<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
CAPITAL FUND
---------------------
SEMIANNUAL REPORT
March 31, 1999
-------------
WHAT'S INSIDE
-------------
Investment Update
About the Fund,
economy and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar seal]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1998
[end Dalbar seal]
For Excellence
in
Shareholder Service
[SSR 75th Anniversary logo]
STATE STREET RESEARCH
75 YEARS
LASTING VALUES
- --------------
LEADING IDEAS
[end SSR 75th Anniversary logo]
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered around 4%, and wages rose. The fourth
quarter of 1998 was far stronger than economists expected, with growth
reported at 6.1%.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and mortgage rates
translated into additional income for many consumers.
o The nation's savings rate fell below zero, but debate flared over the
significance of that figure because it does not include retirement savings in
tax-advantaged accounts.
The Markets
o The S&P 500, a broad measure of common stock performance, gained 27.32% for
the six-month period.(1) Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market. In fact, the smaller the company, the wider the gap
between growth and value stock performance.
o Bonds benefited from three quick interest rate cuts late in 1998. However, the
yield on the long-term Treasury benchmark climbed from 5.0% back up to 5.7% by
the end of the period. Investors sought bonds of the highest quality in the
wake of market turmoil initiated by a currency crisis in Russia. High-yield
bonds were weak during the first half of the period, but picked up early in
1999 as investors regained confidence in the market.
THE FUND
Over the past six months
o For the six months ended March 31, 1999, Class A shares of Capital Fund
returned 24.90% [does not reflect sales charge.](2) The Fund slightly
underperformed the Lipper capital appreciation funds which averaged a gain of
28.71% for the period.
o Although the Fund lagged its peer group, it delivered solid double-digit
returns during a period that was generally favorable to stocks.
o The Fund's investments in media, advertising and Internet stocks helped
performance as many of these companies demonstrated strong business trends.
o The Fund's exposure to health care was a drag on performance as the industry
was weak and stock selection hurt.
Current Strategy
o The Fund is invested in mid-sized companies that have above-average growth
potential. The emphasis is on consumer services and technology companies.
o Stocks in the Fund have relatively low valuations, which should make them
attractive as investment leadership changes.
March 31, 1999
(1)The S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest directly
in the index.
(2)24.37% for Class B(1) shares; 24.37% for Class B shares; 24.41% for Class C
shares; 25.05% for Class S shares.
(3)Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain or
loss when you sell your shares. All returns assume reinvestment of capital gain
distributions and income dividends at net asset value. Performance reflects a
maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
Performance for Class B(1) reflects Class B performance through December 31,
1998. Class B(1) was introduced on January 1, 1999.
(4)The Fund's returns include performance from before the creation of share
classes. If this performance reflected the share classes' current 12b-1 fees,
the fund's returns may have been lower.
(5)Class S shares, offered without a sales charge, are available only through
certain employee benefit plans and special programs.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended March 31, 1999)
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge)(3),(4),(5)
<TABLE>
<CAPTION>
=================================================
10 Years 5 Years 1 Year
-------------------------------------------------
<S> <C> <C> <C>
Class A 14.70% 10.20% -9.07%
-------------------------------------------------
Class B(1) 14.87% 10.41% -8.52%
-------------------------------------------------
Class B 14.87% 10.41% -8.52%
-------------------------------------------------
Class C 14.90% 10.70% -5.09%
-------------------------------------------------
Class S 15.58% 11.82% -3.27%
=================================================
</TABLE>
Top 10 Holdings
(by percentage of net assets)
1 America Online Internet software 3.9%
2 Qwest Communications International Telecommunications 3.3%
3 Harley-Davidson Motorcycles 2.9%
4 Clear Channel Communications TV radio stations 2.8%
5 Outdoor Systems Outdoor advertising 2.7%
6 Valassis Communications Consumer promotion products 2.6%
7 Mirage Resorts Hotels/casinos 2.5%
8 Univision Communications Spanish language television 2.4%
9 Danaher Hand tools, auto parts 2.3%
10 Sybron International Dental laboratory products 2.2%
These securities represent an aggregate of 27.6% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
- -------------------------------[BAR CHART]--------------------------------------
Top 5 Industries
(by percentage of net assets)
Retail 11.0%
Commercial Services 10.4%
Communications, 9.8%
Media & Entertainment
Advertising Agencies 7.7%
Financial Data
Processing Services 6.6%
& Systems
Total: 45.5%
- -------------------------------[END BAR CHART]----------------------------------
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 99.9%
Automobiles & Transportation 2.9%
Miscellaneous Transportation 2.9%
Harley-Davidson Inc. .............................. 459,100 $ 26,398,250
------------
Total Automobiles & Transportation ........................... 26,398,250
------------
Consumer Discretionary 48.1%
Advertising Agencies 7.7%
Outdoor Systems Inc.* ............................. 803,093 24,092,790
TMP Worldwide Inc.* ............................... 55,300 3,584,131
Valassis Communications Inc. ...................... 446,000 23,080,500
Young & Rubicam Inc.* ............................. 447,000 18,215,250
------------
68,972,671
------------
Casinos/Gambling, Hotel/Motel 3.3%
International Game Technology Inc. ................ 481,600 7,013,300
Mirage Resorts Inc.* .............................. 1,073,200 22,805,500
------------
29,818,800
------------
Commercial Services 10.4%
America Online Inc.* .............................. 237,400 34,660,400
Cendant Corp.* .................................... 1,141,561 17,979,586
Central Parking Corp. ............................. 218,700 7,545,150
Cintas Corp. ...................................... 111,700 7,302,388
iVillage Inc.* .................................... 10,100 1,015,050
Priceline.com, Inc.* .............................. 13,400 1,110,525
Robert Half International Inc.* ................... 259,500 8,514,844
Waste Management Inc.* ............................ 338,500 15,020,937
------------
93,148,880
------------
Communications, Media & Entertainment 9.8%
Capstar Broadcasting Corp. Cl. A* ................. 514,700 11,805,931
Chancellor Media Corp. ............................ 267,700 12,615,362
Clear Channel Communications Inc.* ................ 370,620 24,854,705
Fox Entertainment Group Inc. Cl. A * .............. 202,200 5,484,675
Infinity Broadcasting Corp. Cl. A* ................ 217,300 5,595,475
SFX Entertainment, Inc. Cl. A* .................... 92,000 5,939,750
Univision Communications Inc. Cl. A* .............. 428,300 21,415,000
------------
87,710,898
------------
Consumer Electronics 0.2%
Doubleclick Inc.* ................................. 12,200 2,221,163
------------
Consumer Products 0.5%
Maytag Corp. ...................................... 73,800 4,455,675
------------
Consumer Services 1.6%
Apollo Group Inc. Cl. A* .......................... 491,300 14,677,587
------------
Leisure Time 1.5%
Royal Caribbean Cruises Ltd.* ..................... 344,300 13,427,700
------------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Printing & Publishing 0.3%
Central Newspapers Inc. Cl. A ..................... 82,000 $ 2,552,250
------------
Retail 11.0%
Family Dollar Stores Inc. ......................... 823,100 18,931,300
Jones Apparel Group Inc.* ......................... 618,200 17,270,962
Linens 'n Things Inc.* ............................ 397,400 18,032,025
Men's Wearhouse, Inc.* ............................ 455,412 13,150,021
Saks Inc.* ........................................ 552,300 14,359,800
U.S.A. Networks Inc.* ............................. 488,627 17,498,955
------------
99,243,063
------------
Shoes 0.3%
Nine West Group Inc.* ............................. 95,900 2,367,531
------------
Toys 1.5%
Mattel Inc. ....................................... 541,800 13,477,275
------------
Total Consumer Discretionary ................................... 432,073,493
------------
Consumer Staples 1.1%
Drug & Grocery Store Chains 1.1%
CVS Corp. ......................................... 206,900 9,827,750
------------
Total Consumer Staples ......................................... 9,827,750
------------
Financial Services 12.3%
Banks & Savings & Loan 1.2%
TCF Financial Corp. ............................... 418,700 10,886,200
------------
Financial Data Processing Services & Systems 6.6%
Bisys Group Inc.* ................................. 116,000 6,525,000
Concord EFS Inc.* ................................. 529,100 14,583,319
Fiserv Inc.* ...................................... 359,650 19,286,231
Nova Corp.* ....................................... 538,300 14,130,375
Paychex Inc. ...................................... 97,200 4,610,925
------------
59,135,850
------------
Insurance 1.5%
Ace Ltd. .......................................... 435,100 13,569,681
------------
Miscellaneous Financial 3.0%
Capital One Financial Corp. ....................... 75,000 11,325,000
Heller Financial Inc. Cl. A ....................... 644,000 15,134,000
------------
26,459,000
------------
Total Financial Services ....................................... 110,050,731
------------
Health Care 5.4%
Health Care Facilities 1.4%
Health Management Associates, Inc. Cl. A* ......... 999,050 12,175,922
------------
Health Care Services 1.8%
Lincare Holdings Inc.* ............................ 591,700 16,641,562
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------------- ---------------
<S> <C> <C>
Hospital Supply 2.2%
Sybron International Corp.* ...................... 785,000 $ 19,625,000
------------
Total Health Care ............................................ 48,442,484
------------
Materials & Processing 0.9%
Containers & Packaging 0.9%
AptarGroup Inc. .................................. 316,100 8,218,600
------------
Total Materials & Processing ................................. 8,218,600
------------
Other Energy 4.5%
Oil & Gas Producers 3.3%
Anadarko Petroleum Corp. ......................... 410,500 15,496,375
Burlington Resources Inc. ........................ 363,900 14,533,256
------------
30,029,631
------------
Oil Well Equipment & Services 1.2%
BJ Services Co.* ................................. 179,000 4,195,313
Noble Drilling Corp.* ............................ 360,300 6,237,693
------------
10,433,006
------------
Total Other Energy ........................................... 40,462,637
------------
Producer Durables 5.8%
Aerospace 1.2%
Gulfstream Aerospace Corp.* ...................... 253,800 11,008,575
------------
Miscellaneous Equipment 2.3%
Danaher Corp. .................................... 401,700 20,988,825
------------
Production Technology Equipment 2.3%
KLA-Tencor Corp.* ................................ 236,400 11,480,175
Millipore Corp. .................................. 264,700 6,385,888
Solectron Corp.* ................................. 46,500 2,258,156
------------
20,124,219
------------
Total Producer Durables ...................................... 52,121,619
------------
Technology 14.4%
Communications Technology 5.7%
American Tower Corp. Cl. A* ...................... 541,300 13,261,850
Comverse Technology Inc.* ........................ 28,700 2,439,500
CSG Systems International Inc.* .................. 468,400 18,472,525
Inktomi Corp.* ................................... 38,000 3,258,500
Network Associates Inc.* ......................... 279,900 8,589,431
Network Solutions Inc. Cl. A* .................... 31,600 3,341,700
Sterling Commerce Inc.* .......................... 59,200 1,820,400
------------
51,183,906
------------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer Software 3.2%
Cadence Design Systems Inc.* ..................... 162,500 $ 4,184,375
Citrix Systems Inc.* ............................. 101,600 3,873,500
Intuit, Inc.* .................................... 26,600 2,706,550
Keane Inc.* ...................................... 182,000 3,878,875
Novell Inc.* ..................................... 444,000 11,183,250
Symantec Corp.* .................................. 184,400 3,123,275
------------
28,949,825
------------
Computer Technology 2.0%
Gateway 2000 Inc.* ............................... 75,500 5,176,468
Network Appliance Inc.* .......................... 41,400 2,090,700
Seagate Technology, Inc.* ........................ 61,900 1,829,919
Silicon Graphics Inc.* ........................... 549,400 9,168,113
------------
18,265,200
------------
Electronics: Semi-Conductors/Components 3.5%
Altera Corp.* .................................... 242,600 14,434,700
Linear Technology Corp. .......................... 105,200 5,391,500
Maxim Integrated Products Inc.* .................. 203,100 10,992,788
SCI Systems Inc.* ................................ 13,600 402,900
------------
31,221,888
------------
Total Technology ............................................. 129,620,819
------------
Utilities 4.5%
Telecommunications 4.5%
Colt Telecom Group PLC ADR* ...................... 27,900 2,003,569
Gilat Satellite Networks Ltd.* ................... 146,900 8,814,000
Qwest Communications International Inc.* ......... 413,098 29,781,784
------------
40,599,353
------------
Total Utilities .............................................. 40,599,353
------------
Total Common Stocks (Cost $670,520,714)....................... 897,815,736
------------
SHORT-TERM INVESTMENTS 3.0%
AIM Liquid Assets Portfolio ...................... 26,875,142 26,875,142
------------
Total Short-Term Investments (Cost $26,875,142) .............. 26,875,142
------------
<CAPTION>
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 0.5%
American Express Credit
Corp., 4.85% ...................... $4,221,000 4/01/1999 4,221,000
------------
Total Commercial Paper (Cost $4,221,000) ........................ 4,221,000
------------
Total Investments (Cost $701,616,856)--103.4% ................... 928,911,878
Cash and Other Assets, Less Liabilities--(3.4%) ................. (30,571,107)
------------
Net Assets--100.0% ..............................................$898,340,771
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Federal Income Tax Information:
At March 31, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $701,659,798 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ......... $256,495,575
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ......... (29,243,495)
------------
$227,252,080
============
</TABLE>
- --------------------------------------------------------------------------------
* Nonincome-producing securities
ADR stands for American Despositary Receipt, representing ownership of foreign
securities.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $701,616,856) (Note 1).............. $928,911,878
Cash ........................................................... 8,293
Receivable for securities sold ................................. 9,511,134
Receivable for fund shares sold ................................ 564,618
Dividends and interest receivable .............................. 226,901
Other assets ................................................... 85,681
------------
939,308,505
Liabilities
Payable for collateral received on securities loaned ........... 26,875,142
Payable for securities purchased ............................... 8,932,372
Payable for fund shares redeemed ............................... 2,418,084
Accrued transfer agent and shareholder services
(Note 2) ..................................................... 1,582,018
Accrued management fee (Note 2) ................................ 593,435
Accrued distribution and service fees (Note 4) ................. 472,537
Accrued trustees' fees (Note 2) ................................ 27,249
Other accrued expenses ......................................... 66,897
------------
40,967,734
------------
Net Assets $898,340,771
============
Net Assets consist of:
Unrealized appreciation of investments ........................ $227,295,022
Accumulated net realized gain ................................. 24,357,769
Paid-in capital ............................................... 646,687,980
------------
$898,340,771
============
Net Asset Value and redemption price per share of
Class A shares ($354,817,936 [divided by] 26,395,995 shares).. $ 13.44
============
Maximum Offering Price per share of Class A shares
($13.44 [divided by] .9425)................................... $ 14.26
============
Net Asset Value and offering price per share of Class
B(1) shares ($3,774,712 [divided by] 295,761 shares)*......... $ 12.76
============
Net Asset Value and offering price per share of Class
B shares ($377,040,423 [divided by] 29,540,611 shares)*....... $ 12.76
============
Net Asset Value and offering price per share of Class
C shares ($50,674,706 [divided by] 3,961,374 shares)*......... $ 12.79
============
Net Asset Value, offering price and redemption price
per share of Class S shares ($112,032,994 [divided by]
8,166,389 shares) ............................................ $ 13.72
============
</TABLE>
- --------------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to net
asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $6,026..................... $ 1,076,608
Interest (Note 1) ............................................ 759,363
------------
1,835,971
Expenses
Management fee (Note 2) ...................................... 3,282,019
Transfer agent and shareholder services (Note 2) ............. 1,721,625
Custodian fee ................................................ 119,778
Reports to shareholders ...................................... 69,605
Registration fees ............................................ 29,534
Trustees' fees (Note 2) ...................................... 18,625
Audit fee .................................................... 15,525
Legal fees ................................................... 7,250
Service fee-Class A (Note 4) ................................. 439,700
Distribution and service fees--Class B(1) (Note 4) ........... 5,114
Distribution and service fees--Class B (Note 4) .............. 1,924,614
Distribution and service fees--Class C (Note 4) .............. 268,866
Miscellaneous ................................................ 24,450
------------
7,926,705
Fees paid indirectly (Note 2) ................................ (106,809)
------------
7,819,896
------------
Net investment loss .......................................... (5,983,925)
------------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 3) ............. 24,439,156
Net unrealized appreciation of investments ................... 180,762,743
------------
Net gain on investments ...................................... 205,201,899
------------
Net increase in net assets resulting from operations ......... $199,217,974
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Year ended March 31, 1999
September 30, 1998 (Unaudited)
-------------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss ................. $ (13,857,461) $ (5,983,925)
Net realized gain on investments..... 109,471,374 24,439,156
Net unrealized appreciation
(depreciation) of investments ..... (302,805,063) 180,762,743
-------------- ------------
Net increase (decrease) resulting
from operations ................... (207,191,150) 199,217,974
-------------- ------------
Distributions from net realized
gains:
Class A ............................ (3,841,210) (34,950,690)
Class B ............................ (4,724,072) (41,134,345)
Class C ............................ (889,094) (5,936,698)
Class S ............................ (1,541,241) (11,198,920)
-------------- ------------
(10,995,617) (93,220,653)
-------------- ------------
Net decrease from fund share
transactions (Note 5) ............. (272,124,846) (60,542,577)
-------------- ------------
Total increase (decrease) in net
assets ............................ (490,311,613) 45,454,744
Net Assets
Beginning of period ................. 1,343,197,640 852,886,027
-------------- ------------
End of period ....................... $ 852,886,027 $898,340,771
============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1999
Note 1
State Street Research Capital Fund (the "Fund"), is a series of State Street
Research Capital Trust (the "Trust"), which is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists
presently of three separate funds: State Street Research Capital Fund, State
Street Research Emerging Growth Fund and State Street Research Aurora Fund.
The investment objective of the Fund is to seek maximum capital appreciation by
investing primarily in common stocks of emerging growth companies and of
companies considered to be undervalued special situations, as determined by the
Fund's investment manager.
The Fund offers five classes of shares. Until December 31, 1998 Class A shares
were subject to an initial sales charge of up to 4.50% and effective January 1,
1999 became subject to an initial sales charge of up to 5.75%. Class A shares
pay an annual service fee equal to 0.25% of average daily net assets. On
January 1, 1999, the Fund began offering Class B(1) shares and continued
offering Class B shares but only to current shareholders. Class B(1) and Class
B shares pay annual distribution and service fees of 1.00% and both classes
automatically convert into Class A shares (which pay lower ongoing expenses) at
the end of eight years. Class B(1) shares are subject to a contingent deferred
sales charge on certain redemptions made within six years of purchase. Class B
shares are subject to a contingent deferred sales charge on certain redemptions
made within five years of purchase. Class C shares are subject to a contingent
deferred sales charge of 1.00% on any shares redeemed within one year of their
purchase. Class C shares also pay annual distribution and service fees of
1.00%. Class S shares are only offered through certain retirement accounts,
advisory accounts of State Street Research & Management Company (the
"Adviser"), an indirect wholly owned subsidiary of Metropolitan Life Insurance
Company ("Metropolitan"), and special programs. No sales charge is imposed at
the time of purchase or redemption of Class S shares. Class S shares do not pay
any distribution or service fees. The Fund's expenses are borne pro-rata by
each class, except that each class bears expenses, and has exclusive voting
rights with respect to provisions of the Plan of Distribution, related
specifically to that class. The Trustees declare separate dividends on each
class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. 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 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.
D. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
E. Securities Lending
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At March 31, 1999, the value of the securities loaned and the value of
collateral were $70,708,966 and $71,482,854 (including $26,875,142 of cash
collateral), respectively. During the six months ended March 31, 1999, income
from securities lending amounted to $272,243 and is included in interest
income.
Note 2
The management fee is 0.75% of the first $500 million of net assets, annually,
0.70% of the next $500 million, and 0.65% of any amount over $1 billion. In
consideration of these fees, the Adviser furnishes the Fund with management,
investment advisory, statistical and research facilities and services. The
Adviser also pays all salaries, rent and certain other expenses of management.
During the six months ended March 31, 1999, the fees pursuant to such agreement
amounted to $3,282,019.
6
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance of
the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through or
under which shares of the Fund may be purchased. During the six months ended
March 31, 1999, the amount of such expenses was $585,317.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended March 31, 1999, the
Fund's transfer agent fees were reduced by $106,809 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,625 during the six months ended March 31, 1999.
Note 3
For the six months ended March 31, 1999, exclusive of short-term investments
and U.S. Government obligations, purchases and sales of securities aggregated
$314,343,154 and $424,077,284, 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(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal services and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended March 31, 1999,
fees pursuant to such plan amounted to $439,700, $1,924,614 and $268,866 for
Class A, Class B and Class C shares, respectively. For the period January 1,
1999 (commencement of share class) to March 31, 1999, fees pursuant to such
plan amounted to $5,114 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $429,362 and $2,729,244, respectively, on sales of Class A shares
of the Fund during the six months ended March 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $236,573 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges of
$623,418 and $1,489 on redemptions of Class B and Class C shares, respectively,
during the same period. MetLife Securities, Inc. earned commissions aggregating
$70,875 on sales and the Distributor collected contingent deferred sales
charges aggregating $1,022 on redemptions of Class B(1) shares during the
period January 1, 1999 (commencement of share class) to March 31, 1999.
7
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At March 31, 1999, Metropolitan
owned 37,965 Class B(1) shares and the Adviser owned 8,194 Class A shares of
the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended
September 30, 1998
---------------------------------
Class A Shares Amount
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ...................................................... 3,863,891 $ 54,005,266
Issued upon reinvestment of distributions from net realized gains 290,200 3,744,989
Shares repurchased ............................................... (9,397,620) (131,768,041)
----------- --------------
Net decrease ..................................................... (5,243,529) $ (74,017,786)
=========== ==============
Class B(1)* Shares Amount
- --------------------------------------------------------------------------------------------------
Shares sold ...................................................... -- $ --
Shares repurchased ............................................... -- --
----------- --------------
Net increase ..................................................... -- $ --
========== ==============
Class B Shares Amount
- --------------------------------------------------------------------------------------------------
Shares sold ...................................................... 3,798,453 $ 52,088,872
Issued upon reinvestment of distributions from net realized gains 363,257 4,523,184
Shares repurchased ............................................... (11,729,199) (158,398,285)
----------- --------------
Net decrease ..................................................... (7,567,489) $ (101,786,229)
=========== ==============
Class C Shares Amount
- --------------------------------------------------------------------------------------------------
Shares sold ...................................................... 1,281,510 $ 18,048,769
Issued upon reinvestment of distributions from net realized gains 65,127 810,829
Shares repurchased ............................................... (4,950,325) (67,907,840)
----------- --------------
Net decrease ..................................................... (3,603,688) $ (49,048,242)
=========== ==============
Class S Shares Amount
- --------------------------------------------------------------------------------------------------
Shares sold ...................................................... 4,001,288 $ 57,553,551
Issued upon reinvestment of distributions from net realized gains 115,761 1,516,467
Shares repurchased ............................................... (7,494,655) (106,342,607)
----------- --------------
Net decrease ..................................................... (3,377,606) $ (47,272,589)
=========== ==============
- --------------------------------------------------------------------------------------------------
<CAPTION>
Six months ended
March 31, 1999
(Unaudited)
------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ...................................................... 20,037,016 $ 260,110,205
Issued upon reinvestment of distributions from net realized gains 2,837,347 33,878,568
Shares repurchased ............................................... (23,178,901) (300,706,961)
----------- --------------
Net decrease ..................................................... (304,538) $ (6,718,188)
=========== ==============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 302,993 $ 3,854,970
Shares repurchased ............................................... (7,232) (95,335)
----------- --------------
Net increase ..................................................... 295,761 $ 3,759,635
=========== ==============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 1,075,280 $ 12,803,665
Issued upon reinvestment of distributions from net realized gains 3,398,217 38,637,975
Shares repurchased ............................................... (6,872,301) (83,698,474)
----------- --------------
Net decrease ..................................................... (2,398,804) $ (32,256,834)
=========== ==============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 612,393 $ 7,416,115
Issued upon reinvestment of distributions from net realized gains 471,367 5,373,580
Shares repurchased ............................................... (1,937,192) (23,333,581)
----------- --------------
Net decrease ..................................................... (853,432) $ (10,543,886)
=========== ==============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 1,651,893 $ 21,354,867
Issued upon reinvestment of distributions from net realized gains 897,316 10,929,580
Shares repurchased ............................................... (3,687,310) (47,067,751)
----------- --------------
Net decrease ..................................................... (1,138,101) $ (14,783,304)
=========== ==============
- ---------------------------------------------------------------------------------------------------
</TABLE>
*January 1, 1999 (commencement of share class) to March 31, 1999.
8
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
Years ended September 30
---------------------------------------------------------
1994 1995(a) 1996(a) 1997(a) 1998(a)
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.43 9.92 13.53 13.76 14.74
------- ------- ------- ------- -------
Net investment loss ($) (0.04) (0.04) (0.05) (0.08) (0.12)
Net realized and unrealized gain (loss) on
investments ($) 0.28 3.69 1.30 1.06 (2.54)
------- ------- ------- ------- -------
Total from investment operations ($) 0.24 3.65 1.25 0.98 (2.66)
------- ------- ------- ------- -------
Distributions from net realized gains ($) (0.75) (0.04) (1.02) -- (0.13)
------- ------- ------- ------- -------
Total distributions ($) (0.75) (0.04) (1.02) -- (0.13)
------- ------- ------- ------- -------
Net asset value, end of period ($) 9.92 13.53 13.76 14.74 11.95
======= ======= ======= ======= =======
Total return (b) (%) 2.51 36.95 10.12 7.12 (18.14)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 19,891 55,250 114,247 470,977 319,014
Ratio of operating expenses to average net assets (%) 1.41 1.33 1.26 1.21 1.39
Ratio of net investment loss to average net assets (%) (0.55) (0.34) (0.39) (0.60) (0.88)
Portfolio turnover rate (%) 167.08 214.59 215.07 230.66 86.34
<CAPTION>
Class A Class B(1)
------------------ ------------------
Six months ended Period ended
March 31, 1999 March 31, 1999
(Unaudited)(a) (Unaudited)(a)(c)
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period ($) 11.95 13.17
------- ------
Net investment loss ($) (0.06) (0.04)
Net realized and unrealized gain (loss) on
investments ($) 2.87 (0.37)
------- ------
Total from investment operations ($) 2.81 (0.41)
------- ------
Distributions from net realized gains ($) (1.32) --
------- ------
Total distributions ($) (1.32) --
------- ------
Net asset value, end of period ($) 13.44 12.76
======= ======
Total return (b) (%) 24.90(d) (3.11)(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 354,818 3,775
Ratio of operating expenses to average net assets (%) 1.42(e) 2.20(e)
Ratio of net investment loss to average net assets (%) (0.99)(e) (1.71)(e)
Portfolio turnover rate (%) 34.74 34.74
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------
Years ended September 30
----------------------------------------------------------
1994 1995(a) 1996(a) 1997(a) 1998(a)
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.40 9.82 13.29 13.40 14.24
------ ------ ------- ------- -------
Net investment loss ($) (0.08) (0.12) (0.14) (0.17) (0.22)
Net realized and unrealized gain (loss) on
investments ($) 0.25 3.63 1.27 1.01 (2.44)
------ ------- ------- ------- -------
Total from investment operations ($) 0.17 3.51 1.13 0.84 (2.66)
------ ------- ------- ------- -------
Distributions from net realized gains ($) (0.75) (0.04) (1.02) -- (0.13)
------ ------- ------- ------- -------
Total distributions ($) (0.75) (0.04) (1.02) -- (0.13)
------ ------- ------- ------- -------
Net asset value, end of period ($) 9.82 13.29 13.40 14.24 11.45
====== ======= ======= ======= =======
Total return (b) (%) 1.79 35.90 9.33 6.27 (18.78)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 73,354 203,446 386,899 562,392 365,547
Ratio of operating expenses to average net assets (%) 2.16 2.08 2.01 1.98 2.13
Ratio of net investment loss to average net assets (%) (1.28) (1.10) (1.13) (1.32) (1.63)
Portfolio turnover rate (%) 167.08 214.59 215.07 230.66 86.34
<CAPTION>
Class B
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 11.45
-------
Net investment loss ($) (0.11)
Net realized and unrealized gain (loss) on
investments ($) 2.74
-------
Total from investment operations ($) 2.63
-------
Distributions from net realized gains ($) (1.32)
-------
Total distributions ($) (1.32)
-------
Net asset value, end of period ($) 12.76
=======
Total return (b) (%) 24.37(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 377,040
Ratio of operating expenses to average net assets (%) 2.17(e)
Ratio of net investment loss to average net assets (%) (1.74)(e)
Portfolio turnover rate (%) 34.74
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to March 31, 1999.
(d) Not annualized.
(e) Annualized.
9
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------
Years ended September 30
-------------------------------------------------------
1994 1995(a) 1996(a) 1997(a) 1998(a)
--------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.39 9.83 13.31 13.42 14.26
------ ------ ------- ------- -------
Net investment loss ($) (0.09) (0.12) (0.14) (0.17) (0.22)
Net realized and unrealized gain (loss) on investments ($) 0.28 3.64 1.27 1.01 (2.44)
------ ------ ------- ------- -------
Total from investment operations ($) 0.19 3.52 1.13 0.84 (2.66)
------ ------ ------- ------- -------
Distributions from net realized gains ($) (0.75) (0.04) (1.02) -- (0.13)
------ ------ ------- ------- -------
Total distributions ($) (0.75) (0.04) (1.02) -- (0.13)
------ ------ ------- ------- -------
Net asset value, end of period ($) 9.83 13.31 13.42 14.26 11.47
====== ====== ======= ======= =======
Total return (b) (%) 2.00 36.07 9.23 6.26 (18.76)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 37,783 95,797 190,319 120,051 55,208
Ratio of operating expenses to average net assets (%) 2.16 2.08 2.01 1.98 2.13
Ratio of net investment loss to average net assets (%) (1.28) (1.09) (1.13) (1.30) (1.63)
Portfolio turnover rate (%) 167.08 214.59 215.07 230.66 86.34
<CAPTION>
Class C
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 11.47
------
Net investment loss ($) (0.11)
Net realized and unrealized gain (loss) on investments ($) 2.75
------
Total from investment operations ($) 2.64
------
Distributions from net realized gains ($) (1.32)
------
Total distributions ($) (1.32)
------
Net asset value, end of period ($) 12.79
======
Total return (b) (%) 24.41(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 50,675
Ratio of operating expenses to average net assets (%) 2.17(e)
Ratio of net investment loss to average net assets (%) (1.74)(e)
Portfolio turnover rate (%) 34.74
</TABLE>
<TABLE>
<CAPTION>
Class S
--------------------------------------------------------
Years ended September 30
--------------------------------------------------------
1994 1995(a) 1996(a) 1997(a) 1998(a)
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.46 9.99 13.66 13.94 14.96
------- ------ ------ ------- ------
Net investment loss ($) (0.03) (0.01) (0.01) (0.05) (0.09)
Net realized and unrealized gain (loss) on investments ($) 0.31 3.72 1.31 1.07 (2.58)
------- ------ ------ ------- -------
Total from investment operations ($) 0.28 3.71 1.30 1.02 (2.67)
------- ------ ------ ------- -------
Distributions from net realized gains ($) (0.75) (0.04) (1.02) -- (0.13)
------- ------ ------ ------- -------
Total distributions ($) (0.75) (0.04) (1.02) -- (0.13)
------- ------ ------ ------- -------
Net asset value, end of period ($) 9.99 13.66 13.94 14.96 12.16
======= ====== ====== ======= =======
Total return (b) (%) 2.91 37.30 10.41 7.32 (17.94)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 23,967 47,553 34,835 189,778 113,118
Ratio of operating expenses to average net assets (%) 1.16 1.08 1.01 0.96 1.14
Ratio of net investment loss to average net assets (%) (0.32) (0.07) (0.08) (0.37) (0.63)
Portfolio turnover rate (%) 167.08 214.59 215.07 230.66 86.34
<CAPTION>
Class S
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 12.16
-------
Net investment loss ($) (0.05)
Net realized and unrealized gain (loss) on investments ($) 2.93
-------
Total from investment operations ($) 2.88
-------
Distributions from net realized gains ($) (1.32)
-------
Total distributions ($) (1.32)
-------
Net asset value, end of period ($) 13.72
=======
Total return (b) (%) 25.05(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 112,033
Ratio of operating expenses to average net assets (%) 1.17(e)
Ratio of net investment loss to average net assets (%) (0.72)(e)
Portfolio turnover rate (%) 34.74
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to March 31, 1999.
(d) Not annualized.
(e) Annualized.
10
<PAGE>
STATE STREET RESEARCH CAPITAL FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH CAPITAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund Information Officers Trustees
<S> <C> <C>
State Street Research Ralph F. Verni Ralph F. Verni
Capital Fund Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
Investment Adviser Peter C. Bennett Management Company
State Street Research & Vice President
Management Company Bruce R. Bond
One Financial Center Jesus A. Cabrera Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President,
Distributor Lawrence J. Haverty, Jr. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. Steve A. Garban
One Financial Center Richard J. Jodka Former Senior Vice President for
Boston, MA 02111 Vice President Finance and Operations and
Treasurer, The Pennsylvania
Shareholder Services Rudolph K. Kluiber State University
State Street Research Vice President
Service Center Malcolm T. Hopkins
P.O. Box 8408 James M. Weiss Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial Officer,
1-800-562-0032 St. Regis Corp.
Gerard P. Maus
Custodian Treasurer Dean O. Morton
State Street Bank and Former Executive
Trust Company Joseph W. Canavan Vice President, Chief
225 Franklin Street Assistant Treasurer Operating Officer and Director,
Boston, MA 02110 Hewlett-Packard Company
Douglas A. Romich
Legal Counsel Assistant Treasurer Susan M. Phillips
Goodwin, Procter & Hoar LLP Dean, School of Business and
Exchange Place Francis J. McNamara, III Public Management, George
Boston, MA 02109 Secretary and General Counsel Washington Unviersity; former
Member of the Board of Governors
Darman A. Wing of the Federal Reserve System and
Assistant Secretary and Chairman and Commissioner of
Assistant General Counsel the Commodity Futures Trading
Commission
Amy L. Simmons
Assistant Secretary 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
</TABLE>
11
<PAGE>
[back cover]
State Street Research Capital Fund ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
------------
Questions? Comments?
Call us at 1-800-562-0032, or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[State Street Research logo]
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Reserach Capital Fund prospectus. This prospectus contains more complete
information, including sales charges and expenses. Please read the prospectus
carefully before investing.
When used after June 30, 1999, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp0500)SSR-LD CF-644F-0599
<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
EMERGING GROWTH FUND
---------------------
SEMIANNUAL REPORT
March 31, 1999
-------------
WHAT'S INSIDE
-------------
Investment Update
About the Fund,
economy and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar seal]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1998
[end Dalbar seal]
For Excellence
in
Shareholder Service
[SSR 75th Anniversary logo]
STATE STREET RESEARCH
75 YEARS
LASTING VALUES
- --------------
LEADING IDEAS
[end SSR 75th Anniversary logo]
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered around 4%, and wages rose. The fourth
quarter of 1998 was far stronger than economists expected, with growth
reported at 6.1%.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and mortgage rates
translated into additional income for many consumers.
o The nation's savings rate fell below zero, but debate flared over the
significance of that figure because it does not include retirement savings in
tax-advantaged accounts.
The Markets
o The S&P 500, a broad measure of common stock performance, gained 27.32% for
the six-month period.(1) Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market. In fact, the smaller the company, the wider the gap
between growth and value stock performance.
o Bonds benefited from three quick interest rate cuts late in 1998. However, the
yield on the long-term Treasury benchmark climbed from 5.0% back up to 5.7% by
the end of the period. Investors sought bonds of the highest quality in the
wake of market turmoil initiated by a currency crisis in Russia. High-yield
bonds were weak during the first half of the period, but picked up early in
1999 as investors regained confidence in the market.
THE FUND
Over the past six months
o For the six months ended March 31, 1999, Class A shares of Emerging Growth
Fund returned 20.30% [does not reflect sales charge.](2) The Fund outperformed
the Lipper small-cap funds which averaged a gain of 12.53% for the period.
o The Fund delivered solid double-digit returns amid small-cap market
volatility.
o Performance was driven by technology stocks, specifically the Fund's increased
exposure to Internet-related business. Investments in consumer and financial
sectors also contributed positively.
o Specific healthcare holdings which failed to meet earnings estimates, as well
as business services stocks, held back performance.
Current Strategy
o The Fund continues to emphasize investment in technology, healthcare and
consumer sectors. The manager's focus among Internet stocks is in those that
appear to have unique competitive positions, not "me-too" identities.
o Management expects the slow-growth, low-inflation environment to support
small-cap growth stocks and to yield improved earnings in this universe.
March 31, 1999
(1)The S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest directly
in the index.
(2)20.14% for Class B(1) shares; 20.02% for Class B shares; 20.00% for Class C
shares; 20.61% for Class S shares.
(3)Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain or
loss when you sell your shares. All returns assume reinvestment of capital gain
distributions and income dividends at net asset value. Performance reflects a
maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
Performance for Class B(1) reflects Class B performance through December 31,
1998. Class B(1) was introduced on January 1, 1999.
(4)Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended March 31, 1999)
- --------------------------------------------------------------------------------
Average Annual Total Returns
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
==================================================
Life of Fund
(since 10/4/93) 5 Years 1 Year
--------------------------------------------------
<S> <C> <C> <C>
Class A 6.24% 8.05% -24.81%
--------------------------------------------------
Class B(1) 6.54% 8.30% -24.46%
--------------------------------------------------
Class B 6.65% 8.27% -24.54%
--------------------------------------------------
Class C 6.67% 8.56% -21.48%
--------------------------------------------------
Class S 7.71% 9.65% -19.95%
==================================================
</TABLE>
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
Top 10 Holdings
(by percentage of net assets)
1 Biovail Pharmaceuticals 3.7%
2 Intelligent Polymers Drug delivery systems 3.4%
3 Remec Defense systems equipment 2.7%
4 Total Renal Care Dialysis centers 2.5%
5 Aeroflex Electronics 2.3%
6 Steiner Leisure Commercial services 2.2%
7 Young & Rubicam Marketing, communications 2.1%
8 USA Networks Television 2.0%
9 Cadence Design Systems Computer software 1.9%
10 Nova Banking software 1.8%
These securities represent an aggregate of 24.6% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
- -------------------------------[BAR CHART]--------------------------------------
Top 5 Industries
(by percentage of net assets)
Commercial 11.2%
Services
Computer 9.1%
Software
Drugs & 9.0%
Biotechnology
Retail 8.8%
Communications 7.9%
Technology
Total: 46.0%
- -------------------------------[END BAR CHART]----------------------------------
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 100.7%
Automobiles & Transportation 0.7%
Air Transport 0.4%
Mesa Air Group, Inc.* ........................... 60,200 $ 376,250
----------
Automotive Parts 0.3%
Gentex Corp.* ................................... 13,500 291,094
----------
Total Automobiles & Transportation ............................. 667,344
----------
Consumer Discretionary 34.0%
Advertising Agencies 4.7%
Lamar Advertising Co. Cl. A* .................... 27,400 929,887
Valassis Communications Inc. .................... 29,900 1,547,325
Young & Rubicam Inc.* ........................... 48,200 1,964,150
----------
4,441,362
----------
Commercial Services 11.2%
A.C. Nielson Corp.* ............................. 23,900 648,287
Abacus Direct Corp.* ............................ 6,800 557,600
Allied Waste Industries Inc.* ................... 43,470 627,598
Autobytel.com Inc.* ............................. 2,800 117,250
Autoweb.com Inc.* ............................... 500 17,813
Casella Waste Systems Inc. Cl. A* ............... 38,700 873,169
Copart Inc.* .................................... 47,200 979,400
Corporate Executive Board Co. ................... 8,100 213,638
Critical Path Inc.* ............................. 1,700 130,900
GeoCities* ...................................... 4,600 503,987
iVillage Inc.* .................................. 1,100 110,550
Maximus Inc.* ................................... 21,300 620,362
META Group Inc.* ................................ 23,800 365,925
Miningco.com Inc.* .............................. 4,200 375,900
Priceline.com, Inc.* ............................ 1,100 91,163
ProBusiness Services Inc.* ...................... 25,300 1,062,600
RoweCom Inc.* ................................... 1,200 52,350
Steiner Leisure Ltd.* ........................... 67,425 2,073,319
Valley Media Inc.* .............................. 17,700 402,675
Waste Connections Inc. .......................... 29,100 694,762
Ziff-Davis Inc.* ................................ 1,300 46,800
----------
10,566,048
----------
Communications, Media & Entertainment 4.3%
Broadcast.com Inc.* ............................. 5,300 626,394
Cinar Films Inc. Cl. B* ......................... 56,600 1,301,800
Clear Channel Communications Inc.* .............. 15,936 1,068,708
Infinity Broadcasting Corp. Cl. A* .............. 39,600 1,019,700
----------
4,016,602
----------
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Consumer Electronics 1.4%
AboveNet Communications Inc.* ................... 4,500 $ 588,937
InfoSpace.com Inc.* ............................. 1,600 141,800
TheGlobe.com, Inc.* ............................. 7,700 401,362
Xoom.com, Inc.* ................................. 3,100 207,894
----------
1,339,993
----------
Consumer Services 2.4%
Bright Horizons Family Solutions Corp.* ......... 27,600 603,750
Corinthian Colleges Inc.* ....................... 6,100 134,200
DeVry Inc.* ..................................... 40,500 1,174,500
ITT Educational Services Inc.* .................. 4,000 150,250
Strayer Education Inc. .......................... 5,200 192,400
----------
2,255,100
----------
Leisure Time 0.1%
Cheap Tickets Inc.* ............................. 2,800 94,150
----------
Retail 8.8%
Aviation Sales Co.* ............................. 16,500 734,250
Barbeques Galore Ltd. ADR* ...................... 70,500 440,625
CSK Auto Corp.* ................................. 36,700 1,098,706
Global Imaging Systems, Inc.* ................... 33,100 440,644
Guitar Center Inc.* ............................. 18,800 384,225
Jones Apparel Group Inc.* ....................... 38,000 1,061,625
Linens 'n Things Inc.* .......................... 15,700 712,387
Men's Wearhouse, Inc.* .......................... 21,000 606,375
Saks Inc.* ...................................... 31,300 813,800
Ticketmaster Online City Search, Inc.
Cl. B* ........................................ 2,900 97,513
U.S.A. Networks Inc.* ........................... 52,300 1,872,994
----------
8,263,144
----------
Shoes 1.1%
Stride Rite Corp. ............................... 56,700 694,575
Timberland Co. Cl. A* ........................... 5,000 315,313
----------
1,009,888
----------
Total Consumer Discretionary ................................... 31,986,287
----------
Consumer Staples 1.5%
Beverages 0.5%
Golden State Vintners Inc. Cl. B * .............. 40,900 488,244
----------
Drug & Grocery Store Chains 1.0%
Duane Reade Inc.* ............................... 32,800 914,300
----------
Total Consumer Staples ......................................... 1,402,544
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Financial Services 12.8%
Banks & Savings & Loan 2.7%
Bank United Corp. Cl. A* ...................... 11,800 $ 482,325
City National Corp.* .......................... 12,700 392,113
North Fork Bancorporation, Inc.* .............. 22,400 473,200
One Valley Bancorp Inc.* ...................... 10,100 352,238
Saint Paul Bancorp, Inc. ...................... 19,600 424,462
TCF Financial Corp. ........................... 15,300 397,800
----------
2,522,138
----------
Financial Data Processing Services & Systems 3.4%
Bisys Group Inc.* ............................. 5,700 320,625
International Telecommunication Data
Systems, Inc.* .............................. 32,600 403,425
Nova Corp.* ................................... 64,896 1,703,520
Profit Recovery Group International Inc.* ..... 18,700 738,650
----------
3,166,220
----------
Insurance 1.4%
Mutual Risk Management Ltd. ................... 19,932 762,399
Terra Nova Holdings Ltd. Cl. A* ............... 24,300 531,562
----------
1,293,961
----------
Miscellaneous Financial 2.5%
ARM Financial Group, Inc. Cl. A ............... 22,300 333,106
Capital Re Corp. .............................. 12,700 219,075
Heller Financial Inc. Cl. A ................... 28,700 674,450
Metris Companies Inc.* ........................ 15,600 629,850
Multex Systems Inc.* .......................... 1,100 68,750
T & W Financial Corp.* ........................ 57,200 479,050
----------
2,404,281
----------
Rental & Leasing Services: Commercial 1.0%
United Rentals Inc.* .......................... 33,300 949,050
----------
Securities Brokerage & Services 1.8%
Knight/Trimark Group, Inc. Cl. A* ............. 25,000 1,675,000
----------
Total Financial Services ..................................... 12,010,650
----------
Health Care 16.1%
Drugs & Biotechnology 9.0%
Biovail Corp.* ................................ 89,800 3,457,300
Intelligent Polymers Ltd.* .................... 115,200 3,225,600
PharmaPrint Inc.* ............................. 40,300 362,700
Quintiles Transnational Corp.* ................ 22,037 831,912
Spiros Development Corp.* ..................... 68,900 585,650
----------
8,463,162
----------
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Health Care Facilities 2.9%
Healthsouth Corp.* ............................ 40,117 $ 416,214
Total Renal Care Holdings Inc.* ............... 210,200 2,312,200
----------
2,728,414
----------
Health Care Services 4.2%
Covance Inc.* ................................. 37,600 942,350
Eclipsys Corp.* ............................... 15,735 332,402
Healtheon Corp.* .............................. 12,500 531,641
IMPATH Inc.* .................................. 23,800 583,100
NCS Healthcare Inc. Cl. A* .................... 43,800 525,600
Wesley Jessen Vision Care Inc.* ............... 38,800 1,069,424
----------
3,984,517
----------
Total Health Care ............................................ 15,176,093
----------
Integrated Oils 0.4%
Integrated Domestic 0.4%
KCS Energy Inc. ............................... 70,500 92,531
Seagull Energy Corp.* ......................... 46,700 318,144
----------
410,675
----------
Total Integrated Oils ........................................ 410,675
----------
Non-US Equities 1.0%
Gulfstream Resources Ltd. ..................... 140,000 405,300
Post Energy Corp.* ............................ 125,700 358,072
Seven Seas Petroleum Inc.* .................... 33,500 167,500
----------
Total Non-US Equities ........................................ 930,872
----------
Other 0.5%
Multi-Sector 0.5%
Teleflex Inc. ................................. 14,200 483,688
----------
Total Other .................................................. 483,688
----------
Other Energy 2.8%
Offshore Drilling 0.4%
Atwood Oceanics Inc.* ......................... 12,400 372,000
----------
Oil & Gas Producers 1.0%
Abacan Resource Corp.* ........................ 397,200 68,271
Maxx Petroleum Ltd.* .......................... 125,075 281,419
Plains Resources Inc.* ........................ 15,500 232,500
Talisman Energy Inc. .......................... 14,050 302,075
----------
884,265
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Oil Well Equipment & Services 1.4%
Calpine Corp.* .............................. 31,500 $ 1,147,781
Willbros Group Inc.* ........................ 35,900 186,231
-----------
1,334,012
-----------
Total Other Energy .......................................... 2,590,277
-----------
Producer Durables 4.7%
Aerospace 0.8%
Heico Corp. Cl. A* .......................... 34,700 741,713
-----------
Electrical Equipment & Components 0.2%
General Semiconductor Inc. .................. 30,500 221,125
-----------
Electronics: Industrial 0.6%
Mettler Toledo International Inc.* .......... 24,400 603,900
-----------
Machinery 0.8%
Helix Technology Corp.* ..................... 17,100 262,913
Terex Corp.* ................................ 19,100 460,787
-----------
723,700
-----------
Production Technology Equipment 1.5%
Cymer Inc.* ................................. 19,800 393,525
Dupont Photomasks Inc.* ..................... 9,000 356,625
KLA-Tencor Corp.* ........................... 8,000 388,500
Novellus Systems Inc.* ...................... 4,600 253,575
-----------
1,392,225
-----------
Telecommunications Equipment 0.8%
L-3 Communications Holding Corp.* ........... 16,400 758,500
-----------
Total Producer Durables ..................................... 4,441,163
-----------
Technology 25.0%
Communications Technology 7.9%
American Tower Corp. Cl. A* ................. 44,600 1,092,700
Ciena Corp.* ................................ 24,200 544,500
Covad Communications Group Inc. ............. 4,100 269,575
Digital Microwave Corp.* .................... 115,400 966,475
Go2Net, Inc.* ............................... 4,800 636,600
Inktomi Corp.* .............................. 1,200 102,900
MMC Networks Inc.* .......................... 36,400 582,400
Network Solutions Inc. Cl. A* ............... 3,400 359,550
Remec Inc.* ................................. 121,000 2,525,875
Spectrian Corp.* ............................ 28,200 331,350
-----------
7,411,925
-----------
Computer Software 9.1%
Answerthink Consulting Group, Inc.* ......... 18,700 523,600
Cadence Design Systems Inc.* ................ 68,800 1,771,600
Check Point Software Technologies Ltd.* ..... 13,100 563,300
<CAPTION>
- ----------------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Computer Software (cont'd)
Citrix Systems Inc.* ........................ 37,800 $ 1,441,125
Exchange Applications Software Inc.* ........ 4,100 103,013
Neon Systems Inc.* .......................... 2,200 121,000
Peregrine Systems Inc.* ..................... 18,200 611,975
Platinum Technology Inc.* ................... 53,300 1,359,150
Transaction Systems Architects Inc. Cl. A* 24,700 889,200
Walker Interactive Systems, Inc.* ........... 88,300 375,275
Whittman-Hart Inc.* ......................... 20,600 442,900
Wind River Systems Inc.* .................... 18,150 323,296
-----------
8,525,434
-----------
Computer Technology 3.2%
Fore Systems Inc.* .......................... 26,700 504,797
NeoMagic Corp.* ............................. 17,800 176,888
Radiant Systems Inc.* ....................... 75,100 713,450
Verio Inc.* ................................. 26,900 1,240,762
Zebra Technologies Corp. Cl. A* ............. 15,400 365,750
-----------
3,001,647
-----------
Electronics 3.9%
Aeroflex Inc.* .............................. 153,500 2,187,375
SLI Inc.* ................................... 72,922 1,531,362
-----------
3,718,737
-----------
Electronics: Semi-Conductors/Components 0.9%
Cypress Semiconductor Corp.* ................ 38,100 342,900
Integrated Circuit Systems Inc.* ............ 29,300 529,231
-----------
872,131
-----------
Total Technology ............................................ 23,529,874
-----------
Utilities 1.2%
Telecommunications 1.2%
Pacific Gateway Exchange Inc.* .............. 10,700 355,106
RCN Corp.* .................................. 24,000 805,500
-----------
1,160,606
-----------
Total Utilities ............................................. 1,160,606
-----------
Total Common Stocks (Cost $87,998,642) ...................... 94,790,073
-----------
SHORT-TERM INVESTMENTS 3.5%
AIM Liquid Assets Portfolio ................. 3,299,184 3,299,184
-----------
Total Short-Term Investments (Cost $3,299,184) .............. 3,299,184
-----------
Total Investments (Cost $91,297,826)--104.2% ................ 98,089,257
Cash and Other Assets, Less Liabilities--(4.2%) ............. (3,931,136)
-----------
Net Assets--100.0% .......................................... $94,158,121
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
At March 31, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $91,531,827 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost ................................... $21,631,712
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ...................................... (15,074,282)
-----------
$ 6,557,430
===========
</TABLE>
- --------------------------------------------------------------------------------
* Nonincome-producing securities
ADR stands for American Receipt, representing ownership of foreign securities.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $91,297,826) (Note 1) ................ $98,089,257
Cash ............................................................. 29,569
Receivable for securities sold ................................... 808,813
Receivable for fund shares sold .................................. 417,450
Receivable from Distributor (Note 3) ............................. 44,272
Dividends and interest receivable ................................ 2,424
Other assets ..................................................... 38,259
------------
99,430,044
Liabilities
Payable for collateral received on securities loaned ............. 3,299,184
Payable for securities purchased ................................. 1,362,771
Payable for fund shares redeemed ................................. 289,262
Accrued management fee (Note 2) .................................. 124,194
Accrued transfer agent and shareholder services
(Note 2) ....................................................... 99,767
Accrued distribution and service fees (Note 5) ................... 57,746
Accrued trustees' fees (Note 2) .................................. 13,403
Other accrued expenses ........................................... 25,596
------------
5,271,923
------------
Net Assets $94,158,121
============
Net Assets consist of:
Unrealized appreciation of investments .......................... $ 6,791,431
Accumulated net realized loss ................................... (9,584,881)
Paid-in capital ................................................. 96,951,571
------------
$94,158,121
============
Net Asset Value and redemption price per share of
Class A shares ($31,523,907 [divided by] 3,072,126 shares) ..... $ 10.26
============
Maximum Offering Price per share of Class A shares
($10.26 [divided by] .9425) .................................... $ 10.89
============
Net Asset Value and offering price per share of
Class B(1) shares ($1,678,174 [divided by] 171,502 shares)* .... $ 9.79
============
Net Asset Value and offering price per share of
Class B shares ($47,699,501 [divided by] 4,876,302 shares)* .... $ 9.78
============
Net Asset Value and offering price per share of
Class C shares ($7,291,129 [divided by] 744,888 shares)* ....... $ 9.79
============
Net Asset Value, offering price and redemption price
per share of Class S shares ($5,965,410 [divided by] 569,348
shares) ........................................................ $ 10.48
============
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $272 .................. $ 79,876
Interest (Note 1) ........................................ 243,668
-----------
323,544
Expenses
Management fee (Note 2) .................................. 358,820
Transfer agent and shareholder services (Note 2) ......... 221,096
Custodian fee ............................................ 64,463
Registration fees ........................................ 28,533
Reports to shareholders .................................. 22,457
Audit fee ................................................ 11,375
Trustees' fees (Note 2) .................................. 8,282
Legal fees ............................................... 5,947
Service fee--Class A (Note 5) ............................ 40,801
Distribution and service fees--Class B(1) (Note 5) ....... 2,517
Distribution and service fees--Class B (Note 5) .......... 246,454
Distribution and service fees--Class C (Note 5) .......... 37,216
Miscellaneous ............................................ 4,145
-----------
1,052,106
Expenses borne by the Distributor (Note 3) ............... (181,316)
Fees paid indirectly (Note 2) ............................ (17,532)
-----------
853,258
-----------
Net investment loss ...................................... (529,714)
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 4) ......... (9,346,421)
Net unrealized appreciation of investments ............... 27,606,628
-----------
Net gain on investments .................................. 18,260,207
-----------
Net increase in net assets resulting from operations ..... $17,730,493
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Year ended March 31, 1999
September 30, 1998 (Unaudited)
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss ................. $ (910,786) $ (529,714)
Net realized gain (loss) on
investments ....................... 6,291,426 (9,346,421)
Net unrealized appreciation
(depreciation) of
investments ....................... (42,446,270) 27,606,628
----------- -----------
Net increase (decrease)
resulting from operations ......... (37,065,630) 17,730,493
----------- -----------
Distributions from net
realized gains:
Class A ............................ (5,928,823) (1,253,717)
Class B ............................ (7,729,321) (1,968,138)
Class C ............................ (1,418,848) (310,824)
Class S ............................ (1,185,510) (221,009)
----------- -----------
(16,262,502) (3,753,688)
----------- -----------
Net increase (decrease) from
fund share transactions
(Note 6) .......................... 53,047,300 (8,963,016)
----------- -----------
Total increase (decrease) in
net assets ........................ (280,832) 5,013,789
Net Assets
Beginning of period ................. 89,425,164 89,144,332
----------- -----------
End of period ....................... $89,144,332 $94,158,121
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1999
Note 1
State Street Research Emerging Growth Fund (the "Fund"), is a series of State
Street Research Capital Trust (the "Trust"), which is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists
presently of three separate funds: State Street Research Emerging Growth Fund,
State Street Research Capital Fund and State Street Research Aurora Fund.
The investment objective of the Fund is to provide growth of capital. In
seeking to achieve its investment objective, the Fund invests primarily in the
equity securities of emerging growth and small capitalization companies.
The Fund offers five classes of shares. Until December 31, 1998 Class A shares
were subject to an initial sales charge of up to 4.50% and effective January 1,
1999 became subject to an initial sales charge of up to 5.75%. Class A shares
pay a service fee equal to 0.25% of average daily net assets. On January 1,
1999, the Fund began offering Class B(1) shares and continued offering Class B
shares but only to current shareholders. Class B(1) and Class B pay annual
distribution and service fees of 1.00% and both classes automatically convert
into Class A shares (which pay lower ongoing expenses) at the end of eight
years. Class B(1) shares are subject to a contingent deferred sales charge on
certain redemptions made within six years of purchase. Class B shares are
subject to a contingent deferred sales charge on certain redemptions made
within five years of purchase. Class C shares are subject to a contingent
deferred sales charge of 1.00% on any shares redeemed within one year of their
purchase. Class C shares also pay annual distribution and service fees of
1.00%. Class S shares are only offered through certain retirement accounts,
advisory accounts of State Street Research & Management Company (the
"Adviser"), an indirect wholly owned subsidiary of Metropolitan Life Insurance
Company ("Metropolitan"), and special programs. No sales charge is imposed at
the time of purchase or redemption of Class S shares. Class S shares do not pay
any distribution or service fees. The Fund's expenses are borne pro-rata by
each class, except that each class bears expenses, and has exclusive voting
rights with respect to provisions of the Plan of Distribution, related
specifically to that class. The Trustees declare separate dividends on each
class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. 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.
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. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
E. Securities Lending
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At March 31, 1999, the value of the securities loaned and the value of
collateral were $22,242,713 and $22,287,517 (including $3,299,184 of cash
collateral), respectively. During the six months ended March 31, 1999, income
from securities lending amounted to $146,708 and is included in interest
income.
Note 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees equal to 0.75% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended March 31, 1999, the fees pursuant to
such agreement amounted to $358,820.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption
7
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 six months ended
March 31, 1999, the amount of such shareholder servicing and account
maintenance expenses was $76,889.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended March 31, 1999, the
Fund's transfer agent fees were reduced by $17,532 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$8,282 during the six months ended March 31, 1999.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund.
During the six months ended March 31, 1999, the amount of such expenses assumed
by the Distributor and its affiliates was $181,316.
Note 4
For the six months ended March 31, 1999, exclusive of short-term investments
and U.S. Government obligations, purchases and sales of securities aggregated
$48,647,253 and $51,398,072, 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(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal services and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended March 31, 1999,
fees pursuant to such plan amounted to $40,801, $246,454 and $37,216 for Class
A, Class B and Class C respectively. For the period January 1, 1999
(commencement of share class) to March 31, 1999, fees pursuant to such plan
amounted to $2,517 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $73,904 and $369,252, respectively, on sales of Class A shares of
the Fund during the six months ended March 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $81,850 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $120,446 and $681 on redemptions of Class B and Class C shares,
respectively, during the same period. MetLife Securities, Inc. earned
commissions aggregating $24,458 on sales and the Distributor collected
contingent deferred sales charges aggregating $52 on redemptions of Class B(1)
shares during the period January 1, 1999 (commencement of share class) to March
31, 1999.
8
<PAGE>
STATE STREET RESEARCH EMERGING 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 March 31, 1999, Metropolitan
owned 48,923 Class B(1) shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended
September 30, 1998
--------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ...................................................... 2,172,979 $ 25,345,033
Issued upon reinvestment of distributions from net realized gains 462,113 5,446,850
Shares redeemed .................................................. (1,369,043) (15,820,206)
---------- --------------
Net increase (decrease) .......................................... 1,266,049 $ 14,971,677
========== ==============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... -- --
Shares repurchased ............................................... -- --
---------- --------------
Net increase ..................................................... -- --
========== ==============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 3,332,103 $ 38,626,876
Issued upon reinvestment of distributions from net realized gains 522,996 5,952,742
Shares redeemed .................................................. (1,079,812) (11,853,802)
---------- --------------
Net increase (decrease) .......................................... 2,775,287 $ 32,725,816
========== ==============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 712,013 $ 7,691,154
Issued upon reinvestment of distributions from net realized gains 74,509 848,275
Shares redeemed .................................................. (454,421) (4,481,663)
---------- --------------
Net increase (decrease) .......................................... 332,101 $ 4,057,766
========== ==============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 254,611 $ 3,078,367
Issued upon reinvestment of distributions from net realized gains 98,988 1,185,510
Shares redeemed .................................................. (249,446) (2,971,836)
---------- --------------
Net increase ..................................................... 104,153 $ 1,292,041
========== ==============
- ---------------------------------------------------------------------------------------------------
<CAPTION>
Six months ended
March 31, 1999
(Unaudited)
--------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ...................................................... 4,197,036 $ 41,257,036
Issued upon reinvestment of distributions from net realized gains 127,826 1,228,330
Shares redeemed .................................................. (4,736,906) (46,726,214)
---------- -------------
Net increase (decrease) .......................................... (412,044) $ (4,240,848)
========== =============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 175,083 $ 1,731,706
Shares repurchased ............................................... (3,581) (33,683)
---------- -------------
Net increase ..................................................... 171,502 1,698,023
========== =============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 509,432 $ 4,626,764
Issued upon reinvestment of distributions from net realized gains 203,615 1,869,207
Shares redeemed .................................................. (1,296,516) (12,211,891)
---------- -------------
Net increase (decrease) .......................................... (583,469) $ (5,715,920)
========== =============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 1,069,761 $ 10,006,720
Issued upon reinvestment of distributions from net realized gains 31,662 290,973
Shares redeemed .................................................. (1,182,813) (11,162,494)
---------- -------------
Net increase (decrease) .......................................... (81,390) $ (864,801)
========== =============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ...................................................... 168,994 $ 1,667,018
Issued upon reinvestment of distributions from net realized gains 22,552 221,009
Shares redeemed .................................................. (171,854) (1,727,497)
---------- -------------
Net increase ..................................................... 19,692 $ 160,530
========== =============
- ---------------------------------------------------------------------------------------------------
</TABLE>
*January 1, 1999 (commencement of share class) to March 31, 1999.
9
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
--------------------------------------------
Years ended September 30
--------------------------------------------
1994(b) 1995(a) 1996(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ($) 9.45 8.56 9.69
------ ------- ------
Net investment loss ($)* (0.02) (0.08) (0.09)
Net realized and unrealized gain (loss) on investments ($) (0.87) 1.21 1.73
------ ------- ------
Total from investment operations ($) (0.89) 1.13 1.64
------ ------- ------
Distributions from net realized gains ($) -- -- --
------ ------- ------
Total distributions ($) -- -- --
------ ------- ------
Net asset value, end of period ($) 8.56 9.69 11.33
====== ======= ======
Total return(d) (%) (9.42)(f) 13.20 16.92
Ratios/supplemental data:
Net assets at end of period ($ thousands) 21,986 21,480 19,791
Ratio of operating expenses to average net assets (%)* 1.35(g) 1.35 1.35
Ratio of net investment loss to average net assets (%)* (0.58)(g) (0.93) (0.96)
Portfolio turnover rate (%) 83.61 178.60 155.85
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.02 0.06 0.04
Class B
--------------------------------------------
Years ended September 30
--------------------------------------------
1994(b) 1995(a) 1996(a)
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 9.45 8.52 9.58
------- ------- ------
Net investment loss ($)* (0.06) (0.14) (0.17)
Net realized and unrealized gain (loss) on investments ($) (0.87) 1.20 1.70
------- ------- ------
Total from investment operations ($) (0.93) 1.06 1.53
------- ------- ------
Distributions from net realized gains ($) -- -- --
------- ------- ------
Total distributions ($) -- -- --
------- ------- ------
Net asset value, end of period ($) 8.52 9.58 11.11
======= ======= =======
Total return(d) (%) (9.84)(f) 12.44 15.97
Ratios/supplemental data:
Net assets at end of period ($ thousands) 29,287 26,489 23,656
Ratio of operating expenses to average net assets (%)* 2.10(g) 2.10 2.10
Ratio of net investment loss to average net assets (%)* (1.32)(g) (1.67) (1.71)
Portfolio turnover rate (%) 83.61 178.60 155.85
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.02 0.06 0.04
<CAPTION>
Class A
--------------------------------------------------
Six months ended
March 31, 1999
1997(a) 1998(a) (Unaudited) (a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ($) 11.33 15.53 8.86
------- ------ ------
Net investment loss ($)* (0.08) (0.05) (0.03)
Net realized and unrealized gain (loss) on investments ($) 5.13 (4.01) 1.80
------- ------ ------
Total from investment operations ($) 5.05 (4.06) 1.77
------- ------ ------
Distributions from net realized gains ($) (0.85) (2.61) (0.37)
------- ------ ------
Total distributions ($) (0.85) (2.61) (0.37)
------- ------ ------
Net asset value, end of period ($) 15.53 8.86 10.26
======= ====== ======
Total return(d) (%) 48.00 (29.97) 20.30(f)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 34,446 30,858 31,524
Ratio of operating expenses to average net assets (%)* 1.35 1.35 1.39(g)
Ratio of net investment loss to average net assets (%)* (0.64) (0.45) (0.67)(g)
Portfolio turnover rate (%) 273.33 98.30 51.42
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.04 0.02 0.02
Six months ended
March 31, 1999
1997(a) 1998(a) (Unaudited)(a)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 11.11 15.09 8.48
------- ------ ------
Net investment loss ($)* (0.16) (0.14) (0.07)
Net realized and unrealized gain (loss) on investments ($) 4.99 (3.86) 1.74
------- ------ ------
Total from investment operations ($) 4.83 (4.00) 1.67
------- ------ ------
Distributions from net realized gains ($) (0.85) (2.61) (0.37)
------- ------ ------
Total distributions ($) (0.85) (2.61) (0.37)
------- ------ ------
Net asset value, end of period ($) 15.09 8.48 9.78
======= ====== ======
Total return(d) (%) 46.91 (30.56) 20.02(f)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 40,512 46,315 47,700
Ratio of operating expenses to average net assets (%)* 2.10 2.10 2.14(g)
Ratio of net investment loss to average net assets (%)* (1.40) (1.20) (1.42)(g)
Portfolio turnover rate (%) 273.33 98.30 51.42
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.03 0.02 0.02
<CAPTION>
Class B(1)
-------------------
Period ended
March 31, 1999
(Unaudited) (a)(e)
-------------------
<S> <C>
Net asset value, beginning of period ($) 10.22
------
Net investment loss ($)* (0.03)
Net realized and unrealized gain (loss) on investments ($) (0.40)
------
Total from investment operations ($) (0.43)
------
Distributions from net realized gains ($) --
------
Total distributions ($) --
------
Net asset value, end of period ($) 9.79
======
Total return(d) (%) (4.21)(f)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 1,678
Ratio of operating expenses to average net assets (%)* 2.14(g)
Ratio of net investment loss to average net assets (%)* (1.60)(g)
Portfolio turnover rate (%) 51.42
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.01
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) February 1, 1994 (commencement of share class designations) to September 30,
1994
(c) October 4, 1993 (commencement of operations) to September 30, 1994.
(d) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
(e) January 1, 1999 (commencement of share class) to March 31, 1999.
(f) Not annualized.
(g) Annualized.
10
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------------
Years ended September 30 Six months ended
----------------------------------------------------- March 31, 1999
1994(b) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
----------- --------- --------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.45 8.52 9.58 11.10 15.10 8.49
------ ------ ------ ------ ------ ------
Net investment loss ($)* (0.06) (0.14) (0.16) (0.16) (0.14) (0.07)
Net realized and unrealized gain (loss) on investments ($) (0.87) 1.20 1.68 5.01 (3.86) 1.74
------ ------ ------ ------ ------ ------
Total from investment operations ($) (0.93) 1.06 1.52 4.85 (4.00) 1.67
------ ------ ------ ------ ------ ------
Distributions from net realized gains ($) -- -- -- (0.85) (2.61) (0.37)
------ ------ ------ ------ ------ ------
Total distributions ($) -- -- -- (0.85) (2.61) (0.37)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 8.52 9.58 11.10 15.10 8.49 9.79
====== ====== ====== ====== ====== ======
Total return(d) (%) (9.84)(f) 12.44 15.87 47.15 (30.52) 20.00(f)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 10,032 7,391 4,503 7,460 7,012 7,291
Ratio of operating expenses to average net assets (%)* 2.10(g) 2.10 2.10 2.10 2.10 2.14(g)
Ratio of net investment loss to average net assets (%)* (1.32)(g) (1.67) (1.71) (1.41) (1.20) (1.42)(g)
Portfolio turnover rate (%) 83.61 178.60 155.85 273.33 98.30 51.42
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.02 0.06 0.04 0.03 0.02 0.02
</TABLE>
<TABLE>
<CAPTION>
Class S
------------------------------------------------------------------------
Years ended September 30 Six months ended
------------------------------------------------------- March 31, 1999
1994(c) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
----------- ---------- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.55 8.60 9.77 11.44 15.73 9.02
------ ------ ------ ------ ------ -----
Net investment loss ($)* (0.06) (0.06) (0.07) (0.04) (0.02) (0.02)
Net realized and unrealized gain (loss) on investments ($) (0.89) 1.23 1.74 5.18 (4.08) 1.85
------ ------- ------- ------- ------- ------
Total from investment operations ($) (0.95) 1.17 1.67 5.14 (4.10) 1.83
------ ------- ------- ------- ------- ------
Distributions from net realized gains ($) -- -- -- (0.85) (2.61) (0.37)
------ ------- ------- ------- ------- ------
Total distributions ($) -- -- -- (0.85) (2.61) (0.37)
------ ------- ------- ------- ------- ------
Net asset value, end of period ($) 8.60 9.77 11.44 15.73 9.02 10.48
====== ======= ======= ======= ======= ======
Total return(d) (%) (9.95)(f) 13.60 17.09 48.34 (29.83) 20.61(f)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 7,033 12,380 13,311 7,008 4,958 5,965
Ratio of operating expenses to average net assets (%)* 1.10(g) 1.10 1.10 1.10 1.10 1.14(g)
Ratio of net investment loss to average net assets (%)* (0.68)(g) (0.71) (0.71) (0.39) (0.19) (0.43)(g)
Portfolio turnover rate (%) 83.61 178.60 155.85 273.33 98.30 51.42
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.04 0.06 0.04 0.03 0.02 0.02
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) February 1, 1994 (commencement of share class designations) to September
30, 1994
(c) October 4, 1993 (commencement of operations) to September 30, 1994.
(d) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily reduced a portion of the Fund's expenses.
(e) January 1, 1999 (commencement of share class) to March 31, 1999.
(f) Not annualized.
(g) Annualized.
11
<PAGE>
STATE STREET RESEARCH EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH CAPITAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund Information Officers Trustees
<S> <C> <C>
State Street Research Ralph F. Verni Ralph F. Verni
Emerging Growth Fund Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
Investment Adviser Peter C. Bennett Management Company
State Street Research & Vice President
Management Company Bruce R. Bond
One Financial Center Jesus A. Cabrera Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President,
Distributor Lawrence J. Haverty, Jr. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. Steve A. Garban
One Financial Center Richard J. Jodka Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations
and Treasurer,
Shareholder Services Rudolph K. Kluiber The Pennsylvania State University
State Street Research Vice President
Service Center Malcolm T. Hopkins
P.O. Box 8408 James M. Weiss Former Vice Chairman of
Boston, MA 02266-8408 Vice President the Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
Gerard P. Maus
Custodian Treasurer Dean O. Morton
State Street Bank and Former Executive
Trust Company Joseph W. Canavan Vice President, Chief
225 Franklin Street Assistant Treasurer Operating Officer and Director,
Boston, MA 02110 Hewlett-Packard Company
Douglas A. Romich
Legal Counsel Assistant Treasurer Susan M. Phillips
Goodwin, Procter & Hoar LLP Dean, School of Business
Exchange Place Francis J. McNamara, III and Public Management,
Boston, MA 02109 Secretary and General Counsel George Washington University;
former Member of the Board of
Darman A. Wing Governors of the Federal
Assistant Secretary and Reserve System and Chairman
Assistant General Counsel and Commissioner of the
Commodity Futures Trading Commission
Amy L. Simmons
Assistant Secretary 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
</TABLE>
12
<PAGE>
[back cover]
State Street Research Emerging Growth Fund ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
------------
Questions? Comments?
Call us at 1-800-562-0032, or
[hearing-impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408, or
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[State Street logo]
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Emerging Growth Fund prospectus. The prospectus contains more complete
information, including sales charges and expenses. Please read the prospectus
carefully before investing.
When used after June 30, 1999, this report must be accompanied by a current
Quarterly Performance Udate.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp0500)SSR-LD EM-646F-0599
<PAGE>
[front cover]
STATE STREET RESEARCH
---------------------
AURORA FUND
---------------------
SEMIANNUAL REPORT
March 31, 1999
-------------
WHAT'S INSIDE
-------------
Investment Update
About the Fund,
economy and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar seal]
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1998
[end Dalbar seal]
For Excellence
in
Shareholder Service
[SSR 75th Anniversary logo]
STATE STREET RESEARCH
75 YEARS
LASTING VALUES
- --------------
LEADING IDEAS
[end SSR 75th Anniversary logo]
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered around 4%, and wages rose. The fourth
quarter of 1998 was far stronger than economists expected, with growth
reported at 6.1%.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and mortgage rates
translated into additional income for many consumers.
o The nation's savings rate fell below zero, but debate flared over the
significance of that figure because it does not include retirement savings
in tax-advantaged accounts.
The Markets
o The S&P 500, a broad measure of common stock performance, gained 27.32% for
the six-month period.(1) Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market. In fact, the smaller the company, the wider the
gap between growth and value stock performance.
o Bonds benefited from three quick interest rate cuts late in 1998. However,
the yield on the long-term Treasury benchmark climbed from 5.0% back up to
5.7% by the end of the period. Investors sought bonds of the highest quality
in the wake of market turmoil initiated by a currency crisis in Russia.
High-yield bonds were weak during the first half of the period, but picked
up early in 1999 as investors regained confidence in the market.
THE FUND
Over the past six months
o For the six months ended March 31, 1999, Class A shares of Aurora Fund
returned 2.39% [does not reflect sales charge.]2 The Fund outperformed the
Russell 2000 Value Index, which delivered a return of -1.50% for the period.
However, it lagged the Lipper average small cap fund, which gained 12.53%.
o The Fund's investments in industrial companies were a drag on performance.
o Value stocks, in general, lagged the market during the period.
Current Strategy
o The manager has increased the Fund's investment in financial and energy
stocks.
o Value stocks are currently inexpensive relative to historical measures.
March 31, 1999
(1)The S&P 500 (officially the "Standard and Poor's 500 Composite Price Index")
is an unmanaged index of 500 U.S. stocks. The Russell 2000 Value Index is a
weighted index comprised of the 2000 smallest stocks within the Russell 3000 (a
weighted index of the 3000 largest capitalized U.S. companies). The indices are
unmanaged and do not take transaction charges into account. Direct investment
in the indices is not possible; results are for illustrative purposes only.
(2)1.99% for Class B(1) shares; 1.99% for Class B shares; 2.06% for Class C
shares; 2.50% for Class S shares.
(3)Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain or
loss when you sell your shares. All returns assume reinvestment of capital gain
distributions and income dividends at net asset value. Performance reflects a
maximum 5.75% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
Performance for Class B(1) reflects Class B performance through December 31,
1998. Class B(1) was introduced on January 1, 1999.
(4)Class S shares offered without a sales charge, are available through certain
employee benefit plans and special programs.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended March 31, 1999)
- --------------------------------------------------------------------------------
Average Annual Total Return
(at maximum applicable sales charge)3,4
<TABLE>
<CAPTION>
============================================================
Life of Fund
(since 2/13/95) 3 Years 1 Year
------------------------------------------------------------
<S> <C> <C> <C>
Class A 19.79% 15.64% -31.45%
------------------------------------------------------------
Class B(1) 20.32% 16.31% -31.42%
------------------------------------------------------------
Class B 20.32% 16.31% -31.42%
------------------------------------------------------------
Class C 20.59% 17.04% -28.53%
------------------------------------------------------------
Class S 21.81% 18.22% -27.09%
============================================================
</TABLE>
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
Top 10 Holdings
(by percentage of net assets)
1 Core Capital Mortgage finance 3.1%
2 Specialty Equipment Food service equipment 2.2%
3 Wyman-Gordon Aerospace components 2.2%
4 Simpson Industries Auto parts 2.0%
5 Steinway Musical instruments 2.0%
6 L-3 Communications Communication systems 2.0%
7 Imation Data storage/imaging 1.9%
8 Coherent Laser systems 1.8%
9 Entertainment Properties Real estate investment trust 1.8%
10 Wolverine Tube Copper tubing 1.7%
These securities represent an aggregate of 20.7% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table or in the text
above.
- -------------------------------[BAR CHART]--------------------------------------
Top 5 Industries
(by percentage of net assets)
Materials & Processing 9.7%
Chemicals 7.3%
Automotive parts 5.5%
Real Estate Investment 5.4%
Trusts
Commercial services 4.8%
Total: 32.7%
- -------------------------------[END BAR CHART]----------------------------------
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.6%
Automobiles & Transportation 10.2%
Air Transport 1.2%
Airnet Systems Inc.* ........................... 120,000 $ 840,000
America West Holdings Corp. Cl. B* ............. 105,000 2,001,562
Mesa Air Group, Inc.* .......................... 240,000 1,500,000
----------
4,341,562
----------
Automotive Parts 5.5%
American Axle & Manufacturing Holdings
Inc.* ....................................... 97,400 1,180,975
Borg-Warner Automotive Inc. .................... 70,000 3,346,875
Dura Automotive Systems Inc.* .................. 73,294 2,070,542
Exide Corp. .................................... 410,000 4,561,250
Lund International Holdings Inc.* .............. 21,000 133,875
Motorcar Parts & Accessories Inc.* ............. 39,000 436,313
Simpson Industries Inc. ........................ 770,000 7,411,250
Stoneridge Inc.* ............................... 39,500 548,063
Titan International Inc. ....................... 100,000 768,750
----------
20,457,893
----------
Miscellaneous Transportation 1.0%
C.H. Robinson Worldwide Inc.* .................. 30,000 763,124
Marine Transport Corp. ......................... 49,500 142,313
OMI Corp.* ..................................... 180,000 360,000
Trailer Bridge Inc.* ........................... 30,000 75,938
Tranz Rail Holdings Ltd. ADR* .................. 350,000 2,143,750
----------
3,485,125
----------
Railroad Equipment 1.5%
ABC Rail Products Corp.* ....................... 156,000 1,969,500
Johnstown America Industries Inc.* ............. 154,000 2,290,750
Varlen Corp. ................................... 62,500 1,375,000
----------
5,635,250
----------
Railroads 0.6%
Genesee & Wyoming Inc. Cl. A* .................. 200,000 2,137,500
----------
Truckers 0.4%
Jevic Transportation Inc.* ..................... 210,000 1,351,875
----------
Total Automobiles & Transportation ........................... 37,409,205
----------
Consumer Discretionary 19.6%
Casinos/Gambling, Hotel/Motel 2.8%
Anchor Gaming* ................................. 20,000 875,000
Argosy Gaming Corp.* ........................... 50,000 265,625
Harrah's Entertainment Inc.* ................... 290,000 5,528,125
MGM Grand Inc.* ................................ 110,000 3,698,750
----------
10,367,500
----------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial Services 4.8%
Autoweb.com, Inc.* ............................. 2,300 $ 81,938
Bell & Howell Co.* ............................. 215,500 6,316,843
Corporate Executive Board Co. .................. 20,000 527,500
Critical Path Inc. ............................. 6,700 515,900
Envirosource Inc.* ............................. 104,957 262,393
First Aviation Services Inc.* .................. 30,000 123,750
First Consulting Group, Inc.* .................. 43,890 488,276
Korn / Ferry International* .................... 57,400 753,375
Lai Worldwide Inc. ............................. 148,700 938,669
Pierce Leahy Corp.* ............................ 43,000 1,069,625
Priceline.com, Inc.* ........................... 4,300 356,363
Protection One Inc.* ........................... 47,000 293,750
Right Management Consultants Inc.* ............. 110,000 1,739,375
Ritchie Brothers Auctioneers Inc.* ............. 80,000 2,695,000
Valley Media Inc. .............................. 40,000 910,000
Vestcom International, Inc.* ................... 30,000 146,250
Ziff-Davis Inc.* ............................... 5,200 187,200
----------
17,406,207
----------
Communications, Media & Entertainment 0.7%
Hearst Argyle Television, Inc.* ................ 39,667 976,810
SFX Entertainment, Inc. Cl. A* ................. 20,000 1,291,250
Todd-AO Corp. .................................. 35,400 278,775
----------
2,546,835
----------
Consumer Electronics 0.6%
Plantronics Inc.* .............................. 13,000 813,312
Recoton Corp.* ................................. 100,000 1,400,000
----------
2,213,312
----------
Consumer Products 0.2%
Bacou USA Inc.* ................................ 40,000 525,000
Day Runner, Inc.* .............................. 18,800 227,950
----------
752,950
----------
Consumer Services 1.8%
Amerco* ........................................ 198,700 4,272,050
Computer Learning Centers, Inc.* ............... 100,000 531,250
Dollar Thrifty Automotive Group, Inc.* ......... 83,800 1,445,550
Edutrek International Inc. Cl. A* .............. 20,000 137,500
Firearms Training System, Inc. Cl. A* .......... 45,000 46,406
----------
6,432,756
----------
Household Furnishings 0.2%
EKCO Group, Inc.* .............................. 98,800 333,450
Home Products International Inc.* .............. 48,000 438,000
----------
771,450
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Leisure Time 2.6%
Championship Auto Racing Teams, Inc.* ........... 25,000 $ 728,125
Rawlings Sporting Goods Co.* .................... 114,200 942,150
Steinway Musical Instruments Inc.* .............. 326,300 7,239,781
Sturm Ruger & Company Inc. ...................... 70,000 700,000
----------
9,610,056
----------
Photography 0.3%
CPI Corp.* ...................................... 50,000 1,118,750
----------
Printing & Publishing 2.7%
American Media Inc. Cl. A* ...................... 1,078,700 5,932,850
Hollinger International, Inc. Cl. A* ............ 210,760 2,858,433
Pulitzer Inc.* .................................. 24,200 978,587
----------
9,769,870
----------
Retail 2.4%
Barbeques Galore Ltd. ADR* ...................... 100,000 625,000
BJ's Wholesale Club Inc.* ....................... 40,000 1,057,500
Burlington Coat Factory Warehouse Corp. ......... 50,000 587,500
Cole National Corp. Cl. A* ...................... 114,000 2,080,500
Finlay Enterprises, Inc.* ....................... 80,000 865,000
Group 1 Automotive Inc.* ........................ 20,000 491,250
Hawkins Chemical, Inc.* ......................... 40,100 390,975
RDO Equipment Co. Cl. A* ........................ 50,000 450,000
West Coast Entertainment Corp.* ................. 310,000 116,250
Whitehall Jewellers, Inc.* ...................... 129,000 1,983,375
----------
8,647,350
----------
Textile Apparel Manufacturers 0.5%
Oshkosh B' Gosh, Inc. Cl. A ..................... 110,000 1,945,625
----------
Total Consumer Discretionary .............................. 71,582,661
----------
Consumer Staples 2.8%
Beverages 0.8%
Coca-Cola Bottling Co.* ......................... 2,500 138,125
Golden State Vintners Inc. Cl. B * .............. 170,000 2,029,375
Robert Mondavi Corp. Cl. A* ..................... 20,000 715,000
----------
2,882,500
----------
Foods 1.5%
Bush Boake Allen Inc.* .......................... 130,000 3,575,000
Corn Products International Inc.* ............... 30,000 718,125
Del Monte Foods Co.* ............................ 30,000 395,625
International Home Foods Inc.* .................. 50,000 803,125
----------
5,491,875
----------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Tobacco 0.5%
Dimon Inc. ...................................... 260,000 $ 991,250
Standard Commercial Corp.* ...................... 160,000 760,000
----------
1,751,250
----------
Total Consumer Staples .................................... 10,125,625
----------
Financial Services 10.3%
Banks & Savings & Loan 1.0%
EFC Bancorp Inc.* ............................... 20,000 195,000
First International Bancorp Inc.* ............... 4,500 42,750
Life Financial Corp.* ........................... 40,000 125,000
Meritor Savings Bank* ........................... 60,000 153,750
PBOC Holdings Inc.* ............................. 160,000 1,440,000
Richmond County Financial Corp.* ................ 70,000 1,036,875
Staten Island Bancorp Inc. ...................... 44,300 761,406
----------
3,754,781
----------
Insurance 1.1%
Foremost Corp. .................................. 129,400 2,604,175
PAULA Financial* ................................ 160,000 1,190,000
----------
3,794,175
----------
Miscellaneous Financial 2.1%
Capital Re Corp. ................................ 202,200 3,487,950
CIT Group Inc. Cl. A ............................ 80,000 2,445,000
Delta Financial Corp.* .......................... 90,000 506,250
Heller Financial Inc. Cl. A ..................... 58,300 1,370,050
----------
7,809,250
----------
Real Estate Investment Trusts 5.4%
Beacon Capital Partners Inc.*+ .................. 120,000 1,815,000
Core Capital Inc. Cl. A* ........................ 300,000 4,200,000
Core Capital Inc. Series A Pfd.*+ ............... 300,000 7,269,000
Entertainment Properties Trust .................. 380,000 6,555,000
----------
19,839,000
----------
Rental & Leasing Services: Commercial 0.6%
Hanover Compressor Co.* ......................... 60,000 1,590,000
Linc Capital Inc.* .............................. 60,000 457,500
----------
2,047,500
----------
Securities Brokerage & Services 0.1%
Gilman & Ciocia, Inc.* .......................... 20,000 250,000
----------
Total Financial Services .................................. 37,494,706
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Health Care 2.9%
Drugs & Biotechnology 1.5%
Aviron Corp.* .................................. 40,000 $ 810,000
BioReliance Corp.* ............................. 130,000 845,000
CuraGen Corp.* ................................. 60,000 397,500
Lunar Corp.* ................................... 180,000 1,147,500
Nutraceutical International Corp.* ............. 30,000 129,375
Pathogenesis Corp.* ............................ 159,500 2,123,344
----------
5,452,719
----------
Health Care Services 0.2%
DIANON Systems Inc.* ........................... 90,000 787,500
----------
Hospital Supply 1.2%
Igen International, Inc.* ...................... 35,000 840,000
Invivo Corp.* .................................. 164,900 2,226,150
Novametrix Medical Systems Inc.* ............... 110,000 391,875
SeaMed Corp.* .................................. 105,000 997,500
----------
4,455,525
----------
Total Health Care .......................................... 10,695,744
----------
Integrated Oils 0.2%
Integrated Domestic 0.2%
Cabot Oil & Gas Corp. Cl. A .................... 55,000 794,062
----------
Total Integrated Oils ...................................... 794,062
----------
Materials & Processing 22.3%
Building & Construction 1.1%
Centex Construction Products Inc. .............. 14,500 504,781
Kevco Inc.* .................................... 66,500 290,938
Nortek Inc.* ................................... 126,500 3,130,875
----------
3,926,594
----------
Chemicals 7.3%
Agrium Inc. .................................... 480,000 4,410,000
Cambrex Corp. .................................. 280,000 6,195,000
Carbide / Graphite Group Inc.* ................. 55,000 598,125
Channell Commercial Corp.* ..................... 170,000 1,498,125
Geon Co. ....................................... 150,000 3,412,500
Intertape Polymer Group Inc. ................... 40,000 1,055,000
Lilly Industrial Inc. Cl. A* ................... 198,500 3,064,344
Stepan Chemical Co.* ........................... 255,000 5,673,750
Stimsonite Corp.* .............................. 100,000 806,250
----------
26,713,094
----------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Containers & Packaging 1.4%
Ivex Packaging Corp.* .......................... 110,200 $1,673,663
Shorewood Packaging Corp.* ..................... 90,000 1,766,250
U.S. Can Corp.* ................................ 117,900 1,739,025
----------
5,178,938
----------
Diversified Manufacturing 0.1%
Commonwealth Industries Inc.* .................. 20,000 180,000
----------
Fertilizers 1.1%
Mississippi Chemical Corp. ..................... 451,300 4,230,937
----------
Miscellaneous Materials & Processing 9.7%
Belden Inc. .................................... 230,000 3,924,376
Chase Industries Inc.* ......................... 90,100 687,012
CompX International Inc. Cl. A* ................ 10,000 127,500
Dayton Superior Corp. Cl. A* ................... 7,600 132,050
Easco Inc. ..................................... 61,700 447,325
Hawk Corp. Cl. A* .............................. 224,100 1,792,800
Intermet Corp.* ................................ 400,000 5,350,000
N.N. Ball & Roller Inc. ........................ 118,000 671,125
Penn Engineering & Manufacturing Corp. ......... 160,000 3,040,000
Ryerson Tull Inc. .............................. 282,080 4,143,050
TransPro Inc. .................................. 130,000 560,625
Webco Industries Inc.* ......................... 49,500 222,750
Wolverine Tube Inc.* ........................... 300,000 6,337,500
Wyman-Gordon Co.* .............................. 870,000 8,047,500
----------
35,483,613
----------
Non-Ferrous Metals 0.3%
Lindberg Corp.* ................................ 100,000 881,250
Lydall Inc.* ................................... 50,000 415,625
----------
1,296,875
----------
Paper & Forest Products 0.3%
Rock-Tenn Co. Cl. A ............................ 74,000 1,137,750
----------
Real Estate & Construction 0.3%
Castle & Cooke Inc.* ........................... 77,400 1,035,225
----------
Textile & Products 0.7%
Carlyle Industries Inc.* ....................... 110,939 88,405
Interface Inc. Cl. A* .......................... 110,000 1,058,750
Polymer Group Inc.* ............................ 150,000 1,387,500
----------
2,534,655
----------
Total Materials & Processing ............................... 81,717,681
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Non-US Equities 1.0%
Fred Olsen Energy ASA ADR* .................... 54,100 $ 430,811
Jean Coutu Group Inc. Cl.A * .................. 150,000 3,179,860
Probe Exploration Inc.*+ ...................... 277,800 104,900
----------
Total Non-US Equities ..................................... 3,715,571
----------
Other 3.3%
Multi-Sector 3.3%
American Pacific Corp.* ....................... 413,200 3,202,300
Commercial Intertech Corp. .................... 92,800 1,032,400
Gencorp Inc. .................................. 60,000 1,080,000
Global Industrial Technologies Inc.* .......... 380,000 3,990,000
Noel Group Inc.* .............................. 102,000 114,750
Trinity Industries Inc. ....................... 90,000 2,643,750
----------
12,063,200
----------
Total Other ............................................... 12,063,200
----------
Other Energy 2.5%
Offshore Drilling 0.1%
TMBR / Sharp Drilling Inc.* ................... 132,600 563,550
----------
Oil & Gas Producers 1.9%
Maxx Petroleum Ltd.* .......................... 475,000 1,068,750
Ocean Energy Inc. ............................. 327,200 2,229,050
Plains Resources Inc.* ........................ 1,100 16,500
Ranger Oil Ltd.* .............................. 537,500 2,150,000
Titan Exploration Inc.* ....................... 272,500 1,362,500
----------
6,826,800
----------
Oil Well Equipment & Services 0.5%
Stolt Comex Seaway SA* ........................ 48,000 462,000
Stolt Comex Seaway SA A* ...................... 24,000 201,000
Zapata Corp.* ................................. 133,500 1,193,156
----------
1,856,156
----------
Total Other Energy ........................................ 9,246,506
----------
Producer Durables 10.7%
Aerospace 2.1%
Curtiss-Wright Corp. .......................... 100,000 3,106,250
Doncasters PLC ADR* ........................... 51,100 785,663
Ladish Inc.* .................................. 540,000 3,712,500
----------
7,604,413
----------
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Electrical Equipment & Components 0.3%
GSI Lumonics Inc. ............................. 167,297 $ 733,912
Power-One Inc.* ............................... 47,500 320,625
----------
1,054,537
----------
Industrial Products 1.9%
Denison International PLC ADR* ................ 261,700 3,565,662
Whittaker Corp. ............................... 154,000 3,378,375
----------
6,944,037
----------
Machine Tools 0.1%
Thermadyne Holdings Corp.* .................... 13,599 224,384
----------
Machinery 4.1%
CTB International Corp.* ...................... 50,000 318,750
Hirsch International Corp. Cl. A* ............. 305,000 686,250
Howmet International Inc.* .................... 206,900 2,961,256
JLG Industries Inc. ........................... 27,400 373,325
Specialty Equipment Companies Inc.* ........... 298,000 8,232,250
Tokheim Corp.* ................................ 340,000 2,677,500
----------
15,249,331
----------
Pollution Control & Environmental Services 0.1%
Darling International Inc.* ................... 102,400 185,600
Gundle / SLT Environmental Inc.* .............. 88,100 242,275
----------
427,875
----------
Production Technology Equipment 0.1%
InTEST Corp.* ................................. 65,000 373,750
----------
Telecommunications Equipment 2.0%
Asia Pacific Wire & Cable Corp. Ltd.* ......... 36,600 89,213
L-3 Communications Holding Corp.* ............. 155,000 7,168,750
----------
7,257,963
----------
Total Producer Durables ................................... 39,136,290
----------
Technology 8.5%
Communications Technology 0.1%
Glenayre Technologies Inc. .................... 70,000 240,625
----------
Computer Software 1.0%
Best Software Inc.* ........................... 100,000 1,350,000
Eidos PLC ADR* ................................ 50,000 1,621,875
H.T.E. Inc.* .................................. 230,300 705,294
Ontrack Data International Inc.* .............. 40,000 155,000
----------
3,832,169
----------
Computer Technology 2.9%
Exabyte Corp.* ................................ 358,000 1,700,500
Imation Corp.* ................................ 421,800 6,959,700
Verio Inc.* ................................... 40,000 1,845,000
----------
10,505,200
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Electronics 4.3%
BEI Electronics Inc.* ......................... 215,000 $ 322,500
BEI Technologies Inc.* ........................ 335,000 3,601,250
Coherent Inc.* ................................ 480,000 6,600,000
DRS Technologies Inc.* ........................ 56,500 452,000
II-VI, Inc.* .................................. 43,000 333,250
Instron Corp. ................................. 73,700 1,169,987
Optek Technology Inc.* ........................ 230,300 3,382,531
-----------
15,861,518
-----------
Electronics: Semi-Conductors/Components 0.2%
Cypress Semiconductor Corp.* ................. 70,000 630,000
Fusion Systems Corp.* ........................ 1,000 16
-----------
630,016
-----------
Total Technology ........................................ 31,069,528
-----------
Utilities 0.3%
Gas Distribution 0.3%
Western Gas Resources Inc. ................... 120,800 906,000
-----------
Total Utilities ......................................... 906,000
-----------
Total Common Stocks (Cost $411,035,978) ................. 345,956,779
-----------
SHORT-TERM INVESTMENTS 3.3%
AIM Liquid Assets Portfolio .................. 12,194,474 12,194,474
-----------
Total Short-Term Investments (Cost $12,194,474).. 12,194,474
-----------
<CAPTION>
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 3.2%
American Express Credit Corp.,
5.00% ....................... $2,853,000 4/01/1999 2,853,000
American Express Credit Corp.,
4.92% ....................... 7,000,000 4/05/1999 7,000,000
General Electric Capital Corp.,
4.92% ....................... 1,971,000 4/06/1999 1,971,000
----------
Total Commercial Paper (Cost $11,824,000)................ 11,824,000
----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS 0.8%
State Street Bank and Trust
Co., dated 3/31/99, 3.50%,
repurchase proceeds
$3,000,292, collateralized by
$2,965,000 U.S. Treasury
Note, 5.75%, due 4/30/03,
market value $3,094,719 ...................... $3,000,000 4/01/1999 $ 3,000,000
------------
Total Repurchase Agreements (Cost $3,000,000)............................. 3,000,000
------------
Total Investments (Cost $438,054,452)--101.9% ............................ 372,975,253
Cash and Other Assets, Less Liabilities--(1.9%) .......................... (7,046,394)
------------
Net Assets--100.0% ....................................................... $365,928,859
============
Federal Income Tax Information:
At March 31, 1999, the net unrealized depreciation of
investments based on cost for Federal income tax
purposes of $438,246,524 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ................................................................ $ 28,508,306
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value .............................................................. (93,779,577)
------------
$(65,271,271)
============
</TABLE>
- --------------------------------------------------------------------------------
*Nonincome-producing securities.
ADR stands for American Depositary 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
buyers. The total cost and market value of Rule 144A securities owned at March
31, 1999 were $9,564,535 and $9,188,900 (2.51% of net assets), respectively.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $438,054,452) (Note 1).................... $372,975,253
Cash ................................................................. 18,911
Receivable for securities sold ....................................... 11,161,696
Receivable for fund shares sold ...................................... 365,207
Dividends and interest receivable .................................... 321,497
Deferred organization costs and other assets (Note 1) ................ 14,829
------------
384,857,393
Liabilities
Payable for collateral received on securities loaned ................. 12,194,474
Payable for securities purchased ..................................... 3,819,060
Payable for fund shares redeemed ..................................... 1,715,766
Accrued transfer agent and shareholder services
(Note 2) ........................................................... 499,026
Accrued management fee (Note 2) ...................................... 294,896
Accrued distribution and service fees (Note 4) ....................... 262,885
Accrued trustees' fees (Note 2) ...................................... 27,177
Other accrued expenses ............................................... 115,250
------------
18,928,534
------------
Net Assets $365,928,859
============
Net Assets consist of:
Unrealized depreciation of investments .............................. $(65,079,199)
Accumulated net realized loss ....................................... (8,186,022)
Paid-in capital ..................................................... 439,194,080
------------
$365,928,859
============
Net Asset Value and redemption price per share of
Class A shares ($116,814,874 [divided by] 7,374,643 shares)......... $15.84
======
Maximum Offering Price per share of Class A shares
($15.84 [divided by] .9425)......................................... $16.81
======
Net Asset Value and offering price per share of Class
B(1) shares ($5,022,527 [divided by] 326,852 shares)* .............. $15.37
======
Net Asset Value and offering price per share of Class
B shares ($185,779,522 [divided by] 12,089,247 shares)* ............ $15.37
======
Net Asset Value and offering price per share of Class
C shares ($56,866,136 [divided by] 3,700,929 shares)*............... $15.37
======
Net Asset Value, offering price and redemption price
per share of Class S shares ($1,445,800 [divided by] 90,424
shares) ............................................................ $15.99
======
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended March 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $12,597 ............... $1,839,437
Interest (Note 1) ........................................ 1,574,435
----------
3,413,872
Expenses
Management fee (Note 2) .................................. 1,703,576
Transfer agent and shareholder services (Note 2) ......... 579,154
Custodian fee ............................................ 204,632
Report to shareholders ................................... 41,265
Registration fees ........................................ 34,032
Trustees' fees (Note 2) .................................. 19,140
Audit fee ................................................ 9,875
Service fee-Class A (Note 4) ............................. 154,065
Distribution and service fees-Class B(1) (Note 4) ........ 7,516
Distribution and service fees-Class B (Note 4) ........... 1,051,749
Distribution and service fees-Class C (Note 4) ........... 321,726
Amortization of organization costs (Note 1) .............. 7,211
Legal fees ............................................... 3,027
Miscellaneous ............................................ 8,069
----------
4,145,037
Fees paid indirectly (Note 2) ............................ (33,376)
----------
4,111,661
----------
Net investment loss ...................................... (697,789)
----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 3) ......... (6,123,430)
Net unrealized appreciation of investments ............... 15,770,490
----------
Net gain on investments .................................. 9,647,060
----------
Net increase in net assets resulting from operations ..... $8,949,271
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
March 31, 1999
<TABLE>
<CAPTION>
Six months ended
Year ended March 31, 1999
September 30, 1998 (Unaudited)
-------------------- -----------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations:
Net investment loss ................. $ (2,437,864) $ (697,789)
Net realized gain (loss) on
investments ....................... 3,061,152 (6,123,430)
Net unrealized appreciation
(depreciation) of investments ..... (140,139,832) 15,770,490
------------ ------------
Net increase (decrease) resulting
from operations ................... (139,516,544) 8,949,271
------------ ------------
Distribution from net realized
gains:
Class A ............................ (2,244,173) --
Class B ............................ (3,454,508) --
Class C ............................ (1,036,520) --
Class S ............................ (107,482) --
------------ ------------
(6,842,683) --
------------ ------------
Net increase (decrease) from
fund share transactions
(Note 5) .......................... 59,540,188 (31,655,985)
------------ ------------
Total decrease in net assets ........ (86,819,039) (22,706,714)
Net Assets
Beginning of period ................. 475,454,612 388,635,573
------------ ------------
End of period ....................... $388,635,573 $365,928,859
============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1
State Street Research Aurora Fund (the "Fund") is a series of State Street
Research Capital Trust (the "Trust"), which is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists
presently of three separate funds: State Street Research Aurora Fund, State
Street Research Emerging Growth Fund and State Street Research Capital Fund.
The investment objective of the Fund is to provide high total return consisting
principally of capital appreciation. In seeking to achieve its investment
objective, the Fund invests primarily in the equity securities of small
capitalization companies which are trading at prices believed to be below the
true values of such securities.
The Fund is authorized to issue five classes of shares. The Fund has been
offered to new shareholders periodically during the six months ended March 31,
1999. Until December 31, 1998 Class A shares were subject to an initial sales
charge of up to 4.50% and effective January 1, 1999 became subject to an
initial sales charge of up to 5.75%. Class A shares pay an annual service fee
equal to 0.25% of average daily net assets. On January 1, 1999, the Fund
commenced the operations of Class B(1) shares and continued offering Class B
shares but only to current shareholders. Class B(1) and Class B shares pay
annual distribution and service fees of 1.00% and both classes automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
the eight years. Class B(1) shares are subject to a contingent deferred sales
charge on certain redemptions made within six years of purchase. Class B shares
are subject to a contingent deferred sales charge on certain redemptions made
within five years of purchase. Class C shares are subject to a contingent
deferred sales charge of 1.00% on any shares redeemed within one year of their
purchase. Class C shares also pay annual distribution and service fees of
1.00%. Class S shares are only offered through certain retirement accounts,
advisory accounts of State Street Research & Management Company (the
"Adviser"), an indirect wholly owned subsidiary of Metropolitan Life Insurance
Company ("Metropolitan"), and special programs. No sales charge is imposed at
the time of purchase or redemption of Class S shares. Class S shares do not pay
any distribution or service fees. The Fund's expenses are borne pro rata by
each class, except that each class bears expenses, and has exclusive voting
rights with respect to provisions of the Plan of Distribution, related
specifically to that class. The Trustees declare separate dividends on each
class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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. Securities 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 period.
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. The Fund intends to
defer approximately $1,845,000 of losses incurred from November 1, 1997 to
September 30, 1998 and treat as arising in the fiscal year ended September 30,
1999.
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.
E. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
F. Securities Lending
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At March 31, 1999, the value of the securities loaned and the value of
collateral were $21,549,563 and $22,152,449 (including $12,194,474 of cash
collateral), respectively. During the six months ended March 31, 1999, income
from securities lending amounted to $180,312 and is included in interest
income.
Note 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.85% of the Fund's average
daily net assets. In consideration of these fees, the Adviser furnishes the
Fund with management, investment advisory, statistical and research facilities
and services. The Adviser also pays all salaries, rent and certain other
expenses of management. During the six months ended March 31, 1999, the fees
pursuant to such agreement amounted to $1,703,576.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), and 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 six months ended March 31, 1999, the amount of
such expenses was $229,853.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended March 31, 1999, the
Fund's transfer agent fees were reduced by $33,376 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$19,140 during the six months ended March 31, 1999.
Note 3
For the six months ended March 31, 1999, exclusive of short-term investments
and U.S. Government obligations, purchases and sales of securities aggregated
$118,951,699 and $118,390,949, 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(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal services and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
9
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended March 31, 1999,
fees pursuant to such plan amounted to $154,065, $1,051,749 and $321,726 for
Class A, Class B and Class C shares, respectively. For the period January 1,
1999 (commencement of share class) to March 31, 1999, fees pursuant to such
plan amounted to $7,516 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $91,094 and $87,775, respectively, on sales of Class A shares of
the Fund during the six months ended March 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $174,126 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $781,636 and $12,168 on redemptions of Class B and Class C shares,
respectively, during the same period. MetLife Securities, Inc. earned
commissions aggregating $31,021 on sales and the Distributor collected
contingent deferred sales charges aggregating $5,056 on redemptions of Class
B(1) shares during the period January 1, 1999 (commencement of share class) to
March 31, 1999.
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At March 31, 1999, Metropolitan
owned 30,921 Class B(1) shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended
September 30, 1998
---------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................................................. 5,381,653 $ 109,833,386
Issued upon reinvestment of distribution from net realized gains ......... 97,354 1,913,445
Shares repurchased ....................................................... (5,606,090) (109,702,637)
---------- --------------
Net increase (decrease) .................................................. (127,083) $ 2,044,194
========== ==============
Class B(1)* Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold .............................................................. -- $ --
Shares repurchased ....................................................... -- --
---------- --------------
Net increase ............................................................. -- $ --
========== ==============
Class B Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 5,637,518 $ 114,054,313
Issued upon reinvestment of distribution from net realized gains ......... 119,083 2,282,631
Shares repurchased ....................................................... (3,403,166) (63,417,674)
---------- --------------
Net increase (decrease) .................................................. 2,353,435 $ 52,919,270
========== ==============
Class C Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 2,088,859 $ 42,044,189
Issued upon reinvestment of distribution from net realized gains ......... 31,557 603,253
Shares repurchased ....................................................... (1,340,390) (25,018,589)
---------- --------------
Net increase (decrease) .................................................. 780,026 $ 17,628,853
========== ==============
Class S Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 9,023 $ 187,858
Issued upon reinvestment of distribution from net realized gains ......... 5,331 107,482
Shares repurchased ....................................................... (664,232) (13,347,469)
---------- --------------
Net increase (decrease) .................................................. (649,878) $ (13,052,129)
========== ==============
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Six months ended
March 31, 1999
(Unaudited)
--------------------------------
Class A Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................................................. 2,730,664 $ 43,540,725
Issued upon reinvestment of distribution from net realized gains ......... -- --
Shares repurchased ....................................................... (2,850,262) (45,550,788)
---------- ------------
Net increase (decrease) .................................................. (119,598) $ (2,010,063)
========== ============
Class B(1)* Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 336,345 $ 5,359,388
Shares repurchased ....................................................... (9,493) (149,452)
---------- ------------
Net increase ............................................................. 326,852 $ 5,209,936
========== ============
Class B Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 1,861,161 $ 28,765,386
Issued upon reinvestment of distribution from net realized gains ......... -- --
Shares repurchased ....................................................... (3,731,769) (58,127,303)
---------- ------------
Net increase (decrease) .................................................. (1,870,608) $(29,361,917)
========== ============
Class C Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 1,103,036 $ 16,962,270
Issued upon reinvestment of distribution from net realized gains ......... -- --
Shares repurchased ....................................................... (1,484,736) (23,089,805)
---------- ------------
Net increase (decrease) .................................................. (381,700) $ (6,127,535)
========== ============
Class S Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 49,613 $ 753,160
Issued upon reinvestment of distribution from net realized gains ......... -- --
Shares repurchased ....................................................... (7,279) (119,566)
---------- ------------
Net increase (decrease) .................................................. 42,334 $ 633,594
========== ============
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*January 1, 1999 (commencement of share class) to March 31, 1999.
10
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
------------------------------------------------
Years ended September 30
------------------------------------------------
1995(b) 1996(a) 1997(a) 1998(a)
-------------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.55 11.13 15.14 20.71
----- ------ ------- -------
Net investment income (loss) ($)* 0.07 (0.06) 0.03 0.02
Net realized and unrealized gain (loss) on investments ($) 1.51 4.66 9.02 (5.03)
----- ------ ------- -------
Total from investment operations ($) 1.58 4.60 9.05 (5.01)
----- ------ ------- -------
Dividend from net investment income ($) -- (0.09) -- --
Distributions from net realized gains ($) -- (0.50) (3.48) (0.23)
----- ------ ------- -------
Total distributions ($) -- (0.59) (3.48) (0.23)
----- ------ ------- -------
Net asset value, end of period ($) 11.13 15.14 20.71 15.47
===== ====== ======= =======
Total return(c) (%) 16.54(e) 43.63 72.70 (24.42)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 5,782 1,110 157,853 115,973
Ratio of operating expenses to average net assets (%)* 1.45(f) 1.45 1.34 1.39
Ratio of net investment income (loss) to average net assets (%)* 1.05(f) (0.56) 0.17 0.09
Portfolio turnover rate (%) 47.34 124.79 25.03 67.80
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.15 0.32 0.02 --
<CAPTION>
Class A Class B(1)
------------------ ------------------
Six months ended Period ended
March 31, 1999 March 31, 1999
(Unaudited)(a) (Unaudited)(a)(d)
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period ($) 15.47 16.17
------- -----
Net investment income (loss) ($)* 0.01 (0.02)
Net realized and unrealized gain (loss) on investments ($) 0.36 (0.78)
------- -----
Total from investment operations ($) 0.37 (0.80)
------- -----
Dividend from net investment income ($) -- --
Distributions from net realized gains ($) -- --
------- -----
Total distributions ($) -- --
------- -----
Net asset value, end of period ($) 15.84 15.37
===== =====
Total return(c) (%) 2.39(e) (4.95)(e)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 116,815 5,023
Ratio of operating expenses to average net assets (%)* 1.55(f) 2.33(f)
Ratio of net investment income (loss) to average net assets (%)* 0.17(f) (0.68)(f)
Portfolio turnover rate (%) 33.23 33.23
*Reflects voluntary reduction of expenses
per share of these amounts ($) -- --
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------------
Years ended September 30
------------------------------------------------
1995(b) 1996(a) 1997(a) 1998(a)
-------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.55 11.08 15.02 20.33
----- ------ ------ -------
Net investment income (loss) ($)* 0.02 (0.17) (0.09) (0.13)
Net realized and unrealized gain (loss) on investments ($) 1.51 4.65 8.88 (4.90)
----- ------ ------ -------
Total from investment operations ($) 1.53 4.48 8.79 (5.03)
----- ------ ------ -------
Dividend from net investment income ($) -- (0.04) -- --
Distributions from net realized gains ($) -- (0.50) (3.48) (0.23)
----- ------ ------ -------
Total distributions ($) -- (0.54) (3.48) (0.23)
----- ------ ------ -------
Net asset value, end of period ($) 11.08 15.02 20.33 15.07
===== ====== ====== =======
Total return(c) (%) 16.02(e) 42.52 71.34 (24.98)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 116 165 235,938 210,408
Ratio of operating expenses to average net assets (%)* 2.20(f) 2.20 2.08 2.15
Ratio of net investment income (loss) to average net assets (%)* 0.32(f) (1.38) (0.55) (0.68)
Portfolio turnover rate (%) 47.34 124.79 25.03 67.80
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.15 0.32 0.01 --
<CAPTION>
Class B
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 15.07
-------
Net investment income (loss) ($)* (0.05)
Net realized and unrealized gain (loss) on investments ($) 0.35
-------
Total from investment operations ($) 0.30
-------
Dividend from net investment income ($) --
Distributions from net realized gains ($) --
-------
Total distributions ($) --
-------
Net asset value, end of period ($) 15.37
=======
Total return(c) (%) 1.99(e)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 185,780
Ratio of operating expenses to average net assets (%)* 2.30(f)
Ratio of net investment income (loss) to average net assets (%)* (0.58)(f)
Portfolio turnover rate (%) 33.23
*Reflects voluntary reduction of expenses
per share of these amounts ($) --
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) February 13, 1995 (commencement of operations) to September 30, 1995.
(c) Does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
(d) January 1, 1999 (commencement of share class) to March 31, 1999.
(e) Not annualized.
(f) Annualized.
11
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------
Years ended September 30
-----------------------------------------------
1995(b) 1996(a) 1997(a) 1998(a)
-------------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.55 11.08 15.02 20.32
----- ------ ------ ------
Net investment income (loss) ($)* 0.02 (0.17) (0.09) (0.13)
Net realized and unrealized gain (loss) on investments ($) 1.51 4.65 8.87 (4.90)
----- ------ ------ ------
Total from investment operations ($) 1.53 4.48 8.78 (5.03)
----- ------ ------ ------
Dividend from net investment income ($) -- (0.04) -- --
Distributions from net realized gains ($) -- (0.50) (3.48) (0.23)
----- ------ ------ ------
Total distributions ($) -- (0.54) (3.48) (0.23)
----- ------ ------ ------
Net asset value, end of period ($) 11.08 15.02 20.32 15.06
===== ====== ====== ======
Total return(c) (%) 16.02(e) 42.52 71.26 (25.00)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 116 165 67,121 61,504
Ratio of operating expenses to average net assets (%)* 2.20(f) 2.20 2.09 2.15
Ratio of net investment income (loss) to average net assets (%)* 0.32(f) (1.38) (0.58) (0.68)
Portfolio turnover rate (%) 47.34 124.79 25.03 67.80
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.15 0.32 0.01 --
<CAPTION>
Class C
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 15.06
-----
Net investment income (loss) ($)* (0.05)
Net realized and unrealized gain (loss) on investments ($) 0.36
------
Total from investment operations ($) 0.31
------
Dividend from net investment income ($) --
Distributions from net realized gains ($) --
------
Total distributions ($) --
------
Net asset value, end of period ($) 15.37
======
Total return(c) (%) 2.06(e)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 56,866
Ratio of operating expenses to average net assets (%)* 2.30(f)
Ratio of net investment income (loss) to average net assets (%)* (0.58)(f)
Portfolio turnover rate (%) 33.23
*Reflects voluntary reduction of expenses
per share of these amounts ($) --
</TABLE>
<TABLE>
<CAPTION>
Class S
-----------------------------------------------
Years ended September 30
-----------------------------------------------
1995(b) 1996(a) 1997(a) 1998(a)
-------------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 9.55 11.15 15.18 20.83
------ ------ ------ ------
Net investment income (loss) ($)* 0.09 (0.06) (0.00) 0.10
Net realized and unrealized gain (loss) on investments ($) 1.51 4.70 9.13 (5.10)
------ ------ ------ ------
Total from investment operations ($) 1.60 4.64 9.13 (5.00)
------ ------ ------ ------
Dividend from net investment income ($) -- (0.11) -- --
Distributions from net realized gains ($) -- (0.50) (3.48) (0.23)
------ ------ ------ ------
Total distributions ($) -- (0.61) (3.48) (0.23)
------ ------ ------ ------
Net asset value, end of period ($) 11.15 15.18 20.83 15.60
====== ====== ====== ======
Total return(c) (%) 16.75(e) 43.95 73.10 (24.23)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 117 7,752 14,542 750
Ratio of operating expenses to average net assets (%)* 1.20(f) 1.20 1.16 1.04
Ratio of net investment income (loss) to average net assets (%)* 1.32(f) (0.43) (0.02) 0.53
Portfolio turnover rate (%) 47.34 124.79 25.03 67.80
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.15 0.32 0.12 --
<CAPTION>
Class S
-----------------
Six months ended
March 31, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 15.60
-----
Net investment income (loss) ($)* 0.04
Net realized and unrealized gain (loss) on investments ($) 0.35
-----
Total from investment operations ($) 0.39
-----
Dividend from net investment income ($) --
Distributions from net realized gains ($) --
-----
Total distributions ($) --
-----
Net asset value, end of period ($) 15.99
=====
Total return(c) (%) 2.50(e)
Ratios / supplemental data:
Net assets at end of period ($ thousands) 1,446
Ratio of operating expenses to average net assets (%)* 1.30(f)
Ratio of net investment income (loss) to average net assets (%)* 0.44(f)
Portfolio turnover rate (%) 33.23
*Reflects voluntary reduction of expenses
per share of these amounts ($) --
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) February 13, 1995 (commencement of operations) to September 30, 1995.
(c) 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.
(d) January 1, 1999 (commencement of share class) to March 31, 1999.
(e) Not annualized.
(f) Annualized.
12
<PAGE>
STATE STREET RESEARCH AURORA FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH CAPITAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund Information Officers Trustees
<S> <C> <C>
State Street Research Ralph F. Verni Ralph F. Verni
Aurora Fund Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
Investment Adviser Peter C. Bennett Management Company
State Street Research & Vice President
Management Company Bruce R. Bond
One Financial Center Jesus A. Cabrera Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President,
Distributor Lawrence J. Haverty, Jr. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. Steve A. Garban
One Financial Center Richard J. Jodka Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations
and Treasurer, The Pennsylvania
Shareholder Services Rudolph K. Kluiber State University
State Street Research Vice President
Service Center Malcolm T. Hopkins
P.O. Box 8408 James M. Weiss Former Vice Chairman of the Board
Boston, MA 02266-8408 Vice President and Chief Financial Officer,
1-800-562-0032 St. Regis Corp.
Gerard P. Maus
Custodian Treasurer Dean O. Morton
State Street Bank and Former Executive Vice President,
Trust Company Joseph W. Canavan Chief Operating Officer and
225 Franklin Street Assistant Treasurer Director, Hewlett-Packard
Boston, MA 02110 Company
Douglas A. Romich
Legal Counsel Assistant Treasurer Susan M. Phillips
Goodwin, Procter & Hoar LLP Dean, School of Business and
Exchange Place Francis J. McNamara, III Public Management, George
Boston, MA 02109 Secretary and General Counsel Washington University; former
Member of the Board of Governors
Darman A. Wing of the Federal Reserve System and
Assistant Secretary and Chairman and Commissioner of
Assistant General Counsel the Commodity Futures Trading
Commission
Amy L. Simmons
Assistant Secretary 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
</TABLE>
13
<PAGE>
[back cover]
State Street Research Aurora Fund ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
------------
Questions? Comments?
Call us at 1-800-562-0032
[hearing impaired 1-800-676-7876]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-Mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[State Street logo]
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Aurora Fund prospectus. The prospectus contains more complete
information, including sales charges and expenses. Please read the prospectus
carefully before investing.
When used after June 30, 1999, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp 0500)SSR-LD AR-645F-0599
