[front cover]
[State Street Research logo]
State Street Research Capital Fund
Annual Report
September 30, 1995
[graphic of man climbing blocks]
What's Inside
From the Chairman:
Stocks continue to perform strongly
Portfolio Manager's Review:
Technology stocks propelled the Fund
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings and Financial Statements
<PAGE>
FROM THE CHAIRMAN
[photo]
To Our Shareholders:
Over the past year, it was hard to beat the returns provided by stocks. The
S&P 500 and Dow Jones Industrial Average, both considered indicators of
large-company stock performance, provided gains of +29.7% and +28.0%,
respectively, over the 12 months ended September 30, 1995.(1) Small-company
stocks provided similar performance, although they did not really pick up
speed until June.
Why such strong stock performance?
The investment environment has been favorable for stocks. The econ-omy has
demonstrated solid growth without overheating. Inflation has remained quite
low--under 3% for the year. Interest rates have declined sharply from 1994's
levels. And, importantly, U.S. businesses have been able to increase profits
by boosting productivity and cutting costs.
Looking ahead
With the economy now slower, however, many wonder whether companies can still
deliver strong profits and whether stocks can continue to perform. We are
convinced there are always individual stocks that will deliver the right
combination of earnings growth and value--the challenge is finding such
stocks.
The power of research
That is the advantage of the "bottom-up," stock-by-stock investment research
provided by State Street Research. We do not simply invest in themes or jump
on the bandwagon with other investors. Instead, we are committed to doing our
homework and analyzing stocks on their individual merits. This successful
investing strategy has been the foundation of State Street Research for more
than 70 years.
Thank you for investing with State Street Research.
Sincerely,
/s/Ralph F. Verni
Ralph F. Verni
Chairman
October 31, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks; the Dow Jones Industrial Average includes 30 widely
traded stocks. The indexes, which are commonly used measures of U.S. stock
market performance, are unmanaged and do not take sales charges into
consideration. Direct investment in the indexes is not possible; results are
for illustrative purposes only.
(2)+35.90% for Class B shares; +37.30% for Class C shares; +36.07% for Class
D shares.
(3)Investment result is based on an assumed $10,000 investment at the "A"
share maximum sales charge of 4.5%, with reinvestment of capital gain
distributions and income dividends. Thus, the net amount invested was $9,550.
No adjustment has been made for income taxes payable by shareholders on
income dividends or capital gain distributions.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. During the periods prior to 1993 that
shares of the Fund were not offered to the general public, the Fund was not
subject to the cash inflows or higher redemptions or expenses that have
occurred since 1993, when the Fund commenced a continuous public offering.
(5)Performance for a class includes periods prior to the adoption of class
designations. Performance reflects up to maximum 4.5% front-end or 5%
contingent deferred sales charges. Performance prior to class designations in
1993 does not reflect annual 12b-1 fees of .25% for "A" shares and 1% for "B"
and "D" shares, which will reduce subsequent performance.
FUND INFORMATION (all data are for periods ended September 30, 1995)
Total value of $10,000 invested on October 1, 1985(3,4,5)(Class A shares, at
maximum applicable sales charge)
[typeset representation of mountain chart]
9/86 12,684
9/87 18,349
9/88 15,787
9/89 21,144
9/90 16,743
9/91 25,764
9/92 27,654
9/93 42,868
9/94 43,943
9/95 60,181
SEC Average Annual Compound Rates
of Return
(at maximum applicable sales charge)(4,5)
<TABLE>
<CAPTION>
10 years 5 years 1 year
-------- ------- ------
<S> <C> <C> <C>
Class A +19.66% +27.98% +30.79%
- ------- ------ ------ ------
Class B +20.01% +28.59% +30.90%
- ------- ------ ------ ------
Class C +20.32% +29.40% +37.30%
- ------- ------ ------ ------
Class D +20.04% +28.79% +35.07%
======== ====== ====== ======
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(4)
<TABLE>
<CAPTION>
10 years 5 years 1 year
-------- ------- ------
<S> <C> <C> <C>
Class A +530.17% +259.44% +36.95%
- ------- ------- ------- ------
Class B +519.88% +253.57% +35.90%
- ------- ------- ------- ------
Class C +536.06% +262.80% +37.30%
- ------- ------- ------- ------
Class D +521.31% +254.39% +36.07%
======== ======= ======= ========
</TABLE>
Top 5 Industry Positions
(by percentage of net assets)
[typeset representation of bar chart]
Electronic components 12.7%
Electronic equipment 10.8%
Computer software & service 10.0%
Retail 7.8%
Hotel & restaurant 6.4%
Total net assets: 47.7%
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of Frederick R. Kobrick]
Frederick R. Kobrick
Portfolio Manager
Capital Fund had outstanding performance over the past year, performing ahead
of similar funds and the stock market as a whole. For the 12 months ended
September 30, 1995, Class A shares of the Fund provided a total return of
+36.95% (does not reflect sales charge).(2) Lipper Analytical Services'
Capital Appreciation Fund category provided an average total return of
+25.22% over the same time period (does not reflect sales charges).
A word about technology
On September 30, 1995, a substantial portion of the Fund's portfolio was
invested in technology stocks in different industries. Technology stocks,
and particularly semiconductor stocks, have led the stock market in 1995,
just as they did in 1994. Our focus over the past year has been on electronics
stocks: electronic components stocks and electronic equipment stocks such as
Exide Electronics (0.6%) and Nokia (3.9%).
We remain confident about the outlook for technology stocks--not because of
trends but because we do our own careful research. We meet with the
companies, analyze them carefully, and talk to customers and competitors. We
also pay careful attention to "valuations" and balance whether a stock's
price is merited given its growth potential. We believe this is one way to
control the risks of investing in stocks with high growth rates.
Telecommunications
Capital Fund continues to hold a number of stocks linked to
telecommunications. Cellular phone manufacturers and service providers have
benefited from exploding demand in the rest of the world. Our
telecommunications holdings are divided between telephone stocks and
electronic equipment stocks.
Retail fits
Retail stocks provided strong performance for the Fund, even though the
overall retail sector performed poorly in 1995. Sunglass Hut International
(3.1%) is a good example of a company that has created and dominated a retail
niche--sunglasses. Retail is a sector where our research skills can play a
big factor--doing your homework on company management, strategy, cash flow
and earnings growth makes all the difference.
Strong market led to higher turnover
For the twelve months ended September 30, 1995, the Fund's turnover rate was
215%. This high turnover rate was the result of this year's strong overall
stock performance, combined with periodic market volatility. When stock
prices rise, we often sell holdings when they reach price targets. In
addition, when markets are low, it can create values that we feel compelled
to buy. The result is a higher turnover rate, although clearly it did not
hurt performance in the past year.
Top 10 Stock Positions
Chemical Banking Leading bank
HBO Business services company
Hewlett-Packard Office equipment company
HFS Hotel reservation service
LSI Logic Electronic components company
Nokia Cellular phone maker
Philip Morris Tobacco giant
Sunglass Hut Specialty retailer
Texas Instruments Electronic components company
Xilinx Semiconductor manufacturer
These securities represent an aggregate of 26.3% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
Best and Worst Contributors to Performance
(October 1, 1994 through September 30, 1995)
Best [arrow up]
Nokia
Demand boomed for cellular phones
LSI Logic
Computer electronics maker benefited from strong demand
Sunglass Hut International
Specialty retailer dominates its market niche
Worst [arrow down]
Cyrk
Earnings plunged for this apparel maker
Coram Healthcare
Healthcare stocks were hurt by talk of Medicare cutbacks
Ann Taylor Stores
Difficult year for many clothing retailers
2
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
INVESTMENT PORTFOLIO
September 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------------- ------ -------------
<S> <C> <C>
COMMON STOCKS 90.7%
Basic Industries 5.3%
Chemical 1.9%
Potash Corp. of Saskatchewan, Inc. 79,500 $ 4,948,875
Rohm & Haas Co. 41,400 2,499,525
-----------
7,448,400
-----------
Diversified 0.0%
Thermedics, Inc.* 8,100 160,988
-----------
Electrical Equipment 0.9%
Philips Electronics NV 30,900 1,506,375
Trimble Navigation, Ltd.* 75,900 1,916,475
-----------
3,422,850
-----------
Machinery 2.5%
AGCO Corp. 87,600 3,985,800
Elsag Bailey Process Automation NV 78,800 2,570,850
UCAR International, Inc.* 55,500 1,512,375
Wolverine Tube, Inc.* 54,800 2,075,550
-----------
10,144,575
-----------
Metal & Mining 0.0%
Carbide/Graphite Group, Inc.* 9,500 134,187
-----------
Total Basic Industries 21,311,000
-----------
Consumer Cyclical 27.1%
Airline 4.2%
AMR Corp.* 55,000 3,966,875
Atlas Air, Inc.* 20,000 445,000
British Airways PLC ADR 26,300 1,877,163
KLM Royal Dutch Air Lines 51,400 1,799,000
Northwest Airlines Corp. Cl. A* 110,000 4,675,000
UAL Corp.* 23,900 4,083,912
-----------
16,846,950
-----------
Automotive 1.4%
Danaher Corp. 24,800 812,200
Exide Corp. 88,300 4,415,000
Team Rental Group, Inc. Cl. A* 32,600 326,000
-----------
5,553,200
-----------
Building 0.7%
Owens-Corning Fiberglas Corp.* 40,500 1,807,312
Stimsonite Corp.* 80,300 963,600
-----------
2,770,912
-----------
Hotel & Restaurant 6.3%
Circus Circus Enterprises, Inc.* 18,500 518,000
Doubletree Corp.* 33,600 747,600
Harrah's Entertainment, Inc. 138,600 $ 4,054,050
HFS, Inc. 148,200 7,761,975
La Quinta Inns, Inc. 150,125 4,203,500
Lone Star Steakhouse & Saloon, Inc.* 73,600 3,017,600
Renaissance Hotel Group NV 86,500 1,535,375
Station Casinos, Inc.* 50,700 779,512
Trump Hotels & Casino Resorts, Inc.* 173,900 2,956,300
-----------
25,573,912
-----------
Recreation 1.2%
American Radio Systems Corp.* 15,900 393,525
Anthony Industries, Inc. 37,900 715,363
Oakley, Inc.* 121,800 3,608,325
-----------
4,717,213
-----------
Retail Trade 7.8%
BT Office Products International, Inc.* 110,300 1,447,688
CompUSA, Inc.* 27,700 1,191,100
Corporate Express, Inc.* 43,500 1,060,313
Department 56, Inc.* 19,300 902,275
General Nutrition Centers, Inc.* 59,200 2,693,600
Industrie Natuzzi SPA ADR 37,200 1,325,250
Just For Feet, Inc.* 181,250 5,573,437
Office Depot Inc.* 95,800 2,885,975
Office Max, Inc.* 7,600 184,300
Petsmart, Inc.* 46,800 1,579,500
Pier 1 Imports, Inc. 22,105 223,813
Sunglass Hut International, Inc.* 245,400 12,270,000
-----------
31,337,251
-----------
Textile & Apparel 5.5%
Fila Holdings SPA ADR 106,400 3,763,900
Men's Wearhouse, Inc.* 131,350 4,728,600
Nautica Enterprises, Inc.* 126,700 4,339,475
Tommy Hilfiger Corp. 194,700 6,327,750
Wolverine World Wide, Inc. 103,800 2,841,525
-----------
22,001,250
-----------
Total Consumer Cyclical 108,800,688
-----------
Consumer Staple 8.8%
Business Service 3.1%
Black Box Corp. 36,500 675,250
HBO & Co. 110,300 6,893,750
Medaphis Corp.* 148,000 4,144,000
U.S. Office Products Co.* 44,000 665,500
-----------
12,378,500
-----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
Value
Shares (Note 1)
- ----------------------------------------------- ------ -------------
Drug 1.7%
Amerisource Health Corp.* 19,200 $ 518,400
Cephalon, Inc.* 191,300 5,260,750
Magainin Pharmaceuticals, Inc.* 67,200 730,800
Vertex Pharmaceuticals, Inc.* 24,600 461,250
-----------
6,971,200
-----------
Food & Beverage 0.9%
Starbucks Corp.* 97,800 3,704,175
-----------
Printing & Publishing 0.1%
British Sky Broadcasting Group ADR 12,200 440,725
-----------
Tobacco 3.0%
Philip Morris Companies, Inc. 120,600 10,070,100
RJR Nabisco Holdings Corp. 61,200 1,981,350
-----------
12,051,450
-----------
Total Consumer Staple 35,546,050
-----------
Finance 7.9%
Bank 3.1%
Bankers Trust New York Corp. 50,800 3,568,700
Chase Manhattan Corp. 32,900 2,011,013
Chemical Banking Corp. 113,300 6,897,137
-----------
12,476,850
-----------
Financial Service 1.1%
Charles Schwab Corp. 42,800 1,198,400
Countrywide Credit Industries, Inc. 70,000 1,645,000
Franklin Resources, Inc. 26,300 1,515,537
-----------
4,358,937
-----------
Insurance 3.7%
Aetna Life & Casualty Insurance Co. 52,000 3,815,500
Cigna Corp. 34,500 3,592,313
MBNA Corp. 129,300 5,382,112
Saint Paul Companies, Inc. 38,600 2,253,275
-----------
15,043,200
-----------
Total Finance 31,878,987
-----------
Science & Technology 39.2%
Aerospace 1.4%
Boeing Co. 54,100 3,692,325
United Technologies Corp. 22,400 1,979,600
-----------
5,671,925
-----------
Computer Software & Service 10.0%
Accom, Inc. 11,100 $ 97,125
Ascend Communications, Inc.* 24,400 1,952,000
Bay Networks, Inc.* 70,100 3,741,588
Cabletron Systems, Inc.* 11,400 750,975
Checkfree Corp. 13,300 266,000
Cisco Systems, Inc.* 83,900 5,789,100
Computer Associates International, Inc. 45,000 1,901,250
Geoworks* 150,000 2,887,500
Intuit, Inc.* 37,600 1,767,200
Microsoft Corp.* 29,500 2,669,750
Peoplesoft, Inc.* 18,200 1,653,925
Plaintree Systems, Inc.* 32,800 278,800
SAP AG ADR+ 45,900 2,518,762
Softkey International, Inc.* 46,200 2,044,350
3Com Corp.* 111,300 5,064,150
Xilinx, Inc.* 138,200 6,650,875
-----------
40,033,350
-----------
Electronic Components 12.7%
AVX Corp.* 36,100 1,209,350
Altera Corp.* 45,500 2,838,062
Atmel Corp.* 69,900 2,359,125
LSI Logic Corp.* 164,600 9,505,650
MEMC Electronic Materials, Inc.* 51,000 1,383,375
Maxim Integrated Products, Inc.* 32,100 2,375,400
Sanmina Holdings, Inc.* 79,300 3,786,575
Texas Instruments, Inc. 277,900 22,197,263
VLSI Technology, Inc.* 103,100 3,531,175
Vishay Intertechnology, Inc. 46,000 1,932,000
-----------
51,117,975
-----------
Electronic Equipment 10.8%
ASM Lithography Holdings NV* 66,500 2,917,688
Brooks Automation, Inc.* 30,100 647,150
DSC Communications Corp.* 109,200 6,470,100
Exide Electronics Group, Inc.* 132,700 2,488,125
KLA Instruments Corp.* 47,300 3,795,825
LTX Corp.* 81,400 1,027,675
Lam Research Corp.* 81,200 4,851,700
Nokia Corp. ADR 225,300 15,714,675
Samsung Electronic GDR* 481 34,151
Tencor Instruments, Inc.* 37,800 1,672,650
Teradyne, Inc.* 107,000 3,852,000
-----------
43,471,739
-----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
INVESTMENT PORTFOLIO (cont'd)
Value
Shares (Note 1)
- ----------------------------------------------- ------ -------------
Office Equipment 4.3%
Hewlett-Packard Co. 92,000 $ 7,670,500
Komag, Inc.* 47,000 3,072,625
Stormedia, Inc.* 41,800 1,891,450
U.S. Robotics Corp. 55,700 4,748,425
-----------
17,383,000
-----------
Total Science & Technology 157,677,989
-----------
Utility 2.4%
Telephone 2.4%
ADC Telecommunications, Inc.* 34,100 1,551,550
Metrocall, Inc.* 40,700 1,129,425
Nera AS ADR* 12,500 429,687
Total Access Communications Public Co. Ltd.+ 270,500 1,707,667
Vodafone Group PLC ADR 74,700 3,062,700
Worldcom, Inc.* 51,600 1,657,650
-----------
9,538,679
-----------
Total Utility 9,538,679
-----------
Total Common Stocks (Cost $301,677,249) 364,753,393
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- --------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
COMMERCIAL PAPER 12.6%
American Express Credit Corp., 5.75% $ 4,234,000 10/04/1995 4,234,000
Cargill, Inc., 5.70% 10,000,000 10/06/1995 9,992,083
Commercial Credit Co., 5.74% 6,000,000 10/02/1995 6,000,000
General Electric Capital Corp., 5.75% 7,168,000 10/06/1995 7,168,000
General Electric Capital Corp., 5.72% 10,207,000 10/11/1995 10,207,000
Household Finance Corp., 5.75% 2,066,000 10/02/1995 2,066,000
Household Finance Corp., 5.72% 10,955,000 10/02/1995 10,955,000
-----------
Total Commercial Paper (Cost $50,622,083) 50,622,083
-----------
Total Investments (Cost $352,299,332)--103.3% 415,375,476
Cash and Other Assets, Less Liabilities--(3.3)% (13,329,388)
-----------
Net Assets--100.0% $402,046,088
===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At September 30, 1995, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$352,305,326 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an
excess of value over tax cost $65,854,672
Aggregate gross unrealized depreciation for
all investments in which there is an
excess of tax cost over value (2,784,522)
----------
$63,070,150
==========
</TABLE>
*Nonincome-producing securities
ADR and GDR stand for American Depositary Receipt and Global Depository
Receipt, representing ownership of foreign securities.
+Security restricted in accordance with Rule 144A under the Securities Act of
1933, which allows for the resale of such securities among certain qualified
institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 1995 were $3,389,633 and $4,226,429 (1.05%
of net assets), respectively.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $352,299,332) (Note 1) $415,375,476
Cash 418
Receivable for securities sold 14,249,078
Receivable for fund shares sold 4,113,668
Dividends and interest receivable 114,801
Other assets 28,474
-----------
433,881,915
Liabilities
Payable for securities purchased 30,864,547
Payable for fund shares redeemed 354,372
Accrued distribution fee (Note 4) 242,646
Accrued management fee (Note 2) 232,522
Accrued transfer agent and shareholder services
(Note 2) 46,297
Accrued trustees' fees (Note 2) 9,708
Other accrued expenses 85,735
-----------
31,835,827
-----------
Net Assets $402,046,088
===========
Net Assets consist of:
Unrealized appreciation of investments $ 63,076,144
Accumulated net realized gain 30,696,695
Shares of beneficial interest (Note 6) 308,273,249
-----------
$402,046,088
===========
Net Asset Value and redemption price per share of
Class A shares ($55,250,047 / 4,083,548 shares
of beneficial interest) $13.53
===========
Maximum Offering Price per share of Class A shares
($13.53 / .955) $14.17
===========
Net Asset Value and offering price per share of
Class B shares ($203,446,132 / 15,304,668 shares
of beneficial interest)* $13.29
===========
Net Asset Value, offering price and redemption
price per share of Class C shares ($47,553,286 /
3,482,260 shares of beneficial interest) $13.66
===========
Net Asset Value and offering price per share of
Class D shares ($95,796,623 / 7,195,204 shares
of beneficial interest)* $13.31
===========
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the year ended September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $32,472 $ 1,046,064
Interest 1,270,329
----------
2,316,393
Expenses
Management fee (Note 2) 1,750,735
Transfer agent and shareholder services (Note 2) 375,398
Custodian fee 167,784
Reports to shareholders 96,816
Distribution fee--Class A (Note 4) 81,664
Distribution fee--Class B (Note 4) 1,159,597
Distribution fee--Class D (Note 4) 566,144
Registration fees 59,957
Audit fee 31,924
Trustees' fees (Note 2) 22,550
Legal fees 8,106
Miscellaneous 18,227
----------
4,338,902
----------
Net investment loss (2,022,509)
----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 3) 32,914,544
Net unrealized appreciation of investments 52,115,081
----------
Net gain on investments 85,029,625
----------
Net increase in net assets resulting from operations $83,007,116
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended September 30
----------------------------
1995 1994
- ----------------------------- ----------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (2,022,509) $ (1,070,897)
Net realized gain on
investments* 32,914,544 1,127,123
Net unrealized appreciation
of investments 52,115,081 3,083,463
--------- -----------
Net increase resulting from
operations 83,007,116 3,139,689
--------- -----------
Distributions from net realized
gains:
Class A (92,618) (575,640)
Class B (320,406) (1,273,467)
Class C (93,107) (1,330,595)
Class D (164,154) (477,827)
--------- -----------
(670,285) (3,657,529)
--------- -----------
Net increase from fund share
transactions (Note 6) 164,713,294 108,866,368
--------- -----------
Total increase in net assets 247,050,125 108,348,528
Net Assets
Beginning of year 154,995,963 46,647,435
--------- -----------
End of year $402,046,088 $154,995,963
========= ===========
* Net realized gain for
Federal income tax purposes
(Note 1) $ 32,687,493 $ 1,269,665
========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
Note 1
State Street Research Capital Fund (the "Fund"), is a series of State Street
Research Capital Trust (the "Trust"), formerly State Street Capital Trust,
which is a Massachusetts business trust registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust was organized in November, 1988 as a successor
to State Street Capital Fund, Inc., a Massachusetts corporation. The Trust
consists presently of three separate funds: State Street Research Capital
Fund, State Street Research Small Capitalization Growth Fund and State Street
Research Small Capitalization Value Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay an annual service fee equal to
0.25% of average daily net assets. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase and pay annual distribution and service fees of 1.00%. Class B
shares automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are only offered to certain employee benefit plans and large
institutions. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. Investments in Securities
Values for listed securities represent the last sale on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at the closing price
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations, except for certain
securities that may be restricted as to public resale, which are valued in
accordance with methods adopted by the Trustees. Security transactions are
accounted for on the trade date (date the order to buy or sell is executed),
and dividends declared but not received are accrued on the ex-dividend date.
Interest income is determined on the accrual basis. Realized gains and losses
from security transactions are reported on the basis of identified cost of
securities delivered for both financial reporting and Federal income tax
purposes.
7
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
B. Federal Income Taxes
No provision for Federal income taxes is necessary since 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.
C. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested annually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees equal to 1/16 of 1% (3/4 of 1% on an annual basis) of
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. The fees of the Trustees not
currently affiliated with the Adviser amounted to $22,550 during the year
ended September 30, 1995.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended September 30, 1995, the amount of
such expenses was $206,722.
Note 3
For the year ended September 30, 1995, exclusive of short-term investments
and U.S. Government obligations, purchases and sales of securities aggregated
$599,276,036 and $459,656,035, respectively.
Note 4
The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D 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, 1995, fees pursuant
to such plan amounted to $81,664, $1,159,597 and $566,144 for Class A, Class
B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $92,294 and $719, respectively, on sales of Class A shares of the
Fund during the year ended September 30, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $3,383 and $275 on sales of Class B and
Class D shares, respectively, and that the Distributor collected contingent
deferred sales charges of $192,789 and $9,688 on redemptions of Class B and
Class D shares, respectively, during the same period.
Note 5
The Trustees declared a distribution of all capital gains realized during the
year ended September 30, 1995 (approximately $.91 short-term and $.11
long-term per share), payable October 12, 1995 to shareholders of record on
October 2, 1995.
8
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
NOTES (cont'd)
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At September 30, 1995,
Metropolitan held of record 1,084,790 Class C shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended September 30
-----------------------------------------------------
1995 1994
------------------------- ------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,826,294 $ 32,048,209 1,741,014 $16,876,522
Issued upon reinvestment of distributions from
net realized gains 8,771 82,615 45,553 443,337
Shares repurchased (756,484) (8,537,685) (477,056) (4,581,945)
-------- --------- ------ ----------
Net increase 2,078,581 $ 23,593,139 1,309,511 $12,737,914
======== ========= ====== ==========
Class B Shares Amount Shares Amount
- ------------------------------------------------- -------- --------- ------ ----------
Shares sold 9,420,000 $106,150,791 6,253,883 $59,862,105
Issued upon reinvestment of distributions from
net realized gains 31,685 294,989 56,834 551,032
Shares repurchased (1,616,639) (17,716,667) (384,236) (3,668,935)
-------- --------- ------ ----------
Net increase 7,835,046 $ 88,729,113 5,926,481 $56,744,202
======== ========= ====== ==========
Class C Shares Amount Shares Amount
- ------------------------------------------------- -------- --------- ------ ----------
Shares sold 1,284,385 $ 16,174,374 601,695 $ 6,274,545
Issued upon reinvestment of distributions from
net realized gains 8,899 84,452 131,398 1,284,834
Shares repurchased (211,276) (2,192,278) (87,138) (849,817)
-------- --------- ------ ----------
Net increase 1,082,008 $ 14,066,548 645,955 $ 6,709,562
======== ========= ====== ==========
Class D Shares Amount Shares Amount
- ------------------------------------------------- -------- --------- ------ ----------
Shares sold 4,045,991 $ 46,180,380 3,746,426 $36,243,191
Issued upon reinvestment of distributions from
net realized gains 16,713 155,761 22,846 220,144
Shares repurchased (710,067) (8,011,647) (408,826) (3,788,645)
-------- --------- ------ ----------
Net increase 3,352,637 $ 38,324,494 3,360,446 $32,674,690
======== ========= ====== ==========
</TABLE>
9
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------- -------------------------------------------
February 17, 1993 March 15, 1993
Year ended (Commencement (Commencement
September 30 of Share Class Year ended of Share Class
--------------- Designations) to September 30 Designations) to
1995** 1994 September 30, 1993 1995** 1994 September 30, 1993
- ------------------------------------ ---- --- -------------------- ---- --- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.92 $10.43 $ 8.03 $ 9.82 $10.40 $ 8.68
Net investment loss (.04) (.04) (.03) (.12) (.08) (.04)
Net realized and unrealized gain on
investments 3.69 .28 2.43 3.63 .25 1.76
Distributions from net realized
gains (.04) (.75) -- (.04) (.75) --
---- --- ------- ---- --- -------
Net asset value, end of year $13.53 $ 9.92 $10.43 $13.29 $ 9.82 $10.40
==== === ======= ==== === =======
Total return 36.95%+ 2.51%+ 24.61%+++ 35.90%+ 1.79%+ 19.82%+++
Net assets at end of year (000s) $55,250 $19,891 $ 7,251 $203,446 $73,354 $16,044
Ratio of expenses to average
net assets 1.33% 1.41% 2.43%++ 2.08% 2.16% 3.16%++
Ratio of net investment loss to
average net assets (0.34)% (0.55)% (1.43)%++ (1.10)% (1.28)% (2.15)%++
Portfolio turnover rate 214.59% 167.08% 129.57% 214.59% 167.08% 129.57%
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------------------------------------------- -------------------------------------------
March 15, 1993
Year ended (Commencement
Year ended September 30 September 30 of Share Class
-------------------------------------------- --------------- Designations) to
1995** 1994 1993 1992 1991 1995** 1994 September 30, 1993
- ------------------------------ ---- --- ---- --- ---- ---- --- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 9.99 $10.46 $ 7.96 $7.74 $ 5.03 $ 9.83 $10.39 $ 8.68
Net investment loss (.01) (.03) (.06) (.06) (.08) (.12) (.09) (.04)
Net realized and unrealized
gain on investments 3.72 .31 3.90 .63 2.79 3.64 .28 1.75
Distributions from net
realized gains (.04) (.75) (1.34) (.35) -- (.04) (.75) --
---- --- ---- --- ---- ---- --- -------
Net asset value, end of year $13.66 $ 9.99 $10.46 $7.96 $ 7.74 $13.31 $ 9.83 $10.39
==== === ==== === ==== ==== === =======
Total return 37.30%+ 2.91%+ 55.46%+ 7.34%+ 53.88%+ 36.07%+ 2.00%+ 19.70%+++
Net assets at end of year
(000s) $47,553 $23,967 $18,342 $11,654 $10,939 $95,797 $37,783 $ 5,011
Ratio of expenses to average
net assets 1.08% 1.16% 2.11% 1.54% 1.88% 2.08% 2.16% 3.16%++
Ratio of net investment loss
to average net assets (0.07)% (0.32)% (1.30)% (0.86)% (1.14)% (1.09)% (1.28)% (2.16)%++
Portfolio turnover rate 214.59% 167.08% 129.57% 124.94% 219.62% 214.59% 167.08% 129.57%
</TABLE>
++Annualized
**Per-share figures have been calculated using the average shares method.
+Total return figures do not reflect any front-end or contingent deferred
sales charges.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research
Capital Trust and Shareholders of
State Street Research Capital Fund
We have audited the accompanying statement of assets and liabilities of State
Street Research Capital Fund, including the schedule of portfolio
investments, as of September 30, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended for Class C,
for each of the two years in the period then ended and the period February
17, 1993 (commencement of share class designations) to September 30, 1993 for
Class A, and for each of the two years in the period then ended and the
period March 15, 1993 (commencement of share class designations) to September
30, 1993 for Class B and Class D, respectively. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
State Street Research Capital Fund as of September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended for Class C, for each of
the two years in the period then ended and the period February 17, 1993
(commencement of share class designations) to September 30, 1993 for Class A,
and for each of the two years in the period then ended and the period March
15, 1993 (commencement of share class designations) to September 30, 1993 for
Class B and Class D, respectively, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 3, 1995
11
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
State Street Research Capital Fund outperformed the average return for Lipper
Analytical Services' Capital Appreciation Fund category for the 12 months
ended September 30, 1995 (does not reflect sales charges).
On September 30, 1995, a substantial portion of the Fund's portfolio was
invested in technology stocks in various industries. Technology stocks, and
particularly semiconductor stocks, have led the stock market in 1995, just as
they did in 1994. Our focus over the past year has been on electronic
equipment and component stocks.
Retail stocks also provided strong performance for the Fund, even though the
overall retail sector performed poorly in 1995. We looked for stocks that
offered high growth rates.
For the twelve months ended September 30, 1995, the Fund's turnover rate
stood at 215%. This higher turnover rate was partly the result of selling
stocks that had gained from this year's strong overall stock performance. In
addition, market declines led the Fund's manager to buy stocks that offered
compelling values.
The Standard & Poor's Composite Index (S&P 500) includes 500 widely traded
common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Although the Fund was established as a
personal holding company in 1967, performance results cover the period since
the Fund commenced operations as a registered investment company on March 25,
1984. Shares of the Fund were first publicly available in 1987 to
institutions and existing shareholders only. The Fund commenced a continuous
offering to the general public on February 17, 1993. During the period that
shares were not offered to the general public, the Fund was not subject to
the cash inflows or higher level of redemptions or expenses that could occur
when shares are continuously offered to the public. Performance for a class
includes periods prior to the adoption of class designations. Performance
reflects up to maximum 4.5% front-end or 5% contingent deferred sales
charges. Performance prior to class designations in 1993 does not reflect
annual 12b-1 fees of .25% for "A" shares and 1% for "B" and "D" shares, which
will reduce subsequent performance.
Comparison Of Change In Value Of
A $10,000 Investment In Capital
Fund and The S&P 500
Class A Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+30.79% +27.98% +19.66%
Capital S&P
Fund 500
9/85 10,000 10,000
9/86 12,864 13,174
9/87 18,349 18,894
9/88 15,787 16,553
9/89 21,144 22,007
9/90 16,743 19,974
9/91 25,764 26,184
9/92 27,654 29,075
9/93 42,868 32,846
9/94 43,943 34,054
9/95 60,181 44,174
Class B Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+30.90% +28.59% +20.01%
Capital S&P
Fund 500
9/85 10,000 10,000
9/86 13,470 13,174
9/87 19,213 18,894
9/88 16,531 16,553
9/89 22,140 22,007
9/90 17,532 19,974
9/91 26,978 26,184
9/92 28,957 29,075
9/93 44,810 32,846
9/94 45,613 34,054
9/95 61,988 44,174
Class C Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+37.30% +29.40% +20.32%
Capital S&P
Fund 500
9/85 10,000 10,000
9/86 13,470 13,174
9/87 19,213 18,894
9/88 16,531 16,553
9/89 22,140 22,007
9/90 17,532 19,974
9/91 26,978 26,184
9/92 28,957 29,075
9/93 45,017 32,846
9/94 46,328 34,054
9/95 63,606 44,174
Class D Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+35.07% +28.79% +20.04%
Capital S&P
Fund 500
9/85 10,000 10,000
9/86 13,470 13,174
9/87 19,213 18,894
9/88 16,531 16,553
9/89 22,140 22,007
9/90 17,532 19,974
9/91 26,978 26,184
9/92 28,957 29,075
9/93 44,767 32,846
9/94 45,662 34,054
9/95 62,131 44,171
12
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Capital Fund
("Fund"), along with shareholders of other series of State Street Research
Capital Trust ("Meeting"), was held on August 25, 1995, as continued on
September 22, 1995. The results of the Meeting are set forth below.
<TABLE>
<CAPTION>
Votes (millions)
---------------------
For Withheld
--- --------------
<S> <C> <C>
1. The following persons were elected as
Trustees:
Edward M. Lamont 15.3 1
Robert A. Lawrence 15.3 1
Dean O. Morton 15.4 1
Thomas L. Phillips 15.3 1
Toby Rosenblatt 15.4 1
Michael S. Scott Morton 15.3 1
Ralph F. Verni 15.4 1
Jeptha H. Wade 15.3 1
</TABLE>
<TABLE>
<CAPTION>
Votes (millions)
-------------------------
For Against Abstain
--- ------ --------
<S> <C> <C> <C>
2. The Fund's following investment policies were reclassified from fundamental policies to
nonfundamental policies:
a. The policy regarding investments in securities of companies with less than three (3) years'
continuous operation; 9.9 0.7 1.2
b. The policy regarding investments in illiquid securities; 9.8 0.8 1.3
c. The policy regarding purchase of securities on margin and short sales of securities; 9.8 0.8 1.2
d. The policy regarding transactions in options and futures; and 9.8 0.8 1.3
e. The policy regarding investments in other investment companies. 9.9 0.7 1.3
3. The Fund's fundamental policy regarding investing in commodities and commodity contracts was
amended. 9.7 0.9 1.3
4. The Fund's fundamental policy on lending was amended to clarify the permissibility of securities
lending. 9.9 0.7 1.3
5. Class C shares will now be included under the Fund's Plan of Distribution Pursuant to Rule 12b-1. 2.2 0.05 0.5
6. The Master Trust Agreement was amended to eliminate the need for a vote by shareholders of the
acquiring fund to approve a merger or consolidation, or acquisition of assets. 12.8 1.6 1.9
7. The selection of Coopers & Lybrand L.L.P. as the Trust's independent accountants was ratified. 15.0 0.1 1.2
</TABLE>
13
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH CAPITAL TRUST
Fund Information
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Charles S. Glovsky
Vice President
Rudolph K. Kluiber
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
14
<PAGE>
[back cover]
State Street Research Capital Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2789-951122(1296)SSR-LD Cover Illustration by Dorothy
Cullinan CF-866D-1195
<PAGE>
[front cover]
[State Street Research logo]
State Street Research Small Capitalization Growth Fund
Semiannual Report
September 30, 1995
[graphic of man climbing blocks]
What's Inside
From the Chairman:
Stocks continue to perform strongly
Portfolio Manager's Review:
Fund performance rebounded
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings and Financial Statements
<PAGE>
FROM THE CHAIRMAN
[photo]
To Our Shareholders:
Over the past year, it was hard to beat the returns provided by stocks. The
S&P 500 and Dow Jones Industrial Average, both considered indicators of
large-company stock performance, provided gains of +29.7% and +28.0%,
respectively, over the 12 months ended September 30, 1995.(1)
Why such strong stock performance?
The investment environment has been very favorable for stocks. The economy
has demonstrated solid growth without overheating. Inflation has remained
quite low--under 3% for the year. Interest rates have declined sharply from
1994's levels. And, importantly, U.S. businesses have been able to increase
profits by boosting productivity and cutting costs.
Looking ahead
With the economy now slower, however, many wonder whether companies can still
deliver strong profits and whether stocks can continue to perform. We are
convinced there are always individual stocks that will deliver the right
combination of earnings growth and value--the challenge is finding such
stocks.
The power of research
That is the advantage of the "bottom-up," stock-by-stock investment research
provided by State Street Research. We do not simply invest in themes or jump
on the bandwagon with other investors. Instead, we are committed to doing our
homework and analyzing stocks on their individual merits. This successful
investing strategy has been the foundation of State Street Research for more
than 70 years.
Thank you for investing with State Street Research.
Sincerely,
/s/Ralph F. Verni
Ralph F. Verni
Chairman
October 31, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks; the Dow Jones Industrial Average includes 30 widely
traded stocks. The indexes, which are commonly used measures of U.S. stock
market performance, are unmanaged and do not take sales charges into
consideration. Direct investment in the indexes is not possible; results are
for illustrative purposes only.
(2)+12.44% for Class B shares; +13.60% for Class C shares; +12.44% for Class
D shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4)Performance for a class includes periods prior to the adoption of class
designations. Performance reflects up to maximum 4.5% front-end or 5%
contingent deferred sales charges. Performance prior to class designations
does not reflect annual 12b-1 fees of .25% for "A" shares and 1% for "B"
shares, which will reduce subsequent performance.
FUND INFORMATION (all data are for periods ended September 30, 1995)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
Life of Fund
(since
10/4/93) 1 year
- -------- ------------ --------------
<S> <C> <C>
Class A -1.57%/-2.10% +8.11%/+7.35%
- -------- ---------- ------------
Class B -1.87%/-2.42% +7.44%/+6.64%
- -------- ---------- ------------
Class C +1.15%/+0.57% +13.60%/+12.81%
- -------- ---------- ------------
Class D +0.16%/-0.39% +11.44%/+10.64%
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
Life of Fund
(since
10/4/93) 1 year
- -------- ------------ --------------
<S> <C> <C>
Class A +1.47%/+0.38% +13.20%/+12.41%
- -------- ---------- ------------
Class B +0.31%/-0.77% +12.44%/+11.64%
- -------- ---------- ------------
Class C +2.30%/+1.13% +13.60%/+12.81%
- -------- ---------- ------------
Class D +0.31%/-0.77% +12.44%/+11.64%
</TABLE>
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. The first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Top 5 Industry Positionsi
(by percentage of net assets)
[typeset representation of bar chart]
Computer software & service 16.7%
Hospital supply 13.2%
Business service 8.4%
Retail 7.1%
Oil 5.7%
Total net assets: 51.1%
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of Charles S. Glovsky]
Charles S. Glovsky
Portfolio Manager
Improved performance
For Small Capitalization Growth Fund, the biggest news was a dramatic
turnaround in performance. 1994 was terrible for the Fund; 1995 was an
improvement. For the twelve months ended September 30, 1995, Small
Capitalization Growth Fund provided a total return of +13.20% (does not
reflect sales charge).(2) This return was behind the +28.93% average gain for
288 funds in Lipper Analytical Services' Small Company Growth Fund category--
primarily because the Fund's performance didn't begin to rebound until early
1995.
The Fund's earlier poor performance was the result of several factors. First,
too much of the portfolio was invested in consumer-related stocks and too
little in technology--we have corrected that. Second, the Fund was hurt by a
heavy position in health-care stocks. Overall, we believe the outlook is very
favorable--reasonable valuations, low interest rates, and a strong dollar
tend to benefit small-cap stocks.
Bigger technology focus
The biggest change in the portfolio over the past year was an increased focus
in technology stocks. Technology stocks in various industries stood at 28% of
the portfolio on September 30, 1995, up from 8% a year earlier. Currently, we
are targeting the stocks of computer software companies offering
productivity-enhancing products, such as Softkey International (3.6% of the
portfolio) and Information Storage Devices (0.2%).
Added financial stocks
Financial services stocks were another sector that demonstrated strong
performance over the past year. In this area, we have participated in several
niche companies that benefited from lower interest rates. A good example is
The Money Store (1.6%), which makes consumer loans.
Reduced presence in consumer stocks
We reduced holdings in consumer stocks, especially in hotel and restaurant,
recreation, business service, and hospital-supply stocks. We retain smaller
positions in each area, focusing on individual stocks with compelling
potential. We maintained our position in retail stocks, where we have found
several opportunities, including Gymboree (2.1%) and The Sports Authority
(0.6%).
Potential for health care
Health-care stocks were a disappointment for the portfolio. Congress's move
to balance the budget--and possibly cut Medicare--resulted in serious
confusion in the health-care area. We reduced our position in health stocks,
although not before the damage was done. We retained a significant position
in health maintenance organizations (HMOs) and nursing-home stocks, however,
as we believe their potential is strong once the political scene settles.
Among our key HMO holdings are HealthCare COMPARE (2.3%) and Mariner Health
Group (1.5%).
Optimistic outlook for energy
We recently boosted our holdings in the energy sector. We took positions in a
number of oil and gas exploration firms, such as Nuevo Energy (1.2%) and
Plains Resources (0.5%). Our view is that worldwide energy demand is rising
much faster than energy supply, and that such stocks will benefit.
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
1 Softkey International CD-ROM maker 3.6%
2 Intersolv Computer software firm 2.5%
3 HealthCare COMPARE Health-care provider 2.3%
4 Gymboree Specialty children's retailer 2.1%
5 Authentic Fitness Sports clothing retailer 2.0%
6 Avid Technology Video equipment maker 2.0%
7 Cheyenne Software Computer software firm 1.9%
8 Department 56 Retail goods company 1.8%
9 Hyperion Software Financial software
company 1.7%
10 The Money Store Financial services company 1.6%
</TABLE>
These securities represent an aggregate of 21.5% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
Best and Worst Contributors to Performance
(October 1, 1994 through September 30, 1995)
Best [arrow up]
The Money Store
Lower interest rates benefited this loan provider
Softkey International
Strong computer sales benefited this CD-ROM maker
Tencor Instruments
Good year for semiconductor equipment suppliers
Worst [arrow down]
Primadonna Resorts
1995 has been a difficult year for gaming firms
Quantum Health Resources
Health-care companies disappointed
Future Healthcare
Stock declined when company was forced to restate earnings
2
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
INVESTMENT PORTFOLIO
September 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------------------------------------- ------ ------------
<S> <C> <C>
COMMON STOCKS 95.4%
Basic Industries 0.7%
Chemical 0.7%
Cambrex Corp. 11,900 $ 478,975
----------
Total Basic Industries 478,975
----------
Consumer Cyclical 26.8%
Airline 0.6%
Midwest Express Holdings, Inc.* 17,000 382,500
----------
Automotive 3.8%
Exide Corp. 18,100 905,000
Federal-Mogul Corp. 31,500 602,438
Lear Seating Corp.* 36,500 1,072,187
----------
2,579,625
----------
Hotel & Restaurant 5.0%
Au Bon Pain Company, Inc.* 40,600 314,650
Main Street and Main, Inc.* 53,700 234,938
Outback Steakhouse, Inc.* 19,950 613,462
Primadonna Resorts, Inc.* 48,100 733,525
Red Lion Hotels, Inc.* 11,000 231,000
Station Casinos, Inc.* 59,300 911,737
Studio Plus Hotels, Inc.* 15,300 351,900
----------
3,391,212
----------
Recreation 4.9%
Emmis Broadcasting Corp. Cl. A* 12,200 382,775
Hollywood Entertainment Corp.* 47,300 1,013,994
Infinity Broadcasting Corp. Cl. A* 19,025 623,069
Renaissance Communications Corp.* 26,700 934,500
Sodak Gaming, Inc.* 16,700 346,525
----------
3,300,863
----------
Retail Trade 7.1%
Department 56, Inc.* 26,600 1,243,550
Gymboree Corp.* 47,100 1,418,888
Sports Authority, Inc.* 13,800 381,225
Tiffany & Co. 22,900 958,937
Viking Office Products, Inc.* 19,600 818,300
----------
4,820,900
----------
Textile & Apparel 5.4%
Authentic Fitness Corp. 61,000 1,372,500
Norton McNaughton, Inc.* 41,900 932,275
Warnaco Group, Inc. Cl. A 45,000 1,080,000
Wolverine World Wide, Inc. 11,200 306,600
----------
3,691,375
----------
Total Consumer Cyclical 18,166,475
----------
Consumer Staple 24.1%
Business Service 8.4%
Computer Horizons Corp.* 31,700 $ 634,000
Eltron International, Inc.* 30,100 850,325
Global DirectMail Corp.* 36,200 891,425
Medic Computer Systems, Inc.* 15,800 801,850
Personnel Group of America, Inc. 61,100 855,400
Premenos Technologies, Corp. 12,100 393,250
Scientific Games Holdings Corp. 5,200 194,350
Syncronys Softcorp* 22,400 336,000
3D Systems Corp.* 44,300 742,025
----------
5,698,625
----------
Drug 2.1%
Arris Pharmaceutical Corp.* 69,200 899,600
CytoTherapeutics, Inc.* 54,000 526,500
----------
1,426,100
----------
Hospital Supply 13.2%
American Homepatient, Inc.* 29,200 744,600
American Medical Response, Inc.* 26,600 754,775
Community Care of America, Inc. 47,900 664,613
Community Health Systems, Inc.* 25,300 1,021,487
GranCare, Inc.* 27,200 472,600
HealthCare COMPARE Corp.* 39,700 1,538,375
Lincare Holdings, Inc.* 16,900 435,175
Mariner Health Group, Inc.* 70,000 988,750
Maxicare Health Plans, Inc.* 46,000 856,750
Multicare Companies, Inc.* 17,200 399,900
Pediatrix Medical Group, Inc. 3,800 77,900
Rotech Medical Corp.* 32,900 818,388
Sierra Health Services, Inc.* 6,500 162,500
----------
8,935,813
----------
Personal Care 0.4%
U.S.A. Detergents, Inc.* 11,400 236,550
----------
Total Consumer Staple 16,297,088
----------
Energy 6.7%
Oil 5.7%
Abacan Resource Corp.* 114,300 289,130
Tom Brown, Inc.* 27,500 374,688
Global Natural Resources, Inc.* 34,500 340,687
Nuevo Energy Co.* 36,200 814,500
Plains Resources, Inc.* 38,600 306,388
Ranger Oil Ltd. 132,600 795,600
Swift Energy Co.* 106,200 969,075
----------
3,890,068
----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
Value
Shares (Note 1)
- ------------------------------------- ------ ------------
Oil Service 1.0%
Landmark Graphics Corp.* 23,600 $ 665,225
----------
Total Energy 4,555,293
----------
Finance 6.7%
Financial Service 3.2%
BancTec, Inc.* 21,600 464,400
Jayhawk Acceptance Corp.* 6,200 90,675
The Money Store, Inc. 23,550 1,115,681
United Companies Financial Corp. 7,680 524,160
----------
2,194,916
----------
Insurance 3.5%
Mutual Risk Management Ltd. 23,300 920,350
NAC Re Corp. 17,200 623,500
National Re Corp. 23,100 817,163
----------
2,361,013
----------
Total Finance 4,555,929
----------
Science & Technology 28.5%
Computer Software & Service 16.7%
Avid Technology, Inc.* 31,900 1,371,700
Boca Research, Inc.* 8,000 194,000
Cheyenne Software, Inc.* 63,200 1,264,000
Datastream Systems, Inc.* 22,000 500,500
HPR, Inc.* 2,500 58,125
Harbinger Corp.* 800 11,000
Hyperion Software Corp.* 20,400 1,157,700
Inference, Inc. Cl. A* 35,900 538,500
Information Storage Devices, Inc.* 4,700 106,338
Intersolv, Inc.* 85,800 1,726,725
Mattson Technologies, Inc.* 12,900 548,250
OnTechnologies Corp.* 39,000 682,500
Phamis, Inc.* 10,100 276,487
Plasma Materials Technologies, Inc.* 4,400 77,550
Shiva Corp.* 3,800 232,750
Simware, Inc. 10,700 107,000
Smith Micro Software, Inc.* 4,000 39,500
Softkey International, Inc.* 55,000 2,433,750
----------
11,326,375
----------
Electronic Components 2.5%
C.P. Clare Corp.* 20,800 530,400
Dovatron International, Inc.* 5,300 183,513
Telcom Semiconductor, Inc.* 1,600 18,400
US Order, Inc.* 51,200 947,200
----------
1,679,513
----------
Electronic Equipment 4.5%
Electroglas, Inc.* 10,800 $ 735,750
Itron, Inc.* 14,500 402,375
Tekelec, Inc.* 45,100 1,014,750
Tencor Instruments* 19,800 876,150
----------
3,029,025
----------
Office Equipment 4.8%
Broadway & Seymour, Inc.* 33,600 840,000
FileNet Corp.* 17,600 778,800
SCI Systems, Inc. 27,000 931,500
Sequent Computer Systems, Inc.* 35,500 705,562
----------
3,255,862
----------
Total Science & Technology 19,290,775
----------
Utility 1.9%
Telephone 1.9%
Allen Group, Inc. 24,600 891,750
Tel-Save Holdings, Inc.* 25,100 385,912
----------
1,277,662
----------
Total Utility 1,277,662
----------
Total Common Stocks (Cost $53,644,148) 64,622,197
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- ----------------------------------- --------- -------- -----------
<S> <C> <C> <C>
COMMERCIAL PAPER 5.4%
Ford Motor Credit Co., 5.77% $1,519,000 10/4/1995 1,519,000
Household Finance Corp., 5.75% 301,000 10/2/1995 301,000
Philip Morris Companies, Inc. 6.60% 1,862,317 10/2/1995 1,862,317
---------
Total Commercial Paper (Cost $3,682,317) 3,682,317
---------
Total Investments (Cost $57,326,465)--100.8% 68,304,514
Cash and Other Assets, Less Liabilities--(0.8)% (564,771)
---------
Net Assets--100.0% $67,739,743
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
INVESTMENT PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At September 30, 1995, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$57,330,054 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an
excess of value over tax cost $12,836,492
Aggregate gross unrealized depreciation for
all investments in which there is an
excess of tax cost over value (1,862,032)
----------
$10,974,460
==========
</TABLE>
* Nonincome-producing securities
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $57,326,465) (Note 1) $68,304,514
Cash 31,640
Receivable for securities sold 1,900,195
Receivable from Distributor (Note 3) 24,868
Dividends and interest receivable 9,672
Deferred organization costs and other assets (Note 1) 22,225
----------
70,293,114
Liabilities
Payable for securities purchased 2,208,372
Payable for fund shares redeemed 146,459
Accrued management fee (Note 2) 41,712
Accrued distribution fee (Note 5) 32,556
Accrued trustees' fees (Note 2) 6,567
Other accrued expenses 117,705
----------
2,553,371
----------
Net Assets $67,739,743
==========
Net Assets consist of:
Unrealized appreciation of investments $10,978,049
Accumulated net realized loss (6,159,873)
Shares of beneficial interest (Note 6) 62,921,567
----------
$67,739,743
==========
Net Asset Value and redemption price per share of
Class A shares ($21,479,765 / 2,216,062 shares of
beneficial interest) $9.69
==========
Maximum Offering Price per share of Class A shares
($9.69 / .955) $10.15
==========
Net Asset Value and offering price per share of
Class B shares ($26,489,022 / 2,766,405 shares
of beneficial interest)* $9.58
==========
Net Asset Value, offering price and redemption price
per share of Class C shares ($12,379,730 / 1,267,435
shares of beneficial interest) $9.77
==========
Net Asset Value and offering price per share of
Class D shares ($7,391,226 / 771,686 shares
of beneficial interest)* $9.58
==========
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF OPERATIONS
For the year ended September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 184,282
Dividends, net of foreign taxes of $3,157 97,753
----------
282,035
Expenses
Management fee (Note 2) 501,000
Transfer agent and shareholder services (Note 2) 298,779
Custodian fee 171,195
Registration fees 95,255
Distribution fee--Class A (Note 5) 55,059
Distribution fee--Class B (Note 5) 277,822
Distribution fee--Class D (Note 5) 86,314
Reports to shareholders 42,947
Legal fees 24,495
Audit fee 18,980
Trustees' fees (Note 2) 14,366
Amortization of organization costs (Note 1) 6,529
Miscellaneous 14,423
----------
1,607,164
Expenses borne by the Distributor (Note 3) (453,010)
----------
1,154,154
----------
Net investment loss (872,119)
----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 4) (3,364,808)
Net unrealized appreciation of investments 11,482,443
----------
Net gain on investments 8,117,635
----------
Net increase in net assets resulting from operations $ 7,245,516
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
October 4, 1993
(Commencement of
Year ended Operations) to
September 30, September 30,
1995 1994
- ----------------------------------- --------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (872,119) $ (356,585)
Net realized loss on investments* (3,364,808) (2,795,065)
Net unrealized appreciation
(depreciation) of investments 11,482,443 (504,394)
------------- ---------------
Net increase (decrease) resulting
from operations 7,245,516 (3,656,044)
------------- ---------------
Net increase (decrease) from fund
share transactions (Note 6) (7,844,245) 71,994,516
------------- ---------------
Total increase (decrease) in net
assets (598,729) 68,338,472
Net Assets
Beginning of year 68,338,472 --
------------- ---------------
End of year $67,739,743 $68,338,472
============= ===============
* Net realized loss for Federal
income tax purposes
(Note 1) $(2,682,827) $ (10,835)
============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
Note 1
State Street Research Small Capitalization Growth Fund (the "Fund"), is a
series of State Street Research Capital Trust (the "Trust"), formerly State
Street Capital Trust, which is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Trust was organized in November,
1988 as a successor to State Street Capital Fund, Inc., a Massachusetts
corporation. The Trust consists presently of three separate funds: State
Street Research Small Capitalization Growth Fund, State Street Research
Capital Fund and State Street Research Small Capitalization Value Fund.
The Fund offers four classes of shares. Shares of the Fund had no class
designations until February 1, 1994. Class A shares are subject to an initial
sales charge of up to 4.50% and pay an annual service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. Investments in Securities
Values for listed securities represent the last sale on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at the closing price
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations, except for certain
securities that may be restricted as to public resale, which are valued in
accordance with methods adopted by the Trustees. Security transactions are
accounted for on the trade date (date the order to buy or sell is executed),
and dividends declared but not received are accrued on the ex-dividend date.
Interest income is determined on the accrual basis. Realized gains and losses
from security transactions are reported on the basis of identified cost of
securities delivered for both financial reporting and Federal income tax
purposes.
B. Federal Income Taxes
No provision for Federal income taxes is necessary since the Fund intends to
qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
if any, within the prescribed time periods. At September 30, 1995, the Fund
had a capital loss carryforward of $2,693,662 available, to the extent
provided in regulations, to offset future capital gains, if any, of which
$10,835 and $2,682,827 expire on September 30, 2002 and 2003, 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, 1993
through September 30, 1994, the Fund incurred net capital losses of
$2,454,661 and has deferred and treated such losses as arising in the fiscal
year ending September 30, 1995. From November 1, 1994 through September 30,
1995, the Fund incurred net capital losses of approximately $3,463,000 and
intends to defer and treat such losses as arising in the fiscal year ending
September 30, 1996.
C. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested annually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
D. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees equal to 1/16 of 1% (3/4 of 1% on an annual basis) of
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. The fees of the Trustees not
currently affiliated with the Adviser amounted to $14,366 during the year
ended September 30, 1995.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect
7
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
to the purchase and redemption of shares of the Fund. In addition,
Metropolitan receives a fee for maintenance of the accounts of certain
shareholders who are participants in sponsored arrangements, employee benefit
plans and similar programs or plans, through or under which shares of the
Fund may be purchased. During the year ended September 30, 1995, the amount
of such shareholder servicing and account maintenance expenses was
$72,975.
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, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $453,010.
Note 4
For the year ended September 30, 1995, exclusive of short-term investments
and U.S. Government obligations, purchases and sales of securities aggregated
$113,097,415 and $122,362,902, respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D 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, 1995, fees pursuant
to such plan amounted to $55,059, $277,822 and $86,314 for Class A, Class B
and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $9,616 and $42,175, respectively, on sales of Class A shares of
the Fund during the year ended September 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $50,489 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $128,068 and $6,586 on redemptions of Class B and Class D shares,
respectively during the same period.
8
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
NOTES (cont'd)
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At September 30, 1995, the Distributor owned one Class C share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
February 1, 1994
(Commencement of
Share Class
Year ended Designations)
September 30, 1995 to September 30, 1994
------------------------- ------------------------
Class A Shares Amount Shares Amount
- ----------------------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold 585,876 $ 4,916,956 2,793,089 $24,869,158
Shares redeemed (937,567) (7,864,550) (225,336) (1,967,087)
-------- --------- ------ ----------
Net increase (decrease) (351,691) $(2,947,594) 2,567,753 $22,902,071
======== ========= ====== ==========
Class B Shares Amount Shares Amount
- ----------------------- -------- --------- ------ ----------
Shares sold 477,595 $ 3,977,732 3,606,689 $32,666,242
Shares redeemed (1,148,744) (9,420,297) (169,135) (1,476,529)
-------- --------- ------ ----------
Net increase (decrease) (671,149) $(5,442,565) 3,437,554 $31,189,713
======== ========= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
October 4, 1993
(Commencement of
Operations) to
September 30, 1994
---------------------------
Class C Shares Amount Shares Amount
- --------------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 836,117 $ 7,366,455 1,914,962 $ 17,425,844
Shares redeemed (386,614) (3,415,989) (1,097,030) (10,337,651)
------ -------- -------- -----------
Net increase 449,503 $ 3,950,466 817,932 $ 7,088,193
====== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
February 1, 1994
(Commencement of
Share Class
Designations)
to September 30, 1994
------------------------
Class D Shares Amount Shares Amount
- ----------------------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold 85,008 $ 686,924 1,290,249 $11,826,451
Shares redeemed (490,937) (4,091,476) (112,634) (1,011,912)
------ --------- ------ ----------
Net increase (decrease) (405,929) $(3,404,552) 1,177,615 $10,814,539
====== ========= ====== ==========
</TABLE>
9
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Class B Class C Class D
----------------------- ----------------------- ----------------------- -------------------------
Year ended Year ended Year ended Year ended
September September September September
30, 30, 30, 30,
1995**** 1994** 1995**** 1994** 1995**** 1994*** 1995**** 1994**
---------------- ----------- -------- ----------- -------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year $8.56 $9.45 $8.52 $9.45 $8.60 $9.55 $8.52 $9.45
Net investment
loss* (.08) (.02) (.14) (.06) (.06) (.06) (.14) (.06)
Net realized and
unrealized gain
(loss) on
investments 1.21 (.87) 1.20 (.87) 1.23 (.89) 1.20 (.87)
--------- ------ --------- ------ --------- ------ --------- --------
Net asset value,
end of year $9.69 $8.56 $9.58 $8.52 $9.77 $8.60 $9.58 $8.52
========= ====== ========= ====== ========= ====== ========= ========
Total return 13.20%+ (9.42)%+++ 12.44%+ (9.84)%+++ 13.60%+ (9.95)%+++ 12.44%+ (9.84)%+++
Net assets at
end of year
(000s) $21,480 $21,986 $26,489 $29,287 $12,380 $7,033 $7,391 $10,032
Ratio of
operating
expenses to
average net
assets* 1.35% 1.35%++ 2.10% 2.10%++ 1.10% 1.10%++ 2.10% 2.10%++
Ratio of net
investment loss
to average net
assets* (0.93)% (0.58)%++ (1.67)% (1.32)%++ (0.71)% (0.68)%++ (1.67)% (1.32)%++
Portfolio
turnover rate 178.60% 83.61% 178.60% 83.61% 178.60% 83.61% 178.60% 83.61%
*Reflects
voluntary
assumption of
fees or
expenses per
share in each
year (Note 3). $.06 $.02 $.06 $.02 $.06 $.04 $.06 $.02
</TABLE>
++Annualized
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
**February 1, 1994 (commencement of share class designations) to September
30, 1994.
***October 4, 1993 (commencement of operations) to September 30, 1994.
****Per-share figures have been calculated using the average shares method.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research
Capital Trust and Shareholders of
State Street Research Small Capitalization Growth Fund
We have audited the accompanying statement of assets and liabilities of State
Street Research Small Capitalization Growth Fund, including the schedule of
portfolio investments, as of September 30, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for the year then ended and the period October 4, 1993 (commencement of
operations) to September 30, 1994 and the financial highlights for the year
then ended and the period February 1, 1994 (commencement of share class
designations) to September 30, 1994 for Class A, Class B and Class D and for
the year then ended and the period October 4, 1993 (commencement of
operations) to September 30, 1994 for Class C. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
State Street Research Small Capitalization Growth Fund as of September 30,
1995, the results of its operations for the year then ended, the changes in
its net assets for the year then ended and the period October 4, 1993
(commencement of operations) to September 30, 1994, and the financial
highlights for the year then ended and the period February 1, 1994
(commencement of share class designations) to September 30, 1994 for Class A,
Class B and Class D and for the year then ended and the period October 4,
1993 (commencement of operations) to September 30, 1994 for Class C, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 3, 1995
11
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For the twelve months ended September 30, 1995, Small Capitalization Growth
Fund significantly trailed the average gain for Lipper Analytical Services'
Small Company Growth Fund category (does not reflect sales charges.)
The Fund's underperformance was the result of several factors. First, too
much of the portfolio was invested in consumer-related stocks and too little
in technology--we have corrected that. Second, the Fund was hurt by a heavy
position in health-care stocks.
The Fund increased its focus on technology. Technology stocks in various
industries stood at 28% of the portfolio on September 30, 1995, up from 8% a
year earlier. Currently, we are targeting the stocks of computer software
companies offering productivity-enhancing products.
We reduced holdings in consumer stocks, especially in hotel and restaurant,
recreation, business service, and hospital-supply stocks. We retained smaller
positions in each area, focusing on individual stocks with compelling
potential. We maintained our position in retail stocks. Health-care stocks
were disappointing, as Congress's moves to balance the budget have resulted
in serious confusion in the health-care area. Our health-care focus is on
health maintenance organizations (HMOs) and nursing home stocks.
The Standard & Poor's Composite Index (S&P 500) includes 500 widely traded
common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations.
Performance reflects up to maximum 4.5% front-end or 5% contingent deferred
sales charges. Performance prior to class designations does not reflect
annual 12b-1 fees of .25% for "A" shares and 1% for "B" shares, which will
reduce subsequent performance.
Comparison Of Change In Value Of
A $10,000 Investment In Small
Capitalization Growth Fund and The S&P 500
[typeset representation of line charts]
Class A Shares
Average Annual Total Return
1 Year Life of Fund
+8.11%/+7.35% -1.57%/-2.10%
Small Capitalization Growth S&P 500
10/4/93 10,000.0 10,000.0
9/30/94 8,921.0 10,368.0
9/30/95 9,690.0 13,448.0
Class B Shares
Average Annual Total Return
1 Year Life of Fund
+7.44%/+6.64% -1.87%/-2.42%
Small Capitalization Growth S&P 500
10/4/93 10,000.0 10,000.0
9/30/94 8,921.0 10,368.0
9/30/95 9,631.0 13,448.0
Class C Shares
Average Annual Total Return
1 Year Life of Fund
+13.60%/+12.81% +1.15%/+0.57%
Small Capitalization Growth S&P 500
10/4/93 10,000.0 10,000.0
9/30/94 8,921.0 10,368.0
9/30/95 10,230.0 13,448.0
Class D Shares
Average Annual Total Return
1 Year Life of Fund
+11.44%/+10.64% +0.16%/-0.39%
Small Capitalization Growth S&P 500
10/4/93 10,000.0 10,000.0
9/30/94 8,921.0 10,368.0
9/30/95 10,031.0 13,448.0
12
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Small
Capitalization Growth Fund ("Fund"), along with shareholders of other series
of State Street Research Capital Trust ("Meeting"), was held on August 25,
1995, as continued on September 22, 1995. The results of the Meeting are set
forth below.
<TABLE>
<CAPTION>
Votes (millions)
---------------------
For Withheld
--- --------------
<S> <C> <C>
1. The following persons were elected as
Trustees:
Edward M. Lamont 15.3 1
Robert A. Lawrence 15.3 1
Dean O. Morton 15.4 1
Thomas L. Phillips 15.3 1
Toby Rosenblatt 15.4 1
Michael S. Scott Morton 15.3 1
Ralph F. Verni 15.4 1
Jeptha H. Wade 15.3 1
</TABLE>
<TABLE>
<CAPTION>
Votes (millions)
-------------------
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
2. Class C shares of the Fund will now be included under the Fund's Plan of Distribution Pursuant
to Rule 12b-1. 0.8 0.02 0.2
3. The Master Trust Agreement was amended to eliminate the need for a vote by shareholders of the
acquiring fund to approve a merger or consolidation, or acquisition of assets. 12.8 1.6 1.9
4. The selection of Coopers & Lybrand L.L.P. as the Trust's independent accountants was ratified. 15.0 0.1 1.2
</TABLE>
13
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION GROWTH FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH CAPITAL TRUST
Fund Information
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Charles S. Glovsky
Vice President
Rudolph K. Kluiber
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
14
<PAGE>
[back cover]
State Street Research Small Capitalization Growth Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2792-951124(1296)SSR-LD Cover Illustration by Dorothy
Cullinan SCG-085E-1195
<PAGE>
[front cover]
[State Street Research logo]
State Street Research Small Capitalization Value Fund
Annual Report
September 30, 1995
[graphic of man climbing blocks]
What's Inside
From the Chairman:
Stocks continue to perform strongly
Portfolio Manager's Review:
Solid performance in the Fund's first year
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings and Financial Statements
<PAGE>
FROM THE CHAIRMAN
[photo]
To Our Shareholders:
Over the past year, it was hard to beat the returns provided by stocks. The
S&P 500 and Dow Jones Industrial Average, both considered indicators of
large-company stock performance, provided gains of +29.7% and +28.0%,
respectively, over the 12 months ended September 30, 1995.(1)
Why such strong stock performance?
The investment environment has been very favorable for stocks. The economy
has demonstrated solid growth without overheating. Inflation has remained
quite low--under 3% for the year. Interest rates have declined sharply from
1994's levels. And, importantly, U.S. businesses have been able to increase
profits by boosting productivity and cutting costs.
Looking ahead
With the economy now slower, however, many wonder whether companies can still
deliver strong profits and whether stocks can continue to perform. We are
convinced there are always individual stocks that will deliver the right
combination of earnings growth and value--the challenge is finding such
stocks.
The power of research
That is the advantage of the "bottom-up," stock-by-stock investment research
provided by State Street Research. We do not simply invest in themes or jump
on the bandwagon with other investors. Instead, we are committed to doing our
homework and analyzing stocks on their individual merits. This successful
investing strategy has been the foundation of State Street Research for more
than 70 years.
Thank you for investing with State Street Research.
Sincerely,
/s/Ralph F. Verni
Ralph F. Verni
Chairman
October 31, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks; the Dow Jones Industrial Average includes 30 widely
traded stocks. The indexes, which are commonly used measures of U.S. stock
market performance, are unmanaged and do not take sales charges into
consideration. Direct investment in the indexes is not possible; results are
for illustrative purposes only.
(2)+16.02% for Class B shares; +16.75% for Class C shares; +16.02% for Class
D shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4)Performance reflects up to maximum 4.5% front-end or 5% contingent
deferred sales charges.
FUND INFORMATION (all data are for periods ended September 30, 1995)
Aggregate Total Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
Life of Fund
(since
2/13/95)
- -------- --------------
<S> <C>
Class A +11.30%
- -------- ------------
Class B +11.02%
- -------- ------------
Class C +16.75%
- -------- ------------
Class D +15.02%
- -------- ------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
Life of Fund
(since
2/13/95)
- -------- --------------
<S> <C>
Class A +16.54%
- -------- ------------
Class B +16.02%
- -------- ------------
Class C +16.75%
- -------- ------------
Class D +16.02%
- -------- ------------
</TABLE>
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
1 The Carbide/Graphite Group Metal and
mining company 2.8%
2 Gaylord Container Linerboard (cardboard)
leader 2.5%
3 Sunshine Mining/Refining Metal and mining
company 2.4%
4 Protection One Home security company 2.4%
5 Webco Industries Tubing manufacturer 2.4%
6 Nortek Building company 2.3%
7 America West Airline Regional airline 2.3%
8 Noel Group Diversified company 2.2%
9 Interlake Metal and mining company 2.1%
10 MEMC Electronic Electronic components
company 2.0%
</TABLE>
These securities represent an aggregate of 23.4% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of Rudolph K. Kluiber]
Rudolph K. Kluiber
Portfolio Manager
Small Capitalization Value Fund has provided solid performance thus far. From
its inception on February 13 through September 30, 1995, Class A shares of
the Fund provided a total return of +16.54% (does not reflect sales
charge).(2)
It is difficult to compare the Fund's performance with that of similar funds
because of the unusual time period--seven and one-half months.
Small-capitalization value stocks in general have underperformed
small-company growth stocks over the past 12 months.
The Fund's performance may have been hindered at first by the challenge of
finding value stocks in a rising stock market. As a result, the portfolio
held more cash than would be typical for the first few months.
What is value?
When we use the term "value," we mean that our investment approach targets
stocks that are underpriced--trading below what we believe are their true
values. Our expectation is that a value stock's price will rise in time to
reach that true value.
Digging into metal and mining
Approximately 20% of the portfolio is invested in metal and mining stocks.
This area includes a wide range of companies, most performing unglamorous
industrial tasks. Two such companies are The Carbide/Graphite Group (2.8% of
the portfolio), which makes industrial parts out of scrap steel, and CasTech
Aluminum Group (1.8%), an aluminum minimill.
Absolute value in building, retail
Out-of-favor sectors of the stock market usually offer good value--the hard
part is that it can take time for such stocks to recover. Building and retail
stocks are good examples. We have identified several building stocks that we
believe can benefit from lower interest rates and, eventually, increased
construction. Retail stocks have been beaten down in 1995 by price- conscious
consumers. We sifted through the bargains to find retail companies whose
customers may be less price sensitive--such as furniture retailers.
Potential in automotive stocks
With the economy slowing, automotive stocks have suffered--creating values.
We have targeted companies that supply parts to the big auto makers. Such
companies offer potential because of cost-cutting, merger and acquisition
activity, and international opportunities. Among our automotive holdings are
Lear Seating (1.4%) and Federal-Mogul (1.6%).
A word about small-cap stocks
It's important to point out that, although we are targeting stocks that offer
strong value, small-capitalization value stocks are not without risk. Small
stocks always involve higher degrees of price fluctuation than large stocks.
As a result, you should expect the Fund's returns and share price to
fluctuate, sometimes sharply.
Top 5 Industry Positions
[Tabular version of bar chart]
Metal & mining 19.6%
Building 8.5%
Retail 8.5%
Automotive 7.9%
Diversified 5.9%
Total net assets 50.4%
(by percentage of net assets)
Best and Worst Contributors to Performance
(October 1, 1994 through September 30, 1995)
Best [arrow up]
Exide
Auto battery maker benefited from strategic acquisitions
Aames Financial
Strong loan growth helped consumer finance company
Protection One
Home security company benefited from continued customer growth
Worst [arrow down]
Algoma Steel
Steel prices fell, hurting this stock
Gaylord Container
Linerboard maker's stock slumped because of concerns about slowing economy
Webco Industries
Tubing manufacturer hurt by concerns about slowing economy
2
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
INVESTMENT PORTFOLIO
September 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- ----- -----------
<S> <C> <C>
COMMON STOCKS 99.6%
Basic Industries 37.6%
Chemical 5.1%
Applied Extrusion Technologies, Inc.* 3,000 $ 55,125
Carlisle Plastics, Inc. Cl. A* 10,000 50,000
McWhorter Technologies, Inc.* 7,000 107,625
Rexene Corp.* 2,500 29,375
Uniroyal Chemical Corp.* 7,500 67,500
---------
309,625
---------
Diversified 5.9%
Alltrista Corp.* 2,000 38,000
Commercial Intertech Corp. 1,500 28,688
Noel Group, Inc. 22,000 137,500
Triton Group Ltd.* 33,300 104,062
Zero Corp. 3,300 53,625
---------
361,875
---------
Forest Product 2.5%
Gaylord Container Corp. Wts.* 18,199 154,694
---------
Machinery 3.6%
Arden Industrial Products, Inc.* 8,000 64,000
Hardinge, Inc. 3,500 91,875
Specialty Equipment Companies, Inc.* 5,000 61,250
---------
217,125
---------
Metal & Mining 19.6%
Algoma Steel, Inc.* 11,000 51,150
Bayou Steel Corp. Cl. A* 3,000 14,813
Carbide/Graphite Group, Inc.* 12,000 169,500
Castech Aluminum Group, Inc.* 7,000 112,875
Chase Brass Industries, Inc.* 8,000 102,000
Commonwealth Aluminum Corp. 1,000 17,500
Easco, Inc. 11,000 82,500
Encore Wire Corp.* 2,000 24,125
Interlake, Inc.* 53,900 128,013
Maxxam, Inc.* 1,000 49,125
Shaw Group, Inc.* 6,000 54,750
Sinter Metals, Inc. Cl. A* 3,000 33,000
Sunshine Mining & Refining Co. Pfd.* 18,000 148,500
Webco Industries, Inc.* 21,000 145,687
Wyman Gordon Co.* 5,000 69,062
---------
1,202,600
---------
Railroad 0.9%
Westinghouse Air Brake Co.* 4,000 57,500
---------
Total Basic Industries 2,303,419
---------
Consumer Cyclical 34.0%
Airline 3.0%
America West Airline, Inc.* 9,000 $ 139,500
Midwest Express Holdings, Inc. 2,000 45,000
---------
184,500
---------
Automotive 7.9%
Borg Warner Automotive, Inc. 1,000 32,000
Federal-Mogul Corp. 5,000 95,625
Harvard Industries, Inc. Cl. B* 1,000 26,750
Lear Seating Corp.* 3,000 88,125
Littelfuse, Inc.* 1,000 32,500
Masland Corp. 7,000 104,125
Tower Automotive, Inc.* 3,000 41,250
Wescast Industries, Inc. Cl. A 6,000 66,000
---------
486,375
---------
Building 8.5%
American Buildings Co.* 2,500 59,062
Cameron Ashley, Inc.* 6,000 57,000
Centex Construction Products, Inc.* 6,500 85,313
Falcon Building Products, Inc.* 5,000 43,750
Miles Homes, Inc.* 20,000 27,500
Nortek, Inc.* 16,000 140,000
Simpson Manufacturing, Inc.* 4,000 48,500
Stimsonite Corp.* 5,000 60,000
---------
521,125
---------
Hotel & Restaurant 2.3%
Hollywood Casino Cl. A* 10,000 70,000
Primadonna Resorts, Inc.* 4,500 68,625
---------
138,625
---------
Recreation 3.8%
Lewis Galoob Toys, Inc. Cv. Pfd.* 5,000 91,875
Granite Broadcasting Co.* 7,000 76,125
HMG Worldwide Corp.* 27,000 64,125
---------
232,125
---------
Retail Trade 8.5%
Bombay Company, Inc.* 5,000 40,625
Cole National Corp. Cl. A* 5,000 60,625
Eastbay, Inc.* 4,500 88,875
Finlay Enterprises, Inc.* 3,000 51,750
Home Shopping Network, Inc.* 3,000 27,750
Rhodes, Inc.* 10,000 115,000
TBC Corp.* 8,000 77,000
Valuevision International, Inc.* 10,000 58,750
---------
520,375
---------
Total Consumer Cyclical 2,083,125
---------
The accompanying notes are an integral part of the financial
statements.
3
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
Value
Shares (Note 1)
- ----------------------------------------- ----- -----------
Consumer Staple 11.7%
Business Service 5.3%
Computer Learning Centers, Inc.* 4,000 $ 44,000
Ideon Group, Inc. 5,000 51,250
Protection One, Inc.* 16,000 146,000
Staffing Resources, Inc. 6,500 81,250
---------
322,500
---------
Container 3.8%
Continental Can Company, Inc.* 4,000 78,500
Lufkin Industries, Inc. 3,000 70,500
U.S. Can Corp.* 6,500 86,937
---------
235,937
---------
Drug 0.8%
Martek Biosciences Corp.* 3,000 48,750
---------
Printing & Publishing 1.8%
Katz Media Group, Inc.* 5,500 112,063
---------
Total Consumer Staple 719,250
---------
Energy 5.2%
Oil 4.3%
Crystal Oil Corp.* 3,700 110,075
Gerrity Oil & Gas Corp. Cv. Pfd. 10,000 106,250
Optima Petroleum Corp.* 17,100 49,162
---------
265,487
---------
Oil Service 0.9%
Global Marine, Inc.* 8,000 57,000
---------
Total Energy 322,487
---------
Finance 2.7%
Bank 0.8%
Springfield Institution For Savings Bank* 3,000 46,125
---------
Financial Service 1.9%
Hawthorne Financial Corp.* 20,000 73,750
Midland Financial Group, Inc. 4,000 44,000
---------
117,750
---------
Total Finance 163,875
---------
Science & Technology 7.2%
Aerospace 1.1%
BE Aerospace, Inc.* 8,000 67,000
---------
Computer Software & Service 3.0%
Computational Systems, Inc.* 3,900 63,375
Computervision Corp.* 10,000 121,250
---------
184,625
---------
Electronic Components 3.1%
MEMC Electronic Materials, Inc.* 4,500 $ 122,062
Thermospectra Corp.* 4,000 67,000
---------
189,062
---------
Total Science & Technology 440,687
---------
Utility 1.2%
Natural Gas 1.2%
TransTexas Gas Corp.* 4,000 72,500
---------
Total Utility 72,500
---------
Total Common Stocks (Cost $5,568,938) 6,105,343
---------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- ------------------------------ ------- -------- ----------
<S> <C> <C> <C>
Short-Term Obligations 1.7%
Household Finance Corp., 5.65% $104,000 10/2/1995 104,000
--------
Total Short-Term Obligations (Cost $104,000) 104,000
--------
Total Investments (Cost $5,672,938)--101.3% 6,209,343
Cash and Other Assets, Less Liabilities--(1.3)% (78,070)
--------
Net Assets--100.0% $6,131,273
========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At September 30, 1995, the net unrealized
appreciation of investments based on cost for
Federal income tax purposes of $5,672,938 was as
follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 777,614
Aggregate gross unrealized depreciation for all
investments in which there is an excess of
tax cost over value (241,209)
--------
$ 536,405
========
</TABLE>
* Nonincome-producing securities
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $5,672,938) (Note 1) $6,209,343
Cash 19,606
Receivable for securities sold 29,479
Receivable from Distributor (Note 3) 2,177
Dividends and interest receivable 531
Deferred organization costs and other assets (Note 1) 69,733
---------
6,330,869
Liabilities
Payable for securities purchased 136,125
Accrued trustees' fees (Note 2) 9,128
Accrued management fee (Note 2) 4,269
Accrued distribution fee (Note 5) 1,375
Accrued transfer agent and shareholder services (Note 2) 730
Other accrued expenses 47,969
---------
199,596
---------
Net Assets $6,131,273
=========
Net Assets consist of:
Undistributed net investment income $ 36,497
Unrealized appreciation of investments 536,405
Accumulated net realized gain 275,486
Shares of beneficial interest (Note 6) 5,282,885
---------
$6,131,273
=========
Net Asset Value and redemption price per share of Class A
shares ($5,781,809 / 519,451 shares of beneficial
interest) $11.13
=========
Maximum Offering Price per share of Class A shares
($11.13 / .955) $11.65
=========
Net Asset Value and offering price per share of
Class B shares ($116,240 / 10,493 shares of beneficial
interest)* $11.08
=========
Net Asset Value, offering price and redemption price per
share of Class C shares ($116,984 / 10,493 shares of
beneficial interest) $11.15
=========
Net Asset Value and offering price per share of
Class D shares ($116,240 / 10,493 shares of
beneficial interest)* $11.08
=========
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the period February 13, 1995
(commencement of operations) to September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 78,168
Dividends, net of foreign taxes of $36 10,878
-------
89,046
Expenses
Custodian fee 44,957
Management fee (Note 2) 30,298
Amortization of organization costs (Note 1) 9,230
Trustees' fees (Note 2) 9,128
Reports to shareholders 8,800
Audit fee 8,139
Legal fees 5,584
Registration fees 4,649
Transfer agent and shareholder services (Note 2) 730
Distribution fee--Class A (Note 5) 8,392
Distribution fee--Class B (Note 5) 692
Distribution fee--Class D (Note 5) 692
Miscellaneous 1,280
-------
132,571
Expenses borne by the Distributor (Note 3) (80,022)
-------
52,549
-------
Net investment income 36,497
-------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 3) 275,486
Net unrealized appreciation of investments 536,405
-------
Net gain on investments 811,891
-------
Net increase in net assets resulting from operations $848,388
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period February 13, 1995
(commencement of operations) to September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 36,497
Net realized gain on investments* 275,486
Net unrealized appreciation of investments 536,405
---------
Net increase resulting from operations 848,388
---------
Net increase from fund share transactions (Note 6) 5,282,885
---------
Total increase in net assets 6,131,273
Net Assets
Beginning of period --
---------
End of period (including undistributed net investment
income of $36,497) $6,131,273
=========
*Net realized gain for Federal income tax purposes
(Note 1) $ 275,486
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
Note 1
State Street Research Small Capitalization Value Fund (the "Fund"), is a
series of State Street Research Capital Trust (the "Trust"), formerly State
Street Capital Trust, which is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Trust was organized in November,
1988 as a successor to State Street Capital Fund, Inc., a Massachusetts
corporation. The Trust consists presently of three separate funds: State
Street Research Small Capitalization Value Fund, State Street Research Small
Capitalization Growth Fund and State Street Research Capital Fund.
The Fund is authorized to issue four classes of shares. At the present time,
only Class A shares are generally available for purchase. Class B, Class C
and Class D shares are not being offered at this time. Class A shares are
subject to an initial sales charge of up to 4.50% and pay an annual service
fee equal to 0.25% of average daily net assets. Class B shares are subject to
a contingent deferred sales charge on certain redemptions made within five
years of purchase and pay annual distribution and service fees of 1.00%.
Class B shares automatically convert into Class A shares (which pay lower
ongoing expenses) at the end of eight years after the issuance of the Class B
shares. Class C shares are only offered to certain employee benefit plans and
large institutions. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro- rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. Investment in Securities
Values for listed securities represent the last sale on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at the closing price
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations, except for certain
securities that may be restricted as to public resale, which are valued in
accordance with methods adopted by the Trustees. Security transactions are
accounted for on the trade date (date the order to buy or sell is executed),
and dividends declared but not received are accrued on the ex-dividend date.
Interest income is determined on the accrual basis. Realized gains and losses
from security transactions are reported on the basis of identified cost of
securities delivered for both financial reporting and Federal income tax
purposes.
6
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
NOTES (cont'd)
B. Federal Income Taxes
No provision for Federal income taxes is necessary since the Fund intends to
qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
if any, within the prescribed time periods.
C. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested annually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
D. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight- line method over a
period of five years.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), 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. The fees of the Trustees not currently affiliated with the
Adviser amounted to $9,128 during the period February 13, 1995 (commencement
of operations) to September 30, 1995.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the period February 13, 1995 (commencement of
operations) to September 30, 1995, the amount of such expenses was $118.
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 period February 13, 1995 (commencement of operations) to
September 30, 1995, the amount of such expenses assumed by the Distributor
and its affiliates was $80,022.
Note 4
For the period February 13, 1995 (commencement of operations) to September
30, 1995, exclusive of short-term investments and U.S. Government
obligations, purchases and sales of securities aggregated $6,865,944 and
$1,572,492, respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D 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 period February 13, 1995 (commencement of
operations) to September 30, 1995, fees pursuant to such plan amounted to
$8,392, $692 and $692 for Class A, Class B and Class D, respectively.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At September 30, 1995,
Metropolitan owned one share of each of Class A, Class B, Class C and Class D
shares and the Adviser owed 492,146 Class A shares and 10,471 of each of
Class B, Class C and Class D shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
February 13, 1995
(Commencement of
Operations)
to September 30, 1995
---------------------
Class A Shares Amount
- -------------- ------ -----------
<S> <C> <C>
Shares sold 519,451 $4,982,255
---- ---------
Net increase 519,451 $4,982,255
==== =========
Class B Shares Amount
- -------------- ---- ---------
Shares sold 10,493 $ 100,210
---- ---------
Net increase 10,493 $ 100,210
==== =========
Class C Shares Amount
- -------------- ---- ---------
Shares sold 10,493 $ 100,210
---- ---------
Net increase 10,493 $ 100,210
==== =========
Class D Shares Amount
- -------------- ---- ---------
Shares sold 10,493 $ 100,210
---- ---------
Net increase 10,493 $ 100,210
==== =========
</TABLE>
7
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
FINANCIAL HIGHLIGHTS
For a share outstanding from February 13, 1995 (commencement of operations)
to September 30, 1995
<TABLE>
<CAPTION>
Class A Class B Class C Class D
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.55 $9.55 $9.55 $9.55
Net investment income* .07 .02 .09 .02
Net unrealized gain on investments 1.51 1.51 1.51 1.51
-------- -------- -------- ----------
Net asset value, end of period $11.13 $11.08 $11.15 $11.08
======== ======== ======== ==========
Total return+ 16.54% 16.02% 16.75% 16.02%
Net assets at end of period (000s) $5,782 $116 $117 $116
Ratio of operating expenses to average net assets* 1.45%++ 2.20%++ 1.20%++ 2.20%++
Ratio of net investment income to average net assets* 1.05%++ 0.32%++ 1.32%++ 0.32%++
Portfolio turnover rate 47.34% 47.34% 47.34% 47.34%
*Reflects voluntary assumption of fees or expenses per share
in each period. (Note 3). $.15 $.15 $.15 $.15
</TABLE>
++Annualized
+Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research
Capital Trust and Shareholders of
State Street Research Small Capitalization Value Fund
We have audited the accompanying statement of assets and liabilities of State
Street Research Small Capitalization Value Fund, including the schedule of
portfolio investments, as of September 30, 1995, and the related statements
of operations and changes in net assets and the financial highlights for the
period February 13, 1995 (commencement of operations) to September 30, 1995.
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.
We conducted our audit in accordance with generally accepted auditing
standards. 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, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant esti mates 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
State Street Research Small Capitalization Value Fund as of September 30,
1995, the results of its operations and changes in its net assets and the
financial highlights for the period February 13, 1995 (commencement of
operations) to September 30, 1995, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 3, 1995
9
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Small
Capitalization Value Fund ("Fund"), along with shareholders of other series
of State Street Research Capital Trust ("Meeting"), was held on August 25,
1995, as continued on September 22, 1995. The results of the Meeting are set
forth below.
<TABLE>
<CAPTION>
Votes (millions)
---------------------
For Withheld
--- --------------
<S> <C> <C>
1. The following persons were elected as
Trustees:
Edward M. Lamont 15.3 1
Robert A. Lawrence 15.3 1
Dean O. Morton 15.4 1
Thomas L. Phillips 15.3 1
Toby Rosenblatt 15.4 1
Michael S. Scott Morton 15.3 1
Ralph F. Verni 15.4 1
Jeptha H. Wade 15.3 1
</TABLE>
<TABLE>
<CAPTION>
Votes (millions)
-------------------------
For Against Abstain
--- ------ --------
<S> <C> <C> <C>
2. The Master Trust Agreement was amended to eliminate the need for a vote by shareholders of the
acquiring fund to approve a merger or consolidation, or acquisition of assets. 12.8 1.6 1.9
3. The selection of Coopers & Lybrand L.L.P. as the Trust's independent accountants was ratified. 15.0 0.1 1.2
</TABLE>
10
<PAGE>
STATE STREET RESEARCH SMALL CAPITALIZATION VALUE FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH CAPITAL TRUST
Fund Information
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Charles S. Glovsky
Vice President
Rudolph K. Kluiber
Vice President
Frederick R. Kobrick
Vice President
Thomas P. Moore, Jr.
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
11
<PAGE>
[back cover]
State Street Research Small Capitalization Value Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2793-951124(1296)SSR-LD Cover Illustration by Dorothy
Cullinan SCV-339E-1195
