-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KOAF9QTteX3zX9BgztJDcrQ2CxltbjfD0jtqKdMDXu9B8BGhb85IRThOkWOtCBXG vqXV7An8TKbcTFSy+oZ+NQ== 0001047469-03-039155.txt : 20031203 0001047469-03-039155.hdr.sgml : 20031203 20031203161412 ACCESSION NUMBER: 0001047469-03-039155 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031203 EFFECTIVENESS DATE: 20031203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATE STREET RESEARCH CAPITAL TRUST CENTRAL INDEX KEY: 0000727101 IRS NUMBER: 046171663 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03838 FILM NUMBER: 031035502 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR STREET 2: RM 3800 CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6173577800 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET CAPITAL FUND INC DATE OF NAME CHANGE: 19890530 N-CSR 1 a2123486zn-csr.txt N-CSR EDGAR 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 ---------------------------------------------- State Street Research Capital Trust ------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, MA 02111 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Francis J. McNamara, III, Secretary State Street Research One Financial Center, Boston, MA 02111 ------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 617-357-1200 ------------------ Date of fiscal year end: 09/30/03 ----------------- Date of reporting period: 10/01/02 - 09/30/03 ---------------------------- 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. [BACKGROUND GRAPHIC] [LOGO] STATE STREET RESEARCH [PHOTO] Mid-Cap Growth Fund September 30, 2003 Annual Report to Shareholders Table of Contents 3 Performance Discussion 6 Portfolio Holdings 8 Financial Statements 12 Financial Highlights 14 Independent Auditors' Report 15 Trustees and Officers FROM THE CHAIRMAN State Street Research Optimism in the Economy The uncertainty that plagued the markets early in the 12-month period ended September 30, 2003, and gave way to optimism as economic news brightened. Low short-term interest rates, a significant income tax cut and higher government spending worked together to boost economic growth to its highest level in four years. Housing sales remained strong, although auto sales slipped late in the period. Corporate profits staged a solid rebound. Employment was the only holdout, as the jobless rate remained stubbornly high. A Weak Start, Then Stocks Move Higher The economy's weak showing held stocks back early in the period as investors backed away from risk in the buildup to war. However, in the second quarter of 2003 stocks began an impressive rally that continued until the last weeks of the period. Technology stocks were the strongest performers. Consumer stocks also gained ground as spending remained strong. In general, small- and mid-cap stocks outperformed large-caps, and growth stocks significantly outpaced value. Although all stock market indexes reported solid gains for the period, they were trimmed somewhat in the final weeks of September after news that consumer confidence had dropped. Bonds Retreat in Second Half As investors began to add risk back into their portfolios, lower-quality segments of the bond market staged an impressive comeback. High-yield bonds and emerging market bonds were the period's strongest performers. However, as interest rates began to climb and as investors moved money into the stock market, bonds gave back some of their gains in the second half of the period. Mortgage bonds lagged as mortgage prepayment activity heated up in the spring. Municipal bonds were hurt by concerns over state budget deficits and revenue shortfalls. Looking Ahead A revival for riskier segments of both the stock and bond markets took many investors by surprise over the past year. Yet, it provided an excellent reminder that the best way to take advantage of the market's strongest gains is to own a diversified portfolio of stocks and bonds. We hope you will take time to talk to your financial advisor about diversification. And as always, we look forward to helping you achieve your long-term financial goals with State Street Research Funds. Sincerely, /s/ Richard S. Davis Richard S. Davis Chairman September 30, 2003 - -------------------------------------------------------------------------------- A Special Message on Recent News Recent articles in the press have highlighted investigations into after-hours trading and frequent-trading practices in the mutual fund industry. These are serious matters, and we want to assure you that State Street Research is committed to maintaining full compliance with all legal requirements and ethical standards regarding these and other mutual fund trading practices. In fact, our mutual fund trading processes are designed to prevent these types of activities from taking place, and we are committed to maintaining their integrity. Our trade processing procedures carefully track the forward-pricing requirements contained in federal regulations and in our funds' prospectuses. We closely monitor trading in our funds and take measures to prevent market timing whenever it is identified. Furthermore, we do not enter into any special arrangements that would permit investors to avoid the forward-pricing or market-timing provisions of our prospectuses. In recent weeks, we have carefully reviewed our trading policies, procedures and operations. In addition, our firm recommended early on that the funds' Trustees engage an independent accounting firm, which has been reviewing trading issues on behalf of our funds' Audit Committee. While there is always more work that can be done, I am pleased to report that we believe our processes are working effectively, based on our preliminary findings. We understand that our relationship with our shareholders is based on trust, and we are committed to acting in the best interests of our shareholders at all times. - -------------------------------------------------------------------------------- 2 PERFORMANCE Discussion as of September 30, 2003 How State Street Research Mid-Cap Growth Fund Performed State Street Research Mid-Cap Growth Fund returned 32.75% for the 12-month period ended September 30, 2003.(1) That was below the Russell Midcap(R) Growth Index, which returned 38.89% over the same period.(2) However, the fund outperformed the Lipper Mid-Cap Growth Funds Average, which returned 27.72% over the same period.(3) Reasons for the Fund's Performance Although the fund lagged its benchmark during the year, it posted attractive gains. Stock selection in the Consumer Discretionary sector made the greatest positive contribution to performance. CarMax, a used-car superstore chain, rose as a result of strong sales and profits as well as gains in market share. Apparel retailer Gap appreciated as new management slowed store expansion, improved sales and cut costs. However, we sold the stock after the company announced disappointing sales results. In the commercial services industry, online retailer eBay and online travel service provider Expedia helped boost returns. The fund's Technology holdings also posted strong gains. National Semiconductor and Cypress Semiconductor both outperformed during the tech rally, which was fueled by an increased demand for personal computers and other high-tech products. However, our underweight in this sector detracted from the fund's relative performance as Technology made significant contributions to returns within the Russell Midcap Growth Index. Weak stock selection in Health Care, Financial Services and Energy further detracted from the fund's performance. In Health Care, drug manufacturer InterMune fell as investors expressed disappointment in weaker-than-expected demand for the firm's flagship drug, Actimmune. Health insurance and services provider Anthem declined as investors rotated out of defensive HMO names to more aggressive areas of the market. Our emphasis on Energy stocks also hurt performance. An unusually cool summer brought natural gas prices down and inventories rose. Falling prices also led to earnings disappointments for oil service companies. Looking Ahead Going forward, the fund remains heavily invested in Technology, Consumer Discretionary and Health Care--its three largest positions. We have also maintained our commitment to the Energy sector. Although it detracted from the fund's return during this period, we believe that a favorable natural gas supply and demand outlook should support higher prices over the long term. Top 10 Holdings - -------------------------------------------------------------------------------- Issuer/Security % of fund net assets 1 Caremark Rx 2.2% ----------------------------------------------------- 2 InterActiveCorp 2.1% ----------------------------------------------------- 3 Staples 1.9% ----------------------------------------------------- 4 Cypress Semiconductor 1.8% ----------------------------------------------------- 5 International Game Technology 1.8% ----------------------------------------------------- 6 CarMax 1.7% ----------------------------------------------------- 7 National Semiconductor 1.7% ----------------------------------------------------- 8 Teva Pharmaceutical Industries 1.6% ----------------------------------------------------- 9 Investors Financial Services 1.6% ----------------------------------------------------- 10 Affiliated Computer Services 1.6% ----------------------------------------------------- Total 18.0% Performance: Class A - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4) (does not reflect sales charge) 1 Year 5 Years 10 Years 32.75% 0.90% 3.54% - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4,5) (at maximum applicable sales charge) 1 Year 5 Years 10 Years 25.12% -0.29% 2.93% - -------------------------------------------------------------------------------- Russell Midcap Growth Index as of 9/30/03(2) 1 Year 5 Years 10 Years 38.89% 4.49% 8.50% - -------------------------------------------------------------------------------- See pages 4 and 5 for additional performance data for Class A shares and for performance data on other share classes. 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. (1) Class A shares; does not reflect sales charge. (2) The Russell Midcap Growth Index contains those stocks within the complete Russell Midcap[RegTM] Index (800 of the smallest securities in the Russell 1000[RegTM] 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 the index. (3) The Lipper Mid-Cap Growth Funds Average shows performance of a category of mutual funds with similar goals. The Lipper average shows you how well the fund has done compared with competing funds. (4) Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund participated as a class member in a class-action lawsuit against Cendant Corporation. Cendant agreed to pay $3 billion to class members to settle the suit. The fund received a pro-rata portion of the settlement which helped boost short-term returns. These returns are not typical and may not continue in the future. (5) Performance reflects a maximum 5.75% Class A share front-end sales charge. State Street Research Mid-Cap Growth Fund 3 PERFORMANCE Discussion as of September 30, 2003 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) 32.75% 4.56% 41.57% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 25.12% -1.45% 33.59% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 25.12% -0.29% 2.93% - -------------------------------------------------------------------------------- $10,000 Over 10 Years (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class A ....... $ 9,425 9,661 13,232 14,570 15,608 12,777 16,195 25,087 12,585 10,063 13,359 Russell Mid-Cap Growth Index .. $10,000 10,243 13,282 15,451 20,031 18,154 24,905 39,941 19,263 16,278 22,608
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B(1) 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 31.70% 0.91% 31.57% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 26.70% 0.12% 31.57% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 26.70% 0.02% 2.78% - -------------------------------------------------------------------------------- $10,000 Over 10 Years (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class B(1) .... $10,000 10,179 13,833 15,124 16,072 13,054 16,413 25,260 12,568 10,002 13,157 Russell Mid-Cap Growth Index .. $10,000 10,243 13,282 15,451 20,031 18,154 24,905 39,941 19,263 16,278 22,608
- -------------------------------------------------------------------------------- 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) 33.05% 2.32% 33.40% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 28.05% 0.30% 33.40% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 28.05% 0.30% 2.92% - -------------------------------------------------------------------------------- $10,000 Over 10 Years (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class B ....... $10,000 10,179 13,833 15,124 16,072 13,054 16,413 25,248 12,578 10,039 13,340 Russell Mid-Cap Growth Index .. $10,000 10,243 13,282 15,451 20,031 18,154 24,905 39,941 19,263 16,278 22,608
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 31.90% 0.85% 31.84% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 30.90% 0.85% 31.84% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 30.90% 0.17% 2.80% - -------------------------------------------------------------------------------- $10,000 Over 10 Years (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class C ....... $10,000 10,200 13,879 15,160 16,109 13,088 16,461 25,327 12,625 10,008 13,184 Russell Mid-Cap Growth Index .. $10,000 10,243 13,282 15,451 20,031 18,154 24,905 39,941 19,263 16,278 22,608
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class S 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 33.33% 6.03% 45.49% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 33.33% 6.03% 45.49% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 33.33% 1.18% 3.82% - -------------------------------------------------------------------------------- $10,000 Over 10 Years (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class S ....... $10,000 10,291 14,129 15,600 16,741 13,738 17,455 27,111 13,643 10,925 14,549 Russell Mid-Cap Growth Index .. $10,000 10,243 13,282 15,451 20,031 18,154 24,905 39,941 19,263 16,278 22,608
- -------------------------------------------------------------------------------- Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. Performance reflects a maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B share or 1% Class C share contingent deferred sales charge, where applicable. Performance for Class B(1) shares reflect 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, these returns would have been lower. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Class S shares, offered without sales charge, are available through certain employee benefit plans and special programs. The Russell Midcap Growth Index contains those stocks in the 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 the index. The fund participated as a class member in a class-action lawsuit against Cendant Corporation. Cendant agreed to pay $3 billion to class members to settle the suit. The fund received a pro-rata portion of the settlement which helped boost short-term returns. These returns are not typical and may not continue in the future. State Street Research Mid-Cap Growth Fund 5 PORTFOLIO Holdings September 30, 2003 Issuer Shares Value - -------------------------------------------------------------------------------- Common Stocks 97.1% Automobiles & Transportation 1.4% Air Transport 1.4% Expeditors International Inc. .................. 71,200 $ 2,449,992 Ryanair Holdings plc ADR* ...................... 63,600 2,575,800 ----------- Total Automobiles & Transportation ............................... 5,025,792 ----------- Consumer Discretionary 28.9% Advertising Agencies 0.6% Lamar Advertising Co. Cl. A* ................... 70,600 2,071,404 ----------- Casinos/Gambling, Hotel/Motel 2.9% International Game Technology Inc. ............. 220,400 6,204,260 Mandalay Resort Group Inc. ..................... 103,100 4,083,791 ----------- 10,288,051 ----------- Commercial Services 6.5% ChoicePoint Inc.* .............................. 103,166 3,456,061 Corporate Executive Board Co.* ................. 97,300 4,568,235 E.W. Scripps Co. ............................... 23,500 1,999,850 InterActiveCorp.* .............................. 225,282 7,445,570 Manpower Inc. .................................. 138,000 5,119,800 ----------- 22,589,516 ----------- Communications, Media & Entertainment 2.8% General Motors Corp.* .......................... 205,900 2,946,429 Univision Communications Inc. Cl. A* ........... 153,000 4,885,290 Westwood One Inc.* ............................. 67,100 2,025,749 ----------- 9,857,468 ----------- Consumer Electronics 1.4% Yahoo!, Inc.* .................................. 135,800 4,804,604 ----------- Consumer Products 0.8% Yankee Candle Company Inc.* .................... 108,700 2,769,676 ----------- Consumer Services 0.7% Career Education Corp.* ........................ 51,600 2,337,480 ----------- Printing & Publishing 0.5% Tribune Co. .................................... 39,700 1,822,230 ----------- Restaurants 1.8% Brinker International Inc.* .................... 54,100 1,804,776 Darden Restaurants Inc. ........................ 85,100 1,616,900 Starbucks Corp.* ............................... 106,800 3,075,840 ----------- 6,497,516 ----------- Retail 10.9% Bed Bath & Beyond Inc.* ........................ 88,626 3,383,741 Best Buy Company Inc.* ......................... 53,100 2,523,312 CarMax Inc.* ................................... 183,379 5,989,158 CDW Corp. ...................................... 84,300 4,867,482 Chicos FAS Inc.* ............................... 145,300 4,451,992 Family Dollar Stores Inc. ...................... 74,700 2,979,783 Staples Inc.* .................................. 280,848 6,670,140 Tiffany & Co. .................................. 58,400 2,180,072 Issuer Shares Value - -------------------------------------------------------------------------------- Williams-Sonoma Inc.* ............................ 184,200 $ 4,969,716 ------------ 38,015,396 ------------ Total Consumer Discretionary ..................................... 101,053,341 ------------ Consumer Staples 1.5% Beverages 0.9% Pepsi Bottling Group Inc. ........................ 151,600 3,119,928 ------------ Household Products 0.6% Clorox Co. ....................................... 45,000 2,064,150 ------------ Total Consumer Staples ........................................... 5,184,078 ------------ Financial Services 9.2% Banks & Savings & Loan 2.6% Investors Financial Services Co. ................. 174,100 5,466,740 TCF Financial Corp. .............................. 77,200 3,701,740 ------------ 9,168,480 ------------ Financial Data Processing Services & Systems 2.1% Affiliated Computer Services Inc.* ............... 112,200 5,463,018 Fair, Issac & Company Inc. ....................... 30,500 1,798,280 ------------ 7,261,298 ------------ Insurance 1.2% RenaissanceRe Holdings Ltd. ...................... 92,000 4,197,960 ------------ Miscellaneous Financial 0.7% Willis Group Holdings Ltd. ....................... 83,500 2,567,625 ------------ Securities Brokerage & Services 2.6% Lehman Brothers Holdings Inc. .................... 67,400 4,655,992 T Rowe Price Group Inc. .......................... 104,200 4,299,292 ------------ 8,955,284 ------------ Total Financial Services ......................................... 32,150,647 ------------ Health Care 18.7% Drugs & Biotechnology 10.5% Allergan Inc. .................................... 66,600 5,243,418 Altana AG ADR .................................... 10,100 639,835 Biogen Inc.* ..................................... 64,400 2,462,012 BioVail Corp.* ................................... 35,900 1,333,685 CV Therapeutics Inc.* ............................ 99,100 2,180,200 Forest Laboratories Inc.* ........................ 58,000 2,984,100 Genzyme Corp.* ................................... 54,700 2,529,875 InterMune Inc.* .................................. 169,300 3,230,244 Medimmune Inc.* .................................. 120,000 3,961,200 Millennium Pharmaceuticals Inc.* ................. 117,600 1,809,864 Mylan Laboratories Inc. .......................... 115,900 4,479,535 Teva Pharmaceutical Industries Ltd. ADR .......... 99,800 5,703,570 ------------ 36,557,538 ------------ Health Care Services 5.2% Aetna Inc. ....................................... 51,500 3,143,045 Anthem Inc.* ..................................... 24,700 1,761,851 Caremark Rx Inc.* ................................ 336,800 7,611,680 Community Health Systems Inc.* ................... 181,800 3,945,060 Coventry Health Care Inc.* ....................... 35,000 1,845,900 ------------ 18,307,536 ------------ Hospital Supply 3.0% Dentsply International Inc. ...................... 82,900 3,717,236 Guidant Corp. .................................... 61,100 2,862,535 Zimmer Holdings Inc.* ............................ 72,383 3,988,303 ------------ 10,568,074 ------------ Total Health Care ................................................ 65,433,148 ------------ 6 The notes are an integral part of the financial statements. Issuer Shares Value - -------------------------------------------------------------------------------- Materials & Processing 4.1% Chemicals 1.3% Eco Lab Inc. ................................. 173,900 $ 4,390,975 ----------- Containers & Packaging 1.0% Sealed Air Corp.* ............................ 74,900 3,537,527 ----------- Fertilizers 0.7% Potash Corp. ................................. 34,900 2,462,195 ----------- Gold & Precious Metals 1.1% Newmont Mining Corp. ......................... 96,700 3,780,003 ----------- Total Materials & Processing ..................................... 14,170,700 ----------- Other 2.7% Miscellaneous 2.7% iShares Trust ................................ 58,000 3,818,720 Nasdaq 100 Shares* ........................... 171,232 5,551,320 ----------- Total Other ...................................................... 9,370,040 ----------- Other Energy 7.3% Oil & Gas Producers 3.2% Devon Energy Corp. ........................... 55,807 2,689,340 Newfield Exploration Co.* .................... 120,200 4,636,114 XTO Energy Inc. .............................. 178,200 3,740,418 ----------- 11,065,872 ----------- Oil Well Equipment & Services 4.1% BJ Services Co.* ............................. 61,500 2,101,455 Nabors Industries Ltd.* ...................... 69,500 2,589,570 Noble Corp.* ................................. 45,300 1,539,747 Patterson UTI Energy Inc.* ................... 118,400 3,205,088 Rowan Companies Inc.* ........................ 75,800 1,863,164 Weatherford International Ltd.* .............. 83,350 3,148,963 ----------- 14,447,987 ----------- Total Other Energy ............................................... 25,513,859 ----------- Producer Durables 3.8% Miscellaneous Equipment 0.7% Pentair Inc. ................................. 64,700 2,579,589 ----------- Production Technology Equipment 2.7% LAM Research Corp.* .......................... 215,000 4,762,250 Novellus Systems Inc.* ....................... 57,100 1,927,125 Teradyne Inc.* ............................... 147,500 2,743,500 ----------- 9,432,875 ----------- Telecommunications Equipment 0.4% American Tower Corp.*+ ....................... 118,100 1,198,715 ----------- Total Producer Durables .......................................... 13,211,179 ----------- Technology 18.9% Communications Technology 2.2% Adtran Inc. .................................. 66,200 4,050,116 Ciena Corp.* ................................. 260,400 1,538,964 UTStarcom Inc.* .............................. 61,100 1,943,591 ----------- 7,532,671 ----------- Computer Software 6.7% Adobe Systems Inc. ........................... 128,000 5,025,280 Amdocs Ltd.* ................................. 138,600 2,605,680 BEA Systems Inc.* ............................ 379,100 4,568,155 Ceridian Corp.* .............................. 98,100 1,826,622 Cognos Inc.* ................................. 114,500 3,551,790 Mercury Interactive Corp.* ................... 41,300 1,875,433 Veritas Software Co.* ........................ 128,000 4,019,200 ----------- 23,472,160 ----------- Issuer Shares Value - -------------------------------------------------------------------------------- Computer Technology 0.5% Sandisk Corp.* ................................. 29,100 $ 1,854,834 ------------ Electronics 2.0% Amphenol Corp. Cl. A* .......................... 36,700 1,910,235 Sanmina-SCI Corp. .............................. 268,400 2,603,480 Vishay Intertechnology Inc.* ................... 147,400 2,582,448 ------------ 7,096,163 ------------ Electronics: Semiconductors/Components 7.5% Altera Corp.* .................................. 187,300 3,539,970 ATI Technologies Inc.* ......................... 148,100 2,199,285 Broadcom Corp. Cl. A* .......................... 142,700 3,798,674 Cypress Semiconductor Corp.* ................... 358,000 6,329,440 Jabil Circuit Inc.* ............................ 81,100 2,112,655 Microchip Technology Inc. ...................... 99,800 2,389,212 National Semiconductor Corp.* .................. 182,100 5,880,008 ------------ 26,249,244 ------------ Total Technology ................................................. 66,205,072 ------------ Utilities 0.6% Telecommunications 0.6% Sprint PCS Corp.* .............................. 384,900 2,205,477 ------------ Total Utilities .................................................. 2,205,477 ------------ Total Common Stocks (Cost $281,023,976) .......................... 339,523,333 ------------ Short-Term Investments 10.1% State Street Navigator Securities Lending Prime Portfolio ................................... 35,360,449 35,360,449 ---------- Total Short-Term Investments (Cost $35,360,449) .................. 35,360,449 ---------- Maturity Amount of Issuer Date Principal - -------------------------------------------------------------------------------- Commercial Paper 2.7% AIG Funding Inc., 1.08% ................. 10/01/2003 $4,067,000 4,067,000 AIG Funding Inc., 1.03% ................. 10/03/2003 3,610,000 3,609,794 American Express Credit Corp., 1.02% ........................... 10/03/2003 152,000 151,991 Morgan Stanley Dean Witter & Co., 1.04% .................... 10/03/2003 1,674,000 1,673,903 ---------- Total Commercial Paper (Cost $9,502,688) ........................... 9,502,688 ---------- % of Net Assets - -------------------------------------------------------------------------------- Summary of Portfolio Assets Investments (Cost $325,887,113) ................. 110.0% 384,386,470) Cash and Other Assets, Less Liabilities ......... (10.0%) (34,791,870) ----- ------------- Net Assets ...................................... 100.0% $ 349,594,600) ===== ============= KEY TO SYMBOLS * Denotes a security which has not paid a dividend during the last year. ADR Stands for American Depositary Receipt. + Denotes a Rule 144A restricted security, meaning that it trades only among certain qualified institutional buyers. As of the report date, the fund had 0.10% of net assets in Rule 144A securities. Federal Income Tax Information At September 30, 2003, the net unrealized appreciation of investments based on cost for federal income tax purposes of $326,353,372 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $65,935,760 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (7,902,662) ----------- $58,033,098 =========== The notes are an integral part of the financial statements. State Street Research Mid-Cap Growth Fund 7 FINANCIAL Statements Statement of Assets and Liabilities - -------------------------------------------------------------------------------- September 30, 2003 Assets Investments, at value (Cost $325,887,113) (Note 1)............ $384,386,470 Cash ......................................................... 2,038,103 Receivable for securities sold ............................... 1,551,265 Receivable for fund shares sold .............................. 115,083 Dividends receivable ......................................... 81,694 Other assets ................................................. 55,982 ------------ 388,228,597 ------------ Liabilities Payable for collateral received on securities loaned ......... 35,360,449 Payable for securities purchased ............................. 2,037,155 Payable for fund shares redeemed ............................. 301,020 Accrued transfer agent and shareholder services .............. 289,778 Accrued management fee ....................................... 268,889 Accrued distribution and service fees ........................ 81,228 Accrued trustees' fees ....................................... 29,859 Accrued administration fee ................................... 20,107 Other accrued expenses ....................................... 245,512 ------------ 38,633,997 ------------ Net Assets ................................................... $349,594,600 ============ Net Assets consist of: Unrealized appreciation of investments ....................... $ 58,499,357 Accumulated net realized loss ................................ (356,265,476) Paid-in capital .............................................. 647,360,719 ------------ $349,594,600 ============ 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 / Number of Shares = NAV A $179,519,207 33,555,763 $5.35* B(1) $ 28,518,264 6,234,339 $4.57** B $ 95,215,848 20,545,665 $4.63** C $ 12,043,639 2,623,767 $4.59** S $ 34,297,642 6,037,457 $5.68 * Maximum offering price per share = $5.68 ($5.35 [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, 2003 Investment Income Dividends, net of foreign taxes of $9,563 (Note 1)............ $ 1,184,969 Interest (Note 1) ............................................ 304,815 ----------- 1,489,784 ----------- Expenses Management fee (Note 2) ...................................... 2,400,292 Transfer agent and shareholder services (Note 2) ............. 1,767,824 Custodian fee ................................................ 149,069 Reports to shareholders ...................................... 100,296 Administration fee ........................................... 77,616 Distribution and service fees - Class A (Note 4) ............. 472,838 Distribution and service fees - Class B(1) (Note 4) .......... 242,238 Distribution and service fees - Class C (Note 4) ............. 111,375 Audit fee .................................................... 36,365 Registration fees ............................................ 28,525 Trustees' fees (Note 2) ...................................... 24,542 Legal fees ................................................... 21,052 Miscellaneous ................................................ 33,681 ----------- 5,465,713 Fees paid indirectly (Note 2) ................................ (16,842) ----------- 5,448,871 ----------- Net investment loss .......................................... (3,959,087) ----------- Realized and Unrealized Gain (Loss) on Investments Net realized loss on investments (Notes 1 and 3) ............. (2,516,067) Change in unrealized appreciation of investments ............. 96,745,512 ----------- Net gain on investments ...................................... 94,229,445 ----------- Net increase in net assets resulting from operations ......... $90,270,358 =========== 8 The notes are an integral part of the financial statements. Statement of Changes in Net Assets - -------------------------------------------------------------------------------- Years ended September 30 ------------------------------- 2003 2002* ------------------------------- Increase (Decrease) In Net Assets Operations: Net investment loss ........................ $ (3,959,087) $ (6,329,931) Net realized loss on investments ........... (2,516,067) (92,837,818) Change in unrealized appreciation of investments ............................. 96,745,512 24,991,773 ------------- ------------- Net increase (decrease) resulting from operations .............................. 90,270,358 (74,175,976) ------------- ------------- Net decrease from fund share transactions (Note 6) ................... (43,134,681) (73,285,726) ------------- ------------- Total increase (decrease) in net assets .... 47,135,677 (147,461,702) ============= ============= Net Assets Beginning of year .......................... 302,458,923 449,920,625 ------------- ------------- End of year ................................ $ 349,594,600 $ 302,458,923 ============= ============= * Audited by other auditors Notes to Financial Statements - -------------------------------------------------------------------------------- September 30, 2003 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 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. 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. 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. 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. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, are expected to materially affect the value of these securities, then they are valued at their fair value taking this trading or these events into account. 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. The notes are an integral part of the financial statements. State Street Research Mid-Cap Growth Fund 9 Notes (continued) - -------------------------------------------------------------------------------- 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, 2003, the fund had a capital loss carryforward of $355,799,217 available, to the extent provided in regulations, to offset future capital gains, if any, of which $21,447,854, 247,124,039, and 87,227,324 expire on September 30, 2009, 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 litigation settlements. At September 30, 2003, 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 post-October losses. At September 30, 2003, 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, 2003, the value of the securities loaned and the value of collateral were $34,371,036 and $35,360,449 (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, 2003, income from securities lending amounted to $88,825 and is included in interest income. Note 2 The Trust and the Adviser have entered into an agreement under which the Adviser earns monthly fees at an annual rate of 0.75% of the 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, 2003, the fees pursuant to such agreement amounted to $2,400,292. 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, 2003, the amount of such expenses allocated to the fund was $698,086. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expense. During the year ended September 30, 2003, the fund's transfer agent fees were reduced by $16,842 under this arrangement. The fees of the Trustees not currently affiliated with the Adviser amounted to $24,542 during the year ended September 30, 2003. 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, 2003, the amount of such expenses was $77,616. Note 3 For the year ended September 30, 2003, purchases and sales of securities, exclusive of short-term obligations, aggregated $324,364,790, and $355,344,525, 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 waived 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, 2003, fees pursuant to such plans amounted to $472,838, $242,238 and $111,375 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, 2003, there were $2,010,375 and $1,693,357 for Class A 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. The fund has been informed that the Distributor and MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, earned initial sales charges aggregating $51,162 and $138,463, respectively, on sales of Class A shares of the fund during the year ended September 30, 2003, and that MetLife Securities, Inc. earned commissions aggregating $126,661 and $507 on sales of Class B(1) and Class C shares, and the Distributor collected contingent deferred sales charges aggregating $52,712, $547 and $216 on redemptions of Class B(1), Class B and Class C shares, respectively, during the same period. 10 Note 5 PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the fund's independent accountants for the fund's fiscal year ended September 30, 2003. During the previous two years, PricewaterhouseCoopers LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope or accounting principle. Further, in connection with its audits for the two previous fiscal years and through April 25, 2003, there were no disagreements between the fund and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it to make reference to the disagreements in its report on the financial statements for such years. 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 ------------------------------------------------------------ 2003 2002* ------------------------------------------------------------ Class A Shares Amount Shares Amount - ------------------------------------------------------------------------------------- Shares sold 10,362,428 $ 47,693,729 12,872,573 $ 68,780,491 Shares redeemed (12,783,402) (57,272,190) (16,997,725) (89,584,675) ----------- ------------ ----------- ------------ Net decrease (2,420,974) $ (9,578,461) (4,125,152) $(20,804,184) =========== ============ =========== ============ Class B(1) Shares Amount Shares Amount - ------------------------------------------------------------------------------------- Shares sold 1,604,810 $ 6,518,156 1,865,430 $ 8,577,447 Shares redeemed (1,808,414) (6,879,464) (1,407,386) (6,207,338) ----------- ------------ ----------- ------------ Net increase (decrease) (203,604) $ (361,308) 458,044 $ 2,370,109 =========== ============ =========== ============ Class B Shares Amount Shares Amount - ------------------------------------------------------------------------------------- Shares sold 416,179 $ 1,648,440 727,648 $ 3,315,351 Shares redeemed (6,915,765) (27,246,929) (9,900,212) (44,833,459) ----------- ------------ ----------- ------------ Net decrease (6,499,586) $(25,598,489) (9,172,564) $(41,518,108) =========== ============ =========== ============ Class C Shares Amount Shares Amount - ------------------------------------------------------------------------------------- Shares sold 316,274 $ 1,309,387 211,840 $ 1,014,532 Shares redeemed (799,177) (3,109,189) (1,064,624) (4,952,964) ----------- ------------ ----------- ------------ Net decrease (482,903) $ (1,799,802) (852,784) $ (3,938,432) =========== ============ =========== ============ Class S Shares Amount Shares Amount - ------------------------------------------------------------------------------------- Shares sold 1,519,064 $ 7,703,821 1,361,310 $ 7,769,327 Shares redeemed (2,637,590) (13,500,442) (2,998,486) (17,164,438) ----------- ------------ ----------- ------------ Net decrease (1,118,526) $ (5,796,621) (1,637,176) $ (9,395,111) =========== ============ =========== ============
* Audited by other auditors State Street Research Mid-Cap Growth Fund 11 FINANCIAL Highlights For a share outstanding throughout each year:
Class A - Years ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 4.03 5.04 20.10 13.64 11.95 ------- ------- ------- ------- ------- Net investment loss ($) (0.06) (0.07) (0.06) (0.15) (0.14) Net realized and unrealized gain (loss) on investments ($) 1.38 (0.94) (6.47) 7.44 3.15 ------- ------- ------- ------- ------- Total from investment operations ($) 1.32 (1.01) (6.53) 7.29 3.01 ------- ------- ------- ------- ------- Distributions from capital gains ($) -- -- (8.53) (0.83) (1.32) ------- ------- ------- ------- ------- Total distributions ($) -- -- (8.53) (0.83) (1.32) ------- ------- ------- ------- ------- Net asset value, end of year ($) 5.35 4.03 5.04 20.10 13.64 ======= ======= ======= ======= ======= Total return %(b) 32.75 (20.04) (49.83) 54.91 26.75 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 179,519 144,814 201,936 450,521 321,667 Expense ratio (%) 1.75 1.78 1.56 1.38 1.40 Expense ratio after expense reductions (%) 1.74 1.76 1.54 1.37 1.38 Ratio of net investment loss to average net assets (%) (1.36) (1.33) (0.73) (0.85) (1.03) Portfolio turnover rate (%) 104.91 136.30 123.50 171.87 68.03 Class B(1) - Years ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(c)(f) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 3.47 4.36 18.83 12.90 13.17 ------- ------- ------- ------- ------- Net investment loss ($) (0.09) (0.09) (0.09) (0.26) (0.17) Net realized and unrealized gain (loss) on investments ($) 1.19 (0.80) (5.85) 7.02 (0.10) ------- ------- ------- ------- ------- Total from investment operations ($) 1.10 (0.89) (5.94) 6.76 (0.27) ------- ------- ------- ------- ------- Distributions from capital gains ($) -- -- (8.53) (0.83) -- ------- ------- ------- ------- ------- Total distributions ($) -- -- (8.53) (0.83) -- ------- ------- ------- ------- ------- Net asset value, end of year ($) 4.57 3.47 4.36 18.83 12.90 ======= ======= ======= ======= ======= Total return %(b) 31.70 (20.41) (50.25) 53.90 (2.05)(d) Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 28,518 22,314 26,083 37,063 8,730 Expense ratio (%) 2.45 2.48 2.26 2.11 2.15(e) Expense ratio after expense reductions (%) 2.44 2.46 2.24 2.10 2.13(e) Ratio of net investment loss to average net assets (%) (2.17) (2.02) (1.43) (1.52) (1.81)(e) Portfolio turnover rate (%) 104.91 136.30 123.50 171.87 68.03 Class B - Years ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 3.48 4.36 18.82 12.90 11.45 ------- ------- ------- ------- ------- Net investment loss ($) (0.03) (0.07) (0.10) (0.26) (0.22) Net realized and unrealized gain (loss) on investments ($) 1.18 (0.81) (5.83) 7.01 2.99 ------- ------- ------- ------- ------- Total from investment operations ($) 1.15 (0.88) (5.93) 6.75 2.77 ------- ------- ------- ------- ------- Distributions from capital gains ($) -- -- (8.53) (0.83) (1.32) ------- ------- ------- ------- ------- Total distributions ($) -- -- (8.53) (0.83) (1.32) ------- ------- ------- ------- ------- Net asset value, end of year ($) 4.63 3.48 4.36 18.82 12.90 ======= ======= ======= ======= ======= Total return %(b) 33.05 (20.18) (50.18) 53.83 25.74 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 95,216 94,029 157,788 411,584 318,695 Expense ratio (%) 1.45 1.88 2.26 2.11 2.15 Expense ratio after expense reductions (%) 1.44 1.86 2.24 2.10 2.13 Ratio of net investment loss to average net assets (%) (0.83) (1.46) (1.44) (1.58) (1.77) Portfolio turnover rate (%) 104.91 136.30 123.50 171.87 68.03
(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) January 1, 1999 (commencement of share class) to September 30, 1999 (d) Not annualized (e) Annualized (f) Audited by other auditors 12
Class C - Years ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 3.48 4.39 18.87 12.93 11.47 ------ ------ ------ ------- ------ Net investment loss ($) (0.08) (0.09) (0.10) (0.27) (0.22) Net realized and unrealized gain (loss) on investments ($) 1.19 (0.82) (5.85) 7.04 3.00 ------ ------ ------ ------- ------ Total from investment operations ($) 1.11 (0.91) (5.95) 6.77 2.78 ------ ------ ------ ------- ------ Distributions from capital gains ($) -- -- (8.53) (0.83) (1.32) ------ ------ ------ ------- ------ Total distributions ($) -- -- (8.53) (0.83) (1.32) ------ ------ ------ ------- ------ Net asset value, end of year ($) 4.59 3.48 4.39 18.87 12.93 ====== ====== ====== ======= ====== Total return %(b) 31.90 (20.73) (50.15) 53.86 25.77 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 12,044 10,805 17,362 51,721 41,235 Expense ratio (%) 2.45 2.48 2.26 2.11 2.15 Expense ratio after expense reductions (%) 2.44 2.46 2.24 2.10 2.13 Ratio of net investment loss to average net assets (%) (2.00) (2.05) (1.44) (1.58) (1.77) Portfolio turnover rate (%) 104.91 136.30 123.50 171.87 68.03 Class S - Years ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 4.26 5.32 20.62 13.94 12.16 ------ ------ ------ ------- ------ Net investment loss ($) (0.04) (0.06) (0.04) (0.11) (0.10) Net realized and unrealized gain (loss) on investments ($) 1.46 (1.00) (6.73) 7.62 3.20 ------ ------ ------ ------- ------ Total from investment operations ($) 1.42 (1.06) (6.77) 7.51 3.10 ------ ------ ------ ------- ------ Distributions from capital gains ($) -- -- (8.53) (0.83) (1.32) ------ ------ ------ ------- ------ Total distributions ($) -- -- (8.53) (0.83) (1.32) ------ ------ ------ ------- ------ Net asset value, end of year ($) 5.68 4.26 5.32 20.62 13.94 ====== ====== ====== ======= ====== Total return %(b) 33.33 (19.92) (49.68) 55.32 27.06 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 34,298 30,497 46,751 121,727 90,751 Expense ratio (%) 1.45 1.48 1.26 1.11 1.15 Expense ratio after expense reductions (%) 1.44 1.46 1.24 1.10 1.13 Ratio of net investment loss to average net assets (%) (0.87) (1.05) (0.43) (0.58) (0.77) Portfolio turnover rate (%) 104.91 136.30 123.50 171.87 68.03
The notes are an integral part of the financial statements. State Street Research Mid-Cap Growth Fund 13 INDEPENDENT AUDITORS' Report 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, 2003, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year ended September 30, 2003. 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 audit. The statement of changes in net assets for the year ended September 30, 2002, and the financial highlights for each of the years in the four-year period ended September 30, 2002, were audited by other auditors whose report dated November 8, 2002, expressed an unqualified opinion on such statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, 2003, 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 audit provides 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, 2003, and the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts October 31, 2003 14 TRUSTEES AND OFFICERS State Street Research Capital Trust
Name, Position(s) Term of Office Address Held with and Length of Principal Occupations and Age(a) Fund Time Served(b) During Past 5 Years =================================================================================================== Independent Trustees Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, Chief (57) 1999 Executive Officer and President, PictureTel Corporation (video conferencing systems) - --------------------------------------------------------------------------------------------------- Steve A. Garban Trustee Since Retired; formerly Senior Vice President for (66) 1997 Finance and Operations and Treasurer, The Pennsylvania State University - --------------------------------------------------------------------------------------------------- Dean O. Morton Trustee Since Retired; formerly Executive Vice President, Chief (71) 1985 Operating Officer and Director, Hewlett-Packard Company (computer manufacturer) - --------------------------------------------------------------------------------------------------- Susan M. Phillips Trustee Since Dean, School of Business and Public Management, (58) 1998 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. (65) 1995 (investments); formerly President, The Glen Ellen Company (private investment firm) - --------------------------------------------------------------------------------------------------- Michael S. Trustee Since Jay W. Forrester Professor of Management, Sloan Scott Morton (66) 1987 School of Management, Massachusetts Institute of Technology - --------------------------------------------------------------------------------------------------- James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law firm) (72) 2002 =================================================================================================== Interested Trustees Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief (58) 2000 Executive Officer of State Street Research & Management Company; formerly Senior Vice President, Fixed Income Investments, Metropolitan Life Insurance Company =================================================================================================== Officers John F. Burbank Vice Since Managing Director of State Street Research & (66) President 2001 Management Company; formerly Senior Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Caroline Evascu Vice Since Vice President of State Street Research & (28) President 2003 Management Company; formerly Vice President and senior analyst at SG Cowen Asset Management; and research associate at Donaldson, Lufkin & Jenrette - --------------------------------------------------------------------------------------------------- C. Kim Goodwin Vice Since Managing Director and Chief Investment Officer - (44) President 2002 Equities of State Street Research & Management Company; formerly Chief Investment Officer - U.S. Growth Equities, American Century - --------------------------------------------------------------------------------------------------- Paul Haagensen Vice Since Senior Vice President of State Street Research & (57) President 2003 Management Company; formerly Portfolio Manager and senior analyst at Putnam Investments - --------------------------------------------------------------------------------------------------- Eileen M. Leary Vice Since Senior Vice President of State Street Research & (41) President 2002 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- John S. Lombardo Vice Since Managing Director, Chief Financial Officer and (48) President 2001 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 Research & (34) President 2003 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Tucker Walsh Vice Since Managing Director of State Street Research & (34) 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 (46) 2001 Street Research & Management Company; formerly Vice President and Assistant Treasurer, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Francis J. Secretary Since Managing Director, General Counsel and Secretary McNamara, III (48) 1995 of State Street Research & Management Company; formerly Executive Vice President, State Street Research & Management Company Number of Funds Name, in Fund Complex Other Address Overseen by Directorships Held and Age(a) Trustee/Officer(c) by Trustee/Officer ================================================================================ Independent Trustees 19 Ceridian Corporation Bruce R. Bond (57) - -------------------------------------------------------------------------------- Steve A. Garban 55 Metropolitan Series Fund, Inc.(d) (66) - -------------------------------------------------------------------------------- Dean O. Morton 55 The Clorox Company; KLA-Tencor (71) Corporation; BEA Systems, Inc.; Cepheid; Pharsight Corporation; and Metropolitan Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Susan M. Phillips 19 The Kroger Co. (58) - -------------------------------------------------------------------------------- Toby Rosenblatt 55 A.P. Pharma, Inc.; and Metropolitan (65) Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Michael S. 55 Metropolitan Series Fund, Inc.(d) Scott Morton (66) - -------------------------------------------------------------------------------- James M. Storey 19 SEI Investments Funds (consisting of (72) 104 portfolios); and The Massachusetts Health & Education Tax-Exempt Trust ================================================================================ Interested Trustees Richard S. Davis(+) 19 None (58) ================================================================================ Officers John F. Burbank 3 None (66) - -------------------------------------------------------------------------------- Caroline Evascu 3 None (28) - -------------------------------------------------------------------------------- C. Kim Goodwin 18 None (44) - -------------------------------------------------------------------------------- Paul Haagensen 3 None (57) - -------------------------------------------------------------------------------- Eileen M. Leary 3 None (41) - -------------------------------------------------------------------------------- John S. Lombardo 19 None (48) - -------------------------------------------------------------------------------- Andrew Morey 3 None (34) - -------------------------------------------------------------------------------- Tucker Walsh 3 None (34) - -------------------------------------------------------------------------------- Douglas A. Romich 19 None (46) - -------------------------------------------------------------------------------- Francis J. 19 None McNamara, III (48)
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. (d) Serves as Director of Metropolitan Series Fund, Inc., an investment company comprising 36 separate portfolios. (+) 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. 15 [LOGO] STATE STREET RESEARCH One Financial Center Boston, MA 02111-2690 ---------------- PRSRT STD 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. - -------------------------------------------------------------------------------- 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, 2003, this report must be accompanied by a current Quarterly Performance Update. To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus contains more complete information, including sales charges and expenses. Please read the prospectus carefully before investing or sending money. 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)2003 State Street Research Investment Services, Inc. One Financial Center Boston, MA 02111-2690 www.ssrfunds.com CONTROL NUMBER:(exp1104)SSR-LD MG-2653-1103 [BACKGROUND GRAPHIC] [LOGO] STATE STREET RESEARCH [PHOTO] Emerging Growth Fund September 30, 2003 Annual Report to Shareholders Table of Contents 3 Performance Discussion 6 Portfolio Holdings 8 Financial Statements 12 Financial Highlights 14 Independent Auditors' Report 15 Trustees and Officers FROM THE CHAIRMAN State Street Research Optimism in the Economy The uncertainty that plagued the markets early in the 12-month period ended September 30, 2003, and gave way to optimism as economic news brightened. Low short-term interest rates, a significant income tax cut and higher government spending worked together to boost economic growth to its highest level in four years. Housing sales remained strong, although auto sales slipped late in the period. Corporate profits staged a solid rebound. Employment was the only holdout, as the jobless rate remained stubbornly high. A Weak Start, Then Stocks Move Higher The economy's weak showing held stocks back early in the period as investors backed away from risk in the buildup to war. However, in the second quarter of 2003 stocks began an impressive rally that continued until the last weeks of the period. Technology stocks were the strongest performers. Consumer stocks also gained ground as spending remained strong. In general, small- and mid-cap stocks outperformed large-caps, and growth stocks significantly outpaced value. Although all stock market indexes reported solid gains for the period, they were trimmed somewhat in the final weeks of September after news that consumer confidence had dropped. Bonds Retreat in Second Half As investors began to add risk back into their portfolios, lower-quality segments of the bond market staged an impressive comeback. High-yield bonds and emerging market bonds were the period's strongest performers. However, as interest rates began to climb and as investors moved money into the stock market, bonds gave back some of their gains in the second half of the period. Mortgage bonds lagged as mortgage prepayment activity heated up in the spring. Municipal bonds were hurt by concerns over state budget deficits and revenue shortfalls. Looking Ahead A revival for riskier segments of both the stock and bond markets took many investors by surprise over the past year. Yet, it provided an excellent reminder that the best way to take advantage of the market's strongest gains is to own a diversified portfolio of stocks and bonds. We hope you will take time to talk to your financial advisor about diversification. And as always, we look forward to helping you achieve your long-term financial goals with State Street Research Funds. Sincerely, /s/ Richard S. Davis Richard S. Davis Chairman September 30, 2003 - -------------------------------------------------------------------------------- A Special Message on Recent News Recent articles in the press have highlighted investigations into after-hours trading and frequent-trading practices in the mutual fund industry. These are serious matters, and we want to assure you that State Street Research is committed to maintaining full compliance with all legal requirements and ethical standards regarding these and other mutual fund trading practices. In fact, our mutual fund trading processes are designed to prevent these types of activities from taking place, and we are committed to maintaining their integrity. Our trade processing procedures carefully track the forward-pricing requirements contained in federal regulations and in our funds' prospectuses. We closely monitor trading in our funds and take measures to prevent market timing whenever it is identified. Furthermore, we do not enter into any special arrangements that would permit investors to avoid the forward-pricing or market-timing provisions of our prospectuses. In recent weeks, we have carefully reviewed our trading policies, procedures and operations. In addition, our firm recommended early on that the funds' Trustees engage an independent accounting firm, which has been reviewing trading issues on behalf of our funds' Audit Committee. While there is always more work that can be done, I am pleased to report that we believe our processes are working effectively, based on our preliminary findings. We understand that our relationship with our shareholders is based on trust, and we are committed to acting in the best interests of our shareholders at all times. - -------------------------------------------------------------------------------- 2 PERFORMANCE Discussion as of September 30, 2003 How State Street Research Emerging Growth Fund Performed State Street Research Emerging Growth Fund returned 33.22% for the 12-month period ended September 30, 2003.(1) That was below the Russell 2000[RegTM] Growth Index, which returned 41.72% over the same period.(2) The fund also underperformed the Lipper Small-Cap Growth Funds Average, which returned 34.03% over the same period.(3) Reasons for the Fund's Performance The fund's strong absolute returns were driven by investments in a broad range of industries and sectors. However, underweights in the strong-performing Technology and Health Care sectors, as well as specific disappointments among our Health Care holdings, accounted for the fund's underperformance compared to its benchmark. The fund's investments in Consumer Discretionary stocks were a plus for performance; however, we were overweight in the sector compared to the index, and that was also a modest drag on the fund's return. In Health Care, Province Healthcare, Priority Healthcare and CV Therapeutics were disappointments. We sold our position in Province Healthcare. In Technology our investment in SanDisk, which makes memory chips for consumer electronics, made a strong contribution to return. The fund also benefited from owning International Rectifier, National Semiconductor and Silicon Storage Technology. In the Consumer Discretionary sector, our investments in online travel, post-secondary education and gaming stocks provided strong returns. However, our investments in casual dining restaurants, including The Cheesecake Factory and O'Charley's, lagged as a slower economy depressed earnings. Cox Radio and Radio One also detracted from returns. Looking Ahead As the year progressed, we became more optimistic about Technology stocks and added new semiconductor holdings. However, at the period's end we remained underweight in the sector. Within the Consumer Discretionary sector, we maintained our exposure to gaming stocks and initiated a position in Mandalay Bay. However, our stake in consumer-oriented stocks was slightly lower at the end of the period because we sold or decreased our positions in strong performers such as Ann Taylor and Michael's. We also reduced our exposure to restaurant stocks and added Krispy Kreme to the portfolio. Top 10 Holdings - -------------------------------------------------------------------------------- Issuer/Security % of fund net assets 1 Alliance Gaming 3.3% ------------------------------------------------- 2 Caremark Rx 2.9% ------------------------------------------------- 3 ESCO Technologies 2.7% ------------------------------------------------- 4 Harman International 2.4% ------------------------------------------------- 5 Autobytel.com 2.4% ------------------------------------------------- 6 Sylvan Learning Systems 2.3% ------------------------------------------------- 7 Aeroflex 2.1% ------------------------------------------------- 8 Coventry Health Care 1.9% ------------------------------------------------- 9 International Rectifier 1.7% ------------------------------------------------- 10 American Medical Systems Holdings 1.6% ------------------------------------------------- Total 23.3% Performance: Class A - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4,6,7) (does not reflect sales charge) Life of Fund 1 Year 5 Years (10/4/93) 33.22% 10.54% 7.34% - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4,5,6,7) (at maximum applicable sales charge) Life of Fund 1 Year 5 Years (10/4/93) 25.56% 9.24% 6.70% - -------------------------------------------------------------------------------- Russell 2000 Growth Index as of 9/30/03(2) Life of Fund 1 Year 5 Years (10/4/93) 41.72% 2.75% 4.46% - -------------------------------------------------------------------------------- See pages 4 and 5 for additional performance data for Class A shares and for performance data on other share classes. 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. (1) Class A shares; does not reflect sales charge. (2) 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 the index. (3) The Lipper Small-Cap Growth Funds Average shows performance of a category of mutual funds with similar goals. The Lipper average shows you how well the fund has done compared with competing funds. (4) Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. (5) Performance reflects a maximum 5.75% Class A share front-end sales charge. (6) Performance results for the fund are increased by the voluntary reduction of fund fees and expenses; without subsidization, performance would have been lower. (7) Because the fund invests in emerging growth and special situation companies, an investment in the fund may involve greater-than-average risk and above-average price fluctuations. Small-company stocks are more volatile than large-company stocks. Favorable investments in initial public offerings ("IPOs") have helped produce short-term returns in some periods that are not typical and may not continue in the future. State Street Research Emerging Growth Fund 3 PERFORMANCE Discussion as of September 30, 2003 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 (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 33.22% 65.06% 102.95% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 25.56% 55.57% 91.28% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 25.56% 9.24% 6.70% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class A ................. $ 9,425 8,448 9,563 11,182 16,549 11,589 14,961 21,850 15,263 14,358 19,128 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B(1) Life of Fund 1 Year 5 Years (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 32.25% 59.82% 89.68% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 27.25% 57.82% 89.68% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 27.25% 9.56% 6.61% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class B(1) .............. $10,000 8,921 10,031 11,634 17,090 11,868 15,235 22,095 15,360 14,342 18,968 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Class B (only available through exchanges from another Class B account) Life of Fund 1 Year 5 Years (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 32.21% 60.00% 89.89% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 27.21% 58.00% 89.89% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 27.21% 9.58% 6.62% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class B ................. $10,000 8,921 10,031 11,634 17,090 11,868 15,235 22,080 15,363 14,363 18,989 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Life of Fund 1 Year 5 Years (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 32.17% 59.93% 90.04% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 31.17% 59.93% 90.04% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 31.17% 9.85% 6.63% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class C ................. $10,000 8,921 10,031 11,623 17,103 11,883 15,235 22,095 15,278 14,378 19,004 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class R Life of Fund 1 Year 5 Years (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 32.99% 64.77% 102.60% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 32.99% 64.77% 102.60% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 32.99% 10.50% 7.32% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class R ................. $10,000 8,983 10,147 11,864 17,559 12,296 15,873 23,183 16,194 15,234 20,260 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class S Life of Fund 1 Year 5 Years (10/4/93) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 33.66% 67.78% 109.22% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 33.66% 67.78% 109.22% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 33.66% 10.90% 7.66% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Class S ................. $10,000 9,005 10,230 11,979 17,770 12,470 16,160 23,651 16,620 15,653 20,922 Russell 2000 Growth Index $10,000 10,086 12,931 14,562 17,962 13,502 17,908 23,221 13,331 10,910 15,462
- -------------------------------------------------------------------------------- Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. Performance reflects a maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B share or 1% Class C share contingent deferred sales charge, where applicable. 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 S shares, offered without sales charge, are available through certain retirement plans and special programs. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance results for the fund are increased by the voluntary reduction of fund fees and expenses; without subsidization, performance would have been lower. Because the fund invests in emerging growth and special situation companies, an investment in the fund may involve greater-than-average risk and above-average price fluctuations. Small-company stocks are more volatile than large-company stocks. Favorable investments in initial public offerings ("IPOs") have helped produce short-term returns in some periods that are not typical and may not continue in the future. 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 the index. State Street Research Emerging Growth Fund 5 PORTFOLIO Holdings September 30, 2003 Issuer Shares Value - -------------------------------------------------------------------------------- Common Stocks 97.9% Automobiles & Transportation 2.9% Air Transport 1.1% JetBlue Airways Corp.* ......................... 32,600 $ 1,987,622 ----------- Automotive Parts 1.0% Gentex Corp.* .................................. 51,200 1,783,808 ----------- Miscellaneous Transportation 0.8% Tidewater Inc. ................................. 54,000 1,528,200 ----------- Total Automobiles & Transportation ............................. 5,299,630 ----------- Consumer Discretionary 32.1% Casinos/Gambling, Hotel/Motel 3.9% Boyd Gaming Corp. .............................. 135,400 2,066,204 International Game Technology Inc. ............. 68,700 1,933,905 Mandalay Resort Group Inc. ..................... 43,200 1,711,152 Station Casinos Inc. ........................... 42,100 1,288,260 ----------- 6,999,521 ----------- Commercial Services 6.6% Advisory Board Co.* ............................ 41,200 1,872,540 Ask Jeeves Inc.* ............................... 59,200 1,030,080 Autobytel.com Inc.* ............................ 450,642 4,290,112 InterActive Corp.* ............................. 77,852 2,573,008 Kroll Inc.* .................................... 119,800 2,228,280 ----------- 11,994,020 ----------- Communications, Media & Entertainment 6.7% Alliance Gaming Corp.* ......................... 297,800 6,039,384 Entravision Communications Corp.* .............. 240,100 2,280,950 Hollywood Entertainment Corp.* ................. 94,800 1,611,600 Radio One Inc. Cl. D* .......................... 147,700 2,120,972 ----------- 12,052,906 ----------- Consumer Electronics 2.4% Harman International Inc. ...................... 44,400 4,366,740 ----------- Consumer Services 4.2% Career Education Corp.* ........................ 64,400 2,917,320 Education Management Corp.* .................... 10,400 599,768 Sylvan Learning Systems Inc.* .................. 150,500 4,105,640 ----------- 7,622,728 ----------- Household Furnishings 0.7% Kirklands Inc.* ................................ 81,900 1,312,857 ----------- Leisure Time 1.0% Penn National Gaming Inc.* ..................... 86,900 1,852,708 ----------- Restaurants 1.7% The Cheesecake Factory Inc.* ................... 52,300 1,891,691 Krispy Kreme Doughnuts Inc.* ................... 28,200 1,085,700 ----------- 2,977,391 ----------- Issuer Shares Value - -------------------------------------------------------------------------------- Retail 3.3% Cache Inc.* .................................... 28,800 $ 587,520 Michaels Stores Inc. ........................... 42,500 1,732,300 Pier1 Imports Inc. ............................. 63,800 1,227,512 Priceline.com Inc.* ............................ 63,300 1,835,067 RedEnvelope Inc.* .............................. 35,610 498,540 ----------- 5,880,939 ----------- Toys 1.6% LeapFrog Enterprises Inc.* ..................... 76,100 2,891,800 ----------- Total Consumer Discretionary ................................... 57,951,610 ----------- Financial Services 8.9% Banks & Savings & Loan 4.4% East West Bancorp Inc. ......................... 34,500 1,474,875 Greater Bay Bancorp Inc. ....................... 54,100 1,125,280 Hudson River Bancorp Inc. ...................... 7,700 247,401 Independent Bank Corp. ......................... 2,278 58,340 New York Community Bancorp Inc. ................ 75,400 2,375,854 Southwest Bancorp of Texas Inc. ................ 34,600 1,263,246 Texas Capital Bancshares Inc.* ................. 108,900 1,330,758 ----------- 7,875,754 ----------- Insurance 1.3% WellChoice Inc.* ............................... 79,700 2,401,361 ----------- Miscellaneous Financial 0.6% CapitalSource Inc.* ............................ 58,700 1,027,250 ----------- Securities Brokerage & Services 2.6% Affiliated Managers Group Inc.* ................ 35,300 2,216,840 Jeffries Group Inc. ............................ 88,600 2,547,250 ----------- 4,764,090 ----------- Total Financial Services ....................................... 16,068,455 ----------- Health Care 15.6% Drugs & Biotechnology 3.9% Alkermes Inc.* ................................. 108,900 1,494,108 Atrix Laboratories Inc.* ....................... 50,200 1,033,618 CV Therapeutics Inc.* .......................... 60,900 1,339,800 ICOS Corp.* .................................... 51,900 1,988,808 Martek Biosciences Corp.* ...................... 20,900 1,100,803 ----------- 6,957,137 ----------- Health Care Services 6.0% Caremark Rx Inc.* .............................. 233,400 5,274,840 Coventry Health Care Inc.* ..................... 66,300 3,496,662 Molina Healthcare Inc.* ........................ 37,600 1,043,400 Sierra Health Services Inc.* ................... 49,600 1,019,280 ----------- 10,834,182 ----------- Hospital Supply 5.7% American Medical Systems Holdings Inc.* ........ 137,000 2,972,900 Cyberonics Inc.* ............................... 59,800 1,845,428 Respironics Inc.* .............................. 60,400 2,523,512 TheraSense Inc.* ............................... 141,700 1,769,833 Zoll Medical Corp.* ............................ 37,700 1,208,285 ----------- 10,319,958 ----------- Total Health Care .............................................. 28,111,277 ----------- 6 The notes are an integral part of the financial statements. Issuer Shares Value - -------------------------------------------------------------------------------- Other Energy 3.8% Oil & Gas Producers 1.0% Newfield Exploration Co.* ........................ 45,700 $ 1,762,649 ------------ Oil Well Equipment & Services 2.8% Grant Prideco Inc.* .............................. 118,000 1,202,420 Key Energy Group Inc.* ........................... 160,100 1,544,965 Patterson UTI Energy Inc.* ....................... 42,900 1,161,303 Varco International Inc.* ........................ 75,000 1,268,250 ------------ 5,176,938 ------------ Total Other Energy ............................................... 6,939,587 ------------ Producer Durables 15.2% Industrial Products 2.9% Cuno Inc.* ....................................... 13,200 517,309 ESCO Technologies Inc.* .......................... 105,900 4,794,093 ------------ 5,311,402 ------------ Machinery 1.0% Helix Technology Corp. ........................... 104,100 1,704,117 ------------ Production Technology Equipment 7.7% ATMI Inc.* ....................................... 97,000 2,451,190 August Technology Corp.* ......................... 63,180 899,683 Axcelis Technologies Inc.* ....................... 298,200 2,463,132 Brooks Automation Inc.* .......................... 105,700 2,209,130 LAM Research Corp.* .............................. 67,500 1,495,125 Teradyne Inc.* ................................... 153,200 2,849,520 Varian Semiconductor Equipment Inc.* ............. 38,300 1,434,335 ------------ 13,802,115 ------------ Telecommunications Equipment 3.6% American Tower Corp.+ ............................ 167,100 1,696,065 Polycom Inc.* .................................... 169,500 2,815,395 SpectraLink Corp.* ............................... 107,800 2,013,704 ------------ 6,525,164 ------------ Total Producer Durables ......................................... 27,342,798 ------------ Technology 19.4% Communications Technology 2.0% Anaren Inc.* ..................................... 69,400 885,544 Avocent Corp.* ................................... 89,600 2,713,984 ------------ 3,599,528 ------------ Computer Software 6.5% Autodesk Inc. .................................... 123,400 2,100,268 eCollege Inc.@* .................................. 141,300 2,268,713 Embarcadero Technologies Inc.* ................... 190,800 1,915,632 Kronos Inc.* ..................................... 37,700 1,994,707 Opsware Inc.* .................................... 160,200 1,169,460 SafeNet Inc.* .................................... 61,200 2,211,156 ------------ 11,659,936 ------------ Computer Technology 0.8% SanDisk Corp.* ................................... 23,100 1,472,394 ------------ Electronics 2.8% Aeroflex Inc.* ................................... 425,600 3,766,560 Kemet Corp.* ..................................... 106,200 1,352,988 ------------ 5,119,548 ------------ Issuer Shares Value - -------------------------------------------------------------------------------- Electronics: Semiconductors/Components 7.3% Artisan Components Inc.* ......................... 71,200 $ 1,196,872 ASM International Inc. NV* ....................... 88,300 1,302,425 Cypress Semiconductor Corp.* ..................... 73,700 1,303,016 Integrated Silicon Solution Inc.* ................ 118,600 1,180,070 International Rectifier Corp.* ................... 80,500 3,013,920 O2Micro International Ltd.* ...................... 171,800 2,482,510 Silicon Storage Technology Inc.* ................. 309,300 2,706,375 ------------ 13,185,188 ------------ Total Technology ................................................ 35,036,594 ------------ Total Common Stocks (Cost $150,749,444) ......................... 176,749,951 ------------ Short-Term Investments 21.1% State Street Navigator Securities Lending Prime Portfolio ................................. 37,987,218 37,987,218 ------------ Total Short Term Investments (cost 37,987,218) .................. 37,987,218 ------------ Maturity Amount of Issuer Date Principal - -------------------------------------------------------------------------------- Commercial Paper 1.9% Morgan Stanley Dean Witter & Co., 1.04% .............. 10/01/2003 $3,474,000 3,474,000 ---------- Total Commercial Paper (cost $3,474,000) ........................... 3,474,000 ---------- % of Net Assets - -------------------------------------------------------------------------------- Summary of Portfolio Assets Investments (Cost $192,210,662) ............. 120.9% 218,211,169 Other Assets, Less Liabilities .............. (20.9%) (37,753,134) ----- ------------- Net Assets .................................. 100.0% $ 180,458,035 ===== ============= KEY TO SYMBOLS * Denotes a security which has not paid a dividend during the last year. @ Security valued under consistently applied procedures established by the Trustees. + Denotes a Rule 144A restricted security, meaning that it trades only among certain qualified institutional buyers. As of the report date, the fund had 0.94% of net assets in Rule 144A securities. Federal Income Tax Information At September 30, 2003, the net unrealized appreciation of investments based on cost for federal income tax purposes of $192,979,437 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $29,636,102 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (4,404,370) ----------- $25,231,732 =========== The notes are an integral part of the financial statements. State Street Research Emerging Growth Fund 7 FINANCIAL Statements Statement of Assets and Liabilities - -------------------------------------------------------------------------------- September 30, 2003 Assets Investments, at value (Cost $192,210,662) (Note 1) .......... $ 218,211,169 Receivable for securities sold .............................. 2,013,396 Receivable for fund shares sold ............................. 2,387,187 Receivable from distributor ................................. 33,300 Divdends receivable ......................................... 7,620 Other assets ................................................ 29,376 ------------- 222,682,048 ------------- Liabilities Payable for collateral received on securities loaned ........ 37,987,218 Payable for securities purchased ............................ 2,668,733 Payable to custodian (Note 1) ............................... 856,794 Payable for fund shares redeemed ............................ 280,468 Accrued management fee ...................................... 116,223 Accrued transfer agent and shareholder services ............. 77,670 Accrued distribution and service fees ....................... 77,489 Accrued administration fee .................................. 22,119 Accrued trustees' fees ...................................... 3,910 Other accrued expenses ...................................... 133,389 ------------- 42,224,013 ------------- Net Assets .................................................. $ 180,458,035 ============= Net Assets consist of: Unrealized appreciation of investments ...................... $ 26,000,507 Accumulated net realized loss ............................... (18,944,416) Paid-in capital ............................................. 173,401,944 ------------- $ 180,458,035 ============= 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 / Number of Shares = NAV A $117,571,227 10,112,394 $11.63* B(1) $ 19,797,087 1,864,961 $10.62** B $ 21,618,467 2,034,040 $10.63** C $ 13,530,493 1,271,907 $10.64** R $ 131,768 11,346 $11.61 S $ 7,808,993 645,079 $12.11 * Maximum offering price per share = $12.34 ($11.63 [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, 2003 Investment Income Dividends (Note 1) .......................................... $ 208,199 Interest (Note 1) ........................................... 142,894 ------------ 351,093 ------------ Expenses Management fee (Note 2) ..................................... 857,754 Transfer agent and shareholder services (Note 2) ............ 549,615 Custodian fee ............................................... 118,430 Administration fee (Note 2) ................................. 89,672 Reports to shareholders ..................................... 2,514 Distribution and service fees - Class A (Note 5) ............ 192,554 Distribution and service fees - Class B(1) (Note 5) ......... 147,892 Distribution and service fees - Class B (Note 5) ............ 204,996 Distribution and service fees - Class C (Note 5) ............ 82,185 Distribution and service fees - Class R (Note 5) ............ 304 Registration fees ........................................... 42,416 Audit fee ................................................... 36,593 Trustees' fees (Note 2) ..................................... 16,865 Legal fees .................................................. 2,308 Miscellaneous ............................................... 11,068 ------------ 2,355,166 Expenses borne by the distributor (Note 3) .................. (469,197) Fees paid indirectly (Note 2) ............................... (5,074) ------------ 1,880,895 ------------ Net investment loss ......................................... (1,529,802) ------------ Realized and Unrealized Gain on Investments Net realized gain on investments (Notes 1 and 4) ............ 2,300,598 Change in unrealized appreciation of investments ............ 31,784,757 ------------ Net gain on investments ..................................... 34,085,355 ------------ Net increase in net assets resulting from operations ........ $ 32,555,553 ============ 8 The notes are an integral part of the financial statements. Statement of Changes in Net Assets - -------------------------------------------------------------------------------- Years ended September 30 ------------------------------- 2003 2002* ------------------------------- Increase (Decrease) In Net Assets Operations: Net investment loss ........................ $ (1,529,802) $ (1,357,076) Net realized gain (loss) on investments .... 2,300,598 (8,624,322) Change in unrealized appreciation of investments ............................. 31,784,757 3,916,599 ------------- ------------- Net increase (decrease) resulting from operations .............................. 32,555,553 (6,064,799) ------------- ------------- Net increase (decrease) from fund share transactions (Note 7) ............. 58,870,609 (4,847,629) ------------- ------------- Total increase (decrease) in net assets .... 91,426,162 (10,912,428) Net Assets Beginning of year .......................... 89,031,873 99,944,301 ------------- ------------- End of year ................................ $ 180,458,035 $ 89,031,873 ============= ============= * Audited by other auditors Notes to Financial Statements - -------------------------------------------------------------------------------- September 30, 2003 Note 1 State Street Research Emerging Growth Fund is a series of State Street Research Capital Trust (the "Trust"), which was organized as a Massachusetts business trust in November 1988 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 primarily in the equity securities of emerging growth and small capitalization 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. 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. 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. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, are expected to materially affect the value of these securities, then they are valued at their fair value taking this trading or these events into account. 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. The notes are an integral part of the financial statements. State Street Research Emerging Growth Fund 9 Notes (continued) - -------------------------------------------------------------------------------- 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, 2003, the payable to the custodian bank of $856,794 represents the amount due for cash advance for the settlement of a 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, 2003, the fund had a capital loss carryforward of $16,878,454 available, to the extent provided in regulations, to offset future capital gains, if any, of which, $3,427,141, $13,297,422, and $153,891 expire on September 30, 2009, 2010, 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, 2001, through September 30, 2002, the fund incurred net capital losses of approximately $3,622,000 and has deferred and treated such losses as arising in the fiscal year ended September 30, 2003. From November 1, 2002, through September 30, 2003, the fund incurred net capital losses of approximately $1,297,187 and intends to defer and treat such losses as arising in the fiscal year ended September 30, 2004. 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 litigation settlements. At September 30, 2003, 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 post-October losses. At September 30, 2003, 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, 2003, the value of the securities loaned and the value of collateral were $36,858,399 and $37,987,218 (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, 2003, income from securities lending amounted to $52,370 and is included in interest income. Note 2 The Trust and the Adviser have entered into an agreement under which the Adviser earns monthly fees at an annual rate of 0.75% of the fund's average 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, 2003, the fees pursuant to such agreement amounted to $857,754. 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, 2003, the amount of such expenses allocated to the fund was $237,336. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expense. During the year ended September 30, 2003, the fund's transfer agent fees were reduced by $5,074 under this arrangement. The fees of the Trustees not currently affiliated with the Adviser amounted to $16,865 during the year ended September 30, 2003. 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, 2003, the amount of such expenses was $89,672. 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, 2003, the amount of such expenses assumed by the Distributor and its affiliates was $469,197. Note 4 For the year ended September 30, 2003, purchases and sales of securities, exclusive of short-term obligations, aggregated $241,328,767, and $182,749,099, 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. 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, 2003, 10 fees pursuant to such plans amounted to $192,554, $147,892, $204,996, $82,185 and $304 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, 2003, there were $1,310,716, $95,084 and $1,216,822 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 $32,907 and $47,192, respectively, on sales of Class A shares of the fund during the year ended September 30, 2003, and that MetLife Securities, Inc. earned commissions aggregating $57,791 and $524 on sales of Class B(1) and Class C shares, and the Distributor collected contingent deferred sales charges aggregating $33,772, $6,796 and $1,127 on redemptions of Class B(1), Class B and Class C shares, respectively, during the same period. Note 6 PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the fund's independent accountants for the fund's fiscal year ended September 30, 2003. During the previous two years, PricewaterhouseCoopers LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope or accounting principle. Further, in connection with its audits for the two previous fiscal years and through April 25, 2003, there were no disagreements between the fund and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it to make reference to the disagreements in its report on the financial statements for such years. 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, 2003, the Adviser held 11,338 Class R shares. These transactions break down by share class as follows: Years ended September 30 ------------------------------------------------------- 2003 2002* ------------------------------------------------------- Class A Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 12,559,523 $126,927,170 5,930,783 $ 61,427,485 Shares redeemed ....... (7,197,443) (69,515,792) (5,445,382) (55,869,175) ---------- ------------ ---------- ------------ Net increase .......... 5,362,080 $ 57,411,378 485,401 $ 5,558,310 ========== ============ ========== ============ Class B(1) Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 683,689 $ 6,402,427 478,669 $ 4,634,686 Shares redeemed ....... (473,546) (4,009,539) (307,186) (2,857,508) ---------- ------------ ---------- ------------ Net increase .......... 210,143 $ 2,392,888 171,483 $ 1,777,178 ========== ============ ========== ============ Class B Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 93,323 $ 904,460 127,430 $ 1,258,103 Shares redeemed ....... (848,937) (7,249,730) (1,588,051) (15,195,467) ---------- ------------ ---------- ------------ Net decrease .......... (755,614) $ (6,345,270) (1,460,621) $(13,937,364) ========== ============ ========== ============ Class C Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 761,479 $ 7,223,469 321,730 $ 3,179,152 Shares redeemed ....... (209,540) (1,831,112) (221,312) (2,114,963) ---------- ------------ ---------- ------------ Net increase .......... 551,939 $ 5,392,357 100,418 $ 1,064,189 ========== ============ ========== ============ Class R Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 11,346 $ 100,075 -- $ -- ---------- ------------ ---------- ------------ Net increase .......... 11,346 $ 100,075 -- $ -- ========== ============ ========== ============ Class S Shares Amount Shares Amount - -------------------------------------------------------------------------------- Shares sold ........... 497,551 $ 5,435,719 527,195 $ 5,731,904 Shares redeemed ....... (520,322) (5,516,538) (463,656) (5,041,846) ---------- ------------ ---------- ------------ Net increase (decrease) (22,771) $ (80,819) 63,539 $ 690,058 ========== ============ ========== ============ * Audited by other auditors State Street Research Emerging Growth Fund 11 FINANCIAL Highlights For a share outstanding throughout each year:
Class A - Years Ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 8.73 9.27 16.08 11.01 8.86 ------- ------ ------ ------ ------ Net investment loss ($)* (0.11) (0.09) (0.08) (0.14) (0.08) Net realized and unrealized gain (loss) on investments 3.01 (0.45) (4.45) 5.21 2.60 ------- ------ ------ ------ ------ Total from investment operations ($) 2.90 (0.54) (4.53) 5.07 2.52 ------- ------ ------ ------ ------ Distributions from capital gains ($) -- -- (2.28) -- (0.37 ------- ------ ------ ------ ------ Total distributions ($) -- -- (2.28) -- (0.37 ------- ------ ------ ------ ------ Net asset value, end of year ($) 11.63 8.73 9.27 16.08 11.01 ======= ====== ====== ====== ====== Total return (%)(b) 33.22 (5.93) (30.22) 46.05 29.10 Ratios/Supplemental Data: - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 117,571 41,474 39,522 53,600 31,384 Expense ratio (%)* 1.40 1.42 1.44 1.38 1.37 Expense ratio after expense reductions (%)* 1.40 1.40 1.40 1.37 1.35 Ratio of net investment loss to average net assets (%)* (1.10) (0.90) (0.69) (0.90) (0.75) Portfolio turnover rate (%) 166.71 167.69 281.64 218.99 93.38 *Reflects voluntary reduction of expenses of these amounts (%) 0.38 0.56 0.63 0.22 0.50 Class B(1) - Years Ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g) 1999(a)(e)(g) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 8.03 8.60 15.17 10.46 10.22) ------ ------ ------ ------ ----- Net investment loss ($)* (0.16) (0.15) (0.15) (0.24) (0.12) Net realized and unrealized gain (loss) on investments ($) 2.75 (0.42) (4.14) 4.95 0.36 ------ ------ ------ ------ ----- Total from investment operations ($) 2.59 (0.57) (4.29) 4.71 0.24 ------ ------ ------ ------ ----- Distributions from capital gains ($) -- -- (2.28) -- -- ------ ------ ------ ------ ----- Total distributions ($) -- -- (2.28) -- -- ------ ------ ------ ------ ----- Net asset value, end of year ($) 10.62 8.03 8.60 15.17 10.46 ====== ====== ====== ====== ===== Total return (%)(b) 32.25 (6.63) (30.48) 45.03 2.35(c) Ratios/Supplemental Data: - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 19,797 13,288 12,749 16,554 3,767 Expense ratio (%)* 2.10 2.12 2.14 2.11 2.12(d) Expense ratio after expense reductions (%)* 2.10 2.10 2.10 2.10 2.10(d) Ratio of net investment loss to average net assets (%)* (1.78) (1.60) (1.39) (1.59) (1.59)(d) Portfolio turnover rate (%) 166.71 167.69 281.64) 218.99 93.38 *Reflects voluntary reduction of expenses of these amounts (%) 0.44 0.56 0.63 0.22 0.50(d) Class B - Years Ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 8.04) 8.60 15.16 10.46 8.48 ------ ------ ------ ------ ------ Net investment loss ($)* (0.16) (0.16) (0.15) (0.24) (0.15) Net realized and unrealized gain (loss) on investments ($) 2.75 (0.40) (4.13) 4.94 2.50 ------ ------ ------ ------ ------ Total from investment operations ($) 2.59 (0.56) (4.28) 4.70 2.35 ------ ------ ------ ------ ------ Distributions from capital gains ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ------ Total distributions ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ------ Net asset value, end of year ($) 10.63 8.04 8.60 15.16 10.46 ====== ====== ====== ====== ====== Total return (%)(b) 32.21 (6.51) (30.42) 44.93 28.37 Ratios/Supplemental Data: - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 21,618 22,422 36,531 65,496 44,377 Expense ratio (%)* 2.10 2.12 2.14 2.11 2.12 Expense ratio after expense reductions (%)* 2.10 2.10 2.10 2.10 2.10 Ratio of net investment loss to average net assets (%)* (1.77) (1.61 (1.39) (1.64) (1.50) Portfolio turnover rate (%) 166.71 167.69) 281.64 218.99 93.38 *Reflects voluntary reduction of expenses of these amounts (%) 0.47 0.58 0.63 0.22 0.50
12
Class C - Years Ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 8.05 8.61 15.17 10.46 8.49 ------ ------ ------ ------ ----- Net investment loss ($)* (0.16) (0.15) (0.15) (0.24) (0.15) Net realized and unrealized gain (loss) on investments ($) 2.75 (0.41) (4.13) 4.95 2.49 ------ ------ ------ ------ ----- Total from investment operations ($) 2.59 (0.56) (4.28) 4.71 2.34 ------ ------ ------ ------ ----- Distributions from capital gains ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ----- Total distributions ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ----- Net asset value, end of year ($) 10.64 8.05 8.61 15.17 10.46 ====== ====== ====== ====== ===== Total return (%)(b) 32.17 (6.50) (30.40) 45.03 28.21 Ratios/Supplemental Data: - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 13,530 5,794 5,332 9,082 6,545 Expense ratio (%)* 2.10 2.12 2.14 2.11 2.12 Expense ratio after expense reductions (%)* 2.10 2.10 2.10 2.10 2.10 Ratio of net investment loss to average net assets (%)* (1.79) (1.60) (1.39) (1.63) (1.50) Portfolio turnover rate (%) 166.71 167.69 281.64 218.99 93.38 *Reflects voluntary reduction of expenses of these amounts (%) 0.41 0.56 0.63 0.22 0.50 Class R ---------- 2003(a)(f) - -------------------------------------------------------------------------------- Net asset value, beginning of period ($) 8.82 ------ Net investment loss ($)* (0.07) Net realized and unrealized gain on investments ($) 2.86 ------ Total from investment operations ($) 2.79 ------ Net asset value, end of period ($) 11.61 ====== Total return (%)(b) 31.63(c) Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets at end of period ($ thousands) 132 Expense ratio (%)* 1.60(d) Expense ratio after expense reductions (%)* 1.60(d) Ratio of net investment loss to average net assets (%)* (1.34)(d) Portfolio turnover rate (%) 166.71 *Reflects voluntary reduction of expenses of these amounts (%) 0.24(d) Class S - Years Ended September 30 ----------------------------------------------------------- 2003(a) 2002(a)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 9.06 9.62 16.48 11.26 9.02 ------ ------ ------ ------ ----- Net investment loss ($)* (0.08) (0.06) (0.04) (0.10) (0.05) Net realized and unrealized gain (loss) on investments ($) 3.13 (0.50) (4.54) 5.32 2.66 ------ ------ ------ ------ ----- Total from investment operations ($) 3.05 (0.56) (4.58) 5.22 2.61 ------ ------ ------ ------ ----- Distributions from capital gains ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ----- Total distributions ($) -- -- (2.28) -- (0.37) ------ ------ ------ ------ ----- Net asset value, end of year ($) 12.11 9.06 9.62 16.48 11.26 ====== ====== ====== ====== ===== Total return (%)(b) 33.66 (5.82) 29.73 46.36 29.59 Ratios/Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 7,809 6,054 5,810 8,744 6,432 Expense ratio (%)* 1.10 1.12 1.14 1.11 1.12 Expense ratio after expense reductions (%)* 1.10 1.10 1.10 1.10 1.10 Ratio of net investment loss to average net assets (%)* (0.78) (0.60) (0.39) (0.64) (0.51) Portfolio turnover rate (%) 166.71 167.69 281.64 218.99 93.38 *Reflects voluntary reduction of expenses of these amounts (%) 0.45 0.57 0.63 0.22 0.50
(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 voluntarliy assumed a portion of the fund's expenses. (c) Not annualized (d) Annualized (e) January 1, 1999 (commencement of share class) to March 31, 1999 (f) April 3, 2003 (commencement of share class) to September 30, 2003 (g) Audited by other auditors State Street Research Emerging Growth Fund 13 INDEPENDENT AUDITORS' Report 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, 2003, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year ended September 30, 2003. 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 audit. The statement of changes in net assets for the year ended September 30, 2002, and the financial highlights for each of the years in the four-year period ended September 30, 2002, were audited by other auditors whose report dated November 8, 2002, expressed an unqualified opinion on such statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, 2003, 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 audit provides 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, 2003, and the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts October 31, 2003 14 TRUSTEES AND OFFICERS State Street Research Capital Trust
Name, Position(s) Term of Office Address Held with and Length of Principal Occupations and Age(a) Fund Time Served(b) During Past 5 Years =================================================================================================== Independent Trustees Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, Chief (57) 1999 Executive Officer and President, PictureTel Corporation (video conferencing systems) - --------------------------------------------------------------------------------------------------- Steve A. Garban Trustee Since Retired; formerly Senior Vice President for (66) 1997 Finance and Operations and Treasurer, The Pennsylvania State University - --------------------------------------------------------------------------------------------------- Dean O. Morton Trustee Since Retired; formerly Executive Vice President, Chief (71) 1985 Operating Officer and Director, Hewlett-Packard Company (computer manufacturer) - --------------------------------------------------------------------------------------------------- Susan M. Phillips Trustee Since Dean, School of Business and Public Management, (58) 1998 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. (65) 1995 (investments); formerly President, The Glen Ellen Company (private investment firm) - --------------------------------------------------------------------------------------------------- Michael S. Trustee Since Jay W. Forrester Professor of Management, Sloan Scott Morton (66) 1987 School of Management, Massachusetts Institute of Technology - --------------------------------------------------------------------------------------------------- James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law firm) (72) 2002 =================================================================================================== Interested Trustees Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief (58) 2000 Executive Officer of State Street Research & Management Company; formerly Senior Vice President, Fixed Income Investments, Metropolitan Life Insurance Company =================================================================================================== Officers John F. Burbank Vice Since Managing Director of State Street Research & (66) President 2001 Management Company; formerly Senior Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Caroline Evascu Vice Since Vice President of State Street Research & (28) President 2003 Management Company; formerly Vice President and senior analyst at SG Cowen Asset Management; and research associate at Donaldson, Lufkin & Jenrette - --------------------------------------------------------------------------------------------------- C. Kim Goodwin Vice Since Managing Director and Chief Investment Officer - (44) President 2002 Equities of State Street Research & Management Company; formerly Chief Investment Officer - U.S. Growth Equities, American Century - --------------------------------------------------------------------------------------------------- Paul Haagensen Vice Since Senior Vice President of State Street Research & (57) President 2003 Management Company; formerly Portfolio Manager and senior analyst at Putnam Investments - --------------------------------------------------------------------------------------------------- Eileen M. Leary Vice Since Senior Vice President of State Street Research & (41) President 2002 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- John S. Lombardo Vice Since Managing Director, Chief Financial Officer and (48) President 2001 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 Research & (34) President 2003 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Tucker Walsh Vice Since Managing Director of State Street Research & (34) 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 (46) 2001 Street Research & Management Company; formerly Vice President and Assistant Treasurer, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Francis J. Secretary Since Managing Director, General Counsel and Secretary McNamara, III (48) 1995 of State Street Research & Management Company; formerly Executive Vice President, State Street Research & Management Company Number of Funds Name, in Fund Complex Other Address Overseen by Directorships Held and Age(a) Trustee/Officer(c) by Trustee/Officer ================================================================================ Independent Trustees 19 Ceridian Corporation Bruce R. Bond (57) - -------------------------------------------------------------------------------- Steve A. Garban 55 Metropolitan Series Fund, Inc.(d) (66) - -------------------------------------------------------------------------------- Dean O. Morton 55 The Clorox Company; KLA-Tencor (71) Corporation; BEA Systems, Inc.; Cepheid; Pharsight Corporation; and Metropolitan Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Susan M. Phillips 19 The Kroger Co. (58) - -------------------------------------------------------------------------------- Toby Rosenblatt 55 A.P. Pharma, Inc.; and Metropolitan (65) Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Michael S. 55 Metropolitan Series Fund, Inc.(d) Scott Morton (66) - -------------------------------------------------------------------------------- James M. Storey 19 SEI Investments Funds (consisting of (72) 104 portfolios); and The Massachusetts Health & Education Tax-Exempt Trust ================================================================================ Interested Trustees Richard S. Davis(+) 19 None (58) ================================================================================ Officers John F. Burbank 3 None (66) - -------------------------------------------------------------------------------- Caroline Evascu 3 None (28) - -------------------------------------------------------------------------------- C. Kim Goodwin 18 None (44) - -------------------------------------------------------------------------------- Paul Haagensen 3 None (57) - -------------------------------------------------------------------------------- Eileen M. Leary 3 None (41) - -------------------------------------------------------------------------------- John S. Lombardo 19 None (48) - -------------------------------------------------------------------------------- Andrew Morey 3 None (34) - -------------------------------------------------------------------------------- Tucker Walsh 3 None (34) - -------------------------------------------------------------------------------- Douglas A. Romich 19 None (46) - -------------------------------------------------------------------------------- Francis J. 19 None McNamara, III (48)
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. (d) Serves as Director of Metropolitan Series Fund, Inc., an investment company comprising 36 separate portfolios. (+) 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. 15 [LOGO] STATE STREET RESEARCH One Financial Center Boston, MA 02111-2690 ---------------- PRSRT STD 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. - -------------------------------------------------------------------------------- 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, 2003, this report must be accompanied by a current Quarterly Performance Update. To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus contains more complete information, including sales charges and expenses. Please read the prospectus carefully before investing or sending money. 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)2003 State Street Research Investment Services, Inc. One Financial Center Boston, MA 02111-2690 www.ssrfunds.com CONTROL NUMBER:(exp1104)SSR-LD EM-2656-1103 [BACKGROUND GRAPHIC] [LOGO] STATE STREET RESEARCH [PHOTO] Aurora Fund September 30, 2003 Annual Report to Shareholders Table of Contents 3 Performance Discussion 6 Portfolio Holdings 10 Financial Statements 14 Financial Highlights 16 Independent Auditors' Report 17 Trustees and Officers FROM THE CHAIRMAN State Street Research Optimism in the Economy The uncertainty that plagued the markets early in the 12-month period ended September 30, 2003, and gave way to optimism as economic news brightened. Low short-term interest rates, a significant income tax cut and higher government spending worked together to boost economic growth to its highest level in four years. Housing sales remained strong, although auto sales slipped late in the period. Corporate profits staged a solid rebound. Employment was the only holdout, as the jobless rate remained stubbornly high. A Weak Start, Then Stocks Move Higher The economy's weak showing held stocks back early in the period as investors backed away from risk in the buildup to war. However, in the second quarter of 2003 stocks began an impressive rally that continued until the last weeks of the period. Technology stocks were the strongest performers. Consumer stocks also gained ground as spending remained strong. In general, small- and mid-cap stocks outperformed large-caps, and growth stocks significantly outpaced value. Although all stock market indexes reported solid gains for the period, they were trimmed somewhat in the final weeks of September after news that consumer confidence had dropped. Bonds Retreat in Second Half As investors began to add risk back into their portfolios, lower-quality segments of the bond market staged an impressive comeback. High-yield bonds and emerging market bonds were the period's strongest performers. However, as interest rates began to climb and as investors moved money into the stock market, bonds gave back some of their gains in the second half of the period. Mortgage bonds lagged as mortgage prepayment activity heated up in the spring. Municipal bonds were hurt by concerns over state budget deficits and revenue shortfalls. Looking Ahead A revival for riskier segments of both the stock and bond markets took many investors by surprise over the past year. Yet, it provided an excellent reminder that the best way to take advantage of the market's strongest gains is to own a diversified portfolio of stocks and bonds. We hope you will take time to talk to your financial advisor about diversification. And as always, we look forward to helping you achieve your long-term financial goals with State Street Research Funds. Sincerely, /s/ Richard S. Davis Richard S. Davis Chairman September 30, 2003 - -------------------------------------------------------------------------------- A Special Message on Recent News Recent articles in the press have highlighted investigations into after-hours trading and frequent-trading practices in the mutual fund industry. These are serious matters, and we want to assure you that State Street Research is committed to maintaining full compliance with all legal requirements and ethical standards regarding these and other mutual fund trading practices. In fact, our mutual fund trading processes are designed to prevent these types of activities from taking place, and we are committed to maintaining their integrity. Our trade processing procedures carefully track the forward-pricing requirements contained in federal regulations and in our funds' prospectuses. We closely monitor trading in our funds and take measures to prevent market timing whenever it is identified. Furthermore, we do not enter into any special arrangements that would permit investors to avoid the forward-pricing or market-timing provisions of our prospectuses. In recent weeks, we have carefully reviewed our trading policies, procedures and operations. In addition, our firm recommended early on that the funds' Trustees engage an independent accounting firm, which has been reviewing trading issues on behalf of our funds' Audit Committee. While there is always more work that can be done, I am pleased to report that we believe our processes are working effectively, based on our preliminary findings. We understand that our relationship with our shareholders is based on trust, and we are committed to acting in the best interests of our shareholders at all times. - -------------------------------------------------------------------------------- 2 PERFORMANCE Discussion as of September 30, 2003 How State Street Research Aurora Fund Performed State Street Research Aurora Fund returned 32.90% for the 12-month period ended September 30, 2003.(1) The fund outperformed the Russell 2000[RegTM] Value Index, which returned 31.66% over the same period.(2) It also beat the Lipper Small-Cap Value Funds Average, which was 30.21% over the same period.(3) Reasons for the Fund's Performance Good stock selection with an emphasis on cyclical stocks--especially Automobiles & Transportation, Materials & Processing, Producer Durables and Technology--was the primary reason for the fund's strong performance relative to its benchmark during the year. The fund also benefited by underweighting Financial Services and Utilities, which were disappointments during the period. In Automobiles & Transportation, Mesa Air and Frontier Airlines delivered strong gains. Both companies benefited from an upturn in business activity and, indirectly, from the bankruptcy of United Airlines. In Technology, Cypress Semiconductor and Benchmark Electronics rallied on news of increased technology spending and better-than-expected earnings. The fund's Health Care investments detracted from performance. Because we look for companies that can generate cash flow, we were underweight in biotechnology, a source of strong gains, especially during the first half of the period. In general, we also underweighted pharmaceutical stocks, which, along with biotechnology, drove returns within the Russell 2000 Value Index. Stock selection in the Consumer Discretionary sector also detracted from the fund's return. Within Consumer Discretionary, we lost ground with Reader's Digest, which reported lower-than-expected earnings, and Argosy Gaming, which was hurt by unfavorable tax legislation in Illinois. However, we retained the positions in the fund as we continue to believe in the long-term prospects of both companies. Looking Ahead We have positioned the fund to benefit from an improving U.S. economy--an environment that has historically favored small-company stocks. Our bottom-up investment process has uncovered attractive opportunities in the Consumer Discretionary sector, especially restaurants and retail. We initiated positions in CKE Restaurants and Payless ShoeSource and increased our position in Too, a specialty retailer that sells apparel for young girls. We reduced our exposure to Financial Services and Utilities because we believe that valuations have reached historically high levels. Given that Financial Services only modestly exceeded the return of the overall index in the third quarter, we believe that investors may have begun to look elsewhere for opportunity and that the fund will benefit from our decision to underweight the sector. Top 10 Holdings - -------------------------------------------------------------------------------- Issuer/Security % of fund net assets 1 Agrium 1.9% ------------------------------------------- 2 Technitrol 1.8% ------------------------------------------- 3 Reader's Digest Association 1.6% ------------------------------------------- 4 Veeco Instruments 1.5% ------------------------------------------- 5 Argosy Gaming 1.4% ------------------------------------------- 6 Wabtec 1.4% ------------------------------------------- 7 Phelps Dodge 1.2% ------------------------------------------- 8 Martin Marietta Materials 1.1% ------------------------------------------- 9 Cypress Semiconductor 1.1% ------------------------------------------- 10 Kemet 1.1% ------------------------------------------- Total 14.1% Performance: Class A - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4,6,7) (does not reflect sales charge) Life of Fund 1 Year 5 Years (2/13/95) 32.90% 17.99% 20.48% - -------------------------------------------------------------------------------- Fund average annual total return as of 9/30/03(4,5,6,7) (at maximum applicable sales charge) Life of Fund 1 Year 5 Years (2/13/95) 25.26% 16.60% 19.65% - -------------------------------------------------------------------------------- Russell 2000 Value Index as of 9/30/03(2) Life of Fund 1 Year 5 Years (2/13/95) 31.66% 10.84% 11.29% - -------------------------------------------------------------------------------- See pages 4 and 5 for additional performance data for Class A and for performance data on other share classes. 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. (1) Class A shares; does not reflect sales charge. (2) 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 the index. (3) The Lipper Small-Cap Value Funds Average shows performance of a category of mutual funds with similar goals. The Lipper average shows you how well the fund has done compared with competing funds. (4) Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. (5) Performance reflects maximum 5.75% Class A share front-end sales charge. (6) Performance results for the fund are increased by the voluntary reduction of fund fees and expenses; without subsidization, performance would have been lower. (7) Because the fund invests in emerging growth and special situation companies, an investment in the fund may involve greater-than-average risk and above-average price fluctuations. Small-company stocks are more volatile than large-company stocks. Favorable investments in initial public offerings ("IPOs") have helped produce short-term returns in some periods that are not typical and may not continue in the future. State Street Research Aurora Fund 3 PERFORMANCE Discussion as of September 30, 2003 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) 32.90% 28.68% 399.59% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 25.26% 115.53% 370.87% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 25.26% 16.60% 19.65% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
2/95 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 Class A ........................... $ 9,425 10,984 15,776 27,245 20,591 25,302 38,826 38,447 35,430 47,087 Russell 2000 Value Index .......... $10,000 12,076 13,704 19,548 17,048 18,042 20,813 21,981 21,657 28,514
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B(1) Life of Fund 1 Year 5 Years (2/13/95) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 31.96% 120.50% 368.62% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 26.96% 118.50% 368.62% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 26.96% 16.92% 19.59% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
2/95 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 Class B(1) ........................ $10,000 11,602 16,535 28,332 21,253 25,907 39,474 38,814 35,513 46,862 Russell 2000 Value Index .......... $10,000 12,076 13,704 19,548 17,048 18,042 20,813 21,981 21,657 28,514
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Class B Life of Fund 1 Year 5 Years (2/13/95) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 33.31% 124.21% 376.51% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 28.31% 122.21% 376.51% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 28.31% 17.31% 19.82% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
2/95 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 Class B ........................... $10,000 11,602 16,535 28,332 21,253 25,907 39,474 38,814 35,744 47,651 Russell 2000 Value Index ......... $10,000 12,076 13,704 19,548 17,048 18,042 20,813 21,981 21,657 28,514
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Life of Fund 1 Year 5 Years (2/13/95) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 31.97% 120.57% 368.47% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 30.97% 120.57% 368.47% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 30.97% 17.14% 19.58% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
2/95 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 Class C ........................... $10,000 11,602 16,535 28,318 21,239 25,907 39,474 38,815 35,498 46,847 Russell 2000 Value Index .......... $10,000 12,076 13,704 19,548 17,048 18,042 20,813 21,981 21,657 28,514
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class S Life of Fund 1 Year 5 Years (2/13/95) - -------------------------------------------------------------------------------- Cumulative Total Return (does not reflect sales charge) 33.21% 132.94% 413.45% - -------------------------------------------------------------------------------- Cumulative Total Return (at maximum applicable sales charge) 33.21% 132.94% 413.45% - -------------------------------------------------------------------------------- Average Annual Total Return (at maximum applicable sales charge) 33.21% 18.43% 20.86% - -------------------------------------------------------------------------------- $10,000 Over Life of Fund (reflects maximum applicable sales charge) [Data below is represented by a line chart in the original report]
2/95 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 Class S ........................... $10,000 11,675 16,806 29,092 22,042 27,157 41,908 41,638 38,545 51,345 Russell 2000 Value Index .......... $10,000 12,076 13,704 19,548 17,048 18,042 20,813 21,981 21,657 28,514
- -------------------------------------------------------------------------------- Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. Performance reflects a maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B share or 1% Class C share contingent deferred sales charge, where applicable. 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, these returns would have been lower. Class S shares, offered without sales charge, are available through certain employee benefit plans and special programs. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance results for the fund are increased by the voluntary reduction of fund fees and expenses; without subsidization, performance would have been lower. Because the fund invests in emerging growth and special situation companies, an investment in the fund may involve greater-than-average risk and above-average price fluctuations. Small-company stocks are more volatile than large-company stocks. Favorable investments in initial public offerings ("IPOs") have helped produce short-term returns in some periods that are not typical and may not continue in the future. 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 the index. State Street Research Aurora Fund 5 PORTFOLIO Holdings September 30, 2003
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Common Stocks 99.6% Automobiles & Transportation 8.9% Air Transport 3.3% AAR Corp.* ............................................................. 2,100,700 $ 16,847,614 Alaska Air Group Inc.* ................................................. 720,900 20,055,438 EGL Inc.* .............................................................. 1,477,700 26,864,586 Frontier Airlines Inc.* ................................................ 848,000 13,958,080 Mesa Air Group Inc.* ................................................... 1,458,500 16,189,350 ------------ 93,915,068 ------------ Automotive Parts 2.3% American Axle & Manufacturing Holdings Inc.* ....................................................... 467,800 13,837,524 Borg-Warner Automotive Inc. ............................................ 200,900 13,631,065 Navistar International Corp.* .......................................... 807,200 30,092,416 Wabash National Corp.* ................................................. 397,400 6,338,530 ------------ 63,899,535 ------------ Miscellaneous Transportation 1.1% Kirby Corp.* ........................................................... 246,400 7,071,680 OMI Corp.* ............................................................. 2,669,600 17,672,752 Teekay Shipping Corp. .................................................. 151,600 6,412,680 ------------ 31,157,112 ------------ Railroad Equipment 1.4% Wabtec Corp. ........................................................... 2,530,300 40,105,255 ------------ Railroads 0.2% RailAmerica Inc.* ...................................................... 732,800 6,302,080 ------------ Tires & Rubber 0.5% Cooper Tire & Rubber Co. ............................................... 848,100 13,459,347 ------------ Truckers 0.1% Marten Transport Ltd.* ................................................. 75,000 1,957,500 ------------ Total Automobiles & Transportation .......................................................... 250,795,897 ------------ Consumer Discretionary 19.8% Advertising Agencies 0.3% Valassis Communications Inc.* .......................................... 369,900 9,765,360 ------------ Casinos/Gambling, Hotel/Motel 2.2% Argosy Gaming Corp.* ................................................... 1,652,900 40,330,760 Boyd Gaming Corp. ...................................................... 549,500 8,385,370 International Game Technology Inc. ..................................... 434,100 12,219,915 ------------ 60,936,045 ------------ Commercial Services 3.4% Heidrick & Struggles International Inc.* ............................... 1,434,400 24,284,392 Pep Boys Inc. .......................................................... 684,900 10,478,970 ProQuest Co.* .......................................................... 432,700 11,380,010 Six Flags Inc.* ........................................................ 2,029,100 10,673,066 Steiner Leisure Ltd.* .................................................. 855,000 16,381,800 Tetra Tech Inc.* ....................................................... 749,000 14,912,590 Viad Corp. ............................................................. 341,200 8,147,856 ------------ 96,258,684 ------------
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Communications, Media & Entertainment 0.7% Entravision Communications Corp.* ...................................... 652,500 $ 6,198,750 Gray Television Inc. ................................................... 548,400 6,405,312 LIN TV Corp. Cl. A* .................................................... 393,300 8,361,558 ------------ 20,965,620 ------------ Consumer Products 1.0% Playtex Products Inc.* ................................................. 1,833,400 10,927,064 Tupperware Corp. ....................................................... 1,266,200 16,941,756 ------------ 27,868,820 ------------ Consumer Services 1.4% Dollar Thrifty Automotive Group Inc.* .................................. 718,900 16,333,408 SkillSoft plc ADR* ..................................................... 1,588,800 11,836,560 Stewart Enterprises Inc. Cl. A* ........................................ 3,134,900 11,912,620 ------------ 40,082,588 ------------ Household Furnishings 0.7% Furniture Brands International Inc.* ................................... 336,400 8,107,240 La-Z-Boy Inc. .......................................................... 550,400 12,218,880 ------------ 20,326,120 ------------ Leisure Time 1.5% Callaway Golf Co. ...................................................... 966,900 13,797,663 K2 Inc.* ............................................................... 769,300 11,424,105 Penn National Gaming Inc.* ............................................. 332,400 7,086,768 Steinway Musical Instruments Inc.* ..................................... 519,300 9,217,575 ------------ 41,526,111 ------------ Printing & Publishing 3.0% Bowne & Company Inc. ................................................... 365,400 5,462,730 Hollinger International Inc. ........................................... 1,247,700 15,409,095 Journal Register Co.* .................................................. 1,012,700 18,988,125 Reader's Digest Association Inc. Cl. A ................................. 3,188,200 44,602,918 ------------ 84,462,868 ------------ Restaurants 1.2% CKE Restaurants Inc.* .................................................. 1,136,400 7,329,780 Jack in the Box Inc.* .................................................. 104,300 1,856,540 O'Charley's Inc.* ...................................................... 372,000 5,516,760 Papa Johns International Inc.* ......................................... 154,600 3,835,626 Ruby Tuesday Inc. ...................................................... 282,900 6,820,719 Ryan's Family Steak Houses Inc.* ....................................... 704,400 9,009,276 ------------ 34,368,701 ------------ Retail 4.3% American Eagle Outfitters Inc.* ........................................ 468,900 6,967,854 Barnes & Noble Inc.* ................................................... 390,200 9,914,982 Brookstone Inc.* ....................................................... 549,450 10,895,593 Charming Shopper Inc.* ................................................. 1,908,200 10,895,822 Dillard's Inc. ......................................................... 565,000 7,898,700 Friedman's Inc. Cl. A .................................................. 452,400 6,310,980 Genesco Inc.* .......................................................... 391,500 6,287,490 Hancock Fabrics Inc. ................................................... 308,600 4,869,708 J. Jill Group Inc.* .................................................... 709,300 8,156,950 Linens 'n Things Inc.* ................................................. 270,800 6,439,624 Payless ShoeSource Inc.* ............................................... 971,700 12,573,798 Talbots Inc. ........................................................... 310,900 10,834,865 Too Inc.* .............................................................. 1,031,400 15,192,522 Tweeter Home Entertainment Group Inc.* ................................. 632,845 4,860,250 ------------ 122,099,138 ------------ Shoes 0.1% Stride Rite Corp. ...................................................... 160,400 1,732,320 ------------ Textile Apparel Manufacturers 0.0% Oshkosh B'Gosh Inc. Cl. A .............................................. 9,800 252,056 ------------ Total Consumer Discretionary ................................................................. 560,644,431 ------------
6 The notes are an integral part of the financial statements.
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Consumer Staples 2.6% Drug & Grocery Store Chains 1.6% Duane Reade Inc.* ........................................................ 917,100 $14,627,745 Longs Drug Stores Corp. .................................................. 770,900 15,518,217 Wild Oats Markets Inc.* .................................................. 1,431,600 15,647,388 ----------- 45,793,350 ----------- Foods 1.0% International Multifoods Corp.* .......................................... 317,900 7,422,965 Interstate Bakeries Corp. ................................................ 1,332,000 19,980,000 ----------- 27,402,965 ----------- Total Consumer Staples ........................................................................ 73,196,315 ----------- Financial Services 7.4% Banks & Savings & Loan 0.8% First Niagara Financial Group Corp.* ..................................... 445,600 6,728,560 Staten Island Bancorp Inc. ............................................... 344,700 6,704,415 Sterling Bancshares Inc. ................................................. 771,900 9,208,767 ----------- 22,641,742 ----------- Financial Data Processing Services & Systems 0.9% Carreker Corp.* .......................................................... 1,153,600 9,286,480 John H. Harland Co. ...................................................... 580,500 15,365,835 ----------- 24,652,315 ----------- Insurance 2.3% Amerus Group Co. ......................................................... 438,400 14,905,600 Harleysville Group Inc. .................................................. 372,200 8,675,982 Hub International Ltd. ................................................... 679,100 11,137,240 Odyssey Reinsurance Holdings Corp. ....................................... 595,300 12,251,274 Ohio Casualty Corp.* ..................................................... 938,200 13,603,900 RLI Corp. ................................................................ 94,100 3,097,772 ----------- 63,671,768 ----------- Miscellaneous Financial 0.3% Fidelity National Financial Inc. ......................................... 194,263 5,839,546 Medallion Financial Corp. ................................................ 492,400 3,102,120 ----------- 8,941,666 ----------- Real Estate Investment Trusts 0.7% Anthracite Capital Inc. .................................................. 629,985 6,079,355 Heritage Property Investment Trust Inc. .................................. 484,400 13,989,472 ----------- 20,068,827 ----------- Rental & Leasing Services: Commercial 0.6% GATX Corp. ............................................................... 867,800 18,353,970 ----------- Securities Brokerage & Services 1.8% American Capital Strategies Ltd. ......................................... 657,000 16,333,020 Investment Technology Group Inc.* ........................................ 369,800 7,092,764 MCG Capital Corp. ........................................................ 375,000 5,853,750 NCO Group Inc.* .......................................................... 658,800 15,462,036 SWS Group Inc. ........................................................... 259,400 5,112,774 ----------- 49,854,344 ----------- Total Financial Services ...................................................................... 208,184,632 ----------- Health Care 5.0% Drugs & Biotechnology 1.3% ArthroCare Corp.* ........................................................ 395,100 7,040,682 Chattem Inc.* ............................................................ 439,800 6,104,424 Cytyc Corp.* ............................................................. 449,600 6,761,984 ICN Pharmaceuticals Inc. ................................................. 1,016,100 17,436,276 ----------- 37,343,366 ----------- Health Care Facilities 0.9% Genesis Health Ventures Inc.* ............................................ 410,400 9,952,200 LifePoint Hospitals Inc.* ................................................ 591,500 14,225,575 ----------- 24,177,775 -----------
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Health Care Services 1.5% Community Health Systems Inc.* ........................................... 288,800 $ 6,266,960 Hooper Holmes Inc. ....................................................... 1,317,600 8,762,040 Humana Inc.* ............................................................. 285,500 5,153,275 Province Healthcare Co.* ................................................. 1,240,900 16,069,655 Rehabcare Group Inc.* .................................................... 328,500 5,600,925 ----------- 41,852,855 ----------- Hospital Supply 1.3% American Medical Systems Holdings Inc.* 232,900 5,053,930 DJ Orthopedics Inc.* ..................................................... 469,000 6,542,550 Invivo Corp.* ............................................................ 171,356 2,688,568 Ocular Sciences Inc.* .................................................... 322,200 7,178,616 Sola International Inc.* ................................................. 393,400 6,294,400 Viasys Healthcare Inc.* .................................................. 443,400 8,956,680 ----------- 36,714,744 ----------- Total Health Care ............................................................................. 140,088,740 ----------- Materials & Processing 16.8% Agriculture 0.7% Bunge Ltd. ............................................................... 297,100 8,170,250 Corn Products International Inc. ......................................... 311,900 9,934,015 ----------- 18,104,265 ----------- Building & Construction 2.7% ElkCorp .................................................................. 826,700 19,477,052 Granite Construction Inc. ................................................ 689,800 12,885,464 Martin Marietta Materials Inc. ........................................... 877,300 31,977,585 York International Corp. ................................................. 327,300 11,321,307 ----------- 75,661,408 ----------- Chemicals 1.7% Cambrex Corp. ............................................................ 431,100 9,785,970 Ferro Corp. .............................................................. 514,800 10,996,128 Methanex Corp. ........................................................... 992,800 9,292,608 Omnova Solutions Inc.* ................................................... 2,357,000 8,273,070 Spartech Corp. ........................................................... 399,600 8,511,480 Stepan Chemical Co. ...................................................... 42,150 960,177 ----------- 47,819,433 ----------- Containers & Packaging 0.9% Anchor Glass Container Corp.* ............................................ 293,900 4,790,570 Apogee Enterprises, Inc. ................................................. 613,800 6,334,416 Packaging Corp. of America* .............................................. 763,100 14,819,402 ----------- 25,944,388 ----------- Diversified Manufacturing 0.9% Acuity Brands Inc. ....................................................... 468,900 8,468,334 Barnes Group Inc. ........................................................ 61,200 1,588,752 Graphic Packaging Corp.* ................................................. 1,273,600 6,444,416 Tredegar Industries Corp. ................................................ 607,400 9,141,370 ----------- 25,642,872 ----------- Engineering & Contracting Services 0.8% Dycom Industries Inc.* ................................................... 587,500 11,979,125 Integrated Electrical Services Inc.* ..................................... 1,581,100 10,909,590 ----------- 22,888,715 ----------- Fertilizers 2.2% Agrium Inc. .............................................................. 4,173,900 52,424,184 IMC Global Inc. .......................................................... 1,290,600 8,272,746 Lesco Inc.* .............................................................. 118,400 1,292,928 ----------- 61,989,858 ----------- Forest Products 0.7% Louisiana Pacific Corp.* ................................................. 967,800 13,336,284 Rayonier Inc. ............................................................ 177,450 7,204,470 ----------- 20,540,754 -----------
The notes are an integral part of the financial statements. State Street Research Aurora Fund 7 Portfolio Holdings (cont'd) - --------------------------------------------------------------------------------
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Gold & Precious Metals 0.1% Coeur D'Alene Mines Corp.* ............................................... 748,700 $ 2,328,457 ----------- Miscellaneous Materials & Processing 2.2% Maverick Tube Corp.* ..................................................... 1,048,200 16,268,064 NN Inc. .................................................................. 674,500 8,674,070 NS Group Inc.* ........................................................... 1,185,600 7,658,976 Precision Castparts Corp. ................................................ 214,300 7,521,930 RTI International Metals Inc.* ........................................... 644,600 6,781,192 Valmont Industries Inc. .................................................. 795,900 15,750,861 Wolverine Tube Inc.* ..................................................... 146,200 618,426 ----------- 63,273,519 ----------- Non-Ferrous Metals 2.3% GrafTech International Ltd.* ............................................. 738,900 5,911,200 Lydall Inc.* ............................................................. 238,600 2,865,586 Minerals Technologies Inc. ............................................... 356,400 18,140,760 Phelps Dodge Corp. * ..................................................... 737,700 34,524,360 Titanium Metals Corp.* ................................................... 108,219 3,652,391 ----------- 65,094,297 ----------- Paper & Forest Products 0.2% Caraustar Industries Inc.* ............................................... 577,200 5,038,956 ----------- Steel 1.3% Alaska Steel Holding Corp.* .............................................. 881,600 1,763,200 Allegheny Technologies Inc. .............................................. 1,398,100 9,157,555 United States Steel Corp. ................................................ 1,379,300 25,351,534 ----------- 36,272,289 ----------- Textile & Products 0.1% Quaker Fabric Corp. ...................................................... 554,700 3,760,866 ----------- Total Materials & Processing .................................................................. 474,360,077 ----------- Other 1.8% Multi-Sector 1.8% Jacuzzi Brands Inc.* ..................................................... 912,100 5,655,020 Trinity Industries Inc. .................................................. 1,082,600 27,985,210 Walter Industries Inc. ................................................... 1,605,500 17,227,015 ----------- Total Other ................................................................................... 50,867,245 ----------- Other Energy 5.2% Miscellaneous Energy 0.4% Peabody Energy Corp. ..................................................... 406,300 12,745,631 ----------- Offshore Drilling 0.1% Atwood Oceanics Inc.* .................................................... 78,500 1,883,215 ----------- Oil & Gas Producers 2.1% Cabot Oil & Gas Corp. .................................................... 735,600 19,125,600 Energy Partners Ltd.* .................................................... 916,700 10,193,704 Nuevo Energy Co.* ........................................................ 487,400 8,856,058 Spinnaker Exploration Co.* ............................................... 238,900 5,733,600 Stone Energy Inc.* ....................................................... 257,900 9,098,712 Vintage Petroleum Inc. ................................................... 580,200 6,312,576 ----------- 59,320,250 ----------- Oil Well Equipment & Services 2.6% Core Laboratories NV Co.* ................................................ 887,300 12,466,565 Global Industries Ltd.* .................................................. 2,328,800 10,596,040 Hanover Compressor Co.* .................................................. 1,966,600 19,469,340 NewPark Resources Inc.* .................................................. 1,613,500 6,938,050 Veritas DGC Inc.* ........................................................ 800,200 6,385,596 W-H Energy Services Inc.* ................................................ 1,053,000 18,743,400 ----------- 74,598,991 ----------- Total Other Energy ............................................................................ 148,548,087 -----------
Issuer Shares Value - ------------------------------------------------------------------------------------------------------------- Producer Durables 19.4% Aerospace 1.6% Heico Corp. .............................................................. 616,500 $ 8,384,400 Ladish Company Inc.* ..................................................... 742,800 4,642,500 Orbital Sciences Corp.* .................................................. 621,300 5,765,664 Teledyne Technologies Inc.* .............................................. 793,400 11,543,970 United Defense Industries Inc.* .......................................... 511,000 14,507,290 ----------- 44,843,824 ----------- Electrical Equipment & Components 3.4% LittleFuse Inc.* ......................................................... 297,100 6,833,300 MKS Instruments Inc.* .................................................... 729,303 15,796,703 Regal Beloit Corp. ....................................................... 529,000 10,791,600 Technitrol Inc.* ......................................................... 2,710,200 49,894,782 Triumph Group Inc.* ...................................................... 460,000 13,708,000 ----------- 97,024,385 ----------- Industrial Products 3.6% C&D Technologies Inc. .................................................... 101,400 1,918,488 Denison International plc ADR* ........................................... 97,100 1,978,898 Federal Signal Corp. ..................................................... 522,400 7,783,760 Flowserve Corp.* ......................................................... 1,076,500 21,852,950 Roper Industries Inc. .................................................... 387,500 16,875,625 Veeco Instruments Inc.* .................................................. 2,108,400 42,083,664 Watts Industries Inc. Cl. A .............................................. 553,500 9,752,670 ----------- 102,246,055 ----------- Machinery 4.3% AGCO Corp.* .............................................................. 899,100 15,410,574 Applied Films Corp.* ..................................................... 415,100 12,340,923 Cummings Inc. ............................................................ 90,600 4,025,358 Helix Technology Corp. ................................................... 648,100 10,609,397 JLG Industries Inc. ...................................................... 586,300 6,754,176 Joy Global Inc.* ......................................................... 734,300 11,528,510 Kadant Inc.* ............................................................. 1,274,900 24,427,084 Manitowoc Company Inc. ................................................... 654,800 14,202,612 Stewart & Stevenson Services Inc. ........................................ 924,800 13,890,496 Terex Corp.* ............................................................. 458,000 8,486,740 ----------- 121,675,870 ----------- Miscellaneous Equipment 0.8% Pentair Inc. ............................................................. 247,700 9,875,799 Thomas & Betts Corp.* .................................................... 749,600 11,881,160 ----------- 21,756,959 ----------- Office Furniture & Business Equipment 0.4% Steelcase Inc. Cl. A ..................................................... 897,200 10,569,016 ----------- Production Technology Equipment 3.3% ATMI Inc.* ............................................................... 733,600 18,538,072 Brooks Automation Inc.* .................................................. 1,219,100 25,479,190 Cognex Corp. ............................................................. 500,800 13,166,032 Esterline Technologies Corp.* ............................................ 532,200 10,266,138 Varian Semiconductor Equipment Inc.* ..................................... 683,600 25,600,820 ----------- 93,050,252 ----------- Telecommunications Equipment 2.0% American Tower Corp. Cl. A* .............................................. 1,235,000 12,535,250 Andrew Corp.* ............................................................ 1,767,300 21,720,117 Belden Inc. .............................................................. 405,200 7,078,844 Plantronics Inc.* ........................................................ 650,100 15,517,887 ----------- 56,852,098 ----------- Total Producer Durables ....................................................................... 548,018,459 -----------
8 The notes are an integral part of the financial statements.
Issuer Shares Value - -------------------------------------------------------------------------------- Technology 11.4% Communications Technology 2.2% Advanced Fibre Communications Inc.* .......... 247,900 $ 5,198,463 Anaren Microwave Inc.* ....................... 951,600 12,142,416 Anixter International Inc.* .................. 363,000 8,265,510 CommScope Inc.* .............................. 961,800 11,599,308 INET Technologies Inc.* ...................... 1,496,100 19,359,534 NMS Communications Corp.* .................... 2,327,900 5,214,496 ------------- 61,779,727 ------------- Computer Software 2.0% Ciber Inc.* .................................. 1,758,900 13,367,640 Eletronics for Imaging Inc.* ................. 1,063,500 24,800,820 Iona Technologies plc ADR* ................... 1,224,100 2,937,840 Micros Systems Inc.* ......................... 281,800 9,623,470 Systems & Computer Technology Corp.* ......... 604,000 6,299,720 ------------- 57,029,490 ------------- Computer Technology 0.6% Hutchinson Technology Inc.* .................. 420,900 13,931,790 SimpleTech Inc.* ............................. 662,300 4,742,068 ------------- 18,673,858 ------------- Electronics 4.4% AVX Corp. .................................... 632,100 8,653,449 BEI Technologies Inc. ........................ 998,900 15,582,840 Benchmark Electronics Inc.* .................. 530,500 22,424,235 Coherent Inc.* ............................... 315,900 7,780,617 Herley Industries Inc.* ...................... 926,300 16,228,776 Kemet Corp.* ................................. 2,496,400 31,804,136 Lecroy Corp.* ................................ 806,600 12,929,798 Trimble Navigation Ltd.* ..................... 418,700 9,692,905 ------------- 125,096,756 ------------- Electronics: Semiconductors/Components 2.2% Avnet Inc.* .................................. 529,000 8,739,080 Chippac Inc. ................................. 608,800 3,585,832 Cypress Semiconductor Corp.* ................. 1,802,100 31,861,128 Excel Technology Inc.* ....................... 348,100 8,702,500 OpticNet Inc.* @ ............................. 208,500 8,340 TriQuint Semiconductors Inc.* ................ 1,469,900 8,231,440 ------------- 61,128,320 ------------- Total Technology .............................................. 323,708,151 ------------- Utilities 1.3% Electrical 0.2% Hawaiian Electric Industries Inc. ............ 102,200 4,448,766 ------------- Gas Distribution 0.4% NUI Corp. .................................... 751,800 11,239,410 ------------- Telecommunications 0.7% PTEK Holdings Inc.* .......................... 2,433,500 19,833,025 ------------- Total Utilities ............................................... 35,521,201 ------------- Total Common Stocks (Cost $2,415,314,362) ..................... 2,813,933,235 ------------- Short-Term Investments 16.7% State Street Navigator Securities Lending Prime Portfolio ...................... 472,319,423 472,319,423 ------------- Total Short-Term Investments (cost $472,319,423) .............. 472,319,423 -------------
Maturity Amount of Coupon Rate Date Principal Value - ------------------------ ------------ ------------- ------------- Commercial Paper 1.1% AIG Funding Inc., 1.08% 10/01/2003 $8,166,000 $8,166,000 General Electric Capital Corp., 1.04% ......... 10/02/2003 11,400,000 11,399,671 General Electric Capital Corp., 1.02% ......... 10/06/2003 5,970,000 5,969,154 General Electric Capital Corp., 1.05% ......... 10/06/2003 6,102,000 6,101,110 ---------- Total Commercial Paper (Cost $31,635,935) ........... 31,635,935 ----------
% of Net Assets ------------ Summary of Portfolio Assets Investments (Cost $2,919,269,720) ............... 117.4% 3,317,888,593 Cash and Other Assets, Less Liabilities ......... (17.4%) (490,778,267) ----- ------------- Net Assets ...................................... 100.0% $2,827,110,326 ============= ==============
KEY TO SYMBOLS * Denotes a security which has not paid a dividend during the last year. @ Security valued under consistently applied procedures established by the Trustees. ADR Stands for American Depositary Receipt. Federal Income Tax Information At September 30, 2003, the net unrealized appreciation of investments based on cost for federal income tax purposes of $2,930,431,275 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $531,739,766 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (144,282,448) ------------ $387,457,318 ============ The notes are an integral part of the financial statements. State Street Research Aurora Fund 9 FINANCIAL Statements Statement of Assets and Liabilities - -------------------------------------------------------------------------------- September 30, 2003 Investments, at value (Cost $2,919,269,720) (Note 1) $3,317,888,593 Cash ..................................................... 886,359 Receivable for fund shares sold .......................... 6,650,150 Dividends receivable ..................................... 1,974,462 Receivable for securities sold ........................... 130,809 Other assets ............................................. 14,527 --------- 3,327,544,900 ------------- Liabilities Payable for collateral received on securities loaned ..... 472,319,423 Payable for fund shares redeemed ......................... 11,895,211 Payable for securities purchased ......................... 10,905,815 Accrued management fee ................................... 2,104,387 Accrued transfer agent and shareholder services .......... 1,474,721 Accrued distribution and service fees .................... 1,151,199 Accrued trustees' fees ................................... 36,445 Accrued administration fee ............................... 23,924 Other accrued expenses ................................... 523,449 ------------- 500,434,574 ------------- Net Assets ............................................... $2,827,110,326 ============== Net Assets consist of: Unrealized appreciation of investments ................... $ 398,618,873 Accumulated net realized loss ............................ (19,061,225) Paid-in capital .......................................... 2,447,552,678 -------------- $2,827,110,326 ============== 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 $1,682,503,635 52,128,021 $ 32.28* B(1) $ 401,015,986 13,284,859 $ 30.19** B $ 192,054,780 6,256,257 $ 30.70** C $ 409,076,392 13,552,560 $ 30.18** S $ 142,459,533 4,293,543 $ 33.18
* Maximum offering price per share = $34.25 ($32.28 [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, 2003 Investment Income Dividends, net of foreign taxes of $234,581 (Note 1)...... $ 19,042,335 Interest (Note 1) ........................................ 2,596,244 ------------ 21,638,579 ------------ Expenses Management fee (Note 2) .................................. 21,291,705 Transfer agent and shareholder services (Note 2) ......... 8,612,090 Distribution and service fees - Class A (Note 4) ......... 4,427,563 Distribution and service fees - Class B(1) (Note 4) ...... 3,534,392 Distribution and service fees - Class C (Note 4) ......... 3,856,413 Reports to shareholders .................................. 596,539 Custodian fee ............................................ 453,223 Trustees' fees (Note 2) .................................. 102,527 Registration fees ........................................ 89,840 Administration fee ....................................... 77,616 Audit fee ................................................ 37,128 Legal fees ............................................... 24,456 Miscellaneous ............................................ 145,625 ------------ 43,249,117 Fees paid indirectly (Note 2) ............................ (45,884) ------------ 43,203,233 ------------ Net investment loss ...................................... (21,564,654) ------------ Realized and Unrealized Gain (Loss) on Investments Net realized loss on investments (Notes 1 and 3) ......... (5,964,906) Change in unrealized appreciation of investments ......... 732,152,627 ------------ Net gain on investments .................................. 726,187,721 ------------ Net increase in net assets resulting from operations ..... $704,623,067 ============ 10 The notes are an integral part of the financial statements. Statement of Changes in Net Assets - -------------------------------------------------------------------------------- Years ended September 30 ------------------------------- 2003 2002* ------------------------------- Increase (Decrease) In Net Assets Operations: Net investment income ................ $ (21,564,654) $ (28,714,402) Net realized gain (loss) on investments ....................... (5,964,906) 14,770,020 Change in unrealized appreciation (depreciation) of investments ..... 732,152,627 (356,652,695) -------------- -------------- Net increase (decrease) resulting from operations ................... 704,623,067 (370,597,077) -------------- -------------- Distribution from capital gains: Class A ........................... (8,427,738) - Class B(1) ........................ (2,137,073) - Class B ........................... (1,112,809) - Class C ........................... (2,440,090) - Class S ........................... (560,409) - -------------- -------------- (14,678,119) - -------------- -------------- Net increase (decrease) from fund share transactions (Note 6) .......................... (332,003,552) 516,543,308 -------------- -------------- Total increase in net assets ......... 357,941,396 145,946,231 Net Assets Beginning of year .................... 2,469,168,930 2,323,222,699 -------------- -------------- End of year .......................... $2,827,110,326 $2,469,168,930 ============== ============== * Audited by other auditors Notes to Financial Statements - -------------------------------------------------------------------------------- September 30, 2003 Note 1 State Street Research Aurora Fund is a series of State Street Research Capital Trust (the "Trust"), which is a Massachusetts business trust 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 primarily in the equity securities of small-capitalization companies which are trading at prices believed to be below the true values of such securities. 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. 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. 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. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, are expected to materially affect the value of these securities, then they are valued at their fair value taking this trading or these events into account. 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. The notes are an integral part of the financial statements. State Street Research Aurora Fund 11 Notes (continued) - -------------------------------------------------------------------------------- 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 quarterly. Net realized capital gains, if any, are distributed annually, unless additional distributions are required for compliance with applicable tax regulations. Income dividends and capital 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, 2003, the fund had a capital loss carryforward of $7,899,670 available, to the extent provided in regulations, to offset future capital gains, if any, which expire on September 30, 2011. 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 litigation settlements. At September 30, 2003, 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 post-October losses. At September 30, 2003, 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, 2003, the value of the securities loaned and the value of collateral were $455,124,952 and $472,319,423 (including $472,205,387 of cash collateral invested in State Street Navigator Securities Lending Prime Portfolio and $114,036 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, 2003, income from securities lending amounted to $978,724 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, 2003, the fees pursuant to such agreement amounted to $21,291,705. 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, 2003, the amount of such expenses allocated to the fund was $4,938,440. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expense. During the year ended September 30, 2003, the fund's transfer agent fees were reduced by $45,884 under this arrangement. The fees of the Trustees not currently affiliated with the Adviser amounted to $102,527 during the year ended September 30, 2003. 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, 2003, the amount of such expenses was $77,616. Note 3 For the year ended September 30, 2003, purchases and sales of securities, exclusive of short-term obligations, aggregated $1,180,259,283, and $1,206,762,934, 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 voluntarily waived 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, 2003, fees pursuant to such plans amounted to $4,427,563, $3,534,392 and $3,856,413 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, 2003, there were $25,246,201 and $7,335,326 for Class A 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. The fund has been informed that the Distributor and MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, earned initial sales charges aggregating $433,166 and $243,228, respectively, on sales of Class A shares of the fund during the year ended September 30, 2003, and that MetLife Securities, Inc. earned commissions aggregating $306,343 and $2,719 on sales of Class B(1) and Class C shares, and the Distributor collected contingent deferred sales charges aggregating $899,124, $33,729 and $22,390 on redemptions of Class B(1), Class B and Class C shares, respectively, during the same period. 12 Note 5 PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the fund's independent accountants for the fund's fiscal year ended September 30, 2003. During the previous two years, PricewaterhouseCoopers LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope or accounting principle. Further, in connection with its audits for the two previous fiscal years and through April 25, 2003, there were no disagreements between the fund and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it to make reference to the disagreements in its report on the financial statements for such years. 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 ------------------------------------------------------------- 2003 2002* ------------------------------------------------------------- Class A Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------------- Shares sold 16,899,496 $ 469,042,922 37,873,343 $1,213,674,968 Issued upon reinvestment of distribution from capital gains 213,191 5,489,579 -- -- Shares redeemed (24,341,722) (651,666,848) (28,851,694) (872,078,700) ----------- ------------- ----------- -------------- Net increase (decrease) (7,229,035) $(177,134,347) 9,021,649 $ 341,596,268 =========== ============= =========== ============== Class B(1) Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------------- Shares sold 1,403,726 $ 36,779,208 5,868,662 $ 180,539,417 Issued upon reinvestment of distribution from capital gains 64,891 1,576,445 -- -- Shares redeemed (2,979,708) (74,229,578) (2,958,688) (84,030,584) ----------- ------------- ----------- -------------- Net increase (decrease) (1,511,091) $ (35,873,925) 2,909,974 $ 96,508,833 =========== ============= =========== ============== Class B Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------------- Shares sold 131,669 $ 3,441,001 486,207 $ 14,869,430 Issued upon reinvestment of distribution from capital gains 31,392 769,318 -- -- Shares redeemed (1,847,125) (46,449,514) (1,853,292) (53,411,346) ----------- ------------- ----------- -------------- Net decrease (1,684,064) $ (42,239,195) (1,367,085) $ (38,541,916) =========== ============= =========== ============== Class C Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------------- Shares sold 1,051,716 $ 28,486,342 6,405,484 $ 198,884,462 Issued upon reinvestment of distribution from capital gains 58,514 1,420,934 -- -- Shares redeemed (5,026,706) (124,996,244) (3,990,765) (114,071,764) ----------- ------------- ----------- -------------- Net increase (decrease) (3,916,476) $ (95,088,968) 2,414,719 $ 84,812,698 =========== ============= =========== ============== Class S Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------------- Shares sold 1,772,631 $ 51,725,495 2,710,828 $ 89,899,756 Issued upon reinvestment of distribution from capital gains 21,069 558,168 -- -- Shares redeemed (1,205,014) (33,950,780) (1,841,322) (57,732,331) ----------- ------------- ----------- -------------- Net increase 588,686 $ 18,332,883 869,506 $ 32,167,425 =========== ============= =========== ==============
* Audited by other auditors State Street Research Aurora Fund 13 FINANCIAL Highlights For a share outstanding throughout each year:
Class A - Years Ended September 30 -------------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 24.43 26.51 29.17 19.02 15.47 --------- --------- --------- ------- ------- Net investment income (loss) ($) (0.19) (0.23) 0.02 0.10 0.05 Net realized and unrealized gain (loss) on investments ($) 8.19 (1.85) (0.37) 10.05 3.50 --------- --------- --------- ------- ------- Total from investment operations ($) 8.00 (2.08) (0.35) 10.15 3.55 --------- --------- --------- ------- ------- Distributions from capital gains ($) (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Total Distributions ($) (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Net asset value, end of year ($) 32.28 24.43 26.51 29.17 19.02 ========= ========= ========= ======= ======= Total return (%)(b) 32.90 (7.85) (0.98) 53.45 22.88 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 1,682,504 1,449,869 1,334,548 552,365 146,295 Expense ratio (%) 1.55 1.48 1.44 1.40 1.46 Expense ratio after expense reductions (%) 1.55 1.47 1.43 1.40 1.45 Ratio of net investment income (loss) to average net assets (%) (0.69) (0.73) 0.08 0.42 0.30 Portfolio turnover rate (%) 48.43 42.18 26.40 76.95 65.13 Class B(1) - Years Ended September 30 ----------------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(c)(f) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 23.02 25.16 27.99 18.38 16.17 --------- --------- --------- ------- ------- Net investment loss ($) (0.36) (0.42) (0.18) (0.07) (0.03) Net realized and unrealized gain (loss) on investments ($) 7.68 (1.72) (0.34) 9.68 2.24 --------- --------- --------- ------- ------- Total from investment operations ($) 7.32 (2.14) (0.52) 9.61 2.21 --------- --------- --------- ------- ------- Distributions from capital gains ($) (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Total Distributions (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Net asset value, end of year ($) 30.19 23.02 25.16 27.99 18.38 ========= ========= ========= ======= ======= Total return (%)(b) 31.96 (8.51) (1.67) 52.37 13.61(d) Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 401,016 340,529 299,062 110,743 20,419 Expense ratio (%) 2.25 2.18 2.14 2.13 2.10(e) Expense ratio after expense reductions (%) 2.25 2.17 2.13 2.13 2.09(e) Ratio of net investment loss to average net assets (%) (1.39) (1.43) (0.63) (0.29) (0.24)(e) Portfolio turnover rate (%) 48.43 42.18 26.40 76.95 65.13 Class B - Years Ended September 30 -------------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 23.17 25.16 27.99 18.38 15.07 --------- --------- --------- ------- ------- Net investment loss ($) (0.10) (0.23) (0.15) (0.07) (0.08) Net realized and unrealized gain (loss) on investments ($) 7.78 (1.76) (0.37) 9.68 3.39 --------- --------- --------- ------- ------- Total from investment operations ($) 7.68 (1.99) (0.52) 9.61 3.31 --------- --------- --------- ------- ------- Distributions from capital gains ($) (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Total Distributions ($) (0.15) -- (2.31) -- -- --------- --------- --------- ------- ------- Net asset value, end of year ($) 30.70 23.17 25.16 27.99 18.38 ========= ========= ========= ======= ======= Total return (%)(b) 33.31 (7.91) (1.67) 52.37 21.90 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 192,055 183,973 234,168 268,557 198,783 Expense ratio (%) 1.25 1.51 2.14 2.13 2.21 Expense ratio after expense reductions (%) 1.25 1.50 2.13 2.13 2.20 Ratio of net investment loss to average net assets (%) (0.39) (0.76) (0.54) (0.31) (0.46) Portfolio turnover rate (%) 48.43 42.18 26.40 76.95 65.13
(a) Per-share figures have been calculated using the average shares method. (b) Does not reflect any front-end or contingent deferred sales charges. (c) January 1, 1999 (commencement of share class) to September 30, 1999 (d) Not annualized (e) Annualized (f) Audited by other auditors 14
Class C - Years Ended September 30 -------------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 23.01 25.16 27.99 18.38 15.06 ------- ------- ------- ------- ------ Net investment loss ($) (0.35) (0.42) (0.18) (0.07) (0.08) Net realized and unrealized gain (loss) on investments ($) 7.67 (1.73) (0.34) 9.68 3.40 ------- ------- ------- ------- ------ Total from investment operations ($) 7.32 (2.15) (0.52) 9.61 3.32 ------- ------- ------- ------- ------ Distributions from capital gains ($) (0.15) -- (2.31) -- -- ------- ------- ------- ------- ------ Total Distributions ($) (0.15) -- (2.31) -- -- ------- ------- ------- ------- ------ Net asset value, end of year ($) 30.18 23.01 25.16 27.99 18.38 ======= ======= ======= ======= ====== Total return (%)(b) 31.97 (8.55) (1.67) 52.37 21.98 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 409,076 402,010 378,733 180,877 67,816 Expense ratio (%) 2.25 2.18 2.14 2.13 2.21 Expense ratio after expense reductions (%) 2.25 2.17 2.13 2.13 2.20 Ratio of net investment loss to average net assets (%) (1.39) (1.43) (0.62) (0.30) (0.45) Portfolio turnover rate (%) 48.43 42.18 26.40 76.95 65.13 Class S - Years Ended September 30 -------------------------------------------------------------- 2003(a) 2002(a)(f) 2001(a)(f) 2000(a)(f) 1999(a)(f) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 25.05 27.06 29.66 19.23 15.60 ------- ------- ------- ------- ------ Net investment income (loss) ($) (0.11) (0.14) 0.13 0.12 0.10 Net realized and unrealized gain (loss) on investments ($) 8.39 (1.87) (0.39) 10.31 3.53 ------- ------- ------- ------- ------ Total from investment operations ($) 8.28 (2.01) (0.26) 10.43 3.63 ------- ------- ------- ------- ------ Dividends from net investment income ($) -- -- (0.03) -- -- Distributions from capital gains ($) (0.15) -- (2.31) -- -- ------- ------- ------- ------- ------ Total Distributions ($) (0.15) -- (2.34) -- -- ------- ------- ------- ------- ------ Net asset value, end of year ($) 33.18 25.05 27.06 29.66 19.23 ======= ======= ======= ======= ====== Total return (%)(b) 33.21 (7.43) (0.64) 54.32 23.21 Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 142,460 92,789 76,711 20,298 1,177 Expense ratio (%) 1.25 1.18 1.14 1.13 1.21 Expense ratio after expense reductions (%) 1.25 1.17 1.13 1.13 1.20 Ratio of net investment income (loss) to average net assets (%) (0.38) (0.43) 0.36 0.63 0.54 Portfolio turnover rate (%) 48.43 42.18 26.40 76.95 65.13
State Street Research Aurora Fund 15 INDEPENDENT AUDITORS' Report 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, 2003, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year ended September 30, 2003. 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 audit. The statement of changes in net assets for the year ended September 30, 2002, and the financial highlights for each of the years in the four-year period ended September 30, 2002, were audited by other auditors whose report dated November 8, 2002, expressed an unqualified opinion on such statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 suporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2003, 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 audit provides 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, 2003, and the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts October 31, 2003 16 TRUSTEES AND OFFICERS State Street Research Capital Trust
Name, Position(s) Term of Office Address Held with and Length of Principal Occupations and Age(a) Fund Time Served(b) During Past 5 Years =================================================================================================== Independent Trustees Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, Chief (57) 1999 Executive Officer and President, PictureTel Corporation (video conferencing systems) - --------------------------------------------------------------------------------------------------- Steve A. Garban Trustee Since Retired; formerly Senior Vice President for (66) 1997 Finance and Operations and Treasurer, The Pennsylvania State University - --------------------------------------------------------------------------------------------------- Dean O. Morton Trustee Since Retired; formerly Executive Vice President, Chief (71) 1985 Operating Officer and Director, Hewlett-Packard Company (computer manufacturer) - --------------------------------------------------------------------------------------------------- Susan M. Phillips Trustee Since Dean, School of Business and Public Management, (58) 1998 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. (65) 1995 (investments); formerly President, The Glen Ellen Company (private investment firm) - --------------------------------------------------------------------------------------------------- Michael S. Trustee Since Jay W. Forrester Professor of Management, Sloan Scott Morton (66) 1987 School of Management, Massachusetts Institute of Technology - --------------------------------------------------------------------------------------------------- James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law firm) (72) 2002 =================================================================================================== Interested Trustees Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief (58) 2000 Executive Officer of State Street Research & Management Company; formerly Senior Vice President, Fixed Income Investments, Metropolitan Life Insurance Company =================================================================================================== Officers John F. Burbank Vice Since Managing Director of State Street Research & (66) President 2001 Management Company; formerly Senior Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Caroline Evascu Vice Since Vice President of State Street Research & (28) President 2003 Management Company; formerly Vice President and senior analyst at SG Cowen Asset Management; and research associate at Donaldson, Lufkin & Jenrette - --------------------------------------------------------------------------------------------------- C. Kim Goodwin Vice Since Managing Director and Chief Investment Officer - (44) President 2002 Equities of State Street Research & Management Company; formerly Chief Investment Officer - U.S. Growth Equities, American Century - --------------------------------------------------------------------------------------------------- Paul Haagensen Vice Since Senior Vice President of State Street Research & (57) President 2003 Management Company; formerly Portfolio Manager and senior analyst at Putnam Investments - --------------------------------------------------------------------------------------------------- Eileen M. Leary Vice Since Senior Vice President of State Street Research & (41) President 2002 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- John S. Lombardo Vice Since Managing Director, Chief Financial Officer and (48) President 2001 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 Research & (34) President 2003 Management Company; formerly Vice President, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Tucker Walsh Vice Since Managing Director of State Street Research & (34) 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 (46) 2001 Street Research & Management Company; formerly Vice President and Assistant Treasurer, State Street Research & Management Company - --------------------------------------------------------------------------------------------------- Francis J. Secretary Since Managing Director, General Counsel and Secretary McNamara, III (48) 1995 of State Street Research & Management Company; formerly Executive Vice President, State Street Research & Management Company Number of Funds Name, in Fund Complex Other Address Overseen by Directorships Held and Age(a) Trustee/Officer(c) by Trustee/Officer ================================================================================ Independent Trustees 19 Ceridian Corporation Bruce R. Bond (57) - -------------------------------------------------------------------------------- Steve A. Garban 55 Metropolitan Series Fund, Inc.(d) (66) - -------------------------------------------------------------------------------- Dean O. Morton 55 The Clorox Company; KLA-Tencor (71) Corporation; BEA Systems, Inc.; Cepheid; Pharsight Corporation; and Metropolitan Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Susan M. Phillips 19 The Kroger Co. (58) - -------------------------------------------------------------------------------- Toby Rosenblatt 55 A.P. Pharma, Inc.; and Metropolitan (65) Series Fund, Inc.(d) - -------------------------------------------------------------------------------- Michael S. 55 Metropolitan Series Fund, Inc.(d) Scott Morton (66) - -------------------------------------------------------------------------------- James M. Storey 19 SEI Investments Funds (consisting of (72) 104 portfolios); and The Massachusetts Health & Education Tax-Exempt Trust ================================================================================ Interested Trustees Richard S. Davis(+) 19 None (58) ================================================================================ Officers John F. Burbank 3 None (66) - -------------------------------------------------------------------------------- Caroline Evascu 3 None (28) - -------------------------------------------------------------------------------- C. Kim Goodwin 18 None (44) - -------------------------------------------------------------------------------- Paul Haagensen 3 None (57) - -------------------------------------------------------------------------------- Eileen M. Leary 3 None (41) - -------------------------------------------------------------------------------- John S. Lombardo 19 None (48) - -------------------------------------------------------------------------------- Andrew Morey 3 None (34) - -------------------------------------------------------------------------------- Tucker Walsh 3 None (34) - -------------------------------------------------------------------------------- Douglas A. Romich 19 None (46) - -------------------------------------------------------------------------------- Francis J. 19 None McNamara, III (48)
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. (d) Serves as Director of Metropolitan Series Fund, Inc., an investment company comprising 36 separate portfolios. (+) 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 Aurora Fund 17 [LOGO] STATE STREET RESEARCH One Financial Center Boston, MA 02111-2690 ---------------- PRSRT STD 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. - -------------------------------------------------------------------------------- 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, 2003, this report must be accompanied by a current Quarterly Performance Update. To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus contains more complete information, including sales charges and expenses. Please read the prospectus carefully before investing or sending money. 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)2003 State Street Research Investment Services, Inc. One Financial Center Boston, MA 02111-2690 www.ssrfunds.com CONTROL NUMBER:(exp1104)SSR-LD AR-2655-1103 FORM N-CSR(2 OF 3) ITEM 2: (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) 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. (c) 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. ITEM 3: The Registrant's Board of Directors has determined that Steve A. Garban, a member of the Registrant's Board of Directors and Audit Committee, qualifies as the "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): Not applicable to this filing. ITEM 5 (RESERVED) ITEM 6 (RESERVED) ITEM 7 (DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES): Not applicable to this filing. ITEM 8 (RESERVED) ITEM 9 (CONTROLS AND PROCEDURES): SUB-ITEM 9a - The Principal Executive Officer and the Principal Financial Officer have concluded that the State Street Research Capital Trust disclosure controls and procedures (as defined in Rule 30-a2(c) under the Investment Company Act) provide reasonable assurances that material information relating to the State Street Research Capital Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. SUB-ITEM 9b - There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation referenced in (a)(i) above. ITEM 10 (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 3, 2003 ------------------------------------------------------ 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 3, 2003 ------------------------ By: /s/ Douglas A. Romich ------------------------------------------------------ Douglas A. Romich, Treasurer Principal Financial Officer Date December 3, 2003 ------------------------ EX-99.CODE 3 a2123486zex-99_code.txt EXHIBIT 99.CODE ETH STATE STREET RESEARCH FUNDS FINANCIAL OFFICER CODE OF PROFESSIONAL CONDUCT INTRODUCTION The reputation and integrity of the State Street Research Funds (the "Funds") are valuable assets that are vital to the Funds' success. Each Fund's senior financial officers ("SFOs") are responsible for conducting the Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. A Fund's SFOs include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. The Sarbanes-Oxley Act of 2002 (the "Act") effected sweeping corporate disclosure and financial reporting reform on public companies, including mutual funds, to address corporate malfeasance and assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to foster corporate environments that encourage employees to question unethical and potentially illegal business practices. Each Fund has chosen to adopt a financial officer code of ethics to encourage its SFOs to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Fund's financial disclosures are complete, accurate, and understandable. This Code of Ethics should be read in conjunction with the Fund's other policy statements, including the Code of Ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940. PURPOSES OF THE CODE The purposes of this Code are: - To promote honest and ethical conduct among the Fund's SFOs, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - To assist SFOs to recognize and avoid conflicts of interest, including disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict; - To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the SEC and in other public communications the Fund makes; - To promote compliance with applicable laws, rules and regulations; - To encourage the prompt internal reporting to an appropriate person of violations of the Code; and - To establish accountability for adherence to the Code. QUESTIONS ABOUT THIS CODE The Board of Trustees of each Fund has designated the Secretary of the Fund to be the Compliance Officer for the implementation and administration of the Code. You should direct your questions about this Code to the Compliance Officer. CONDUCT GUIDELINES Each Fund has adopted the following guidelines under which its SFOs must perform their duties and conduct the business affairs of the Funds. Persons subject to this requirement include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. However, the Fund expects that ALL persons who participate in the preparation of any part of the Fund's financial statements follow these guidelines: - ETHICAL AND HONEST CONDUCT IS OF PARAMOUNT IMPORTANCE. The Fund's SFOs must act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships. - SFOS MUST DISCLOSE MATERIAL TRANSACTIONS OR RELATIONSHIPS. The Fund's SFOs must disclose to the Fund's Compliance Officer any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Officer, it should be disclosed to the Fund's Chief Financial Officer or Chief Executive Officer. - STANDARDS FOR QUALITY OF INFORMATION SHARED WITH FUND SERVICE PROVIDERS. The Fund's SFOs must at all times seek to provide information to the Fund's other employees and service providers (adviser, administrator, outside auditor, outside counsel, custodian, ETC.) that is accurate, complete, objective, relevant, timely, and understandable. - STANDARDS FOR QUALITY OF INFORMATION INCLUDED IN PERIODIC REPORTS. The Fund's SFOs must at all times endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports. 2 - COMPLIANCE WITH LAWS. THe Fund's SFOs must comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code. - STANDARD OF CARE. The Fund's SFOs must at all times act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgement to be subordinated. - CONFIDENTIALITY OF INFORMATION. The Fund's SFOs must at all times respect the confidentiality of information acquired in the course of their professional duties, except when authorized by the Fund to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage. - SHARING OF INFORMATION AND ETHICAL STANDARDS. The Fund's SFOs should share information with relevant parties to keep them informed of the business affairs of the Fund, as appropriate, and maintain skills important and relevant to the Fund's needs. - PROMOTE ETHICAL CONDUCT. The Fund's SFOs should at all times proactively promote ethical behavior among peers in the work environment. - STANDARDS FOR RECORDKEEPING. The Fund's SFOs must at all times endeavor to ensure that the Fund's books and records are thoroughly and accurately maintained to the best of their knowledge in a manner consistent with applicable laws and this Code. WAIVERS OF THIS CODE You may request a waiver of a provision of this Code by submitting your request in writing to the Compliance Officer for appropriate review. For example, if a family member works for a service provider that prepares the Fund's financial statements, you may have a potential conflict of interest in reviewing those statements and should seek a waiver of this Code to review the work. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. ANNUAL CERTIFICATION To the extent necessary, the Fund's Compliance Officer will provide guidance on the conduct required by this Code and the manner in which violations must be reported and waivers must be requested. Each SFO will be asked to certify on an annual basis that he/she is in full compliance with this Code. 3 REPORTING SUSPECTED VIOLATIONS SFOs who observe, learn of, or, in good faith, suspect a violation of the Code MUST immediately report the violation to the Compliance Officer, another member of the Fund's senior management, or to the Audit Committee of the Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning. Because service providers such as the adviser, outside accounting firm, and custodian provide much of the work relating to the Fund's financial statements, the Fund's SFOs should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. A SFO should report these actions to the Compliance Officer even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees. SFOs who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible. VIOLATIONS OF THE CODE Dishonest or unethical conduct or conduct that is illegal will constitute a violation of this Code, regardless of whether this Code refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Fund and its operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owned by Fund directors/trustees and officers, and criminal laws. The federal securities laws generally prohibit the Fund from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit material facts. The Fund must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations. ADOPTED MAY 7, 2003 EX-99.CERT 4 a2123486zex-99_cert.txt EXHIBIT 99.CERT State Street Research Capital Trust Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Douglas A. Romich, certify that: 1. I have reviewed this report on Form N-CSR of State State Street Research Capital Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and changes in net assets of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2 (c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 3, 2003 /s/ Douglas A. Romich Douglas A. Romich Treasurer State Street Research Capital Trust Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Richard S. Davis, certify that: 1. I have reviewed this report on Form N-CSR of State Street Research Capital Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and changes in net assets of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2 (c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 3, 2003 /s/ Richard S. Davis Richard S. Davis President, Chairman and Chief Executive Officer EX-99.906CERT 5 a2123486zex-99_906cert.txt EXHIBIT 99.906 CERT State Street Research Capital Trust Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the State Street Research Capital Trust, a Massachusetts business trust, (the "Trust"), does hereby certify that the Trust's report on Form N-CSR for the period ended September 30, 2003 (the "N-CSR") fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the N-CSR fairly presents, in all material respects, the financial condition and the results of operations of the Trust. This certification is provided solely pursuant to 18 U.S.C. 1350 and shall not be deemed a part of the N-CSR, the financial statements filed with the N-CSR or otherwise "filed" for any purpose. Date: December 3, 2003 /s/ Douglas A. Romich Douglas A. Romich Treasurer State Street Research Capital Trust Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the State Street Research Capital Trust, a Massachusetts business trust, (the "Trust"), does hereby certify that the Trust's report on Form N-CSR for the period ended September 30, 2003 (the "N-CSR") fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the N-CSR fairly presents, in all material respects, the financial condition and the results of operations of the Trust. This certification is provided solely pursuant to 18 U.S.C. 1350 and shall not be deemed a part of the N-CSR, the financial statements filed with the N-CSR or otherwise "filed" for any purpose. Date: December 3, 2003 /s/ Richard S. Davis Richard S. Davis President, Chairman and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----