrealized depreciation of options ................. (56,857)
Change in unrealized depreciation of investments ............. (11,935,999)
-----------
Total change in unrealized appreciation ...................... (11,992,856)
-----------
Net gain on investments ...................................... 44,885,650
-----------
Net increase in net assets resulting from operations ......... $40,287,083
===========
The notes are an integral part of the financial statements.
State Street Research Mid-Cap Growth Fund 9
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Years ended September 30
--------------------------------
2004 2003
--------------------------------
Increase In Net Assets
Operations:
Net investment loss .................. $ (4,598,567) $ (3,959,087)
Net increase from payment by
affiliate ......................... 9,526 --
Net realized gain (loss) on
investments ....................... 56,868,980 (2,516,067)
Change in unrealized appreciation
(depreciation) of investments and
options ........................... (11,992,856) 96,745,512
--------------------------------
Net increase resulting from
operations ........................ 40,287,083 90,270,358
--------------------------------
Net decrease from fund share
transactions (Note 6) ............. (34,547,745) (43,134,681)
--------------------------------
Total increase in net assets ......... 5,739,338 47,135,677
Net Assets
Beginning of year .................... 349,594,600 302,458,923
--------------------------------
End of year .......................... $355,333,938 $349,594,600
================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 2004
Note 1
State Street Research Mid-Cap Growth Fund is a series of State Street Research
Capital Trust (the "Trust"), which is a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The investment objective of the fund is to provide long-term growth of capital.
Under normal market conditions, the fund invests at least 80% of its net assets
in mid-cap stocks. These 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% and pay annual service and distribution fees equal
to 0.30% of average daily net assets. Class B(1) shares pay annual service and
distribution fees equal to 1.00% of average daily net assets and 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 B shares are offered only to current shareholders
through reinvestment of dividends and distributions or through exchanges from
existing Class B accounts of State Street Research funds and also automatically
convert to Class A shares at the end of eight years. Currently, the annual
service and distribution fees paid by Class B Shares have been voluntarily
reduced to 0.00%. 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 service and distribution fees equal to 1.00% of average
daily net assets. Class S shares are only offered through certain retirement
accounts, advisory accounts of State Street Research & Management Company (the
"Adviser"), an investment management 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 service or
distribution fees. The fund's expenses are borne prorata 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.
Income, expenses (other than service and distribution fees), and realized and
unrealized gains on losses on investments are allocated to each class of shares
based on its relative net assets. 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 accounting principles generally accepted in the United States of America.
A. Investment Valuation
Values for listed equity 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. If not quoted on the Nasdaq system, such
securities are valued at prices obtained from independent brokers. In the
absence of recorded sales, 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 good faith under consistently applied procedures established by
and under the supervision of the Trustees. In the event that the market
quotations for a portfolio instrument are not deemed to be readily available,
the Investment Adviser's Valuation Committee determines the fair value for such
portfolio instrument. The fair value of any such portfolio instruments are
determined based upon a consideration of all available facts and information.
The fair valuation of a restricted portfolio instrument reflects the inherent
worth of the portfolio instrument, without regard to the restrictive feature,
adjusted for any diminution in value resulting from the restrictive feature. The
Investment Adviser and the Custodian also monitor domestic and foreign markets
and news information for any developing events that may have an impact on the
valuation of portfolio instruments. Such monitoring includes general market news
and financial market information sources currently
10 The notes are an integral part of the financial statements.
Notes (continued)
- --------------------------------------------------------------------------------
utilized in making investment decisions, trading and investment personnel
located abroad, foreign regional brokers, and /or foreign custodians. The value
assigned to these securities is based upon available information at the time,
and does not necessarily represent the amount which might ultimately realized
upon sale.
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.
As part of the custodian contract between the custodian bank and the fund, the
custodian bank has a lien on the securities of the fund to the extent permitted
by the fund's investment restriction to cover any advances made by the custodian
bank for the settlement of securities purchased by the fund. At September 30,
2004 the payable to the custodian bank of $327 represents the amount due for
cash advance for the settlement of the security purchased.
C. Net Investment Income
Net investment income is determined daily and consists of interest and dividends
accrued and discount earned, less the estimated daily expenses of the fund.
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 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 gains distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. The difference is primarily
due to differing treatments for wash sale deferrals.
E. Federal Income Taxes
No provision for federal income taxes is necessary because the fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
At September 30, 2004, the fund had a capital loss carryforward of $299,268,696
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $212,041,374, and $87,227,324 expire on September 30,
2010 and 2011, respectively.
To the extent book/tax differences are permanent in nature, such amounts are
reclassified within the capital accounts based on federal tax basis treatment.
The fund reclassified for book purposes amounts arising from permanent book/tax
differences primarily relating to net operating losses not utilized. At
September 30, 2004, the components of distributable earnings on a tax basis
differ from the amounts reflected in the Statement of Assets and Liabilities by
temporary book/tax differences largely arising from wash sales and capital loss
carryforwards. At September 30, 2004, the tax basis distributable earnings were
$0 in undistributed ordinary income, $0 in undistributed short-term capital
gains and $0 in undistributed long-term gains.
F. Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 these 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 September
30, 2004, the value of the securities loaned and the value of collateral were
$45,267,637 and $46,290,672 (consisting entirely of cash collateral invested in
State Street Navigator Securities Lending Prime Portfolio), respectively. The
collateral was marked to market the next business day and made equal to at least
100% of the current market value of the loaned securities and accrued interest.
During the year ended September 30, 2004, income from securities lending
amounted to $96,355.
H. Options
The Fund may use options to hedge against changes in values of securities the
Portfolio owns or expects to purchase. Writing puts or buying calls tends to
increase the fund's exposure to the underlying instrument and writing calls or
buying puts tends to decrease the fund's exposure to the underlying instrument,
or hege other fund investments.
For options purchased to hedge the fund's investments, the potential risk to the
fund is that the change in value of options contracts may correspond to the
change in value of the hedged instruments. In addition, losses may arise from
changes in the value of the underlying instruments, if there is an illiquid
secondary market, or if the counter party is unable to perform. The maximum loss
for purchased options is limited to the premium initially paid for the option.
For options written by the fund, the maximum loss is not limited to the premium
initially received for the option.
Note 2
The Trust and the Adviser have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% of the first $500 million of
average net assets, 0.70% of the next $500 million, and 0.65% of any amount over
$1 billion of average 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 September 30, 2004,
the fees pursuant to such agreement amounted to $2,805,522.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), 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, such as employee benefit plans, through or under
which shares of the fund may be purchased. Total shareholder service costs are
allocated to each fund in the same ratios as the transfer agent costs. During
the year ended September 30, 2004, the amount of such expenses allocated to the
fund was $491,746.
The fund has entered onto an arrangement with its custodian whereby credits
realized as a result of directed brokerage commissions were used to reduce a
portion of the fund's expenses. During the twelve months ended September 30,
2004 the fund's custodian fees were reduced by $1,281 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$21,924 during the year ended September 30, 2004.
The fund has agreed to pay the Adviser for certain administrative costs incurred
in providing other assistance and services to the fund. The fee was based on a
fixed amount that has been allocated equally among the State Street Research
funds. During the year ended September 30, 2004, the amount of such expenses was
$106,536.
On February 19, 2004, the Distributor entered into an agreement with the NASD
resolving all outstanding issues relating to an investigation by the NASD of the
Distributor's email retention practices and supervision of trading activity in
shares of the State Street Research funds. The Distributor, without admitting or
denying the allegations or the findings set forth in the agreement, and solely
for the purposes of the settlement, agreed to the entry of certain findings by
the NASD relating to the Distributor's compliance with document retention
requirements and the Distributor's supervision of enforcement of shareholder
exchange limitations set forth in the funds' prospectuses. The agreement
contains no allegations or findings of fraudulent conduct by the Distributor. As
part of the agreement the Distributor made a payment to the fund to compensate
the fund for losses relating to the exchange of fund shares beyond the annual
limit set forth in the fund's prospectus. The payment was allocated among the
fund's share classes as follows: $5,845 to Class A; $813 to Class B(1); $1,587
to Class B; $323 to Class C; and $958 to Class S. These amounts are
State Street Research Mid-Cap Growth Fund 11
shown in the total amount of $9,526 as "Net increase from payment by affiliate"
in the Statement of Operations.
Note 3
For the year ended September 30, 2004, purchases and sales of securities,
exclusive of short-term obligations, aggregated $356,332,906, and $391,772,228,
respectively.
Note 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the plans, the fund pays annual service
fees to the Distributor at a rate of 0.25% of average daily net assets for Class
A, Class B(1), Class B and Class C shares. In addition, the fund pays annual
distribution fees of 0.05% 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) and Class C shares. Currently, the annual service and distribution
fees paid by Class B shares have been voluntarily reduced to 0.00%. The
Distributor uses such payments for personal services and/or the maintenance 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 September
30, 2004, fees pursuant to such plans amounted to $669,777, $320,033 and
$126,457 for Class A, Class B(1) and Class C shares, respectively. For Class A,
Class B and Class C shares, the payments are intended to reimburse the
distributor for expenditures incurred under the plan, and any unused payments
are returnable to the fund. As of September 30, 2004, there were $2,427,848,
$14,985 and $1,771,015 for Class A, Class B, and Class C shares, respectively,
of unreimbursed distribution and shareholder servicing related expenses to be
carried forward to future plan years. For Class B(1) shares, the payments
compensate the distributor for services and expenditures incurred under the
plan, and none of the payments are returnable to the fund. During the year ended
September 30, 2004 the Distributor reimbursed a total of $270,857 to Class B
shares of the fund reflecting the estimated excess of payments received over
costs incurred under the plan. This amount is shown as "Reimbursement of
Distribution Fees" in the Statement of Operations.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$163,181 and $747,057, respectively, on sales of Class A shares of the fund
during the year ended September 30, 2004, and that MetLife Securities, Inc.
earned commissions aggregating $574,627 and $7,297 on sales of Class B(1) and
Class C shares, and the Distributor collected contingent deferred sales charges
aggregating $60,470, $268 and $410 on redemptions of Class B(1), Class B and
Class C shares, respectively, during the same period.
Note 5
MetLife announced that it has entered into an agreement to sell the Adviser as
part of a larger transaction to sell MetLife's asset management business to
BlackRock, Inc. ("BlackRock"). The acquisition by BlackRock of MetLife's asset
management business is expected to occur in the first quarter of 2005. At the
time of the closing, the advisory agreement between the fund and the Adviser and
the distribution agreement between the fund and the Distributor will be
terminated. BlackRock Advisors, Inc. and BlackRock Distributors, Inc., wholly
owned subsidiaries of BlackRock, will serve as investment adviser and
distributor, respectively.
A Special Meeting of Shareholders of the fund has been tentatively scheduled for
December 2004. At this meeting, shareholders of the fund will be asked to
consider and approve a plan of reorganization between the fund and the BlackRock
Mid-Cap Growth Equity Portfolio. If the proposed reorganization is approved by
shareholders of the fund, the BlackRock Mid-Cap Growth Equity Portfolio would
acquire substantially all of the assets and liabilities of the fund. In
exchange, shareholders of the fund would receive shares of the BlackRock Mid-Cap
Growth Equity Portfolio with an aggregate value equivalent to the aggregate net
asset value of their fund shares at the time of the transaction. If the proposed
reorganization is not approved by shareholders of the fund, the Board of
Trustees will need to consider other alternatives relating to the management and
operations of the fund, including without limitations, seeking an alternative
investment adviser for the fund or seeking shareholder approval to liquidate the
fund.*
* The foregoing is not an offer to sell, nor a solicitation of an offer to buy,
shares of any fund, nor is it a solicitation of any proxy.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share.
These transactions break down by share class as follows:
Years ended September 30
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
Shares sold 12,365,320 $ 75,029,993) 10,362,428 $ 47,693,729
Shares redeemed (6,317,143) (37,277,820) (12,783,402) (57,272,190)
------------- ------------- -------------- -------------
Net increase (decrease) 6,048,177 $ 37,752,173 (2,420,974) $ (9,578,461)
============= ============= ============== =============
Class B(1) Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
Shares sold 929,181 $ 4,714,722 1,604,810 $ 6,518,156
Shares redeemed (977,296) (4,973,771) (1,808,414) (6,879,464)
------------- ------------- -------------- -------------
Net decrease (48,115) $ (259,049) (203,604) $ (361,308)
============= ============= ============== =============
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
Shares sold 114,168 $ 588,374 416,179 $ 1,648,440
Shares redeemed (13,042,758) (68,824,217) (6,915,765) (27,246,929)
------------- ------------- -------------- -------------
Net decrease (12,928,590) $ (68,235,843) (6,499,586) $ (25,598,489)
============= ============= ============== =============
Class C Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
Shares sold 206,074 $ 1,047,014 316,274 $ 1,309,387
Shares redeemed (520,561) (2,637,595) (799,177) (3,109,189)
------------- ------------- -------------- -------------
Net decrease (314,487) $ (1,590,581) (482,903) $ (1,799,802)
============= ============= ============== =============
Class S Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
Shares sold 715,078 $ 4,498,709 1,519,064 $ 7,703,821
Shares redeemed (1,048,683) (6,713,154) (2,637,590) (13,500,442)
------------- ------------- -------------- -------------
Net decrease (333,605) $ (2,214,445) (1,118,526) $ (5,796,621)
============= ============= ============== =============
12
- -----------
FINANCIAL
- -----------
Highlights
Class A - Years ended September 30
For a share outstanding throughout each year: ---------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 5.35 4.03 5.04 20.10 13.64
------ ------- ------- ------- -------
Net investment loss ($) (0.08) (0.06) (0.07) (0.06) (0.15)
Net realized and unrealized gain (loss) on investments ($) 0.70 1.38 (0.94) (6.47) 7.44
------ ------- ------- ------- -------
Total from investment operations ($) 0.62 1.32 (1.01) (6.53) 7.29
------ ------- ------- ------- -------
Distributions from capital gains ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Total distributions ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Net asset value, end of year ($) 5.97 5.35 4.03 5.04 20.10
====== ======= ======= ======= =======
Total return %(b) 11.59 32.75 (20.04) (49.83) 54.91
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 236,346 179,519 144,814 201,936 450,521
Expense ratio (%) 1.67 1.75 1.78 1.56 1.38
Expense ratio after expense reductions (%) 1.67 1.74 1.76 1.54 1.37
Ratio of net investment loss to average net assets (%) (1.30) (1.36) (1.33) (0.73) (0.85)
Portfolio turnover rate (%) 97.18 104.91 136.30 123.50 171.87
Class B(1) - Years ended September 30
---------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 4.57 3.47 4.36 18.83 12.90
------ ------- ------- ------- -------
Net investment loss ($) (0.10) (0.09) (0.09) (0.09) (0.26)
Net realized and unrealized gain (loss) on investments ($) 0.60 1.19 (0.80) (5.85) 7.02
------ ------- ------- ------- -------
Total from investment operations ($) 0.50 1.10 (0.89) (5.94) 6.76
------ ------- ------- ------- -------
Distributions from capital gains ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Total distributions ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Net asset value, end of year ($) 5.07 4.57 3.47 4.36 18.83
====== ======= ======= ======= =======
Total return %(b) 10.94 31.70 (20.41) (50.25) 53.90
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 31,343 28,518 22,314 26,083 37,063
Expense ratio (%) 2.37 2.45 2.48 2.26 2.11
Expense ratio after expense reductions (%) 2.37 2.44 2.46 2.24 2.10
Ratio of net investment loss to average net assets (%) (2.00) (2.17) (2.02) (1.43) (1.52)
Portfolio turnover rate (%) 97.18 104.91 136.30 123.50 171.87
Class B - Years ended September 30
------------------------------------------------------------------------
2004(a)(c)(d) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 4.63 3.48 4.36 18.82 12.90
------- ------- ------ ------ ------
Net investment loss ($) (0.05) (0.03) (0.07) (0.10) (0.26)
Net realized and unrealized gain (loss) on investments ($) 0.63 1.18 (0.81) (5.83) 7.01
------- ------- ------ ------ ------
Total from investment operations ($) 0.58 1.15 (0.88) (5.93) 6.75
------- ------- ------ ------ ------
Distributions from capital gains ($) -- -- -- (8.53) (0.83)
------- ------- ------ ------ ------
Total distributions ($) -- -- -- (8.53) (0.83)
------- ------- ------ ------ ------
Net asset value, end of year ($) 5.21 4.63 3.48 4.36 18.82
======= ======= ====== ====== ======
Total return %(b) 12.53 33.05 (20.18) (50.18) 53.83
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------ ----------------------------------------
Net assets at end of year ($ thousands) 39,654 95,216 94,029 157,788 411,584
Expense ratio (%) 1.37 1.45 1.88 2.26 2.11
Expense ratio after expense reductions (%) 1.37 1.44 1.86 2.24 2.10
Ratio of net investment loss to average net assets (%) (0.62) (0.83) (1.46) (1.44) (1.58)
Portfolio turnover rate (%) 97.18 136.30 136.30 123.50 171.87
State Street Research Mid-Cap Growth Fund 13
Class C - Years ended September 30
---------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- ------------------------------------------------------------------------------------------ ----------------------------------------
Net asset value, beginning of year ($) 4.59 3.48 4.39 18.87 12.93
------ ------- ------- ------- -------
Net investment loss ($) (0.10) (0.08) (0.09) (0.10) (0.27)
Net realized and unrealized gain (loss) on investments ($) 0.59 1.19 (0.82) (5.85) 7.04
------ ------- ------- ------- -------
Total from investment operations ($) 0.49 1.11 (0.91) (5.95) 6.77
------ ------- ------- ------- -------
Distributions from capital gains ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Total distributions ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Net asset value, end of year ($) 5.08 4.59 3.48 4.39 18.87
====== ======= ======= ======= =======
Total return %(b) 10.68 31.90 (20.73) (50.15) 53.86
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------ ----------------------------------------
Net assets at end of year ($ thousands) 11,740 12,044 10,805 17,362 51,721
Expense ratio (%) 2.37 2.45 2.48 2.26 2.11
Expense ratio after expense reductions (%) 2.37 2.44 2.46 2.24 2.10
Ratio of net investment loss to average net assets (%) (2.00) (2.00) (2.05) (1.44) (1.58)
Portfolio turnover rate (%) 97.18 104.91 136.30 123.50 171.87
Class S - Years ended September 30
---------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- ------------------------------------------------------------------------------------------ ----------------------------------------
Net asset value, beginning of year ($) 5.68 4.26 5.32 20.62 13.94
------ ------- ------- ------- -------
Net investment loss ($) (0.06) (0.04) (0.06) (0.04) (0.11)
Net realized and unrealized gain (loss) on investments ($) 0.74 1.46 (1.00) (6.73) 7.62
------ ------- ------- ------- -------
Total from investment operations ($) 0.68 1.42 (1.06) (6.77) 7.51
------ ------- ------- ------- -------
Distributions from capital gains ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Total distributions ($) -- -- -- (8.53) (0.83)
------ ------- ------- ------- -------
Net asset value, end of year ($) 6.36 5.68 4.26 5.32 20.62
====== ======= ======= ======= =======
Total return %(b) 11.97 33.33 (19.92) (49.68) 55.32
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------ ----------------------------------------
Net assets at end of year ($ thousands) 36,250 34,298 30,497 46,751 121,727
Expense ratio (%) 1.37 1.45 1.48 1.26 1.11
Expense ratio after expense reductions (%) 1.37 1.44 1.46 1.24 1.10
Ratio of net investment loss to average net assets (%) (1.00) (0.87) (1.05) (0.43) (0.58)
Portfolio turnover rate (%) 97.18 104.91 136.30 123.50 171.87
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) During the year ended September 30, 2004, the distributor made restitution
payments to the fund as part of a settlement with NASD. These payments had
no effect on net realized and unrealized gain per share and total return.
(d) During the year ended September 30, 2004, the distributor reimbursed Class B
shares of the fund the estimated excess of payments received over costs
incurred under the 12b-1 plan. The effect of this reimbursement was to
increase net investment income per share $0.02, increase the total return
0.22% and increase the ratio of net investment income to average net assets
0.39%.
(e) Audited by other auditors
14
- -----------
REPORT OF
- -----------
Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of State Street Research Mid-Cap Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio holdings, of State Street Research Mid-Cap Growth Fund (the
"Fund"), a series of State Street Research Capital Trust, as of September 30,
2004, and the related statement of operations for the year then ended, and the
statement of changes in net assets , and the financial highlights for each of
the two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years in the
three-year period ended September 30, 2002, were audited by other auditors whose
report dated November 8, 2002, expressed an unqualified opinion on such
financial highlights.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2004, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of September 30, 2004, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for each
of the two years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 19, 2004
State Street Research Mid-Cap Growth Fund 15
- -----------------------
TRUSTEES AND OFFICERS
- -----------------------
State Street Research Capital Trust
Number
of Funds
in Fund
Complex
Name, Position(s) Term of Office Overseen Other
Address Held with and Length of Principal Occupations by Trustee/ Directorships Held
and Age(a) Fund Time Served(b) During Past 5 Years Officer(c) by Trustee/Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, 19 Avaya, Inc.
(58) 1999 Chief Executive Officer and President,
PictureTel Corporation (video conferencing
systems)
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 First Marblehead Corp.
(62) 2004 PricewaterhouseCoopers LLP
Steve A. Garban Trustee Since Retired; formerly Senior Vice President for 53 Metropolitan Series
(67) 1997 Finance and Operations and Treasurer, The Fund, Inc.; and
Pennsylvania State University Metropolitan Series
Fund II
Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co.
(59) 1998 Management, George Washington University;
formerly a member of the Board of Governors
of the Federal Reserve System; and Chairman
and Commissioner of the Commodity Futures
Trading Commission
Toby Rosenblatt Trustee Since President, Founders Investments Ltd. 53 A.P. Pharma, Inc.;
(66) 1995 (investments); formerly President, The Glen Metropolitan Series
Ellen Company (private investment firm) Fund, Inc.; and
Metropolitan Series
Fund II
Michael S. Trustee Since Jay W. Forrester Professor of Management 53 Metropolitan Series
Scott Morton (67) 1987 (Emeritus), Sloan School of Management, Fund, Inc.; and
Massachusetts Institute of Technology Metropolitan Series
Fund II
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief 19 None
(59) 2000 Executive Officer of State Street Research &
Management Company; formerly Senior Vice
President, Fixed Income Investments,
Metropolitan Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Officers
C. Kim Goodwin Vice Since Managing Director and Chief Investment 18 Akamai Technologies,
(45) President 2002 Officer - Equities of State Street Research Inc.
& Management Company; formerly Chief
Investment Officer - U.S. Growth Equities,
American Century
Paul Haagensen Vice Since Senior Vice President of State Street 3 None
(58) President 2003 Research & Management Company; formerly
Portfolio Manager and senior analyst at
Putnam Investments
Eileen M. Leary Vice Since Senior Vice President of State Street 3 None
(42) President 2002 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
John S. Lombardo Vice Since Managing Director, Chief Financial Officer 19 None
(49) President 2001 and Director of State Street Research &
Management Company; formerly Executive Vice
President, State Street Research &
Management Company; and Senior Vice
President, Product and Financial Management,
MetLife Auto & Home
Andrew Morey Vice Since Senior Vice President of State Street 3 None
(35) President 2003 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
Tucker Walsh Vice Since Managing Director of State Street Research & 3 None
(35) President 1999 Management Company; formerly Vice President
and analyst, State Street Research &
Management Company
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of State 19 None
(47) 2001 Street Research & Management Company;
formerly Vice President and Assistant
Treasurer, State Street Research &
Management Company
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company has served as sole investment adviser and all
series of Metropolitan Series Fund, Inc. and Metropolitan Series Fund II.
The primary adviser to Metropolitan Series Fund, Inc., and Metropolitan
Series Fund II is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
16
[LOGO] STATE STREET RESEARCH --------------
One Financial Center PRSRT STD
Boston, MA 02111-2690 U.S. POSTAGE
PAID
PERMIT #6
HUDSON, MA
--------------
- --------------------------------------------------------------------------------
New accounts, mutual fund purchases,
exchanges and account information
Internet www.ssrfunds.com
E-mail info@ssrfunds.com
Phone 1-87-SSR-FUNDS (1-877-773-8637), toll-free, 7 days a week, 24 hours a
day Hearing-impaired: 1-800-676-7876 Chinese- and Spanish-speaking:
1-888-638-3193
Fax 1-617-737-9722 (request confirmation number
first from the Service Center by calling 1-877-773-8637)
Mail State Street Research Service Center
P.O. Box 8408, Boston, MA 02266-8408
Did You Know?
State Street Research offers electronic delivery of quarterly statements,
shareholder reports and fund prospectuses. If you elect this option, we will
send these materials to you via e-mail. To learn more, visit us on the Web at
www.ssrfunds.com and click on "Go to Your Account" or call us at 1-87-SSR-FUNDS
(1-877-773-8637).
Did you know that you can give a State Street Research mutual fund as a gift?
Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637), Monday
through Friday, 8am-6pm eastern time, to learn more.
Investors should carefully consider the fund's investment objective, risks,
charges and expenses before investing. The fund's prospectus contains more
complete information on these and other matters. A prospectus for any State
Street Research fund is available through your financial professional, by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at
www.ssrfunds.com. Please read the prospectus carefully before investing.
OverView
For more information on the products and services we offer, refer to OverView,
our quarterly shareholder newsletter.
Webcasts
For a professional perspective on the markets, the economy and timely investment
topics, tune in to a State Street Research webcast by visiting our website at
www.ssrfunds.com.
Complete Fund Listing
For a list of our funds, visit our website at www.ssrfunds.com under Research
Our Funds.
[GRAPHIC]
for Excellence in
Shareholder Communications
[GRAPHIC]
for Excellence in Service
This report must be accompanied or preceded by a current prospectus. When used
as sales material after December 31, 2004, this report must be accompanied by a
current Quarterly Performance Update.
"State Street Research Proxy Voting Policies and Procedures"--which describes
how we vote proxies relating to portfolio securities--is available upon request,
free of charge, by calling the State Street Research Service Center toll-free at
1-87-SSR-FUNDS (1-877-773-8637) or by accessing the U.S. Securities and Exchange
Commission website at www.sec.gov.
The DALBAR awards recognize quality shareholder service and quality shareholder
communications, 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 industrywide.
Member NASD, SIPC
(C)2004 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp1105)SSR-LD MG-2653-1104
<Page>
[LOGO] STATE STREET RESEARCH
Emerging Growth Fund
September 30, 2004
Annual Report to Shareholders
Table of Contents
3 Performance Discussion
6 About Your Fund Expenses
7 Portfolio Holdings
9 Financial Statements
13 Financial Highlights
16 Independent Auditors'
Report
17 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
The pace of U.S. economic growth was robust over the past 12 months as the
economy advanced on all fronts. Gross domestic product (GDP) growth, a common
measure of economic growth, averaged just short of 4.0% for the period, solidly
above the economy's long-term trend rate of 3.0%. Our analysts expect the
economy to grow between 3.5% and 4.0% for the remainder of 2004 and into 2005.
Consumers continued to play a key role in the economy. Spending on retail goods,
autos and housing remained generally strong throughout the period. Retail sales
slowed during the summer months of 2004 as a result of higher energy prices and
weather-related events. But the pace of consumer spending picked up again in
September, as did consumer confidence, which see-sawed along with the outlook
for the labor market throughout the period.
The number of new jobs continued to fall short of expectations. In the spring,
more than one million new jobs were added to the economy. But job growth was
disappointing again during the summer months. The economy has yet to replace all
the jobs lost in the downturn of 2000-2001.
A pick-up in business spending was the bright spot in the economy. Industrial
production moved steadily higher, as did manufacturing capacity utilization.
Outlays for new equipment and construction enjoyed double-digit growth in the
second half of the period. Strong spending by business helped offset some of the
slowdown in consumer spending.
Stocks Stumble, Bonds Edge Higher
The U.S. stock market began the period on a strong note. However, the
double-digit gains it achieved over the twelve months covered by this report
were accumulated early in the period and the broad stock market indexes have
been essentially flat in 2004. By contrast, the bond market has held up in the
face of three increases in the Federal funds rate (a key short-term interest
rate) that occurred late in the period. The yield on the 10-year benchmark U.S.
Treasury ended the period only slightly higher than where it began, and bond
prices moved higher across all sectors.
Investing Despite Uncertainty
By all accounts, news on the economy and the markets has been overshadowed over
the past year by external events. As a result, many investors have remained on
the sidelines. With so much uncertainty, it may feel safer to wait out the
storm. Yet, it can be even more risky to try to time your entrances and exits as
the markets move through their natural cycles. If you're feeling uncertain about
your financial strategy, talk to your financial professional. With the advice
and guidance of a financial professional, you can keep your financial goals on
track.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
September 30, 2004
2
- --------------
PERFORMANCE
- --------------
Discussion as of September 30, 2004
How State Street Research Emerging Growth Fund Performed
State Street Research Emerging Growth Fund (Class A shares, without sales
charge) returned 2.84% for the 12-month period ended September 30, 2004. The
fund underperformed the Russell 2000[RegTM] Growth Index and the Lipper
Small-Cap Growth Funds Average, which returned 11.92% and 9.19% respectively for
the period.
Performance: Class A
- -------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04
(does not reflect sales charge)
1 Year 5 Years 10 Years
2.84% 5.63% 8.82%
- -------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04
(at maximum applicable sales charge)
1 Year 5 Years 10 Years
-3.08% 4.38% 8.18%
- -------------------------------------------------------------------------------
Russell 2000 Growth Index as of 9/30/04
1 Year 5 Years 10 Years
11.92% -0.68% 5.55%
- -------------------------------------------------------------------------------
See pages 4 and 5 for additional performance data for Class A shares and for
performance data on other share classes.
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
Average annual total return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
Average annual total return at maximum applicable sales charge reflects a
maximum 5.75% Class A share front-end sales charge.
Performance results for the fund are increased by the voluntary reduction of
fund fees and expenses. Without subsidization, performance results would have
been lower.
The Russell 2000 Growth Index contains those stocks within the complete Russell
2000[RegTM] Index (a small-company index) that show above-average growth. The
index is unmanaged and does not take transaction charges into consideration. It
is not possible to invest directly in an index.
The Lipper Small-Cap Growth Funds Average shows the performance of a category of
mutual funds with similar goals. The Lipper average shows you how well the fund
has done compared to competing funds.
Reasons for the Fund's Performance
Market conditions changed dramatically over the past year. In 2003, small-cap
growth stocks were favored, but beginning in February 2004, investor sentiment
moved away from the sector, given rising energy prices, interest rate fears,
slowed economic growth and geopolitical concerns. Overall liquidity in the
sector lessened dramatically. This negative sentiment caused investors to look
beyond company-specific fundamentals and focus on broader issues. As a result,
individual stocks were subject to tremendous volatility. These factors, along
with selected stock disappointments, hurt the fund's performance.
Strong results from consumer issues Ask Jeeves, Boyd Gaming and Harman
International were offset by poor performances from Corinthian Colleges and
Alliance Gaming. We sold Corinthian Colleges after the company announced that
its earnings would fall short of expectations. We also sold Nektar Therapeutics,
a health care stock that lost ground after indications that European drug
regulators would not approve its inhaled insulin product, Exubera.
Technology returns also hurt results. The economic "soft patch" in June resulted
in an immediate weakness in technology spending, and a number of holdings in the
sector were hard hit. We reduced our exposure late in the period when it
appeared likely that the semiconductor industry had peaked.
Other sectors within the fund held up well, including energy, financials and
materials. We anticipate further strength in energy shares owing to continued
high oil, natural gas and coal prices. Gaming equipment makers and casino
operators continue to demonstrate robust growth irrespective of economic
conditions.
Looking Ahead
We believe that the fund is positioned for improved performance once the
uncertainties that are holding back investors are lifted. We believe that the
fund is invested in many solid companies with strong business prospects. And, we
continue to adhere to our disciplined, bottom-up fundamental investment process.
A Word about Risk
The major risks of stock investing include sudden and unpredictable drops in
value and period of lackluster performance. Emerging growth stocks of any size
company often have an above-average sensitivity to market fluctuations, as their
market prices tend to reflect future expectations. Small-company stocks may be
particularly sensitive, because they may be thinly traded. The fund may
underperform other stock funds during periods when small-cap stocks or emerging
growth stocks are out of favor.
Summary Portfolio Schedule
- -------------------------------------------------------------------------------
Industries % of Fund Net Assets
Consumer Discretionary 30.7%
- -----------------------------------------------
Health Care 25.1%
- -----------------------------------------------
Technology 13.2%
- -----------------------------------------------
Financial Services 10.5%
- -----------------------------------------------
Producer Durables 7.6%
- -----------------------------------------------
Other Energy 5.2%
- -----------------------------------------------
Other 4.5%
- -----------------------------------------------
Materials & Processing 1.3%
- -----------------------------------------------
Utilities 1.3%
- -----------------------------------------------
Net Cash 0.6%
- -----------------------------------------------
Total 100.0%
Because financial markets and mutual fund strategies are constantly evolving, it
is 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.
State Street Research Emerging Growth Fund 3
- --------------
PERFORMANCE
- --------------
Discussion as of September 30, 2004
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is not a guarantee of future results, long-term returns
can serve as an important context for evaluating recent performance. There are
three ways of measuring long-term performance: cumulative total returns, average
annual total returns and the change in dollar value over time of a given
investment. Information about these measures follows, while the share class
boxes contain the results of these measures for each share class.
Cumulative Total Return
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.
Average Annual Total Return
Represents the rate you would have had to earn during each year of a given time
period in order to end up with the fund's actual cumulative return for those
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
Similar to cumulative total return, but uses dollars rather than percentages,
and assumes that the lump sum you invested was $10,000 (less the applicable
maximum sales charge, if any) and compares fund performance to the performance
of a market index.
- --------------------------------------------------------------------------------
Class A
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 2.84% 31.48% 132.85%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) -3.08% 23.92% 119.46%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) -3.08% 4.38% 8.18%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class A Growth Index
------- ------------
94 9425 10000
95 10669 12821
96 12475 14438
97 18463 17808
98 12929 13387
99 16691 17757
00 24377 23024
01 17028 13218
02 16019 10818
03 21340 15329
04 21946 17159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B(1)
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 2.17% 27.20% 117.21%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) -2.83% 25.20% 117.21%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) -2.83% 4.60% 8.07%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class B(1) Growth Index
--------- ------------
94 10000 10000
95 11244 12821
96 13040 14438
97 19156 17808
98 13303 13387
99 17076 17757
00 24766 23024
01 17217 13218
02 16076 10818
03 21261 15329
04 21721 17159
- --------------------------------------------------------------------------------
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions, or the
redemption of fund shares.
Cumulative Total Return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
4
- --------------------------------------------------------------------------------
Class B (only available through exchanges from another Class B account)
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 3.10% 28.51% 119.46%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) -1.90% 26.51% 119.46%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) -1.90% 4.82% 8.18%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class B Growth Index
------- ------------
94 10000 10000
95 11244 12821
96 13040 14438
97 19156 17808
98 13303 13387
99 17076 17757
00 24749 23024
01 17220 13218
02 16099 10818
03 21285 15329
04 21964 17159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 2.16% 27.44% 117.62%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 1.16% 27.44% 117.62%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 1.16% 4.97% 8.09%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class C Growth Index
------- ------------
94 10000 10000
95 11244 12821
96 13028 14438
97 19171 17808
98 13319 13387
99 17077 17757
00 24766 23024
01 17237 13218
02 16116 10818
03 21301 15329
04 21762 17159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class R
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 2.58% 30.94% 131.87%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 2.58% 30.94% 131.87%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 2.58% 5.54% 8.77%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class R Growth Index
------- ------------
94 10000 10000
95 11320 12821
96 13236 14438
97 19589 17808
98 13718 13387
99 17709 17757
00 25864 23024
01 18067 13218
02 16996 10818
03 22603 15329
04 23187 17159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class S
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 3.14% 33.53% 139.62%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 3.14% 33.53% 139.62%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 3.14% 5.95% 9.13%
- --------------------------------------------------------------------------------
$10,000 Over 10 Years
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class S Growth Index
------- ------------
94 10000 10000
95 11360 12821
96 13302 14438
97 19733 17808
98 13847 13387
99 17945 17757
00 26264 23024
01 18456 13218
02 17382 10818
03 23233 15329
04 23962 17159
- --------------------------------------------------------------------------------
Cumulative and Average Annual Total Return at maximum applicable sales charge
reflect 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. Performance for Class B(1) shares reflects Class B share performance
through December 31, 1998, and Class B(1) performance thereafter. Performance
for Class R shares reflects Class A share performance through April 2, 2003, and
Class R share performance thereafter. If the returns for Class B(1) and Class R
shares had reflected their current service/distribution (Rule 12b-1) fees for
the entire period, returns would have been lower. Class R and Class S shares,
offered without sales charge, are available through certain retirement plans and
special programs.
Performance results for the fund are increased by the voluntary reduction of
fund fees and expenses, without subsidization, performance would have been
lower. The Russell 2000 Growth Index contains those stocks within the complete
Russell 2000 Index (a small-company index) that show above-average growth. The
index is unmanaged and does not take transaction charges into consideration. It
is not possible to invest directly in an index.
State Street Research Emerging Growth Fund 5
About Your Fund Expenses
As a fund shareholder, you incur two types of costs: (1) Transaction costs,
which include sales charges, and (2) ongoing expenses, which include management
fees, service/distribution fees (12b-1) and "other" expenses. The examples below
illustrate the ongoing cost in dollars of investing in the fund and allow you to
compare these costs with the expenses of other funds. The examples are based on
a $1,000 investment at the beginning of the period and held for the entire
period from March 31, 2004, to September 30, 2004.
Actual Fund Return is based on the fund's actual return and expenses. To
estimate the ongoing expenses you paid during the entire period shown, simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number shown for your
fund under the column "Expenses Paid during the Period."
Hypothetical 5% Return is based on the fund's actual expense ratio and an
assumed rate of 5% per year before expenses. Please note that the return used is
not the fund's actual return; therefore, this information may not be used to
estimate your actual ending account balance and expenses paid during the period.
To compare your fund's ongoing expenses with those of other funds, simply
compare this 5% hypothetical example with the 5% hypothetical examples shown in
the shareholder reports of other funds.
Beginning Ending Expenses
Account Account Paid Annualized
Six months ended Value Value during Expense
9/30/04 3/31/04 9/30/04 Period* Ratio
- --------------------------------------------------------------------------------
Actual Fund Return
- --------------------------------------------------------------------------------
Class A $1,000 $ 820.14 $ 6.34 1.39%
- --------------------------------------------------------------------------------
Class B(1) $1,000 $ 814.00 $ 9.49 2.09%
- --------------------------------------------------------------------------------
Class B (closed) $1,000 $ 826.10 $ 4.99 1.09%
- --------------------------------------------------------------------------------
Class C $1,000 $ 813.64 $ 9.49 2.09%
- --------------------------------------------------------------------------------
Class R $1,000 $ 817.99 $ 7.23 1.59%
- --------------------------------------------------------------------------------
Class S $1,000 $ 823.35 $ 4.97 1.09%
- --------------------------------------------------------------------------------
Hypothetical 5% Return
- --------------------------------------------------------------------------------
Class A $1,000 $1,018.03 $ 7.03 1.39%
- --------------------------------------------------------------------------------
Class B(1) $1,000 $1,014.53 $10.54 2.09%
- --------------------------------------------------------------------------------
Class B (closed) $1,000 $1,019.54 $ 5.52 1.09%
- --------------------------------------------------------------------------------
Class C $1,000 $1,014.53 $10.55 2.09%
- --------------------------------------------------------------------------------
Class R $1,000 $1,017.05 $ 8.02 1.59%
- --------------------------------------------------------------------------------
Class S $1,000 $1,019.55 $ 5.50 1.09%
- --------------------------------------------------------------------------------
* Expenses are equal to the fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
period and then divided by the number of days in the year.
Please note that the expenses shown in the table are meant to highlight and help
you compare ongoing costs only and do not reflect transactional expenses such as
sales charges, which would result in higher total expenses. It should also be
noted that, for certain funds, expenses have been subsidized or reduced through
expense offset arrangements, which reduces costs for shareholders. Generally,
the fund expects that the expense subsidy or expense offset arrangement will
continue although there is no guarantee that it will. Please see the fund's
prospectus for more information.
6
- ------------
PORTFOLIO
- ------------
Holdings
September 30, 2004
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------------------
Common Stocks 99.4%
Consumer Discretionary 30.7%
Casinos/Gambling, Hotel/Motel 8.5%
Boyd Gaming Corp.^ ....................................................... 352,130 $ 9,912,459
Pinnacle Entertainment Inc.*^ ............................................ 550,500 7,596,900
Shuffle Master Inc.*^ .................................................... 142,199 5,326,774
Station Casinos Inc.^ .................................................... 195,800 9,602,032
WMS Industries Inc.*^ .................................................... 177,882 4,569,789
-----------
37,007,954
-----------
Commercial Services 7.2%
Ask Jeeves Inc.*^ ........................................................ 259,600 8,491,516
Autobytel Inc.*^ ......................................................... 556,100 4,988,217
Autobytel Inc.*++ ........................................................ 73,012 655,187
Corporate Executive Board Co.*^ .......................................... 54,200 3,319,208
LECG Corp.^ .............................................................. 266,500 4,506,515
Resources Connection Inc.^ ............................................... 244,000 9,218,320
-----------
31,178,963
-----------
Communications, Media & Entertainment 4.3%
Alliance Gaming Corp.*^ .................................................. 271,600 4,090,296
Citadel Broadcasting Corp.^ .............................................. 400,300 5,131,846
Entravision Communications Corp.*^ ....................................... 341,200 2,596,532
Radio One Inc.^ .......................................................... 488,800 6,955,624
-----------
18,774,298
-----------
Consumer Electronics 2.5%
Activision Inc.*^ ........................................................ 216,900 3,008,403
Harman International Inc.^ ............................................... 72,800 7,844,200
-----------
10,852,603
-----------
Consumer Services 2.7%
Aaron Rents Inc.^ ........................................................ 166,250 3,617,600
Laureate Education, Inc.^ ................................................ 166,600 6,200,852
SkillSoft plc ADR*^ ...................................................... 261,500 1,749,435
-----------
11,567,887
-----------
Leisure Time 0.6%
West Marine Inc.*^ ....................................................... 115,600 2,471,528
-----------
Retail 4.9%
Ann Taylor Stores Corp.* ................................................. 153,100 3,582,540
Chico's, FAS Inc.*^ ...................................................... 72,300 2,472,660
Cost Plus Inc.^ .......................................................... 89,100 3,152,358
Guitar Center Inc.*^ ..................................................... 73,300 3,173,890
Linens 'n Things Inc.*^ .................................................. 120,100 2,782,717
Pacific Sunwear of California Inc.^ ...................................... 187,400 3,944,770
Williams-Sonoma Inc.*^ ................................................... 57,700 2,166,635
-----------
21,275,570
-----------
Total Consumer Discretionary ............................................. 133,128,803
-----------
Financial Services 10.5%
Banks & Savings & Loan 4.3%
East West Bancorp Inc.^ .................................................. 89,400 3,002,946
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------
South Financial Group Inc.^ .............................................. 120,900 $ 3,409,380
Southwest Bancorp of Texas Inc.^ ......................................... 301,500 6,072,210
UCBH Holdings Inc.^ ...................................................... 159,600 6,235,572
-----------
18,720,108
-----------
Insurance 1.0%
Bristol West Holdings Inc.*^ ............................................. 253,300 4,341,562
-----------
Miscellaneous Financial 2.9%
CapitalSource Inc.*^ ..................................................... 236,700 5,287,878
Collegiate Funding Services Inc.^ ........................................ 277,900 3,490,424
Nelnet Inc.^ ............................................................. 166,456 3,725,285
-----------
12,503,587
-----------
Securities Brokerage & Services 2.3%
Affiliated Managers Group Inc.*^ ......................................... 187,300 10,028,042
-----------
Total Financial Services ................................................. 45,593,299
-----------
Health Care 25.1%
Drugs & Biotechnology 6.3%
Abgenix Inc.^ ............................................................ 299,500 2,953,070
Alkermes Inc.*^ .......................................................... 382,200 4,410,588
Dyax Corp.*^ ............................................................. 310,200 2,369,928
ICOS Corp.*^ ............................................................. 315,500 7,616,170
Invitrogen Corp.*^ ....................................................... 54,900 3,018,951
Martek Biosciences Corp.*^ ............................................... 61,000 2,967,040
MGI PHARMA Inc.*^ ........................................................ 74,200 1,980,398
Protein Design Laboratories, Inc.^ ....................................... 104,100 2,038,278
-----------
27,354,423
-----------
Health Care Facilities 6.4%
LCA-Vision Inc.^ ......................................................... 148,200 3,822,078
LifePoint Hospitals Inc.^ ................................................ 255,000 7,652,550
Psychiatric Solutions Inc.*^ ............................................. 293,100 7,430,085
United Surgical Partners Int'l Inc.*^ .................................... 250,600 8,608,110
-----------
27,512,823
-----------
Health Care Services 5.7%
Amedisys Inc.^ ........................................................... 91,700 2,746,415
AmSurg Corp.*^ ........................................................... 304,800 6,455,664
Cerner Corp.*^ ........................................................... 58,300 2,522,058
Community Health Systems Inc.*^ .......................................... 220,500 5,882,940
Covance Inc.*^ ........................................................... 125,100 5,000,247
Phase Forward Inc.^ ...................................................... 258,610 2,136,118
-----------
24,743,442
-----------
Hospital Supply 6.7%
Advanced Medical Optics Inc. ............................................. 111,800 4,423,926
Animas Corp.^ ............................................................ 191,000 3,075,100
Cooper Companies Inc. .................................................... 57,300 3,927,915
Cutera Inc.^ ............................................................. 285,882 3,224,749
Cyberonics Inc.*^ ........................................................ 95,200 1,947,792
INAMED Corp. ............................................................. 120,500 5,744,235
Respironics Inc.*^ ....................................................... 85,100 4,547,744
Wright Medical Group Inc.^ ............................................... 87,300 2,192,976
-----------
29,084,437
-----------
Total Health Care ........................................................ 108,695,125
-----------
Materials & Processing 1.3%
Building & Construction 1.3%
Trex Company Inc.*^ ...................................................... 126,900 5,619,132
-----------
Total Materials & Processing ............................................. 5,619,132
-----------
Other 4.5%
Miscellaneous 4.5%
iShares Trust ............................................................ 170,300 19,388,655
-----------
Total Other .............................................................. 19,388,655
-----------
The notes are an integral part of the financial statements.
State Street Research Emerging Growth Fund 7
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------
Other Energy 5.2%
Miscellaneous Energy 2.1%
Arch Coal Inc.^ .......................................................... 130,300 $ 4,624,347
Consol Energy Inc.^ ...................................................... 126,100 4,399,629
-----------
9,023,976
-----------
Oil Well Equipment & Services 3.1%
Cal Dive International Inc.*^ ............................................ 48,100 1,713,322
NewPark Resources Inc.*^ ................................................. 715,100 4,290,600
Patterson-UTI Energy Inc.*^ .............................................. 155,740 2,969,962
Pride International Inc. ................................................. 235,800 4,666,482
-----------
13,640,366
-----------
Total Other Energy ....................................................... 22,664,342
-----------
Producer Durables 7.6%
Industrial Products 1.1%
ESCO Technologies Inc.*^ ................................................. 70,800 4,797,408
-----------
Machinery 0.6%
Helix Technology Corp.^ .................................................. 195,805 2,661,969
-----------
Production Technology Equipment 2.0%
ATMI Inc.*^ .............................................................. 138,900 2,844,672
Cymer Inc.*^ ............................................................. 92,100 2,639,586
LAM Research Corp.*^ ..................................................... 57,500 1,258,100
Mattson Technology Inc.* ^ ............................................... 256,700 1,974,023
-----------
8,716,381
-----------
Telecommunications Equipment 3.9%
American Tower Corp.^ .................................................... 616,900 9,469,415
Polycom Inc.*^ ........................................................... 369,500 7,323,490
-----------
16,792,905
-----------
Total Producer Durables .................................................. 32,968,663
-----------
Technology 13.2%
Communications Technology 1.2%
Anaren Microwave Inc.*^ .................................................. 241,400 3,249,244
Avocent Corp.*^ .......................................................... 76,200 1,983,486
-----------
5,232,730
-----------
Computer Software 5.5%
Anteon International Corp.^ .............................................. 165,729 6,073,968
Caci International Inc.^ ................................................. 82,005 4,328,224
eCollege Inc.*++^ ........................................................ 115,000 1,109,750
eCollege Inc.* ........................................................... 179,607 1,733,208
Epicor Software Corp.*^ .................................................. 195,300 2,349,459
Hyperion Solutions Corp.^ ................................................ 45,800 1,556,742
Jupitermedia Corp.^ ...................................................... 169,111 3,010,176
Opsware Inc.*^ ........................................................... 50,991 286,059
Quest Software Inc.*^ .................................................... 159,000 1,768,080
Sybase Inc.* ............................................................. 104,300 1,438,297
-----------
23,653,963
-----------
Computer Technology 2.0%
Emulex Corp.*^ ........................................................... 259,300 2,987,136
Mobility Electronics Inc.*^ .............................................. 285,200 2,350,048
Nvidia Inc.*^ ............................................................ 229,100 3,326,532
-----------
8,663,716
-----------
Electronics 1.2%
Aeroflex Inc.*^ .......................................................... 265,600 2,807,392
Power Integrations Inc.*^ ................................................ 111,900 2,286,117
-----------
5,093,509
-----------
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------
Electronics: Semiconductors/Components 3.3%
Cree Inc.*^ .............................................................. 118,900 $ 3,630,017
Genesis Microchip Inc.*^ ................................................. 81,300 1,097,550
Micrel Inc.*^ ............................................................ 148,700 1,547,967
Microsemi Corp.*^ ........................................................ 205,100 2,891,910
O2Micro International Ltd.* .............................................. 215,800 2,317,692
Silicon Laboratories Inc.^ ............................................... 90,400 2,991,336
-----------
14,476,472
-----------
Total Technology ......................................................... 57,120,390
-----------
Utilities 1.3%
Telecommunications 1.3%
Western Wireless Corp.*^ ................................................. 214,600 5,517,366
-----------
Total Utilities .......................................................... 5,517,366
-----------
Total Common Stocks (Cost $414,752,255) .................................. 430,695,775
-----------
Short-Term Investments 25.4%
State Street Navigator Securities Lending
Prime Portfolio ......................................................... 110,134,986 110,134,986
-----------
Maturity Amount of
Coupon Rate Date Principal
- -------------------------------------------------------------------------------------------------------------
Commercial Paper 5.6%.
General Electric Capital
Corp., 1.74% .................................................. 10/4/2004 $ 3,088,000 3,087,552
UBS Finance Inc., 1.76%.......................................... 10/1/2004 1,891,000 1,891,000
UBS Finance Inc., 1.88%.......................................... 10/1/2004 9,000,000 9,000,000
UBS Finance Inc., 1.76%.......................................... 10/5/2004 10,449,000 10,446,957
-----------
Total Commercial Paper (cost $24,425,509) ....................... 24,425,509
-----------
% of
Net Assets
----------
Summary of Portfolio Assets
Investments (Cost $549,312,750).................................. 130.4% $ 565,256,270
Cash and Other Assets, Less Liabilities ......................... (30.4%) (131,790,135)
----- -------------
Net Assets ...................................................... 100.0% $ 433,466,135
===== =============
KEY TO SYMBOLS
* Denotes a security which has not paid a dividend during the last year.
++ Security restricted as to public sale. As of report date, the fund had
0.41% of net assets in restricted securities.
^ A portion or all of the security was held on loan. At September 30, 2004,
the value of securities loaned was $107,484,977.
ADR Stands for American Depositary Receipt.
Federal Income Tax Information
At September 30, 2004, the net unrealized appreciation of investments based on
cost for federal income tax purposes of $556,612,693 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 29,723,353
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (21,079,776)
------------
$ 8,643,577
============
8 The notes are an integral part of the financial statements.
- -------------
FINANCIAL
- -------------
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
Assets
Investments, at value (cost $549,312,750) (Note 1) ........... $565,256,270
Cash ......................................................... 1,971
Receivable for securities sold ............................... 12,429,767
Receivable for fund shares sold .............................. 3,979,779
Receivable from distributor .................................. 220,759
Dividends receivable ......................................... 8,390
Other assets ................................................. 84,912
------------
581,981,848
------------
Liabilities
Payable for collateral received on securities loaned ......... 110,134,986
Payable for securities purchased ............................. 37,015,566
Payable for fund shares redeemed ............................. 704,700
Accrued management fee ....................................... 265,607
Accrued transfer agent and shareholder services .............. 194,383
Accrued distribution and service fees ........................ 113,189
Accrued administration fee ................................... 11,743
Accrued trustees' fees ....................................... 9,766
Other accrued expenses ....................................... 65,773
------------
148,515,713
------------
Net Assets ................................................... $433,466,135
============
Net Assets consist of:
Unrealized appreciation of investments ....................... $ 15,943,520
Accumulated net realized loss ................................ (35,164,325)
Paid-in capital .............................................. 452,686,940
------------
$433,466,135
============
Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Class Net Assets [divided by] Number of Shares = NAV
A $268,064,695 22,415,165 $11.96*
B(1) $ 24,880,335 2,294,326 $10.84**
B $ 16,917,143 1,543,330 $10.96**
C $ 29,626,940 2,726,164 $10.87**
R $ 6,456,855 541,974 $11.91
S $ 87,520,167 7,008,894 $12.49
* Maximum offering price per share = $12.69 ($11.96 [divided by] 0.9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
Statement of Operations
- --------------------------------------------------------------------------------
For the year ended September 30, 2004
Investment Income
Dividends (Note 1) ........................................... $ 721,081
Interest (Note 1) ............................................ 160,430
Securities lending income (Note 1) ........................... 137,821
------------
1,019,332
------------
Expenses
Management fee (Note 2) ...................................... 2,550,085
Transfer agent and shareholder services (Note 2) ............. 1,045,395
Distribution and service fees - Class A (Note 5) ............. 666,668
Distribution and service fees - Class B(1) (Note 5) .......... 260,001
Distribution and service fees - Class B (Note 5) ............. 31,730
Distribution and service fees - Class C (Note 5) ............. 250,142
Distribution and service fees - Class R (Note 5) ............. 12,070
Custodian fee ................................................ 435,068
Administration fee (Note 2) .................................. 108,379
Registration fees ............................................ 52,416
Audit fee .................................................... 29,145
Trustees' fees (Note 2) ...................................... 24,907
Reports to shareholders ...................................... 14,381
Legal fees ................................................... 15,690
Miscellaneous ................................................ 3,270
------------
5,499,347
Expenses borne by the distributor (Note 3) ................... (502,887)
Fees paid indirectly (Note 2) ................................ (61,468)
------------
4,934,992
------------
Net investment loss .......................................... (3,915,660)
------------
Realized and Unrealized Gain (Loss) on Investments
Net increase from payment by affiliate (Note 2) .............. 200,956
Net realized loss on investments (Notes 1 and 4) ............. (16,219,909)
Change in unrealized depreciation of investments ............. (10,056,987)
------------
Net loss on investments ...................................... (26,075,940)
------------
Net decrease in net assets resulting from operations ......... $(29,991,600)
============
The notes are an integral part of the financial statements.
State Street Research Emerging Growth Fund 9
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Years ended
September 30
------------------------------
2004 2003
------------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment loss ....................... $ (3,915,660) $ (1,529,802)
Net increase from payment by affiliate..... 200,956 --
Net realized gain (loss) on
investments ............................ (16,219,909) 2,300,598
Change in unrealized appreciation
(depreciation) of investments .......... (10,056,987) 31,784,757
------------------------------
Net increase (decrease) resulting
from operations ........................ (29,991,600) 32,555,553
------------------------------
Net increase from fund share
transactions (Note 7) .................. 282,999,700 58,870,609
------------------------------
Total increase in net assets .............. 253,008,100 91,426,162
Net Assets
Beginning of year ......................... 180,458,035 89,031,873
------------------------------
End of year ............................... $433,466,135 $180,458,035
==============================
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 2004
Note 1
State Street Research Emerging Growth Fund is a series of State Street Research
Capital Trust (the "Trust"), which is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
The investment objective of the fund is to provide growth of capital. In seeking
to achieve its investment objective, the fund invests at least 65% of its total
assets in emerging growth companies, with an emphasis on small-cap companies.
The fund offers six classes of shares. Class A shares are subject to an initial
sales charge of up to 5.75% and pay annual service and distribution fees equal
to 0.30% of average daily net assets. Class B(1) and Class B shares pay annual
service and distribution fees equal to 1.00% of average daily net assets and
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 B shares are offered only to
current shareholders through reinvestment of dividends and distributions or
through exchanges from existing Class B accounts of State Street Research funds.
From October 1, 2003, to March 18, 2004, Class B shares paid annual service and
distribution fees of 1.00%. Effective March 19, 2004, the annual service and
distribution fees paid by Class B shares were voluntarily reduced to 0.00%.
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 service and distribution fees equal to 1.00% of average daily net assets.
Class R shares are offered to retirement plans participating in certain
platforms sponsored by broker-dealers which may involve multiple fund families.
Class R shares pay a service and distribution fee of 0.50%. No sales charge is
imposed at the time of purchase or redemption of Class R shares. Class S shares
are only offered through certain retirement accounts, advisory accounts of State
Street Research & Management Company (the "Adviser"), an investment management
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 service or distribution fees. The fund's expenses are
borne prorata 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. Income, expenses (other than service and
distribution fees), and realized and unrealized gains or losses on investments
are allocated to each class of shares based on its relative net assets. 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 accounting principles generally accepted in the United States of America.
A. Investment Valuation
Values for listed equity 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. If not quoted on the Nasdaq system, such
securities are valued at prices obtained from independent brokers. In the
absence of recorded sales, 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 good faith under consistently applied procedures established by
and under the supervision of the Trustees. In the event that the market
quotations for a portfolio instrument are not deemed to be readily available,
the Investment Adviser's Valuation Committee determines the fair value for such
portfolio instrument. The fair value of any such portfolio instruments are
determined based upon a consideration of all available facts and information.
The fair valuation of a restricted
10 The notes are an integral part of the financial statements.
Notes (continued)
- --------------------------------------------------------------------------------
portfolio instrument reflects the inherent worth of the portfolio instrument,
without regard to the restrictive feature, adjusted for any diminution in value
resulting from the restrictive feature. The Investment Adviser and the Custodian
also monitor domestic and foreign markets and news information for any
developing events that may have an impact on the valuation of portfolio
instruments. Such monitoring includes general market news and financial market
information sources currently utilized in making investment decisions, trading
and investment personnel located abroad, foreign regional brokers, and/or
foreign custodians. The value assigned to these securities is based upon
available information at the time, and does not necessarily represent the amount
which might ultimately be realized upon sale.
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
Net investment income is determined daily and consists of interest and dividends
accrued and discount earned, less the estimated daily expenses of the fund.
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 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 gains distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. The difference is primarily
due to differing treatments for wash sale deferrals.
E. Federal Income Taxes
No provision for federal income taxes is necessary because the fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
At September 30, 2004, the fund had a capital loss carryforward of $8,855,140
available, to the extent provided in regulations, to offset future capital
gains, if any, of which, $8,701,249, and $153,891 expire on September 30, 2010
and 2011, 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 twelve-month period
ending October 31. In this connection, the fund is permitted to defer into its
next fiscal year any net capital losses incurred between each November 1 and the
end of its fiscal year. From November 1, 2002, through September 30, 2003, the
fund incurred net capital losses of $1,297,187 and has deferred and treated such
losses as arising in the fiscal year ended September 30, 2004. From November 1,
2003, through September 30, 2004, the fund incurred net capital losses of
$19,009,241 and intends to defer and treat such losses as arising in the fiscal
year ended September 30, 2005.
To the extent book/tax differences are permanent in nature, such amounts are
reclassified within the capital accounts based on federal tax basis treatment.
The fund reclassified for book purposes amounts arising from permanent book/tax
differences primarily relating to net operating losses not utilized. At
September 30, 2004, the components of distributable earnings on a tax basis
differ from the amounts reflected in the Statement of Assets and Liabilities by
temporary book/tax differences largely arising from wash sales capital loss
carryforwards and post-October losses. At September 30, 2004, the tax basis
distributable earnings were $0 in undistributed ordinary income, $0 in
undistributed short-term capital gains and $0 in undistributed long-term gains.
F. Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 these 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 September
30, 2004, the value of the securities loaned and the value of collateral were
$107,484,977 and $110,134,986 (consisting entirely of cash collateral invested
in State Street Navigator Securities Lending Prime Portfolio), respectively. The
collateral was marked to market the next business day and made equal to at least
100% of the current market value of the loaned securities and accrued interest.
During the year ended September 30, 2004, income from securities lending
amounted to $137,821.
Note 2
The Trust and the Adviser have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% of the fund's average 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 September 30, 2004, the fees pursuant to such agreement
amounted to $2,550,085.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), 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, such as employee benefit plans, through or under
which shares of the fund may be purchased. Total shareholder service costs are
allocated to each fund in the same ratios as the transfer agent costs. During
the year ended September 30, 2004, the amount of such expenses allocated to the
fund was $607,693.
The fund has entered into an arrangement with its custodian whereby credits
realized as a result of directed brokerage commissions were used to reduce a
portion of the fund's expenses. During the year ended September 30, 2004, the
fund's custodian fees were reduced by $61,468 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$24,907 during the year ended September 30, 2004.
The fund has agreed to pay the Adviser for certain administrative costs incurred
in providing other assistance and services to the fund. The fee was based on a
fixed amount that has been allocated equally among the State Street Research
funds. During the year ended September 30, 2004, the amount of such expenses was
$108,379.
On February 19, 2004, the Distributor entered into an agreement with the NASD
resolving all outstanding issues relating to an investigation by the NASD of the
Distributor's e-mail retention practices and supervision of trading activity in
shares of the State Street Research funds. The Distributor, without admitting or
denying the allegations or the findings set forth in the agreement, and solely
for the purpose of the settlement, agreed to the entry of certain findings by
the NASD relating to the Distributor's compliance with document retention
requirements and the Distributor's supervision of and enforcement of shareholder
exchange limitations set forth in the funds' prospectuses. The agreement
contains no allegations or findings of fraudulent conduct by the Distributor. As
part of this agreement, the Distributor made a payment to the fund to compensate
the fund for losses relating to the exchange of fund shares beyond the annual
limit set forth in the fund's prospectus. The payment was allocated among the
fund's share classes as follows: $143,922 to Class A, $17,116 to Class B(1),
$13,661 to Class B, $16,147 to Class C, and $10,110 to Class S. These amounts
are shown in the total amount of $200,956 as "Net increase from payment by
affiliate" in the Statement of Operations.
State Street Research Emerging Growth Fund 11
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 September 30, 2004, the amount of such expenses assumed by the
Distributor and its affiliates was $502,887.
Note 4
For the year ended September 30, 2004, purchases and sales of securities,
exclusive of short-term obligations, aggregated $962,758,623, and $682,502,599,
respectively.
Note 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. 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, Class C and Class R shares. In addition, 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 and 0.25% of average net
assets for Class R shares. From October 1, 2003, to March 18, 2004, Class B
shares paid annual service and distribution fees of 1.00%. Effective March 19,
2004, the annual service and distribution fees paid by Class B shares were
voluntarily reduced to 0.00%. The fund expects this waiver to continue, although
there is no guarantee that it will. The Distributor uses such payments for
personal services and/or the maintenance 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 September 30, 2004, fees pursuant to such
plans amounted to $666,668, $260,001, $31,730, $250,142 and $12,070 for Class A,
Class B(1), Class B, Class C and Class R shares, respectively. For Class A,
Class B and Class C shares, the payments are intended to reimburse the
distributor for expenditures incurred under the plan, and any unused payments
are returnable to the fund.
As of September 30, 2004, there were $2,734,916, $6,138 and $1,512,555 for Class
A, B and Class C shares, respectively, of unreimbursed distribution and
shareholder servicing related expenses to be carried forward to future plan
years. For Class B(1) and R shares, the payments compensate the distributor for
services and expenditures incurred under the plan, and none of the payments are
returnable to the fund.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$428,159 and $451,555 on sales of Class A shares of the fund during the year
ended September 30, 2004, and that MetLife Securities, Inc. earned commissions
aggregating $542,639 and $4,955 on sales of Class B(1) and Class C shares, and
the Distributor collected contingent deferred sales charges aggregating $48,364,
$40 and $3,662 on redemptions of Class B(1), Class B and Class C shares,
respectively, during the same period.
Note 6
MetLife announced that it has entered into an agreement to sell the Adviser as
part of a larger transaction to sell MetLife's asset management business to
BlackRock, Inc. ("BlackRock"). The acquisition by BlackRock of MetLife's asset
management business is expected to occur in the first quarter of 2005. At the
time of closing, the advisory agreement between the fund and the Adviser and the
distribution agreement between the fund and the Distributor will be terminated.
BlackRock Advisors, Inc. and BlackRock Distributors, Inc., wholly owned
subsidiaries of BlackRock, will serve as investment adviser and distributor,
respectively.
A Special Meeting of Shareholders of the fund has been tentatively scheduled for
December 2004. At this meeting, shareholders of the fund will be asked to
consider and approve a plan of reorganization between the fund and the BlackRock
Emerging Growth Portfolio, a newly created series of the BlackRock Funds. If the
proposed reorganization is approved by shareholders of the fund, the BlackRock
Emerging Growth Portfolio would acquire substantially all of the assets and
liabilities of the fund. In exchange, shareholders of the fund would receive
shares of the BlackRock Emerging Growth Portfolio with an aggregate value
equivalent to the aggregate net asset value of their fund shares at the time of
the transaction. If the proposed reorganization is not approved by shareholders
of the fund, the Board of Trustees will need to consider other alternatives
relating to the management and operations of the fund, including without
limitations, seeking an alternative investment adviser for the fund or seeking
shareholder approval to liquidate the fund.*
* The foregoing is not an offer to sell, nor a solicitation of an offer to buy,
shares of any fund, nor is it a solicitation of any proxy.
12
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share. At September 30, 2004, the
Adviser held 11,338 Class R shares.
These transactions break down by share class as follows:
Years ended September 30
------------------------------------------------------------
2004 2003
------------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 19,295,735 $ 258,636,959 12,559,523 $ 126,927,170
Shares redeemed (6,992,964) (89,912,786) (7,197,443) (69,515,792)
----------- ------------- ----------- -------------
Net increase 12,302,771 $ 168,724,173 5,362,080 $ 57,411,378
=========== ============= =========== =============
Class B(1) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 841,240 $ 10,286,273 683,689 $ 6,402,427
Shares redeemed (411,875) (4,915,125) (473,546) (4,009,539)
----------- ------------- ----------- -------------
Net increase 429,365 $ 5,371,148 210,143 $ 2,392,888
=========== ============= =========== =============
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 45,715 $ 560,588 93,323 $ 904,460
Shares redeemed (536,425) (6,494,729) (848,937) (7,249,730)
----------- ------------- ----------- -------------
Net decrease (490,710) $ (5,934,141) (755,614) $ (6,345,270)
=========== ============= =========== =============
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 1,796,388 $ 21,845,563 761,479 $ 7,223,469
Shares redeemed (342,131) (4,015,411) (209,540) (1,831,112)
----------- ------------- ----------- -------------
Net increase 1,454,257 $ 17,830,152 551,939 $ 5,392,357
=========== ============= =========== =============
Class R Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 611,851 $ 7,909,349 11,346 $ 100,075
Shares redeemed (81,223) (1,016,529) -- --
----------- ------------- ----------- -------------
Net increase 530,628 $ 6,892,820 11,346 $ 100,075
=========== ============= =========== =============
Class S Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Shares sold 6,902,293 $ 97,401,258 497,551 $ 5,435,719
Shares redeemed (538,478) (7,285,710) (520,322) (5,516,538)
----------- ------------- ----------- -------------
Net increase (decrease) 6,363,815 $ 90,115,548 (22,771) $ (80,819)
=========== ============= =========== =============
State Street Research Emerging Growth Fund 13
- ------------
FINANCIAL
- ------------
Highlights
For a share outstanding throughout each each year:
Class A - Years Ended September 30
-------------------------------------------------------------------
2004(a)(f) 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 11.63 8.73 9.27 16.08 11.01
---------- ---------- ---------- ---------- ----------
Net investment loss ($)* (0.14) (0.11) (0.09) (0.08) (0.14)
Net realized and unrealized gain (loss) on investments ($) 0.47 3.01 (0.45) (4.45) 5.21
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 0.33 2.90 (0.54) (4.53) 5.07
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Total distributions ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 11.96 11.63 8.73 9.27 16.08
========== ========== ========== ========== ==========
Total return (%)(b) 2.84 33.22 (5.93) (30.22) 46.05
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 268,065 117,571 41,474 39,522 53,600
Expense ratio (%)* 1.41 1.40 1.42 1.44 1.38
Expense ratio after expense reductions (%)* 1.39 1.40 1.40 1.40 1.37
Ratio of net investment loss to average net assets (%)* (1.09) (1.10) (0.90) (0.69) (0.90)
Portfolio turnover rate (%) 208.00 166.71 167.69 281.64 218.99
*Reflects voluntary reduction of expenses of these amounts (%) 0.15 0.38 0.56 0.63 0.22
Class B(1) - Years Ended September 30
-------------------------------------------------------------------
2004(a)(f) 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 10.62 8.03 8.60 15.17 10.46
---------- ---------- ---------- ---------- ----------
Net investment loss ($)* (0.21) (0.16) (0.15) (0.15) (0.24)
Net realized and unrealized gain (loss) on investments ($) 0.43 2.75 (0.42) (4.14) 4.95
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 0.22 2.59 (0.57) (4.29) 4.71
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Total distributions ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 10.84 10.62 8.03 8.60 15.17
========== ========== ========== ========== ==========
Total return (%)(b) 2.17 32.25 (6.63) (30.48) 45.03
Ratios/Supplemental Data: --
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 24,880 19,797 13,288 12,749 16,554
Expense ratio (%)* 2.11 2.10 2.12 2.14 2.11
Expense ratio after expense reductions (%)* 2.09 2.10 2.10 2.10 2.10
Ratio of net investment loss to average net assets (%)* (1.79) (1.78) (1.60) (1.39) (1.59)
Portfolio turnover rate (%) 208.00 166.71 167.69 281.84 218.99
*Reflects voluntary reduction of expenses of these amounts (%) 0.14 0.44 0.56 0.63 0.22
Class B - Years Ended September 30
-------------------------------------------------------------------
2004(a)(f) 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 10.63 8.04 8.60 15.16 10.46
---------- ---------- ---------- ---------- ----------
Net investment loss ($)* (0.11) (0.16) (0.16) (0.15) (0.24)
Net realized and unrealized gain (loss) on investments ($) 0.44 2.75 (0.40) (4.13) 4.94
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 0.33 2.59 (0.56) (4.28) 4.70
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Total distributions ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 10.96 10.63 8.04 8.60 15.16
========== ========== ========== ========== ==========
Total return (%)(b) 3.10 32.21 (6.51) (30.42) 44.93
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 16,917 21,816 22,422 36,531 65,496
Expense ratio (%)* 1.26 2.10 2.12 2.14 2.11
Expense ratio after expense reductions (%)* 1.24 2.10 2.10 2.10 2.10
Ratio of net investment loss to average net assets (%)* (0.94) (1.77) (1.61) (1.39) (1.64)
Portfolio turnover rate (%) 208.00 166.71 167.69 218.64 218.99
*Reflects voluntary reduction of expenses of these amounts (%) 0.14 0.47 0.58 0.63 0.22
14
Class C - Years Ended September 30
-------------------------------------------------------------------
2004(a)(f) 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 10.64 8.05 8.61 15.17 10.46
---------- ---------- ---------- ---------- ----------
Net investment loss ($)* (0.21) (0.16) (0.15) (0.15) (0.24)
Net realized and unrealized gain (loss) on investments ($) 0.44 2.75 (0.41) (4.13) 4.95
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 0.23 2.59 (0.56) (4.28) 4.71
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Total distributions ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 10.87 10.64 8.05 8.61 15.17
========== ========== ========== ========== ==========
Total return (%)(b) 2.16 32.17 (6.50) (30.40) 45.03
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 29,627 13,530 5,794 5,332 9,082
Expense ratio (%)* 2.11 2.10 2.12 2.14 2.11
Expense ratio after expense reductions (%)* 2.09 2.10 2.10 2.10 2.10
Ratio of net investment loss to average net assets (%)* (1.79) (1.79) (1.60) (1.39) (1.63)
Portfolio turnover rate (%) 208.00 166.71 167.69 281.64 218.99
*Reflects voluntary reduction of expenses of these amounts (%) 0.15 0.41 0.56 0.63 0.22
Class R
------------------------
2004(a)(f) 2003(a)(e)
- -----------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 11.61 8.82
---------- ----------
Net investment loss ($)* (0.16) (0.07)
Net realized and unrealized gain on investments ($) 0.46 2.86
---------- ----------
Total from investment operations ($) 0.30 2.79
---------- ----------
Net asset value, end of year ($) 11.91 11.61
========== ==========
Total return (%)(b) 2.58 1.63(c)
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 6,457 132
Expense ratio (%)* 1.61 1.60(d)
Expense ratio after expense reductions (%)* 1.59 1.60(d)
Ratio of net investment loss to average net assets (%)* (1.30) (1.34)(d)
Portfolio turnover rate (%) 208.00 166.71
*Reflects voluntary reduction of expenses of these amounts (%) 0.16 0.24(d)
Class S - Years Ended September 30
-------------------------------------------------------------------
2004(a)(f) 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 12.11 9.06 9.62 16.48 11.26
---------- ---------- ---------- ---------- ----------
Net investment loss ($)* (0.10) (0.08) (0.06) (0.04) (0.10)
Net realized and unrealized gain (loss) on investments ($) 0.48 3.13 (0.50) (4.54) 5.32
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 0.38 3.05 (0.56) (4.58) 5.22
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Total distributions ($) -- -- -- (2.28) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 12.49 12.11 9.06 9.62 16.48
========== ========== ========== ========== ==========
Total return (%)(b) 3.14 33.66 (5.82) 29.73 46.36
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 87,520 7,809 6,054 5,810 8,744
Expense ratio (%)* 1.11 1.10 1.12 1.14 1.11
Expense ratio after expense reductions (%)* 1.09 1.10 1.10 1.10 1.10
Ratio of net investment loss to average net assets (%)* (0.80) (0.78) (0.60) (0.39) (0.64)
Portfolio turnover rate (%) 208.00 166.71 167.69 281.64 218.99
*Reflects voluntary reduction of expenses of these amounts (%) 0.17 0.45 0.57 0.63 0.22
(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 assumed a portion of the fund's expenses.
(c) Not annualized
(d) Annualized
(e) April 3, 2003 (commencement of share class) to September 30, 2003 (f) During
the year ended September 30, 2004, the distributor made restitution
payments to the fund as part of a settlement with NASD. These payments
increased net realized and unrealized gain on investments per share by
$0.01, and increased total return by 0.09%.
(g) Audited by other auditors
State Street Research Emerging Growth Fund 15
- -------------
REPORT OF
- -------------
Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of State Street Research Emerging Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio holdings, of State Street Research Emerging Growth Fund (the
"Fund"), a series of State Street Research Capital Trust, as of September 30,
2004, and the related statement of operations for the year then ended, and the
statement of changes in net assets, and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years in the
three-year period ended September 30, 2002, were audited by other auditors whose
report dated November 8, 2002, expressed an unqualified opinion on such
financial highlights.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of September 30, 2004, the results of its operations for the year then
ended and the changes in its net assets, and the financial highlights for each
of the two years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 19, 2004
16
- --------------------------
TRUSTEES AND OFFICERS
- --------------------------
State Street Research Capital Trust
Number
of Funds
in Fund
Complex
Name, Position(s) Term of Office Overseen Other
Address Held with and Length of Principal Occupations by Trustee/ Directorships Held
and Age(a) Fund Time Served(b) During Past 5 Years Officer(c) by Trustee/Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, 19 Avaya, Inc.
(58) 1999 Chief Executive Officer and President,
PictureTel Corporation (video conferencing
systems)
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 First Marblehead Corp.
(62) 2004 PricewaterhouseCoopers LLP
Steve A. Garban Trustee Since Retired; formerly Senior Vice President for 53 Metropolitan Series
(67) 1997 Finance and Operations and Treasurer, The Fund, Inc. and
Pennsylvania State University Metropolitan Series
Fund II
Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co.
(59) 1998 Management, George Washington University;
formerly a member of the Board of Governors
of the Federal Reserve System; and Chairman
and Commissioner of the Commodity Futures
Trading Commission
Toby Rosenblatt Trustee Since President, Founders Investments Ltd. 53 A.P. Pharma, Inc.;
(66) 1995 (investments); formerly President, The Glen Metropolitan Series
Ellen Company (private investment firm) Fund, Inc.; and
Metropolitan Series
Fund II
Michael S. Trustee Since Jay W. Forrester Professor of Management 53 Metropolitan Series
Scott Morton (67) 1987 (Emeritus), Sloan School of Management, Fund, Inc. and
Massachusetts Institute of Technology Metropolitan Series
Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief 19 None
(59) 2000 Executive Officer of State Street Research &
Management Company; formerly Senior Vice
President, Fixed Income Investments,
Metropolitan Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Officers
C. Kim Goodwin Vice Since Managing Director and Chief Investment 18 Akamai Technologies,
(45) President 2002 Officer - Equities of State Street Research Inc.
& Management Company; formerly Chief
Investment Officer - U.S. Growth Equities,
American Century
Paul Haagensen Vice Since Senior Vice President of State Street 3 None
(58) President 2003 Research & Management Company; formerly
Portfolio Manager and senior analyst at
Putnam Investments
Eileen M. Leary Vice Since Senior Vice President of State Street 3 None
(42) President 2002 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
John S. Lombardo Vice Since Managing Director, Chief Financial Officer 19 None
(49) President 2001 and Director of State Street Research &
Management Company; formerly Executive Vice
President, State Street Research &
Management Company; and Senior Vice
President, Product and Financial Management,
MetLife Auto & Home
Andrew Morey Vice Since Senior Vice President of State Street 3 None
(35) President 2003 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
Tucker Walsh Vice Since Managing Director of State Street Research & 3 None
(35) President 1999 Management Company; formerly Vice President
and Analyst, State Street Research &
Management Company
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of State 19 None
(47) 2001 Street Research & Management Company;
formerly Vice President and Assistant
Treasurer, State Street Research &
Management Company
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company has served as sole investment adviser and all
series of Metropolitan Series Fund, Inc. and Metropolitan Series Fund II.
The primary adviser to Metropolitan Series Fund, Inc., and Metropolitan
Series Fund II is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
State Street Research Emerging Growth Fund 17
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[LOGO] STATE STREET RESEARCH
[GRAPHIC]
Aurora Fund
September 30, 2004
Annual Report to Shareholders
Table of Contents
3 Performance Discussion
6 About Your Fund Expenses
7 Portfolio Holdings
11 Financial Statements
15 Financial Highlights
17 Independent Auditors'
Report
18 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
The pace of U.S. economic growth was robust over the past 12 months as the
economy advanced on all fronts. Gross domestic product (GDP) growth, a common
measure of economic growth, averaged just short of 4.0% for the period, solidly
above the economy's long-term trend rate of 3.0%. Our analysts expect the
economy to grow between 3.5% and 4.0% for the remainder of 2004 and into 2005.
Consumers continued to play a key role in the economy. Spending on retail goods,
autos and housing remained generally strong throughout the period. Retail sales
slowed during the summer months of 2004 as a result of higher energy prices and
weather-related events. But the pace of consumer spending picked up again in
September, as did consumer confidence, which see-sawed along with the outlook
for the labor market throughout the period.
The number of new jobs continued to fall short of expectations. In the spring,
more than one million new jobs were added to the economy. But job growth was
disappointing again during the summer months. The economy has yet to replace all
the jobs lost in the downturn of 2000-2001.
A pick-up in business spending was the bright spot in the economy. Industrial
production moved steadily higher, as did manufacturing capacity utilization.
Outlays for new equipment and construction enjoyed double-digit growth in the
second half of the period. Strong spending by business helped offset some of the
slowdown in consumer spending.
Stocks Stumble, Bonds Edge Higher
The U.S. stock market began the period on a strong note. However, the
double-digit gains it achieved over the twelve months covered by this report
were accumulated early in the period and the broad stock market indexes have
been essentially flat in 2004. By contrast, the bond market has held up in the
face of three increases in the Federal funds rate (a key short-term interest
rate) that occurred late in the period. The yield on the 10-year benchmark U.S.
Treasury ended the period only slightly higher than where it began, and bond
prices moved higher across all sectors.
Investing Despite Uncertainty
By all accounts, news on the economy and the markets has been overshadowed over
the past year by external events. As a result, many investors have remained on
the sidelines. With so much uncertainty, it may feel safer to wait out the
storm. Yet, it can be even more risky to try to time your entrances and exits as
the markets move through their natural cycles. If you're feeling uncertain about
your financial strategy, talk to your financial professional. With the advice
and guidance of a financial professional, you can keep your financial goals on
track.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
September 30, 2004
2
- ---------------
PERFORMANCE
- ---------------
Discussion as of September 30, 2004
How State Street Research Aurora Fund Performed
State Street Research Aurora Fund (Class A shares, without sales charge)
returned 22.39% for the 12-month period ended September 30, 2004. The fund
underperformed the Russell 2000[RegTM] Value Index, which returned 25.66% for
the period. However, it outperformed the Lipper Small-Cap Core Funds Average,
which was 20.52% over the same period.
Performance: Class A
- -------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04
(does not reflect sales charge)
Life of
Fund
1 Year 5 Years (2/13/95)
22.39% 17.90% 20.67%
- -------------------------------------------------------------------------------
Fund average annual total return as of 9/30/04
(at maximum applicable sales charge)
Life of
Fund
1 Year 5 Years (2/13/95)
15.36% 16.51% 19.93%
- -------------------------------------------------------------------------------
Russell 2000 Value Index as of 9/30/04
Life of
Fund
1 Year 5 Years (2/13/95)
25.66% 14.71% 13.41%
- -------------------------------------------------------------------------------
See pages 4 and 5 for additional performance data for Class A and for
performance data on other share classes.
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
Average annual total return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
Average annual total return at maximum applicable sales charge reflects a
maximum 5.75% Class A share front-end sales charge.
The Russell 2000 Value Index contains those stocks within the complete Russell
2000[RegTM] Index (a small-company index) that show below-average growth. The
index is unmanaged and does not take transaction charges into consideration. It
is not possible to invest directly in an index.
The Lipper Small-Cap Core Funds Average shows the performance of a category of
mutual funds with similar goals. The Lipper average shows you how well the fund
has done compared to competing funds.
Reasons for the Fund's Performance
Although the fund lagged its benchmark during the year, it posted solid gains.
The fund's strong absolute return was primarily the result of our investments in
the energy and materials sectors. Energy stocks benefited from higher crude oil
and natural gas prices. In the materials sector, U.S. Steel, Phelps Dodge and
Allegheny Technology gained as steel and copper prices increased in response to
a strengthening worldwide economy and robust economic growth in China. The fund
also benefited from an underweight position in the financial services sector,
which failed to keep pace with other areas of the market.
The fund's shortfall relative to its benchmark was the result of its emphasis on
economically sensitive stocks. This positioning proved costly in the second half
of the period as investors sought lower volatility in the stocks of larger
companies. The fund's performance was hindered especially by investments in the
producer durables and technology sectors. In producer durables, the
semiconductor and electronics industries faltered in the second half of the
period as it became clear that the U.S. economy had hit a "soft patch." MKS
Instruments, ATMI and Varian Semiconductor fell as a result of a slowdown in
demand. In technology, telecommunications equipment manufacturers also
disappointed.
Looking Ahead
We believe that continued signs of economic strength, an accommodative Federal
Reserve Board policy and resolution of the uncertainty surrounding the
presidential race could provide the catalysts for positive momentum in the stock
market going forward. In this environment, we believe that stock selection is
likely to drive returns. We will continue to focus our efforts on fundamental
research to identify stocks trading at a discount to the company's intrinsic
value. This approach has resulted in a modest increase in our emphasis on the
autos & transportation and materials & processing sectors. Although the fund
remains underweight in financial services stocks, we added to the sector by
selectively investing in insurance, investment management and brokerage names.
We also took advantage of the strength in our steel industry holdings to trim
positions in favor of more attractively valued opportunities.
A Word about Risk
The major risks of stock investing include sudden and unpredictable drops in
value and period of lackluster performance. Small-cap stocks can be particularly
sensitive to market movements, as they may be thinly traded and their market
prices tend to reflect future expectations. "Value" investing poses the
potential that a stock may not achieve its "expected" value if the circumstances
that cause the stock to be underpriced do not change.
Summary Portfolio Schedule
- -------------------------------------------------------------------------------
Industries % of Fund
Net Assets
Consumer Discretionary 18.0%
- ---------------------------------------------
Producer Durables 16.3%
- ---------------------------------------------
Materials & Processing 15.8%
- ---------------------------------------------
Financial Services 10.8%
- ---------------------------------------------
Technology 9.7%
- ---------------------------------------------
Other Energy 7.4%
- ---------------------------------------------
Automobiles & Transportation 7.3%
- ---------------------------------------------
Health Care 5.9%
- ---------------------------------------------
Consumer Staples 2.0%
- ---------------------------------------------
Other 2.0%
- ---------------------------------------------
Utilities 1.7%
- ---------------------------------------------
Net Cash 3.1%
- ---------------------------------------------
Total 100.0%
Because financial markets and mutual fund strategies are constantly evolving, it
is 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.
State Street Research Aurora Fund 3
- ---------------
PERFORMANCE
- ---------------
Discussion as of September 30, 2004
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is not a guarantee of future results, long-term returns
can serve as an important context for evaluating recent performance. There are
three ways of measuring long-term performance: cumulative total returns, average
annual total returns and the change in dollar value over time of a given
investment. Information about these measures follows, while the share class
boxes contain the results of these measures for each share class.
Cumulative Total Return
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.
Average Annual Total Return
Represents the rate you would have had to earn during each year of a given time
period in order to end up with the fund's actual cumulative return for those
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 Life of Fund
Similar to cumulative total return, but uses dollars rather than percentages,
and assumes that the lump sum you invested was $10,000 (less the applicable
maximum sales charge, if any) and compares fund performance to the performance
of a market index.
- --------------------------------------------------------------------------------
Class A
Life of Fund
1 Year 5 Years (2/13/95)
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 22.39% 127.77% 511.47%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 15.36% 114.67% 476.31%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 15.36% 16.51% 19.93%
- --------------------------------------------------------------------------------
$10,000 Over Life of Fund
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class A Value Index
------- ------------
2/95 9425 10000
9/95 10984 12278
9/96 15776 13933
9/97 27245 19878
9/98 20591 17337
9/99 25302 18347
9/00 38826 21161
9/01 38447 22344
9/02 35430 22019
9/03 47087 28990
9/04 57361 36433
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B(1)
Life of Fund
1 Year 5 Years (2/13/95)
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 21.53% 119.82% 469.50%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 16.53% 117.82% 469.50%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 16.53% 16.85% 19.78%
- --------------------------------------------------------------------------------
$10,000 Over Life of Fund
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class B(1) Value Index
---------- ------------
2/95 10000 10000
9/95 11602 12278
9/96 16535 13933
9/97 28332 19878
9/98 21253 17337
9/99 25907 18347
9/00 39474 21161
9/01 38814 22344
9/02 35513 22019
9/03 46862 28990
9/04 56950 36433
- --------------------------------------------------------------------------------
Keep in mind that the performance data quoted represents past performance and is
no guarantee of future results. Current performance may be lower or higher than
the performance data quoted herein. For the most recent month-end performance
results, visit our website at www.ssrfunds.com. 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. The returns shown do not reflect the deduction of
taxes that a shareholder would pay on fund distributions, or the redemption of
fund shares.
Cumulative Total Return without sales charge does not reflect the maximum
applicable sales charges. If the applicable sales charges were deducted,
performance results would be lower.
4
- --------------------------------------------------------------------------------
Class B (only available through exchanges from another Class B account)
"9/00"
Life of Fund
1 Year 5 Years (2/13/95)
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 23.19% 126.58% 487.01%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 18.19% 124.58% 487.01%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 18.19% 17.56% 20.16%
- --------------------------------------------------------------------------------
$10,000 Over Life of Fund
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class B Value Index
------- ------------
2/95 10000 10000
9/95 11602 12278
9/96 16535 13933
9/97 28332 19878
9/98 21253 17337
9/99 25907 18347
9/00 39474 21161
9/01 38814 22344
9/02 35744 22019
9/03 47651 28990
9/04 58701 36433
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C
Life of Fund
1 Year 5 Years (2/13/95)
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 21.57% 119.82% 469.50%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 20.57% 119.82% 469.50%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 20.57% 17.06% 19.78%
- --------------------------------------------------------------------------------
$10,000 Over Life of Fund
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class C Value Index
------- ------------
2/95 10000 10000
9/95 11602 12278
9/96 16535 13933
9/97 28318 19878
9/98 21239 17337
9/99 25907 18347
9/00 39474 21161
9/01 38815 22344
9/02 35498 22019
9/03 46847 28990
9/04 56950 36433
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class S
Life of Fund
1 Year 5 Years (2/13/95)
- --------------------------------------------------------------------------------
Cumulative Total Return
(does not reflect sales charge) 22.75% 132.08% 530.26%
- --------------------------------------------------------------------------------
Cumulative Total Return
(at maximum applicable sales charge) 22.75% 132.08% 530.26%
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge) 22.75% 18.34% 21.05%
- --------------------------------------------------------------------------------
$10,000 Over Life of Fund
(reflects maximum applicable sales charge)
[The following table was depicted as a line graph in the printed material.]
Russell 2000
Class S Value Index
------- ------------
2/95 10000 10000
9/95 11675 12278
9/96 16806 13933
9/97 29092 19878
9/98 22042 17337
9/99 27157 18347
9/00 41908 21161
9/01 41638 22344
9/02 38545 22019
9/03 51345 28990
9/04 63026 36433
- --------------------------------------------------------------------------------
Cumulative and Average Annual Total Return at maximum applicable sales charge
reflect 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. Performance for Class B(1) shares reflects Class B share performance
through December 31, 1998, and Class B(1) performance thereafter. If the returns
for Class B(1) shares had reflected their current service/distribution (Rule
12b-1) fees for the entire period, returns would have been lower. Class S
shares, offered without sales charge, are available through certain retirement
plans and special programs.
Performance results for the fund are increased by the voluntary reduction of
fund fees and expenses, without subsidization, performance would have been
lower. The Russell 2000 Value Index contains those stocks within the Russell
2000 Index (a small-company index) that show below-average growth. The index is
unmanaged and does not take transaction charges into consideration. It is not
possible to invest directly in an index.
State Street Research Aurora Fund 5
About Your Fund Expenses
As a fund shareholder, you incur two types of costs: (1) Transaction costs,
which include sales charges, and (2) ongoing expenses, which include management
fees, service/distribution fees (12b-1) and "other" expenses. The examples below
illustrate the ongoing cost in dollars of investing in the fund and allow you to
compare these costs with the expenses of other funds. The examples are based on
a $1,000 investment at the beginning of the period and held for the entire
period from March 31, 2004, to September 30, 2004.
Actual Fund Return is based on the fund's actual return and expenses. To
estimate the ongoing expenses you paid during the entire period shown, simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number shown for your
fund under the column "Expenses Paid during the Period."
Hypothetical 5% Return is based on the fund's actual expense ratio and an
assumed rate of 5% per year before expenses. Please note that the return used is
not the fund's actual return; therefore, this information may not be used to
estimate your actual ending balance and expenses paid during the period. To
compare your fund's ongoing expenses with those of other funds, simply compare
this 5% hypothetical example with the 5% hypothetical examples shown in the
shareholder reports of other funds.
Beginning Ending Expenses
Account Account Paid Annualized
Six months ended Value Value during Expense
9/30/04 3/31/04 9/30/04 Period* Ratio
- --------------------------------------------------------------------------------
Actual Fund Return
- --------------------------------------------------------------------------------
Class A $1,000 $ 973.33 $ 6.73 1.36%
- --------------------------------------------------------------------------------
Class B(1) $1,000 $ 966.25 $10.14 2.06%
- --------------------------------------------------------------------------------
Class B (closed) $1,000 $ 977.78 $ 5.26 1.06%
- --------------------------------------------------------------------------------
Class C $1,000 $ 966.25 $10.15 2.06%
- --------------------------------------------------------------------------------
Class S $1,000 $ 976.12 $ 5.26 1.06%
- --------------------------------------------------------------------------------
Hypothetical 5% Return
- --------------------------------------------------------------------------------
Class A $1,000 $1,018.18 $ 6.88 1.36%
- --------------------------------------------------------------------------------
Class B(1) $1,000 $1,014.68 $10.39 2.06%
- --------------------------------------------------------------------------------
Class B (closed) $1,000 $1,019.68 $ 5.37 1.06%
- --------------------------------------------------------------------------------
Class C $1,000 $1,014.68 $10.40 2.06%
- --------------------------------------------------------------------------------
Class S $1,000 $1,019.68 $ 5.37 1.06%
- --------------------------------------------------------------------------------
* Expenses are equal to the fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
period and then divided by the number of days in the year.
Please note that the expenses shown in the table are meant to highlight and help
you compare ongoing costs only and do not reflect transactional expenses such as
sales charges, which would result in higher total expenses. It should also be
noted that, for certain funds, expenses have been subsidized or reduced through
expense offset arrangements, which reduces costs for shareholders. Generally,
the fund expects that the expense subsidy or expense offset arrangement will
continue although there is no guarantee that it will. Please see the fund's
prospectus for more information.
6
- --------------
PORTFOLIO
- --------------
Holdings
September 30, 2004
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------------
Common Stocks 96.9%
Automobiles & Transportation 7.3%
Air Transport 2.2%
AAR Corp.*^ ............................................................ 1,398,100 $17,406,345
Alaska Air Group Inc.*^ ................................................ 511,200 12,667,536
EGL Inc.*^ ............................................................. 940,200 28,450,452
Mesa Air Group Inc.*^ .................................................. 1,749,600 8,922,960
SkyWest Airlines Inc.^ ................................................. 662,500 9,970,625
-----------
77,417,918
-----------
Automotive Parts 1.6%
American Axle & Manufacturing
Holdings Inc.*^ ...................................................... 210,300 6,153,378
Borg-Warner Automotive Inc.^ ........................................... 403,000 17,445,870
Navistar International Corp.*^ ......................................... 744,600 27,691,674
Tower Automotive Inc.*^ ................................................ 2,096,200 4,381,058
-----------
55,671,980
-----------
Miscellaneous Transportation 1.3%
Kirby Corp.*^ .......................................................... 351,300 14,104,695
OMI Corp.*^ ............................................................ 1,990,900 31,894,218
-----------
45,998,913
-----------
Railroad Equipment 1.3%
Wabtec Corp.^ .......................................................... 2,385,600 44,586,864
-----------
Railroads 0.3%
RailAmerica Inc.*^ ..................................................... 956,000 10,563,800
-----------
Tires & Rubber 0.6%
Cooper Tire & Rubber Co.^ .............................................. 1,028,100 20,736,777
-----------
Total Automobiles & Transportation ..................................... 254,976,252
-----------
Consumer Discretionary 18.0%
Casinos/Gambling, Hotel/Motel 2.1%
Argosy Gaming Corp.*^ .................................................. 947,300 37,134,160
Boyd Gaming Corp.^ ..................................................... 691,500 19,465,725
Pinnacle Entertainment Inc.*^ .......................................... 1,285,100 17,734,380
-----------
74,334,265
-----------
Commercial Services 2.1%
Heidrick & Struggles International Inc.*^ .............................. 948,700 27,341,534
ProQuest Co.*^ ......................................................... 433,900 11,151,230
Startek Inc.^ .......................................................... 216,500 6,789,440
Steiner Leisure Ltd.*^ ................................................. 663,600 14,665,560
Tetra Tech Inc.*^ ...................................................... 751,200 9,517,704
Viad Corp.^ ............................................................ 135,500 3,215,415
-----------
72,680,883
-----------
Communications, Media & Entertainment 1.4%
Entercom Communications Corp. .......................................... 344,900 11,264,434
Gray Television Inc.^ .................................................. 735,100 8,747,690
Hollywood Entertainment Corp.*^ ........................................ 1,484,200 14,649,054
LIN TV Corp.^ .......................................................... 740,200 14,419,096
-----------
49,080,274
-----------
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------------
Consumer Electronics 0.5%
EarthLink Inc.*^ ....................................................... 1,747,500 $17,999,250
-----------
Consumer Products 0.8%
Playtex Products Inc.*^ ................................................ 2,228,500 14,039,550
Tupperware Corp.^ ...................................................... 761,700 12,933,666
-----------
26,973,216
-----------
Consumer Services 1.2%
Learning Tree International Inc.*^ ..................................... 797,500 11,244,750
SkillSoft plc ADR*^ .................................................... 914,900 6,120,681
Stewart Enterprises Inc.^ .............................................. 3,750,900 26,068,755
-----------
43,434,186
-----------
Household Furnishings 0.8%
Furniture Brands International Inc.*^ .................................. 452,100 11,338,668
La-Z-Boy Inc.^ ......................................................... 1,236,500 18,770,070
-----------
30,108,738
-----------
Leisure Time 1.1%
Callaway Golf Co.^ ..................................................... 969,700 10,249,729
K2 Inc.*^ .............................................................. 771,500 11,040,165
Penn National Gaming Inc.*^ ............................................ 333,400 13,469,360
Steinway Musical Instruments Inc.*^ .................................... 150,700 4,099,040
-----------
38,858,294
-----------
Printing & Publishing 1.5%
Hollinger International Inc.^ .......................................... 257,700 4,455,633
Journal Register Co.* .................................................. 1,012,800 19,141,920
Reader's Digest Association Inc. ....................................... 1,994,100 29,093,919
-----------
52,691,472
-----------
Restaurants 1.7%
California Pizza Kitchen Inc.^ ......................................... 711,900 15,555,015
CKE Restaurants Inc.*^ ................................................. 1,291,600 14,272,180
O'Charley's Inc.*^ ..................................................... 802,500 13,080,750
Papa John's International Inc.^ ........................................ 365,900 11,225,812
Ryans Restaurant Group Inc. ............................................ 303,900 4,509,876
-----------
58,643,633
-----------
Retail 4.1%
American Eagle Outfitters Inc.*^ ....................................... 274,800 10,126,380
Barnes & Noble Inc.*^ .................................................. 199,400 7,377,800
BJ's Wholesale Club Inc.^ .............................................. 714,100 19,523,494
Charming Shopper Inc.*^ ................................................ 2,343,200 16,683,584
Christopher & Banks Corp.*^ ............................................ 902,500 14,449,025
CSK Auto Corp.*^ ....................................................... 599,900 7,990,668
Dillard's Inc.^ ........................................................ 307,500 6,070,050
Genesco Inc.*^ ......................................................... 145,400 3,424,170
Hancock Fabrics Inc.^ .................................................. 904,700 10,838,306
Payless ShoeSource Inc.*^ .............................................. 2,155,000 21,830,150
Too Inc.*^ ............................................................. 1,030,700 18,624,749
Tweeter Home Entertainment Group Inc.*^ ................................ 1,584,322 8,951,419
-----------
145,889,795
-----------
Textile Apparel Manufacturers 0.7%
Oshkosh B'Gosh Inc.^ ................................................... 542,288 10,954,218
Russell Corp.^ ......................................................... 751,100 12,648,524
-----------
23,602,742
-----------
Total Consumer Discretionary ........................................... 634,296,748
-----------
Consumer Staples 2.0%
Drug & Grocery Store Chains 1.1%
Longs Drug Stores Corp.^ ............................................... 999,300 24,183,060
Wild Oats Markets Inc.*^ ............................................... 1,603,600 13,855,104
-----------
38,038,164
-----------
The notes are an integral part of the financial statements.
State Street Research Aurora Fund 7
Issuer Shares Value
- -----------------------------------------------------------------------------------------
Foods 0.9%
American Italian Pasta Co. Cl. A*^ ........... 422,300 $11,043,145
Chiquita Brands International Inc.^ .......... 173,100 3,013,671
Sensient Technologies Corp.^ ................. 853,600 18,471,904
-----------
32,528,720
-----------
Total Consumer Staples ....................... 70,566,884
-----------
Financial Services 10.8%
Banks & Savings & Loan 1.3%
First Niagara Financial Group Corp.*^ ........ 885,200 11,843,976
Sterling Bancshares Inc.^ .................... 1,190,941 16,018,156
Zions Bancorp^ ............................... 311,200 18,995,648
-----------
46,857,780
-----------
Financial Data Processing Services & Systems 0.8%
Carreker Corp.*^ ............................. 1,156,900 8,804,009
John H. Harland Co.^ ......................... 581,000 18,214,350
-----------
27,018,359
-----------
Insurance 2.8%
Amerus Group Co.^ ............................ 346,800 14,218,800
Harleysville Group Inc.^ ..................... 948,930 19,604,894
Hub International Ltd. ....................... 678,600 12,269,088
Odyssey Reinsurance Holdings Corp.^ .......... 747,700 16,583,986
Ohio Casualty Corp.*^ ........................ 939,100 19,655,363
Platinum Underwriters Holdings Ltd.^ ......... 238,800 6,992,064
United National Group Ltd.*^ ................. 773,900 11,237,028
-----------
100,561,223
-----------
Miscellaneous Financial 1.8%
Ambac Financial Group Inc.^ .................. 254,500 20,347,275
Fidelity National Financial Inc. ............. 214,369 8,167,459
Medallion Financial Corp.^ ................... 851,100 7,702,455
Moneygram International Inc. ................. 542,000 9,257,360
Radian Group Inc. ............................ 395,700 18,293,211
-----------
63,767,760
-----------
Real Estate Investment Trusts 0.8%
Anthracite Capital Inc.^ ..................... 631,085 7,017,665
Heritage Property Investment Trust Inc.^ ..... 484,700 14,138,699
Highland Hospitality Corp.*^ ................. 594,600 6,778,440
-----------
27,934,804
-----------
Rental & Leasing Services: Commercial 0.8%
GATX Corp.^ .................................. 1,049,800 27,987,668
-----------
Securities Brokerage & Services 2.5%
Affiliated Managers Group Inc.*^ ............. 228,200 12,217,828
AG Edwards Inc.^ ............................. 366,400 12,684,768
American Capital Strategies Ltd.^ ............ 777,800 24,376,252
MCG Capital Corp.^ ........................... 896,200 15,558,032
NCO Group Inc.*^ ............................. 660,700 17,805,865
SWS Group Inc.^ .............................. 260,100 4,182,408
-----------
86,825,153
-----------
Total Financial Services ..................... 380,952,747
-----------
Health Care 5.9%
Drugs & Biotechnology 2.2%
Albany Molecular Research Inc.* .............. 1,227,500 11,784,000
Cytyc Corp.*^ ................................ 521,800 12,601,470
InterMune Inc.*^ ............................. 965,200 11,379,708
Priority Healthcare Corp.*^ .................. 802,600 16,172,390
Valeant Pharmaceuticals Inc.^ ................ 1,111,800 26,816,616
-----------
78,754,184
-----------
Health Care Facilities 0.5%
LifePoint Hospitals Inc.*^ ................... 593,200 17,801,932
-----------
Issuer Shares Value
- -----------------------------------------------------------------------------------------
Health Care Services 1.8%
Hanger Orthopedic Group Inc.*^ ............... 904,500 $ 4,531,545
Hooper Holmes Inc.^ .......................... 3,370,500 15,099,840
Province Healthcare Co.*^ .................... 1,244,500 26,034,940
Rehabcare Group Inc.*^ ....................... 744,800 17,152,744
-----------
62,819,069
-----------
Hospital Supply 1.4%
ICU Medical Inc.*^ ........................... 363,200 9,457,728
Steris Corp. ................................. 655,100 14,372,894
Surmodics Inc.^ .............................. 486,200 11,547,250
VIASYS Healthcare Inc.*^ ..................... 702,900 11,759,517
-----------
47,137,389
-----------
Total Health Care ............................................. 206,512,574
-----------
Materials & Processing 15.8%
Building & Construction 1.8%
Comfort Systems USA Inc.*^ ................... 1,231,300 8,126,580
ElkCorp. ..................................... 500,900 13,904,984
Martin Marietta Materials Inc.^ .............. 729,100 33,006,357
Trex Inc.*^ .................................. 217,600 9,635,328
-----------
64,673,249
-----------
Chemicals 2.4%
Cambrex Corp.^ ............................... 725,100 15,915,945
Ferro Corp.^ ................................. 708,700 15,456,747
Millennium Chemicals Inc.^ ................... 1,118,200 23,717,022
OM Group Inc.^ ............................... 101,800 3,721,808
Omnova Solutions Inc.*^ ...................... 2,363,200 14,250,096
Spartech Corp.^ .............................. 400,300 10,047,530
-----------
83,109,148
-----------
Containers & Packaging 1.3%
Anchor Glass Container Corp.*^ ............... 1,342,600 11,022,746
Apogee Enterprises, Inc.^ .................... 948,496 12,264,053
Packaging Corp. of America*^ ................. 880,900 21,555,623
-----------
44,842,422
-----------
Diversified Manufacturing 0.6%
Acuity Brands Inc.^ .......................... 457,700 10,879,529
Tredegar Industries Corp.^ ................... 609,100 11,085,620
-----------
21,965,149
-----------
Engineering & Contracting Services 0.7%
Dycom Industries Inc.*^ ...................... 589,300 16,730,227
Integrated Electrical Services Inc.*^ ........ 1,990,600 9,574,786
-----------
26,305,013
-----------
Fertilizers 1.5%
Agrium Inc. .................................. 2,227,600 39,562,176
IMC Global Inc.^ ............................. 844,600 14,687,594
-----------
54,249,770
-----------
Forest Products 0.3%
Rayonier Inc. ................................ 211,333 9,560,705
-----------
Miscellaneous Materials & Processing 2.7%
Insituform Technologies Inc.*^ ............... 676,300 12,626,521
Maverick Tube Corp.*^ ........................ 862,200 26,564,382
NN Inc.^ ..................................... 676,500 7,745,925
NS Group Inc.*^ .............................. 1,018,400 18,840,400
RTI International Metals Inc.*^ .............. 702,900 13,615,173
Valmont Industries Inc.^ ..................... 794,900 16,589,563
-----------
95,981,964
-----------
8 The notes are an integral part of the financial statements.
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------------
Non-Ferrous Metals 2.2%
Compass Minerals International Inc.^ ................................... 715,800 $15,890,760
GrafTech International Ltd.*^ .......................................... 1,794,700 25,036,065
Minerals Technologies Inc.^ ............................................ 154,000 9,064,440
Phelps Dodge Corp.*^ ................................................... 213,300 19,629,999
Titanium Metals Corp.*^ ................................................ 268,595 6,301,239
-----------
75,922,503
-----------
Paper & Forest Products 0.6%
Caraustar Industries Inc.*^ ............................................ 1,170,160 19,623,583
-----------
Steel 1.7%
Allegheny Technologies Inc.^ ........................................... 1,750,800 31,952,100
United States Steel Corp.^ ............................................. 722,800 27,191,736
-----------
59,143,836
-----------
Textile & Products 0.0%
Quaker Fabric Corp.^ ................................................... 196,338 1,276,197
-----------
Total Materials & Processing ........................................... 556,653,539
-----------
Other 2.0%
Multi-Sector 2.0%
Jacuzzi Brands Inc.* ................................................... 1,255,300 11,674,290
Trinity Industries Inc.^ ............................................... 1,084,600 33,806,982
Walter Industries Inc.^ ................................................ 1,491,700 23,897,034
-----------
Total Other ............................................................ 69,378,306
-----------
Other Energy 7.4%
Miscellaneous Energy 1.2%
Massey Energy Corp.^ ................................................... 543,900 15,735,027
Peabody Energy Corp.^ .................................................. 407,500 24,246,250
-----------
39,981,277
-----------
Offshore Drilling 0.5%
Atwood Oceanics Inc.*^ ................................................. 395,400 18,797,316
-----------
Oil & Gas Producers 1.8%
Cabot Oil & Gas Corp. Cl. A^ ........................................... 493,900 22,176,110
Spinnaker Exploration Co.*^ ............................................ 239,600 8,395,584
Stone Energy Corp.*^ ................................................... 258,700 11,320,712
Vintage Petroleum Inc.^ ................................................ 991,000 19,889,370
-----------
61,781,776
-----------
Oil Well Equipment & Services 3.9%
Core Laboratories NV Co.*^ ............................................. 692,800 17,035,952
Global Industries Inc.*^ ............................................... 2,778,500 17,171,130
Grey Wolf Inc.*^ ....................................................... 3,546,500 17,342,385
Hanover Compressor Co.*^ ............................................... 2,221,000 29,872,450
NewPark Resources Inc.*^ ............................................... 2,303,900 13,823,400
Veritas DGC Inc.*^ ..................................................... 797,400 18,164,772
W-H Energy Services Inc.*^ ............................................. 1,196,700 24,831,525
-----------
138,241,614
-----------
Total Other Energy ..................................................... 258,801,983
-----------
Producer Durables 16.3%
Aerospace 1.6%
Alliant Technology Systems, Inc.*^ ..................................... 281,300 17,018,650
Heico Corp.^ ........................................................... 650,300 11,497,304
Heico Corp. Cl. A ...................................................... 65,029 876,591
Ladish Inc.* ........................................................... 738,100 6,753,615
Teledyne Technologies Inc.*^ ........................................... 795,700 19,924,328
-----------
56,070,488
-----------
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------------
Electrical Equipment & Components 2.7%
MKS Instruments Inc.*^ ................................................. 989,203 $15,154,590
Regal Beloit Corp.^ .................................................... 528,000 12,772,320
Technitrol Inc.*^ ...................................................... 2,718,100 53,002,950
Triumph Group Inc.*^ ................................................... 460,000 15,561,800
-----------
96,491,660
-----------
Homebuilding 0.2%
Champion Enterprises Inc.^ ............................................. 716,400 7,371,756
-----------
Industrial Products 3.3%
C&D Technologies Inc.^ ................................................. 101,700 1,934,334
Federal Signal Corp.^ .................................................. 522,800 9,713,624
Flowserve Corp.* ....................................................... 705,500 17,058,990
Roper Industries Inc.^ ................................................. 463,300 26,621,218
Veeco Instruments Inc.*^ ............................................... 2,114,500 44,341,065
Watts Industries Inc. Cl. A^ ........................................... 632,000 16,969,200
-----------
116,638,431
-----------
Machinery 4.3%
AGCO Corp.* ............................................................ 1,058,000 23,931,960
Applied Films Corp.*^ .................................................. 205,300 3,697,453
Helix Technology Corp.^ ................................................ 650,000 8,836,750
JLG Industries Inc.^ ................................................... 588,000 9,878,400
Joy Global Inc.*^ ...................................................... 728,200 25,035,516
Kadant Inc.*^ .......................................................... 1,227,800 22,542,408
Manitowoc Company Inc.^ ................................................ 653,400 23,169,564
Stewart & Stevenson Services Inc. ...................................... 855,100 15,109,617
Terex Corp.*^ .......................................................... 458,500 19,898,900
-----------
152,100,568
-----------
Miscellaneous Equipment 0.4%
Thomas & Betts Corp.*^ ................................................. 579,500 15,542,190
-----------
Office Furniture & Business Equipment 0.4%
Steelcase Inc. Cl. A^ .................................................. 897,500 12,565,000
-----------
Production Technology Equipment 2.0%
ATMI Inc.*^ ............................................................ 735,700 15,067,136
Brooks Automation Inc.*^ ............................................... 1,221,600 17,285,640
Esterline Technologies Corp.*^ ......................................... 533,700 16,325,883
Varian Semiconductor Equipment Inc.*^ .................................. 685,500 21,181,950
-----------
69,860,609
-----------
Telecommunications Equipment 1.4%
American Tower Corp. Cl. A*^ ........................................... 786,000 12,065,100
Andrew Corp.*^ ......................................................... 1,655,700 20,265,768
Belden CDT Inc.^ ....................................................... 738,900 16,108,020
-----------
48,438,888
-----------
Total Producer Durables ................................................ 575,079,590
-----------
Technology 9.7%
Electrical Equipment and Components 0.4%
IXYS Corp.*^ ........................................................... 1,866,900 13,404,342
-----------
Communications Technology 2.2%
Advanced Fibre Communications Inc.*^ ................................... 248,600 3,952,740
Anaren Microwave Inc.*^ ................................................ 945,500 12,726,430
Anixter International Inc.*^ ........................................... 293,900 10,312,951
Commscope Inc.*^ ....................................................... 964,600 20,835,360
iNet Technologies Inc.*^ ............................................... 1,500,500 18,876,290
NMS Communications Corp.*^ ............................................. 2,330,200 11,371,376
-----------
78,075,147
-----------
The notes are an integral part of the financial statements.
State Street Research Aurora Fund 9
Issuer Shares Value
- --------------------------------------------------------------------------------
Computer Software 2.4%
Ascential Software Corp.^ .................. 438,100 $ 5,901,207
Aspen Technology Inc.*^ .................... 2,180,979 15,245,043
Ciber Inc.*^ ............................... 1,764,000 13,265,280
Electronics for Imaging Inc.*^ ............. 875,300 14,214,872
IONA Technologies plc*^ .................... 633,100 2,595,710
Keane Inc.*^ ............................... 621,700 9,549,312
Mentor Graphics Corp.*^ .................... 1,317,200 14,443,098
MRO Software Inc.^ ......................... 637,300 6,373,000
Pegasystems Inc.*^ ......................... 266,800 1,862,264
-------------
83,449,786
-------------
Computer Technology 1.2%
Hutchinson Technology Inc.*^ ............... 422,100 11,282,733
Perot Systems Corp.*^ ...................... 1,178,900 18,933,134
Silicon Graphics Inc.*^ .................... 4,835,100 6,914,193
SimpleTech Inc.*^ .......................... 1,770,000 6,478,200
-------------
43,608,260
-------------
Electronics 2.1%
AVX Corp.^ ................................. 634,000 7,512,900
BEI Technologies Inc.^ ..................... 185,500 5,082,700
Benchmark Electronics Inc.* ................ 239,750 7,144,550
Gerber Scientific Inc.*^ ................... 561,800 3,702,262
Herley Industries Inc.*^ ................... 929,000 17,363,010
Kemet Corp.*^ .............................. 2,498,600 20,213,674
LeCroy Corp.* .............................. 758,600 12,676,206
-------------
73,695,302
-------------
Electronics: Semiconductors/Components 1.4%
Actel Corp.*^ .............................. 588,800 8,949,760
Avnet Inc.*^ ............................... 530,500 9,082,160
Cypress Semiconductor Corp.*^ .............. 1,649,800 14,584,232
Excel Technology Inc.*^ .................... 349,000 9,011,180
Stats Chippac Ltd.^ ........................ 531,221 3,176,702
TriQuint Semiconductors Inc.*^ ............. 1,474,200 5,749,380
-------------
50,553,414
-------------
Total Technology ........................... 342,786,251
-------------
Utilities 1.7%
Electrical 0.5%
Hawaiian Electric Industries Inc.^ ......... 204,800 5,435,392
Westar Energy Inc. ......................... 660,100 13,334,020
-------------
18,769,412
-------------
Gas Distribution 0.6%
NUI Corp.^ ................................. 754,000 10,058,360
UGI Corp. .................................. 292,400 10,894,824
-------------
20,953,184
-------------
Telecommunications 0.6%
PTEK Holdings Inc.*^ ....................... 2,509,900 21,509,843
-------------
Total Utilities ............................ 61,232,439
-------------
Total Common Stocks (Cost $2,738,281,233) .. 3,411,237,313
-------------
Short-Term Investments 23.9%
State Street Navigator Securities
Lending Prime Portfolio .................. 840,778,353 840,778,353
-------------
Maturity Amount of
Coupon Rate Date Principal Value
- ---------------------------------------------------------------------------
Commercial Paper 3.4%
Federal National Mortgage
Association 1.64% ........ 10/18/2004 $23,330,000 $23,311,822
UBS Finance Inc., 1.76%..... 10/06/2004 16,973,000 16,968,851
UBS Finance Inc., 1.75%..... 10/07/2004 11,045,000 11,041,779
Caterpillar Financial
Services NV, 1.74% ....... 10/01/2004 20,854,000 20,854,000
Morgan Stanley Dean
Witter & Co., 1.78%....... 10/15/2004 21,200,000 21,185,325
Morgan Stanley Dean
Witter & Co., 1.78%....... 10/27/2004 24,618,000 24,586,352
-----------
Total Commercial Paper (Cost $117,948,129) ............ 117,948,129
-----------
% of
Net Assets
- --------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $3,697,007,715) ......... 124.2% 4,369,963,795
Other Assets, Less Liabilities ............ (24.2%) (850,229,459)
----- -------------
Net Assets ................................ 100.0% $3,519,734,336
===== ==============
KEY TO SYMBOLS
* Denotes a security which has not paid a dividend during the last year.
^ A portion or all of the security was held on loan. At September 30, 2004,
the value of securities loaned was $820,559,939.
ADR Stands for American Depositary Receipt.
Federal Income Tax Information
At September 30, 2004, the net unrealized appreciation of investments based on
cost for federal income tax purposes of $3,702,036,327 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 865,973,632
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (198,046,164)
-------------
$ 667,927,468
=============
10 The notes are an integral part of the financial statements.
- --------------
FINANCIAL
- --------------
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
Investments, at value (Cost $3,697,007,715) (Note 1) ..... $4,369,963,795
Receivable for fund shares sold .......................... 5,127,407
Receivable for securities sold ........................... 3,350,770
Dividends receivable ..................................... 2,843,115
Other assets ............................................. 102,666
--------------
4,381,387,753
--------------
Liabilities
Payable for collateral received on securities loaned ..... 840,778,353
Payable for fund shares redeemed ......................... 8,711,905
Payable for securities purchased ......................... 4,093,193
Accrued transfer agent and shareholder services .......... 2,851,615
Accrued management fee ................................... 2,456,230
Accrued distribution and service fees .................... 1,325,199
Payable to custodian ..................................... 980,526
Accrued trustees' fees ................................... 55,671
Accrued administration fee ............................... 1,705
Other accrued expenses ................................... 399,020
--------------
861,653,417
--------------
Net Assets ............................................... $3,519,734,336
==============
Net Assets consist of:
Unrealized appreciation of investments ................... $ 672,956,080
Accumulated net realized gain ............................ 331,822,817
Paid-in capital .......................................... 2,514,955,439
--------------
$3,519,734,336
==============
Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Class Net Assets [divided by] Number of Shares = NAV
A $2,169,836,016 54,953,387 $39.49*
B(1) $ 470,429,516 12,827,855 $36.67**
B $ 188,014,375 4,973,472 $37.80**
C $ 493,979,675 13,470,862 $36.67**
S $ 197,474,754 4,850,308 $40.71
* Maximum offering price per share = $41.90 ($39.49 [divided by] 0.9425)
** 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.
Statement of Operations
- --------------------------------------------------------------------------------
For the year ended September 30, 2004
Investment Income
Dividends, net of foreign taxes of $234,581 (Note 1)...... $ 25,929,912
Interest (Note 1) ........................................ 1,078,541
Securities lending income (Note 1) ....................... 1,508,066
------------
28,516,519
------------
Expenses
Management fee (Note 2) .................................. 29,179,140
Transfer agent and shareholder services (Note 2) ......... 7,254,508
Distribution and service fees - Class A (Note 4) ......... 6,237,602
Distribution and service fees - Class B(1) (Note 4) ...... 4,701,624
Distribution and service fees - Class C (Note 4) ......... 4,853,723
Custodian fee ............................................ 467,011
Reports to shareholders .................................. 465,128
Administration fee (Note 2) .............................. 96,535
Registration fees ........................................ 110,376
Trustees' fees (Note 2) .................................. 119,304
Legal fees ............................................... 5,544
Audit fee ................................................ 38,052
Miscellaneous ............................................ 76,696
------------
53,605,243
------------
(25,088,724)
Reimbursement of distribution fees (Note 4) .............. 707,239
------------
Net investment loss ...................................... (24,381,485)
------------
Realized and Unrealized Gain on
Investments
et increase from payment by affiliate (Note 2) .......... 426,457
Net realized gain on investments (Notes 1 and 3) ......... 376,473,622
Change in unrealized appreciation of investments ......... 274,337,207
------------
Net gain on investments .................................. 651,237,286
------------
Net increase in net assets resulting from operations ..... $626,855,801
============
The notes are an integral part of the financial statements.
State Street Research Aurora Fund 11
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Years ended
September 30
--------------------------------
2004 2003
--------------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment loss .................. $ (24,381,485) $ (21,564,654)
Net increase from payment
by affiliate ...................... 426,457 --
Net realized gain (loss) on
investments ....................... 376,473,622 (5,964,906)
Change in unrealized appreciation
of investments .................... 274,337,207 732,152,627
--------------------------------
Net increase resulting from
operations ........................ 626,855,801 704,623,067
--------------------------------
Distributions from capital gains:
Class A ........................... (966,224) (8,427,738)
Class B(1) ........................ (240,069) (2,137,073)
Class B ........................... (108,430) (1,112,809)
Class C ........................... (244,717) (2,440,090)
Class S ........................... (83,129) (560,409)
--------------------------------
(1,642,569) (14,678,119)
--------------------------------
Net increase (decrease) from
fund share transactions
(Note 6) .......................... 67,410,778 (332,003,552)
--------------------------------
Total increase in net assets ......... 692,624,010 357,941,396
Net Assets
Beginning of year .................... 2,827,110,326 2,469,168,930
--------------------------------
End of year .......................... $3,519,734,336 $2,827,110,326
================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 2004
Note 1
State Street Research Aurora Fund is a series of State Street Research Capital
Trust (the "Trust"), which is a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The investment objective of the fund is to provide high total return consisting
principally of capital appreciation. In seeking to achieve its investment
objective, the fund invests at least 65% of its total assets in small-cap value
stocks.
The fund offers five classes of shares. Class A shares are subject to an initial
sales charge of up to 5.75% and pay annual service and distribution fees equal
to 0.30% of average daily net assets. Class B(1) shares pay annual service and
distribution fees equal to 1.00% of average daily net assets and 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 B shares are offered only to current shareholders
through reinvestment of dividends and distributions or through exchanges from
existing Class B accounts of State Street Research funds and also automatically
convert into Class A shares at the end of eight years. Class B shares may also
be subject to annual service and distribution fees equal to 1.00% of average
daily net assets. However, these fees are currently waived under the terms of
the distribution plan. Currently, the annual service and distribution fees paid
by Class B shares have been voluntarily reduced to 0.00%. 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 service and
distribution fees equal to 1.00% of average daily net assets. Class S shares are
only offered through certain retirement accounts, advisory accounts of State
Street Research & Management Company (the "Adviser"), an investment management
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 service or distribution fees. The fund's expenses are
borne prorata 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. Income, expenses (other than service and
distribution fees), and realized and unrealized gains or losses on investments
are allocated to each class of shares based on its relative net assets. 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 accounting principles generally accepted in the United States of America.
A. Investment Valuation
Values for listed equity 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. If not quoted on the Nasdaq system, such
securities are valued at prices obtained from independent brokers. In the
absence of recorded sales, 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 good faith under consistently applied procedures established by
and under the supervision of the Trustees. In the event that the market
quotations for a portfolio instrument are not deemed to be readily available,
the Investment Adviser's Valuation Committee determines the fair value for such
portfolio instrument. The fair value of any such portfolio instruments are
determined based upon a consideration of all available facts and information.
The fair value of a restricted portfolio instrument reflects the inherent worth
of the portfolio instrument, without regard to the restrictive feature, adjusted
for any diminution in value resulting from the restrictive feature. The
Investment Adviser and the Custodian also monitor domestic and foreign markets
and news information for any developing events that
12 The notes are an integral part of the financial statements.
Notes (continued)
- --------------------------------------------------------------------------------
may have an impact on the valuation of portfolio instruments. Such monitoring
includes general market news and financial market information sources currently
utilized in making investment decisions, trading and investment personnel
located abroad, foreign regional brokers, and/or foreign custodians. The value
assigned to these securities is based upon available information at the time,
and does not necessarily represent the amount which might ultimately be realized
upon sale.
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.
As part of the custodian contract between the custodian bank and the fund, the
custodian bank has a lien on the securities of the fund to the extent permitted
by the fund's investment restriction to cover any advances made by the custodian
bank for the settlement of securities purchased by the fund. At September 30,
2004 the payable to the custodian bank of $980,526 represents the amount due for
cash advance for the settlement of the security purchased.
C. Net Investment Income
Net investment income is determined daily and consists of interest and dividends
accrued and discount earned, less the estimated daily expenses of the fund.
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 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. For the year ended September 30, 2004, the fund has designated $0
as ordinary income dividends and $1,642,569 as long-term capital gain
distributions.
Income dividends and capital gains distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. The difference is primarily
due to differing treatments for wash sale deferrals.
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.
To the extent book/tax differences are permanent in nature, such amounts are
reclassified within the capital accounts based on federal tax basis treatment.
The fund reclassified for book purposes amounts arising from permanent book/tax
differences primarily relating to non-taxable dividend adjustments and REIT sell
adjustments. At September 30, 2004, the components of distributable earnings on
a tax basis differ from the amounts reflected in the Statement of Assets and
Liabilities by temporary book/tax differences largely arising from wash sales.
At September 30, 2004, the tax basis distributable earnings were $51,565,898 in
undistributed ordinary income and $285,689,445 in undistributed long-term gains.
F. Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 these 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 September
30, 2004, the value of the securities loaned and the value of collateral were
$820,559,939 and $840,778,353 (including $840,459,698 of cash collateral
invested in State Street Navigator Securities Lending Prime Portfolio and
$318,655 of U.S. government obligations), respectively. The collateral was
marked to market the next business day and made equal to at least 100% of the
current market value of the loaned securities and accrued interest. During the
year ended September 30, 2004, income from securities lending amounted to
$1,508,066 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 0.85% 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 September 30, 2004, the fees pursuant to such
agreement amounted to $29,179,140.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), 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, such as employee benefit plans, through or under
which shares of the fund may be purchased. Total shareholder service costs are
allocated to each fund in the same ratios as the transfer agent costs. During
the year ended September 30, 2004, the amount of such expenses allocated to the
fund was $5,284,788.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$119,304 during the year ended September 30, 2004.
The fund has agreed to pay the Adviser for certain administrative costs incurred
in providing other assistance and services to the fund. The fee was based on a
fixed amount that has been allocated equally among the State Street Research
funds. During the year ended September 30, 2004, the amount of such expenses was
$96,535.
On February 19, 2004, the Distributor entered into an agreement with the NASD
resolving all outstanding issues relating to an investigation by the NASD of the
Distributor's e-mail retention practices and supervision of trading activity in
shares of the State Street Research funds. The Distributor, without admitting or
denying the allegations or the findings set forth in the agreement, and solely
for the purpose of the settlement, agreed to the entry of certain findings by
the NASD relating to the Distributor's compliance with document retention
requirements and the Distributor's supervision of and enforcement of shareholder
exchange limitations set forth in the funds' prospectuses. The agreement
contains no allegations or findings of fraudulent conduct by the distributor. As
part of this agreement, the Distributor made a payment to State Street Research
Aurora Fund to compensate the fund for losses relating to the exchange of fund
shares beyond the annual limit set forth in the fund's prospectus. The payment
was allocated among the fund's share classes as follows: $256,999 to Class A;
$58,986 to Class B(1); $25,392 to Class B; $60,506 to Class C; and $24,574 to
Class S. These amounts are shown in the total amount of $426,457 as "Net
increase from payment by affiliate" in the Statement of Operations.
Note 3
For the year ended September 30, 2004, purchases and sales of securities,
exclusive of short-term obligations, aggregated $1,105,387,917, and
$1,158,894,827, respectively.
Note 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. 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) and Class C shares. In addition, 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) and
Class C shares. Currently, the annual service and distribution fees paid by
Class B shares have been reduced to 0.00%. The fund expects this waiver to
continue, although there is no guarantee it will. The Distributor uses such
payments for personal services and/or the maintenance of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion
State Street Research Aurora Fund 13
of its distribution and marketing expenses. For the year ended September 30,
2004, fees pursuant to such plans amounted to $6,237,602, $4,701,624 and
$4,853,723 for Class A, Class B(1) and Class C shares, respectively. For Class
A, Class B and Class C shares, the payments are intended to reimburse the
distributor for expenditures incurred under the plan, and any unused payments
are returnable to the fund. As of September 30, 2004, there were $33,153,047,
$65,986 and $9,332,153 for Class A, Class B and Class C shares, respectively, of
unreimbursed distribution and shareholder servicing related expenses to be
carried forward to future plan years. For Class B(1) shares, the payments
compensate the distributor for services and expenditures incurred under the
plan, and none of the payments are returnable to the fund. During the year ended
September 30, 2004 the Distributor reimbursed a total of $707,239 to Class B
shares of the fund reflecting the estimated excess of payments received over
costs incurred under the plan. This amount is shown as "Reimbursement of
distribution fees" in the Statement of Operations.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$1,745,932 and $2,193,737, respectively, on sales of Class A shares of the fund
during the year ended September 30, 2004, and that MetLife Securities, Inc.
earned commissions aggregating $2,523,913 and $48,625 on sales of Class B(1) and
Class C shares, and the Distributor collected contingent deferred sales charges
aggregating $641,167, $37 and $19,193 on redemptions of Class B(1), Class B and
Class C shares, respectively, during the same period.
Note 5
MetLife announced that it has entered into an agreement to sell the Advisor as
part of a larger transaction to sell MetLife's asset management business to
BlackRock, Inc. ("BlackRock"). The acquisition by BlackRock of MetLife's asset
management business is expected to occur in the first quarter of 2005. At the
time of the closing, the advisory agreement between the fund and the Adviser and
the distribution agreement between the fund and the Distributor will be
terminated. BlackRock Advisors, Inc. and BlackRock Distributors, Inc., wholly
owned subsidiaries of BlackRock, will serve as investment adviser and
distributor, respectively.
A Special Meeting of Shareholders of the fund has been tentatively scheduled for
December 2004. At this meeting, shareholders of the fund will be asked to
consider and approve a plan of reorganization between the fund and the BlackRock
Mid-Cap Value Equity Portfolio II, a newly created series of the BlackRock
Funds. If the proposed reorganization is approved by shareholders of the fund,
the BlackRock Mid-Cap Value Equity Portfolio II would acquire substantially all
of the assets and liabilities of the fund. In exchange, shareholders of the fund
would receive shares of the BlackRock Mid-Cap Value Equity Portfolio II with an
aggregate value equivalent to the aggregate net asset value of their fund shares
at the time of the transaction. If the proposed reorganization is not approved
by shareholders of the fund, the Board of Trustees will need to consider other
alternatives relating to the management and operations of the fund, including
without limitations, seeking an alternative investment adviser for the fund or
seeking shareholder approval to liquidate the fund.*
* The foregoing is not an offer to sell, nor a solicitation of an offer to buy,
shares of any fund, nor is it a solicitation of any proxy.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share.
These transactions break down by share class as follows:
Years ended September 30
----------------------------------------------------------------
2004 2003
----------------------------------------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 21,883,004 $ 843,198,910 16,899,496 $ 469,042,922
Issued upon reinvestment of distributions from capital gains 18,801 708,316 213,191 5,489,579
Shares redeemed (19,076,439) (732,522,081) (24,341,722) (651,666,848)
------------- ------------- ------------- -------------
Net increase (decrease) 2,825,366 $ 111,385,145 (7,229,035) $(177,134,347)
============= ============= ============= =============
Class B(1) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------- ------------------------------
Shares sold 1,603,178 $ 57,403,099 1,403,726 $ 36,779,208
Issued upon reinvestment of distributions from capital gains 5,030 177,068 64,891 1,576,445
Shares redeemed (2,065,212) (73,852,145) (2,979,708) (74,229,578)
------------- ------------- ------------- -------------
Net decrease (457,004) $ (16,271,978) (1,511,091) $ (35,873,925)
============= ============= ============= =============
Class B Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------- ------------------------------
Shares sold 66,288 $ 2,412,694 131,669 $ 3,441,001
Issued upon reinvestment of distributions from capital gains 2,233 80,289 31,392 769,318
Shares redeemed (1,351,306) (49,832,222) (1,847,125) (46,449,514)
------------- ------------- ------------- -------------
Net decrease (1,282,785) $ (47,339,239) (1,684,064) $ (42,239,195)
============= ============= ============= =============
Class C Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------- ------------------------------
Shares sold 2,676,532 $ 96,224,763 1,051,716 $ 28,486,342
Issued upon reinvestment of distributions from capital gains 4,009 141,078 58,514 1,420,934
Shares redeemed (2,762,239) (99,357,980) (5,026,706) (124,996,244)
------------- ------------- ------------- -------------
Net decrease (81,698) $ (2,992,139) (3,916,476) $ (95,088,968)
============= ============= ============= =============
Class S Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------- ------------------------------
Shares sold 2,488,213 $ 98,297,733 1,772,631 $ 51,725,495
Issued upon reinvestment of distributions from capital gains 2,027 78,602 21,069 558,168
Shares redeemed (1,933,475) (75,747,346) (1,205,014) (33,950,780)
------------- ------------- ------------- -------------
Net increase 556,765 $ 22,628,989 588,686 $ 18,332,883
============= ============= ============= =============
14
- ------------
FINANCIAL
- ------------
Highlights
For a share outstanding throughout each year:
Class A - Years Ended September 30
------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 32.28 24.43 26.51 29.17 19.02
---------- ---------- ---------- ---------- ----------
Net investment income (loss) ($) (0.22) (0.19) (0.23) 0.02 0.10
Net realized and unrealized gain (loss) on investments ($) 7.45 8.19 (1.85) (0.37) 10.05
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 7.23 8.00 (2.08) (0.35) 10.15
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Total Distributions ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 39.49 32.28 24.43 26.51 29.17
========== ========== ========== ========== ==========
Total return (%)(b) 22.39 32.90 (7.85) (0.98) 53.45
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 2,169,836 1,682,504 1,449,869 1,334,548 552,365
Expense ratio (%) 1.40 1.55 1.48 1.44 1.40
Expense ratio after expense reductions (%) 1.40 1.55 1.47 1.43 1.40
Ratio of net investment income (loss) to average net assets (%) (0.57) (0.69) (0.73) 0.08 0.42
Portfolio turnover rate (%) 33.04 48.43 42.18 26.40 76.95
Class B(1) - Years ended September 30
------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 30.19 23.02 25.16 27.99 18.38
---------- ---------- ---------- ---------- ----------
Net investment loss ($) (0.45) (0.36) (0.42) (0.18) (0.07)
Net realized and unrealized gain (loss) on investments ($) 6.95 7.68 (1.72) (0.34) 9.68
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 6.50 7.32 (2.14) (0.52) 9.61
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Total Distributions (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 36.67 30.19 23.02 25.16 27.99
========== ========== ========== ========== ==========
Total return (%)(b) 21.53 31.96 (8.51) (1.67) 52.37
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 470,430 401,016 340,529 299,062 110,743
Expense ratio (%) 2.10 2.25 2.18 2.14 2.13
Expense ratio after expense reductions (%) 2.10 2.25 2.17 2.13 2.13
Ratio of net investment loss to average net assets (%) (1.27) (1.39) (1.43) (0.63) (0.29)
Portfolio turnover rate (%) 33.04 48.43 42.18 26.40 76.95
Class B - Years ended September 30
-------------------------------------------------------------------
2004(a)(c)(d) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 30.70 23.17 25.16 27.99 18.38
---------- ---------- ---------- ---------- ----------
Net investment income (loss) ($) 0.03 (0.10) (0.23) (0.15) (0.07)
Net realized and unrealized gain (loss) on investments ($) 7.09 7.78 (1.76) (0.37) 9.68
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 7.12 7.68 (1.99) (0.52) 9.61
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Total Distributions ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 37.80 30.70 23.17 25.16 27.99
========== ========== ========== ========== ==========
Total return (%)(b) 23.19 33.31 (7.91) (1.67) 52.37
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 188,014 192,055 183,973 234,168 268,557
Expense ratio (%) 1.10 1.25 1.51 2.14 2.13
Expense ratio after expense reductions (%) 1.10 1.25 1.50 2.13 2.13
Ratio of net investment income (loss) to average net assets (%) 0.07 (0.39) (0.76) (0.54) (0.31)
Portfolio turnover rate (%) 33.04 48.43 42.18 26.40 76.95
State Street Research Aurora Fund 15
Class C - Years ended September 30
------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 30.18 23.01 25.16 27.99 18.38
---------- ---------- ---------- ---------- ----------
Net investment loss ($) (0.45) (0.35) (0.42) (0.18) (0.07)
Net realized and unrealized gain (loss) on investments ($) 6.96 7.67 (1.73) (0.34) 9.68
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 6.51 7.32 (2.15) (0.52) 9.61
---------- ---------- ---------- ---------- ----------
Distributions from capital gains ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Total Distributions ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 36.67 30.18 23.01 25.16 27.99
========== ========== ========== ========== ==========
Total return (%)(b) 21.57 31.97 (8.55) (1.67) 52.37
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 493,980 409,076 402,010 378,733 180,877
Expense ratio (%) 2.10 2.25 2.18 2.14 2.13
Expense ratio after expense reductions (%) 2.10 2.25 2.17 2.13 2.13
Ratio of net investment loss to average net assets (%) (1.27) (1.39) (1.43) (0.62) (0.30)
Portfolio turnover rate (%) 33.04 48.43 42.18 26.40 76.95
Class S - Years ended September 30
------------------------------------------------------------------
2004(a)(c) 2003(a) 2002(a)(e) 2001(a)(e) 2000(a)(e)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ($) 33.18 25.05 27.06 29.66 19.23
---------- ---------- ---------- ---------- ----------
Net investment income (loss) ($) (0.11) (0.11) (0.14) 0.13 0.12
Net realized and unrealized gain (loss) on investments ($) 7.66 8.39 (1.87) (0.39) 10.31
---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 7.55 8.28 (2.01) (0.26) 10.43
---------- ---------- ---------- ---------- ----------
Dividends from net investment income ($) -- -- -- (0.03) --
Distributions from capital gains ($) (0.02) (0.15) -- (2.31) --
---------- ---------- ---------- ---------- ----------
Total Distributions ($) (0.02) (0.15) -- (2.34) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ($) 40.71 33.18 25.05 27.06 29.66
========== ========== ========== ========== ==========
Total return (%)(b) 22.75 33.21 (7.43) (0.64) 54.32
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 197,475 142,460 92,789 76,711 20,298
Expense ratio (%) 1.10 1.25 1.18 1.14 1.13
Expense ratio after expense reductions (%) 1.10 1.25 1.17 1.13 1.13
Ratio of net investment income (loss) to average net assets (%) (0.27) (0.38) (0.43) 0.36 0.63
Portfolio turnover rate (%) 33.04 48.43 42.18 26.40 76.95
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) During the year ended September 30, 2004, the distributor made restitution
payments to the fund as part of a settlement with NASD. These payments had
no effect on net realized and unrealized gain per share and total return.
(d) During the year ended September 30, 2004, the distributor reimbursed Class B
shares of the fund the estimated excess of payments received over costs
incurred under the 12b-1 plan. The effect of this reimbursement was to
increase net investment income per share $0.13, increase the total return
0.46% and increase the ratio of net investment income to average net assets
0.35%.
(e) Audited by other auditors
16
- ----------------
REPORT OF
- ----------------
Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of State Street Research Aurora Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio holdings, of State Street Research Aurora Fund (the "Fund"), a
series of State Street Research Capital Trust, as of September 30, 2004, and the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for each of the two years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the years in the three-year period
ended September 30, 2002, were audited by other auditors whose report dated
November 8, 2002, expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of September 30, 2004, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for each
of the two years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 19, 2004
State Street Research Aurora Fund 17
- ------------------------
TRUSTEES AND OFFICERS
- ------------------------
State Street Research Capital Trust
Number
of Funds
in Fund
Complex
Name, Position(s) Term of Office Overseen Other
Address Held with and Length of Principal Occupations by Trustee/ Directorships Held
and Age(a) Fund Time Served(b) During Past 5 Years Officer(c) by Trustee/Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, 19 Avaya, Inc.
(58) 1999 Chief Executive Officer and President,
PictureTel Corporation (video conferencing
systems)
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 First Marblehead Corp.
(62) 2004 PricewaterhouseCoopers LLP
Steve A. Garban Trustee Since Retired; formerly Senior Vice President for 53 Metropolitan Series
(67) 1997 Finance and Operations and Treasurer, The Fund, Inc. and
Pennsylvania State University Metropolitan Series
Fund II
Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co.
(59) 1998 Management, George Washington University;
formerly a member of the Board of Governors
of the Federal Reserve System; and Chairman
and Commissioner of the Commodity Futures
Trading Commission
Toby Rosenblatt Trustee Since President, Founders Investments Ltd. 53 A.P. Pharma, Inc.;
(66) 1995 (investments); formerly President, The Glen Metropolitan Series
Ellen Company (private investment firm) Fund, Inc.; and
Metropolitan Series
Fund II
Michael S. Trustee Since Jay W. Forrester Professor of Management 53 Metropolitan Series
Scott Morton (67) 1987 (Emeritus), Sloan School of Management, Fund, Inc. and
Massachusetts Institute of Technology Metropolitan Series
Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief 19 None
(59) 2000 Executive Officer of State Street Research &
Management Company; formerly Senior Vice
President, Fixed Income Investments,
Metropolitan Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Officers
C. Kim Goodwin Vice Since Managing Director and Chief Investment 18 Akamai Technologies,
(45) President 2002 Officer - Equities of State Street Research Inc.
& Management Company; formerly Chief
Investment Officer - U.S. Growth Equities,
American Century
Paul Haagensen Vice Since Senior Vice President of State Street 3 None
(58) President 2003 Research & Management Company; formerly
Portfolio Manager and senior analyst at
Putnam Investments
Eileen M. Leary Vice Since Senior Vice President of State Street 3 None
(42) President 2002 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
John S. Lombardo Vice Since Managing Director, Chief Financial Officer 19 None
(49) President 2001 and Director of State Street Research &
Management Company; formerly Executive Vice
President, State Street Research &
Management Company; and Senior Vice
President, Product and Financial Management,
MetLife Auto & Home
Andrew Morey Vice Since Senior Vice President of State Street 3 None
(35) President 2003 Research & Management Company; formerly Vice
President, State Street Research &
Management Company
Tucker Walsh Vice Since Managing Director of State Street Research & 3 None
(35) President 1999 Management Company; formerly Vice President
and Analyst, State Street Research &
Management Company
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of State 19 None
(47) 2001 Street Research & Management Company;
formerly Vice President and Assistant
Treasurer, State Street Research &
Management Company
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company has served as sole investment adviser and all
series of Metropolitan Series Fund, Inc. The primary adviser to Metropolitan
Series Fund, Inc. is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
18
[LOGO] STATE STREET RESEARCH --------------
One Financial Center PRSRT STD
Boston, MA 02111-2690 U.S. POSTAGE
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HUDSON, MA
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New accounts, mutual fund purchases,
exchanges and account information
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State Street Research offers electronic delivery of quarterly statements,
shareholder reports and fund prospectuses. If you elect this option, we will
send these materials to you via e-mail. To learn more, visit us on the Web at
www.ssrfunds.com and click on "Go to Your Account" or call us at 1-87-SSR-FUNDS
(1-877-773-8637).
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Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637), Monday
through Friday, 8am-6pm eastern time, to learn more.
Investors should carefully consider the fund's investment objective, risks,
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complete information on these and other matters. A prospectus for any State
Street Research fund is available through your financial professional, by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at
www.ssrfunds.com. Please read the prospectus carefully before investing.
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For more information on the products and services we offer, refer to OverView,
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For a list of our funds, visit our website at www.ssrfunds.com under Research
Our Funds.
[GRAPHIC]
for Excellence in
Shareholder Communications
[GRAPHIC]
for Excellence in Service
This report must be accompanied or preceded by a current prospectus. When used
as sales material after December 31, 2004, this report must be accompanied by a
current Quarterly Performance Update.
"State Street Research Proxy Voting Policies and Procedures"--which describes
how we vote proxies relating to portfolio securities--is available upon request,
free of charge, by calling the State Street Research Service Center toll-free at
1-87-SSR-FUNDS (1-877-773-8637) or by accessing the U.S. Securities and Exchange
Commission website at www.sec.gov.
The DALBAR awards recognize quality shareholder service and quality shareholder
communications, 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 industrywide.
Member NASD, SIPC
(C)2004 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp1105)SSR-LD AR-2655-1104
<Page>
FORM N-CSR(2 OF 3)
ITEM 2: CODE OF ETHICS
(a) The Registrant has, as of the end of the period covered by this
report, adopted a code of ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR
that applies to the Registrant's principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the Registrant or a third
party.
(b) Omitted
(c) During the period covered by this report, there were not any amendments
to the provisions of the code of ethics adopted in 2(a) above.
(d) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
(e) Not applicable.
(f) Not applicable.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board of Trustees has determined that Steve A. Garban,
a member of the Registrant's Board of Trustees and Audit Committee,
qualifies as an "audit committee financial expert" as such term is
defined in the instructions to Form N-CSR. Mr. Garban is "independent",
as defined in the instructions to Form N-CSR.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES
<Table>
<Caption>
(a) Audit Fee
Fiscal year ended June 30, 2003 $73,800
Fiscal year ended June 30, 2004 $81,000
(b) Audit-Related Fees - Represents fees for assurance and related services
related to the audit of the registrant's financial statements.
Fiscal year ended June 30, 2003 $0
Fiscal year ended June 30, 2004 $0
(c) Tax Fees - Represents fees for professional services rendered by the
principal accountant for tax compliance, tax provision review, and the
tax return preparation.
Fiscal year ended June 30, 2003 $13,400
Fiscal year ended June 30, 2004 $14,000
(d) All other fees - Represents fees paid to Deloitte & Touche LLP to provide a
special review of late trading, market timing and related issues concerning
the Registrant.
Fiscal year ended September 30, 2003 $0
Fiscal year ended September 30, 2004 $42,000
</Table>
The Registrant's independent accountants, Deloitte & Touche LLP, did not
bill fees for audit-related, tax, or other non-audit services that required
pre-approval by the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X during the Registrant's last two fiscal years.
(e)(1) The Audit Committee has determined that all work performed for the
Registrant by Deloitte & Touche LLP will be pre-approved by the full Audit
Committee and, therefore, has not adopted pre-approval procedures.
(2) None.
(f) Not applicable.
(g) Non-Audit Fees - Represents fees for audit-related, tax and other non-audit
services rendered by the principal accountant to the Registrant, the
Registrant's investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the Registrant.
Fiscal Year Ended September 30, 2003 $ 13,400
Fiscal Year Ended September 30, 2004 $102,000
(h) The Audit Committee of the Registrant has considered whether the
non-audit services that were rendered by the Registrant's principal
accountant to the Registrant's investment adviser (not including any
subadviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Registrant and
that were not pre-approved by the Audit Committee are compatible with
maintaining the principal accountant's independence.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS
The Governance Committee will consider nominees recommended by
shareholders. Shareholders may submit recommendations to the
attention of the Secretary of the Trust, State Street Research
& Management Company, One Financial Center, 30th Floor, Boston
MA 02111.
ITEM 10: CONTROLS AND PROCEDURES
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date
of this report, that the Registrant's disclosure controls and procedures
are reasonably designed to ensure that information required to be
disclosed by the Registrant on Form N-CSR is recorded, processed,
summarized and reported within the required time periods and that
information required to be disclosed by the Registrant in the reports
that it files or submits on Form N-CSR is accumulated and communicated
to the Registrant's management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the Registrant's internal control over financial
reporting during the Registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
internal control over financial reporting.
ITEM 11: EXHIBITS
(a)(1) Code of Ethics required to be disclosed under Item 2 of Form
N-CSR attached hereto as Exhibit 99.CODE ETH
(a)(2) Certification for each principal executive and principal
financial officer of the Registrant required by Rule 30a-2(a)
under the Investment Company Act of 1940, as amended
(17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.302CERT
(b) Certification required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) attached
hereto as Exhibit 99.906CERT
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
State Street Research Capital Trust
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date December 7, 2004
------------------------------------------------------
<Page>
FORM N-CSR(3 OF 3)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities, and on the
dates indicated.
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date December 7, 2004
------------------------
By: /s/ Douglas A. Romich
------------------------------------------------------
Douglas A. Romich, Treasurer
Principal Financial Officer
Date December 7, 2004
------------------------