As filed with the Securities and Exchange Commission on June 19, 1997
Securities Act of 1933 File No. 33-32729
Investment Company Act of 1940 File No. 811-84
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 24 [X]
--------------------
STATE STREET RESEARCH MASTER INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number,
Including Area Code: (617) 357-1200
Francis J. McNamara, III
Executive Vice President, General Counsel & Secretary
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copy to:
Thomas J. Kelly
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
<PAGE>
It is proposed that this filing will become effective under Rule 485:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On ________________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] On August 18, 1997, pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On ______________ pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
-------------------------------------
The Registrant hereby declares that, pursuant to Rule 24f-2 promulgated
under the Investment Company Act of 1940, as amended, it has registered an
indefinite number of Class A shares, Class B shares, Class C shares and Class D
shares of beneficial interst, par value $.001 per share, in the State Street
Research Investment Trust series of the Registrant. A Rule 24f-2 Notice for the
most recent fiscal year ended December 31, 1996, was filed by the Registrant on
or about February 25, 1997.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Part A
FORM N-1A ITEM NO. CAPTION OR LOCATION
IN PROSPECTUS
1. Cover Page Same
2. Synopsis Table of Expenses
3. Condensed Financial Financial Highlights;
Information Calculation of Performance Data
4. General Description The Trust's Investments;
Other Investment Practices;
Limiting Investment Risk;
The Trust and its Shares
5. Management of the Management of the Trust;
Trust Purchase of Shares
5A. Management's [To be included in
Discussion of Fund Financial Statements]
Performance
6. Capital Stock and Shareholder Services;
Other Securities The Trust and its
Shares; Management of
the Trust; Dividends and
Distributions; Taxes
7. Purchase of Purchase of Shares;
Securities Being Shareholder Services
Offered
8. Redemption or Redemption of Shares;
Repurchase Shareholder Services
9. Legal Proceedings Not Applicable
(i)
<PAGE>
Part B
FORM N-1A ITEM NO. CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Same
11. Table of Contents Same
12. General Information Not Applicable
and History
13. Investment Additional Investment
Objectives Policies and Restrictions;
and Policies Additional Information
Concerning Investment Techniques;
Debt Instruments and
Permitted Cash Investments;
Portfolio Transactions
14. Management of the Trustees and Officers
Registrant
15. Control Persons and Trustees and Officers
Principal Holders of
Securities
16. Investment Investment Advisory Services;
Advisory and Custodian; Independent
Other Services Accountants; Distribution of
Shares of the Trust
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Not Applicable (Description in
Other Securities Prospectus)
19. Purchase, Redemption Purchase and Redemption
and Pricing of of Shares; Net Asset Value
Securities Being
Offered
(ii)
<PAGE>
FORM N-1A ITEM NO. CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
INFORMATION
20. Tax Status Certain Tax Matters
21. Underwriters Distribution of Shares
of the Trust
22. Calculation of Calculation of Performance
Performance Data Data
23. Financial Statements Financial Statements
(iii)
<PAGE>
STATE STREET RESEARCH
INVESTMENT TRUST
Prospectus--August 18, 1997
The investment objective of State Street Research Investment Trust is to provide
long-term growth of capital and, secondarily, long-term growth of income. In
seeking to achieve its investment objective, State Street Research Investment
Trust invests primarily in common stocks, or securities convertible into common
stocks, that have long-term growth potential.
State Street Research Investment Trust is the successor to State Street
Investment Corporation (collectively the "Trust") which was established in 1924
as one of the nation's first mutual funds. The Trust is a diversified series of
State Street Research Master Investment Trust (the "Master Trust"), an open-end
management investment company. State Street Research & Management Company (the
"Investment Manager") serves as investment adviser to the Trust. As of February
28, 1997, the Investment Manager had assets of approximately $42.4 billion under
management. State Street Research Investment Services, Inc. serves as
distributor (the "Distributor") for the Trust.
Shareholders may have their shares redeemed directly by the Trust at net
asset value plus the applicable contingent deferred sales charge, if any;
redemptions processed through securities dealers may be subject to processing
charges.
There are risks in any investment program, including the risk of changing
economic and market conditions, and there is no assurance that the Trust will
achieve its investment objective. The net asset value of the Trust's shares
fluctuates as market conditions change.
This Prospectus sets forth concisely the information a prospective investor
ought to know about the Trust before investing. It should be retained for future
reference. A Statement of Additional Information about the Trust dated August
18, 1997, has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge
upon request to the Trust at the address indicated on the back cover or by
calling 1-800-562-0032.
The Trust offers four classes of shares which may be purchased at the next
determined net asset value per share plus, in the case of all classes except
Class C shares, a sales charge which, at the election of the investor, may be
imposed (i) at the time of purchase (the Class A shares) or (ii) on a deferred
basis (the Class B and Class D shares).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
Table of Contents Page
- ------------------------------------------------------
Table of Expenses ............................... 2
Financial Highlights ............................ 4
The Trust's Investments ......................... 6
Other Investment Practices ...................... 6
Limiting Investment Risk ......................... 8
Purchase of Shares ............................... 9
Redemption of Shares ............................ 17
Shareholder Services ............................ 19
The Trust and its Shares ......................... 23
<PAGE>
Management of the Trust ......................... 24
Dividends and Distributions; Taxes ................ 25
Calculation of Performance Data ................... 25
<PAGE>
Class A shares are subject to (i) an initial sales charge of up to 4.5% and
(ii) an annual service fee of 0.25% of the average daily net asset value of the
Class A shares.
Class B shares are subject to (i) a contingent deferred sales charge
(declining from 5% to 2%), which will be imposed on most redemptions made within
five years of purchase, and (ii) annual distribution and service fees of 1% of
the average daily net asset value of such shares. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after purchase. No contingent deferred sales charge applies after
the fifth year following the purchase of Class B shares.
Class C shares are offered only to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or redemption
of Class C shares. Class C shares do not pay any distribution or service fees.
Class D shares are subject to (i) a contingent deferred sales charge of 1%
if redeemed within one year following purchase and (ii) annual distribution and
service fees of 1% of the average daily net asset value of such shares.
Table of Expenses
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C Class D
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ............... 4.5% None None None
Maximum Deferred Sales Charge (as a
percentage of net asset value at time of
purchase or redemption, whichever is lower) None(2) 5% None 1%
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) ...... None None None None
Redemption Fees (as a percentage of
amount redeemed, if applicable) ..................... None None None None
Exchange Fee ....................................... None None None None
Annual Trust Operating Expenses (as a
percentage of average net assets) August 18, 1997 to
August 17, 1998(3)
Management Fees .................................... 0.41% 0.41% 0.41% 0.41%
12b-1 Fees .......................................... 0.25% 1.00% None 1.00%
Other Expenses ....................................... 0.19% 0.19% 0.19% 0.19%
------- ----- ----- -----
Total Trust Operating Expenses ..................... 0.85% 1.60% 0.60% 1.60%
======= ===== ===== =====
Annual Trust Operating Expenses (as a
percentage of average net assets) after August 17, 1998(3)
Management Fees .................................... 0.51% 0.51% 0.51% 0.51%
12b-1 Fees .......................................... 0.25% 1.00% None 1.00%
Other Expenses ....................................... 0.19% 0.19% 0.19% 0.19%
------- ----- ----- -----
Total Trust Operating Expenses ..................... 0.95% 1.70% 0.70% 1.70%
======= ===== ===== =====
</TABLE>
- ------------
(1) Reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge declines
thereafter and no contingent deferred sales charge is imposed after the
fifth year. Class D shares are subject to a 1% contingent deferred sales
charge on any portion of the purchase redeemed within one year of the sale.
Long-term investors in Class A, Class B or Class D shares may, over a period
of years, pay more than the economic equivalent of the maximum sales charge
permissible under applicable rules. See "Purchase of Shares."
(2) Purchases of Class A shares of $1 million or more are not subject to a sales
charge. If such shares are redeemed within 12 months of purchase, a
contingent deferred sales charge of 1% will be applied to the redemption.
See "Purchase of Shares."
(3) The management fee will increase on August 18, 1998. The management fees
shown above are composite rates based on an assumed level of assets equal to
the Trust's assets as of December 31, 1996. For details on the management
fee formula, see "Management of the Trust."
2
<PAGE>
- --------------------------------------------------------------------
Example:
You would pay the following expenses on a $1,000 investment including, for Class
A shares, the maximum applicable initial sales charge, and assuming (1) 5%
annual return and (2) redemption of the entire investment at the end of each
time period. In each column, the first amount shows the estimated expense for
the period August 18, 1997 through August 17, 1998, and the second amount is the
estimate for the period after August 17, 1998.
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- ----------
Class A shares ......... $53/$54 $71/$74 $90/ $95 $145/$156
Class B shares (1) ...... $66/$67 $80/$84 $107/$112 $170/$181
Class C shares ............ $6/ $7 $19/$22 $33/ $39 $75/ $87
Class D shares ......... $26/$27 $50/$54 $87/ $92 $190/$201
You would pay the following expenses on the same investment, assuming no
redemption:
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- ----------
Class B shares (1) ...... $16/$17 $50/$54 $87/ $92 $170/$181
Class D shares ......... $16/$17 $50/$54 $87/ $92 $190/$201
- ------------
(1) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of eight years.
The example should not be considered as a representation of past or future
return or expenses. Actual return or expenses may be greater or less than shown.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor will bear directly or indirectly.
The percentage expense levels shown in the table are based on experience with
expenses during the fiscal year ended December 31, 1996; actual expense levels
for the current fiscal year and future years may vary from the amounts shown.
The table does not reflect charges for optional services elected by certain
shareholders, such as the $7.50 fee for remittance of redemption proceeds by
wire. For further information on sales charges, see "Purchase of
Shares--Alternative Purchase Program"; for further information on 12b-1 fees,
see "Purchase of Shares--Distribution Plan." For further information on
management fees, see "Management of the Trust."
The Trust has been advised that the Investment Manager will undertake to
voluntarily assume the Trust's operating expenses, excluding Rule 12b-1 fees, to
the extent they exceed 0.75% of the Trust's average net assets on an annualized
basis.
3
<PAGE>
Financial Highlights
The data set forth below has been examined by Coopers & Lybrand L.L.P.,
independent accountants, and their report thereon for the latest five years is
included in the Statement of Additional Information. For further information
about the performance of the Trust, see "Financial Statements" in the Statement
of Additional Information.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
February 17,
1993
(Commencement
Year ended of Share Class
December 31 Designations) to
---------------------------------------- December 31,
1996* 1995* 1994 1993
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $9.16 $7.74 $8.69 $8.75
Net investment income ............ .12 .14 .11 .10
Net realized and unrealized gain
(loss) on investments ............ 1.80 2.39 (.44) .81
Dividends from net investment
income ........................... (.13) (.13) (.12) (.13)
Distributions from net realized
gains ........................... (1.87) (.98) (.50) (.84)
Distributions in excess of net
realized gains .................. (.01) -- -- --
--------- --------- --------- --------
Net asset value, end of year ...... $9.07 $9.16 $7.74 $8.69
========= ========= ========= ========
Total return ..................... 21.03%+ 32.85%+ (3.84)%+ 10.53%++
Net assets at end of
year (000s) ..................... $223,868 $135,676 $92,137 $75,259
Ratio of operating expenses to
average net assets ............... 0.75% 0.78% 0.89% 0.75%[dbldag]
Ratio of net investment income
to average net assets ............ 1.17% 1.54% 1.26% 1.27%[dbldag]
Portfolio turnover rate ......... 73.51% 39.21% 33.08% 43.57%
Average commission rate@ ......... $0.05 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------
March 15,
1993
(Commencement
Year ended of Share Class
December 31 Designations) to
---------------------------------------- December 31,
1996* 1995* 1994 1993
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $9.13 $7.72 $8.66 $9.15
Net investment income ............ .04 .07 .06 .06
Net realized and unrealized gain
(loss) on investments ............ 1.80 2.38 (.44) .39
Dividends from net investment
income ........................... (.06) (.06) (.06) (.10)
Distributions from net realized
gains ........................... (1.87) (.98) (.50) (.84)
Distributions in excess of net
realized gains .................. (.01) -- -- --
--------- --------- --------- --------
Net asset value, end of year ...... $9.03 $9.13 $7.72 $8.66
========= ========= ========= ========
Total return ..................... 20.15%+ 31.86%+ (4.43)%+ 4.95%++
Net assets at end of
year (000s) ..................... $315,766 $183,446 $113,301 $73,110
Ratio of operating expenses to
average net assets ............... 1.50% 1.53% 1.64% 1.51%[dbldag]
Ratio of net investment income
to average net assets ............ 0.41% 0.79% 0.51% 0.48%[dbldag]
Portfolio turnover rate ......... 73.51% 39.21% 33.08% 43.57%
Average commission rate@ ......... $0.05 -- -- --
</TABLE>
- ----------
[dbldag] Annualized
* Per-share figures have been calculated using the average shares method.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges.
++ Represents aggregate return for the period without annualization and does not
reflect any front-end or contingent deferred sales charges.
@ Average commission rate per share paid for security trades for fiscal years
beginning on or after January 1, 1996.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
Year ended December 31
-----------------------------------------------------
1996* 1995* 1994 1993
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $9.18 $7.76 $8.70 $8.80
Net investment income ............ .14 .16 .13 .15
Net realized and unrealized gain
(loss) on investments ............ 1.82 2.39 (.43) .74
Dividends from net investment
income ........................... (.15) (.15) (.14) (.15)
Distributions from net realized
gains ........................... (1.87) (.98) (.50) (.84)
Distributions in excess of net
realized gains .................. (.01) -- -- --
-------- --------- --------- ---------
Net asset value, end of year ...... $9.11 $9.18 $7.76 $8.70
========= ========= ========= =========
Total return ..................... 21.48%+ 33.07%+ (3.47)%+ 10.20%+
Net assets at end of
year (000s) ..................... $780,627 $738,649 $627,551 $729,536
Ratio of operating expenses
to average net assets ............ 0.50% 0.54% 0.65% 0.49%
Ratio of net investment income
to average net assets ............ 1.44% 1.81% 1.54% 1.63%
Portfolio turnover rate ......... 73.51% 39.21% 33.08% 43.57%
Average commission rate@ ......... $0.05 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class C
Year ended December 31
-----------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
----------- ------------ -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.04 $7.67 $8.65 $7.24 $7.30 $7.54
Net investment income ............ .16 .19 .22 .26 .21 .21
Net realized and unrealized gain
(loss) on investments ............ .40 1.96 (.31) 2.05 .54 .34
Dividends from net investment
income ........................... (.16) (.20) (.23) (.26) (.21) (.23)
Distributions from net realized
gains ........................... (.64) (.58) (.66) (.64) (.60) (.56)
Distributions in excess of net
realized gains .................. -- -- -- -- -- --
-------- --------- --------- --------- ---------- ---------
Net asset value, end of year ...... $8.80 $9.04 $7.67 $8.65 $7.24 $7.30
======== ========= ========= ========= ========= =========
Total return ..................... 6.28%+ 28.08%+ (0.95)%+ 32.14%+ 10.24%+ 6.88%+
Net assets at end of
year (000s) ..................... $726,671 $657,762 $519,475 $575,114 $486,385 $493,088
Ratio of operating expenses
to average net assets ............ 0.51% 0.50% 0.50% 0.47% 0.51% 0.46%
Ratio of net investment income
to average net assets ............ 1.92% 2.24% 2.64% 3.09% 2.71% 2.26%
Portfolio turnover rate ......... 23.99% 16.28% 10.07% 12.35% 15.39% 3.65%
Average commission rate@ ......... -- -- -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class D
---------------------------------------------------------------
March 15,
1993
(Commencement
Year ended of Share Class
December 31 Designations) to
---------------------------------- December 31,
1996* 1995* 1994 1993
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ........................... $9.15 $7.74 $8.68 $9.15
Net investment income ....................................... .04 .07 .05 .06
Net realized and unrealized gain (loss) on investments ...... 1.79 2.38 (.43) .40
Dividends from net investment income ........................ (.05) (.06) (.06) (.09)
<PAGE>
Distributions from net realized gains ........................ (1.87) (.98) (.50) (.84)
Distributions in excess of net realized gains ............... (.01) -- -- --
-------- --------- --------- ---------
Net asset value, end of year ................................. $9.05 $9.15 $7.74 $8.68
========= ========= ========= ========
Total return ................................................ 20.09%+ 31.75%+ (4.45)%+ 5.10%++
Net assets at end of year (000s) ........................... $25,658 $16,841 $11,707 $9,729
Ratio of operating expenses to average net assets ............ 1.50% 1.53% 1.64% 1.51%[dbldag]
Ratio of net investment income to average net assets ......... 0.42% 0.79% 0.51% 0.51%[dbldag]
Portfolio turnover rate .................................... 73.51% 39.21% 33.08% 43.57%
Average commision rate@ .................................... $0.05 -- -- --
</TABLE>
- ----------
[dbldag] Annualized
* Per-share figures have been calculated using the average shares method.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges.
++ Represents aggregate return for the period without annualization and does not
reflect any front-end or contingent deferred sales charges.
@ Average commission rate per share paid for security trades for fiscal years
beginning on or after January 1, 1996.
5
<PAGE>
The Trust's Investments
The Trust's investment objective is to provide long-term growth of capital and,
secondarily, long-term growth of income. The investment objective is a
fundamental policy that may not be changed without approval of the Trust's
shareholders.
Under normal circumstances at least 65% of the Trust's net assets will be
invested in common stocks, or securities (preferred stock, bonds and debentures)
convertible into common stocks, or which carry the right to acquire equities
(warrants), which have long-term growth potential.
In seeking to achieve its investment objective, the Trust invests in a
diversified portfolio of companies in a broad range of industries whose earnings
and/or assets are expected to grow at a rate above the average for the Standard
& Poor's 500 Stock Index (the "S&P 500") over the long term. Consequently, the
Investment Manager seeks to identify those industries offering the greatest
possibilities for profitable expansion and, within such industries, those
companies that appear most capable of sustained growth. The Trust also invests
in securities of companies believed by the Investment Manager to be selling
below their intrinsic values or in securities of cyclical companies believed by
the Investment Manager to be at low points in their cycles. Although the Trust's
investments are not limited to companies of any particular size, a majority of
the securities in which the Trust invests are listed on a national securities
exchange. The Trust may invest without limitation in securities of non-U.S.
issuers. For further information, see "Other Investment Practices."
Although for the past ten years over 85% of the Trust's portfolio has been
invested as described above and the Trust does not presently anticipate any
significant change in the percentage of the portfolio so invested, the Trust
reserves the right to invest at any time up to 35% of its net assets in other
equity securities and debt securities, consisting of U.S. Government securities
issued by the U.S. Treasury or by U.S. Government agencies or instrumentalities,
and corporate debt securities of varying maturities. The Trust will generally
purchase debt securities that are considered investment grade securities (i.e.,
rated at the time of purchase within the AAA, AA, A or BBB major rating
categories by Standard & Poor's Corporation ("S&P") or Aaa, Aa, A or Baa
categories by Moody's Investors Service, Inc. ("Moody's")), or securities that
are not rated but considered by the Investment Manager to be of equivalent
investment quality. Securities rated within the Baa category by Moody's lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Other Investment Practices
Foreign Investments
The Trust reserves the right to invest without limitation in securities of
non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Under current
policy, however, the Trust limits such investments, including ADRs and EDRs, to
a maximum of 35% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company, which
evidence ownership of underlying securities issued by a foreign corporation or
other entity. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs in registered form are designed for use
in U.S. securities markets and EDRs are designed for use in European securities
markets. The underlying securities are not always denominated in the same
currency as the ADRs or EDRs. Although investment in the form of ADRs or EDRs
facilitates trading in foreign securities, it does not mitigate all the risks
associated with investing in foreign securities.
ADRs are available through facilities which may be either "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program
6
<PAGE>
compared to a sponsored facility. Only sponsored ADRs may be listed on the New
York or American Stock Exchanges. Unsponsored ADRs may prove to be more risky
due to (a) the additional costs involved to the Trust; (b) the relative
illiquidity of the issue in U.S. markets; and (c) the possibility of higher
trading costs in the over-the-counter market as opposed to exchange-based
trading. The Trust will take these and other risk considerations into account
before making an investment in an unsponsored ADR.
The risks associated with investments in foreign securities include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks of
nationalization or expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other taxes which
may reduce investment return, reduced availability of public information
concerning issuers, the difficulty in obtaining and enforcing a judgment against
a foreign issuer and the fact that foreign issuers are not generally subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to domestic
issuers. Moreover, securities of many foreign issuers may be less liquid and
their prices more volatile than those of securities of comparable domestic
issuers. Investments in foreign securities also involve the additional cost of
converting foreign currency into U.S. dollars.
It is anticipated that most of the foreign investments of the Trust will
consist of securities of issuers in countries with developed economies. However,
the Trust may also invest in the securities of issuers in countries with less
developed economies as deemed appropriate by the Investment Manager, although
the Trust does not presently expect to invest more than 5% of its total assets
in issuers in such less developed countries. Such countries include countries
that have an emerging stock market that trades a small number of securities;
countries with low- to middle-income economies; and/or countries with economies
that are based on only a few industries. Eastern European countries are
considered to have less developed capital markets. Some of the risks set forth
above may be heightened for investments in those countries.
For further information regarding foreign investments, see the Statement of
Additional Information.
Currency Transactions
In order to protect against the effect of uncertain future exchange rates on
securities denominated in foreign currencies, the Trust may engage in currency
exchange transactions either on a spot (i.e., cash) basis at the rate prevailing
in the currency exchange market or by entering into forward contracts to
purchase or sell currencies. Although such contracts tend to minimize the risk
of loss resulting from a correctly predicted decline in value of hedged
currency, they tend to limit any potential gain that might result should the
value of such currency increase. In entering a forward currency transaction, the
Trust is dependent upon the creditworthiness and good faith of the counterparty.
The Trust attempts to reduce the risks of nonperformance by the counterparty by
dealing only with established, reputable institutions with which the Investment
Manager has done substantial business in the past. For further information, see
the Statement of Additional Information.
Other Investment Considerations
To aid in achieving its investment objective, the Trust may, subject to certain
limitations, buy and sell options, futures contracts and options on futures
contracts on securities and securities indices and purchase securities on a
"when-issued" or forward commitment basis. The Trust may not establish a
position in a commodity futures contract or purchase or sell a commodity option
contract for other than bona fide hedging purposes if immediately thereafter the
sum of the amount of initial margin deposits and premiums required to establish
such positions for such nonhedging purposes would exceed 5% of the market value
of the Trust's net assets; similar policies apply to options which are not
commodities. The Trust's positions in futures and options may be closed out only
on an exchange or in a market which provides liquidity, and there can be no
assurance that a liquid market will exist. The Trust may enter various forms of
swap arrangements which have simul-
7
<PAGE>
taneously the characteristics of a security and a futures contract, although the
Trust does not presently expect to invest more than 5% of its total assets in
such items. These swap arrangements include interest rate swaps, currency swaps
and index swaps. See the Statement of Additional Information.
The Trust may enter into repurchase agreements involving U.S. Government
securities. Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon the Trust's ability to dispose of the underlying securities.
See the Statement of Additional Information.
The Trust may lend portfolio securities with a value of up to 331/3% of its
total assets. The Trust will receive cash or cash equivalents (e.g., U.S.
Government obligations) as collateral in an amount equal to at least 100% of the
current market value of the loaned securities plus accrued interest. Collateral
received by the Trust will generally be invested in quality short-term
unaffiliated mutual funds, securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, irrevocable stand-by letters of
credit issued by a bank, or any combination thereof. The investing of cash
collateral received from loaning portfolio securities involves leverage which
magnifies the potential for gain or loss on monies invested and, therefore,
results in an increase in the volatility of the Trust's outstanding securities.
Such loans may be terminated at any time.
The Trust will retain most rights of ownership including rights to
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending, although the Trust may call loans to vote proxies
if desired. Should the borrower of the securities fail financially, there is a
risk of delay in recovery of the securities or loss of rights in the collateral.
Loans are made only to borrowers which are deemed by the Investment Manager to
be of good financial standing.
Limiting Investment Risk
In seeking to lessen investment risk, the Trust operates under certain
fundamental investment restrictions.
Under the fundamental investment restrictions the Trust may not (a)
purchase a security of any one issuer (other than securities issued or
guaranteed as to principal or interest by the U.S. Government or its agencies or
instrumentalities or mixed-ownership Government corporations) if such purchase
would, with respect to 75% of the Trust's total assets, cause more than 5% of
the Trust's total assets to be invested in the securities of such issuer or
cause more than 10% of the voting securities of such issuer to be held by the
Trust; (b) purchase securities of certain issuers that have a record of less
than three years' continuous operation if such purchase would cause more than 5%
of the Trust's total assets to be invested in the securities of such issuers,
subject to a number of exceptions; or (c) make any investment that would cause
more than 25% of its total assets, taken at market value, to be invested in any
one industry.
The foregoing fundamental investment restrictions may not be changed except
by vote of the holders of a majority of the outstanding voting securities of the
Trust. The vote of a majority of the outstanding voting securities of the Trust
means the vote (a) of 67 per centum or more of the voting securities present at
a meeting, if the holders of more than 50 per centum of the outstanding voting
securities of the Trust are present or represented by proxy; or (b) of more than
50 per centum of the outstanding voting securities of the Trust, whichever is
less.
For further information on the above and other investment restrictions,
including nonfundamental investment restrictions that may be changed without a
shareholder vote, see the Statement of Additional Information.
The Trust may hold up to 100% of its assets in cash or certain short-term
securities for temporary defensive purposes. The Trust will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market conditions
than adherence to the Trust's other investment policies. The types of short-term
instruments in which the Trust may invest for such purposes are, as more fully
described in the Statement of Additional Information: securities issued or
guaranteed by the U.S. Government or its agencies or
8
<PAGE>
instrumentalities (U.S. Treasury bills, notes, bonds, Government National
Mortgage Association certificates), custodial receipts, certificates of deposit,
time deposits and bankers' acceptances of certain qualified financial
institutions and corporate commercial paper rated at least "A" by S&P or "Prime"
by Moody's (or, if not rated, issued by companies having an outstanding
long-term unsecured debt issue rated at least "A" by S&P or Moody's). See the
Statement of Additional Information.
Portfolio Turnover
The Trust reserves full freedom with respect to portfolio turnover. In periods
when there are rapid changes in economic conditions or security price levels or
when investment strategy is changed significantly, portfolio turnover may be
significantly higher than during times of economic and market price stability or
when investment strategy remains relatively constant. A high rate of portfolio
turnover will result in increased transaction costs for the Trust and may also
result in an increase in the realization of short-term capital gains.
Information on the Purchase of Shares, Redemption of Shares and Shareholder
Services is set forth below on pages 9 to 23.
- -------------------------------------
The Trust is available for investment by many kinds of investors including
participants investing through 401(k) or other retirement plan sponsors,
employees investing through savings plans sponsored by employers, Individual
Retirement Accounts ("IRAs"), trusts, corporations, individuals, etc. The
applicability of the general information and administrative procedures set
forth below accordingly will vary depending on the investor and the
recordkeeping system established for a shareholder's investment in the Trust.
Participants in 401(k) and other plans should first consult with the
appropriate person at their employer or refer to the plan materials before
following any of the procedures below. For more information or assistance,
anyone may call 1-800-562-0032.
Purchase of Shares
Methods of Purchase
Through Dealers and Others
Shares of the Trust are continuously offered through securities dealers,
financial institutions and others (collectively referred to herein as securities
dealers or dealers) who have entered into sales agreements with the Distributor.
Purchases through dealers are confirmed at the offering price, which is the net
asset value plus the applicable sales charge, next determined after the order is
duly received by State Street Research Shareholder Services ("Shareholder
Services"), a division of State Street Research Investment Services, Inc., from
the dealer. ("Duly received" for purposes herein means in accordance with the
conditions of the applicable method of purchase as described below.) The dealer
is responsible for transmitting the order promptly to Shareholder Services in
order to permit the investor to obtain the current price. See "Purchase of
Shares--Net Asset Value" herein.
By Mail
Initial investments in the Trust may be made by mailing or delivering to the
investor's dealer a completed Application (accompanying this Prospectus),
together with a check for the total purchase price payable to the Trust. The
dealer must forward the Application and check in accordance with the
instructions on the Application.
Additional shares may be purchased by mailing to Shareholder Services a
check payable to the Trust in the amount of the total purchase price together
with any one of the following: (i) an Application; (ii) the stub from the
shareholder's account statement; or (iii) a letter setting forth the name of the
Trust, the class of shares and the account name and number. Shareholder Services
will deliver the purchase order to the transfer agent and dividend paying agent,
State Street Bank and Trust Company (the "Transfer Agent").
If the check is not honored for its full amount, the purchaser could be
subject to additional charges to cover collection costs and any investment loss,
and the purchase may be cancelled.
9
<PAGE>
By Wire
An investor may purchase shares by wiring Federal Funds of not less than $5,000
to State Street Bank and Trust Company, which also serves as the Master Trust's
custodian (the "Custodian"), as set forth below. Prior to making an investment
by wire, an investor must notify Shareholder Services at 1-800-562-0032 and
obtain a control number and instructions. Following such notification, Federal
Funds should be wired through the Federal Reserve System to:
ABA #011000028
State Street Bank and Trust Company
Boston, MA
BNF = State Street Research Investment Trust and class of shares (A, B, C or
D)
AC = 99029761
OBI = Shareholder Name
Shareholder Account Number
Control #K (assigned by State Street Research Shareholder Services)
In order for a wire investment to be processed on the same day (i) the
investor must notify Shareholder Services of his or her intention to make such
investment by 12 noon Boston time on the day of his or her investment; and (ii)
the wire must be received by 4 P.M. Boston time that same day.
An investor making an initial investment by wire must promptly complete the
Application accompanying this Prospectus and deliver it to his or her dealer,
who should forward it as required. No redemptions will be effected until the
Application has been duly processed.
The Trust may in its discretion discontinue, suspend or change the practice
of accepting orders by any of the methods described above. Orders for the
purchase of shares are subject to acceptance by the Trust. The Trust reserves
the right to suspend the sale of shares, or reject any purchase order, including
orders in connection with exchanges, for any reason.
Minimum Investment
Class of Shares
------------------------------------
A B C D
--------- --------- ------ --------
Minimum Initial Investment
By Wire ..................... $5,000 $5,000 (a) $5,000
IRAs ..................... $2,000 $2,000 (a) $2,000
By Investamatic ............ $1,000 $1,000 (a) $1,000
All other .................. $2,500 $2,500 (a) $2,500
Minimum Subsequent Investment
By Wire ..................... $5,000 $5,000 (a) $5,000
IRAs ........................ $ 50 $ 50 (a) $ 50
By Investamatic ............ $ 50 $ 50 (a) $ 50
All other .................. $ 50 $ 50 (a) $ 50
(a) Special conditions apply; contact the Distributor.
The Trust reserves the right to vary the minimums for initial or subsequent
investments as in the case of, for example, exchanges and investments under
various employee benefit plans, sponsored arrangements involving group
solicitations of the members of an organization, or other investment plans for
reinvestment of dividends and distributions or for periodic investments (e.g.,
Investamatic Program).
Alternative Purchase Program
General
Alternative classes of shares permit investors to select a purchase program
which they believe will be the most advantageous for them, given the amount of
their purchase, the length of time they anticipate holding Trust shares or the
flexibility they desire in this regard, and other relevant circumstances.
Investors will be able to determine whether in their particular circumstances it
is more advantageous to incur an initial sales charge and not be subject to
certain ongoing charges or to have their entire initial purchase price invested
in the Trust with the investment being subject thereafter to ongoing service
fees and distribution fees.
As described in greater detail below, dealers are paid differing amounts of
commission and other compensation depending on which class of shares they sell.
10
<PAGE>
The major differences among the various classes of shares are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------------------ ----------------------- ---------- ---------------------
<S> <C> <C> <C> <C>
Sales Charges Initial sales charge Contingent deferred None Contingent deferred
at time of sales charge of 5% sales charge of 1%
investment of up to to 2% applies to any applies to any
4.5% depending on shares redeemed shares redeemed
amount of within first five within one year
investment years following following their
their purchase; no purchase
contingent deferred
sales charge after
five years
On investments of $1
million or more, no
initial sales charge;
but contingent deferred
sales charge of 1%
applies to any shares
redeemed within one year
following their purchase
Distribution Fee None 0.75% for first None 0.75% each year
eight years; Class
B shares convert
automatically to
Class A shares after
eight years
Service Fee 0.25% each year 0.25% each year None 0.25% each year
Initial Above described 4% None 1%
Commission initial sales charge
Received by less 0.25% to
Selling 0.50% retained by
Dealer Distributor
On investments of
$1 million or more,
0.25% to 1.00% paid
to dealer by
Distributor
</TABLE>
11
<PAGE>
In deciding which class of shares to purchase, the investor should consider
the amount of the investment, the length of time the investment is expected to
be held, and the ongoing service fee and distribution fee, among other factors.
Class A shares are sold at net asset value plus an initial sales charge of
up to 4.5% of the public offering price. Because of the sales charge, not all of
an investor's purchase amount is invested unless the purchase equals $1,000,000
or more. Class B shareholders pay no initial sales charge, but a contingent
deferred sales charge of up to 5% generally applies to shares redeemed within
five years of purchase. Class D shareholders also pay no initial sales charge,
but a contingent deferred sales charge of 1% generally applies to redemptions
made within one year of purchase. For Class B and Class D shareholders,
therefore, the entire purchase amount is immediately invested in the Trust.
An investor who qualifies for a significantly reduced initial sales charge,
or a complete waiver of the sales charge on investments of $1,000,000 or more,
on the purchase of Class A shares might elect that option to take advantage of
the lower ongoing service and distribution fees that characterize Class A shares
compared with Class B or Class D shares.
Class A, Class B and Class D shares are assessed an annual service fee of
0.25% of average daily net assets. In addition, Class B shares are assessed an
annual distribution fee of 0.75% of daily net assets for an eight-year period
following the date of purchase and are then automatically converted to Class A
shares. Class D shares are assessed an annual distribution fee of 0.75% of daily
net assets for as long as the shares are held. The prospective investor should
consider these fees plus the initial or contingent deferred sales charges in
estimating the costs of investing in the various classes of the Trust's shares.
Only certain employee benefit plans and large institutions may make
investments in Class C shares.
Some of the service and distribution fees are allocated to dealers (see
"Distribution Plan" below). In addition, the Distributor will, at its expense,
provide additional cash and noncash incentives to dealers that sell shares. Such
incentives may be extended only to those dealers that have sold or may sell
significant amounts of shares and/or meet other conditions established by the
Distributor; for example, the Distributor may sponsor special promotions to
develop particular distribution channels or to reach certain investor groups.
The Distributor may also compensate those dealers with clients who maintain
their investments in the Trust over a period of years. The incentives may
include merchandise and trips to and attendance at sales seminars at resorts.
Class A Shares--Initial Sales Charges
Sales Charges
The purchase price of a Class A share of the Trust is the Trust's per share net
asset value next determined after the purchase order is duly received, as
defined herein, plus a sales charge which varies depending on the dollar amount
of the shares purchased as set forth in the table below. A major portion of this
sales charge is reallowed by the Distributor to the dealer responsible for the
sale.
Sales
Sales Charge
Charge Paid
Paid By By Dealer
Dollar Investor Investor Concession
Amount of As % of As % of As % of
Purchase Purchase Net Asset Purchase
Transaction Price Value Price
Less than
$100,000 4.50% 4.71% 4.00%
$100,000 or
above but less
than $250,000 3.50% 3.63% 3.00%
$250,000 or
above but less
than $500,000 2.50% 2.56% 2.00%
$500,000 or
above but less
than $1 million 2.00% 2.04% 1.75%
See
$1 million following
and above 0% 0% discussion
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor may pay the authorized dealer a commission
based on the aggregate of such sales as follows:
12
<PAGE>
Amount of Sale Commission
- ------------------------------------ -------------
(a) $1 million to $3 million ...... 1.00%
(b) Next $2 million ............... 0.50%
(c) Amount over $5 million ......... 0.25%
On such sales of $1,000,000 or more, unless the above commission is waived
by the dealer, the investor is subject to a 1% contingent deferred sales charge
on any portion of the purchase redeemed within one year of the sale. However,
such redeemed shares will not be subject to the contingent deferred sales charge
to the extent that their value represents (1) capital appreciation or (2)
reinvestment of dividends or capital gains distributions. In addition, the
contingent deferred sales charge will be waived for certain other redemptions as
described under "Contingent Deferred Sales Charge Waivers" below (as otherwise
applicable to Class B shares).
Class A shares of the Trust that are purchased without a sales charge may be
exchanged for Class A shares of certain other Eligible Funds, as described
below, without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply upon a subsequent redemption within
one year of the Class A shares which are acquired through such exchange. For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption. The amount of any contingent deferred sales charge will
be paid to the Distributor.
Reduced Sales Charges
The reduced sales charges set forth in the table above are applicable to
purchases made at any one time by any "person," as defined in the Statement of
Additional Information, of $100,000 or more of Class A shares of the Trust or a
combination of "Eligible Funds." "Eligible Funds" include the Trust and other
funds so designated by the Distributor from time to time. Class B, Class C and
Class D shares may also be included in the combination under certain
circumstances. Dealers should call Shareholder Services for details concerning
the other Eligible Funds and any persons who may qualify for reduced sales
charges and related information. See the Statement of Additional Information.
Letter of Intent
Any investor who provides a Letter of Intent may qualify for a reduced sales
charge on purchases of no less than an aggregate of $100,000 of Class A shares
of the Trust and any other Eligible Funds within a 13-month period. Class B,
Class C and Class D shares may also be included in the combination under certain
circumstances. Additional information on a Letter of Intent is available from
dealers, or from the Distributor, and also appears in the Statement of
Additional Information.
Right of Accumulation
Investors may purchase Class A shares of the Trust or a combination of shares of
the Trust and other Eligible Funds at reduced sales charges pursuant to a Right
of Accumulation. Under the Right of Accumulation, the sales charge is determined
by combining the current purchase with the value of the Class A shares of other
Eligible Funds held at the time of purchase. Class B, Class C and Class D shares
may also be included in the combination under certain circumstances. See the
Statement of Additional Information and call Shareholder Services for details
concerning the Right of Accumulation.
Other Programs
Class A shares of the Trust may be sold at a reduced sales charge or without a
sales charge pursuant to certain sponsored arrangements, which include programs
under which a company, employee benefit plan or other organization makes
recommendations to, or permits group solicitation of, its employees, members or
participants, except any organization created primarily for the purpose of
obtaining shares of the Trust at a reduced sales charge or without a sales
charge. Sales without a sales charge, or with a reduced sales charge, may also
be made through brokers, financial planners, institutions, and others, under
managed fee-based programs (e.g., "wrap fee" or similar programs) which meet
certain requirements established from time to time by the Distributor.
Information on such arrangements and further conditions and limitations is
available from the Distributor.
In addition, no sales charge is imposed in connection with the sale of
Class A shares of the Trust to the following entities and persons: (A) the
Investment
13
<PAGE>
Manager, the Distributor, or any affiliated entities, including any direct or
indirect parent companies and other subsidiaries of such parents (collectively
"Affiliated Companies"); (B) employees, officers, sales representatives or
current or retired directors or trustees of the Affiliated Companies or any
investment company managed by any of the Affiliated Companies, any relatives of
any such individuals whose relationship is directly verified by such individuals
to the Distributor, or any beneficial account for such relatives or individuals;
and (C) employees, officers, sales representatives or directors of dealers and
other entities with a selling agreement with the Distributor to sell shares of
any aforementioned investment company, any spouse or child of such person, or
any beneficial account for any of them. The purchase must be made for investment
and the shares purchased may not be resold except through redemption. This
purchase program is subject to such administrative policies, regarding the
qualification of purchasers, minimum investments by various groups of eligible
persons and any other matters, as may be adopted by the Distributor from time to
time.
Class B Shares--Contingent Deferred Sales Charges
Contingent Deferred Sales Charges
The public offering price of Class B shares is the net asset value per share
next determined after the purchase order is duly received, as defined herein. No
sales charge is imposed at the time of purchase; thus the full amount of the
investor's purchase payment will be invested in the Trust. However, a contingent
deferred sales charge may be imposed upon redemptions of Class B shares as
described below.
The Distributor will pay dealers at the time of sale a 4% commission for
selling Class B shares. The proceeds of the contingent deferred sales charge and
the distribution fee are used to offset distribution expenses and thereby permit
the sale of Class B shares without an initial sales charge.
Class B shares that are redeemed within a five-year period after their
purchase will not be subject to a contingent deferred sales charge to the extent
that the value of such shares represents (1) capital appreciation of Trust
assets or (2) reinvestment of dividends or capital gains distributions. The
amount of any applicable contingent deferred sales charge will be calculated by
multiplying the net asset value of such shares at the time of redemption or at
the time of purchase, whichever is lower, by the applicable percentage shown in
the table below:
Contingent Deferred Sales
Charge As A Percentage
Redemption During Of Net Asset Value
- -------------------------------- ----------------------------
1st Year Since Purchase ...... 5%
2nd Year Since Purchase ...... 4%
3rd Year Since Purchase ...... 3%
4th Year Since Purchase ...... 3%
5th Year Since Purchase ...... 2%
6th Year Since Purchase
and Thereafter ............... None
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption of Class B shares is made first of
those shares having the greatest capital appreciation, next of shares
representing reinvestment of dividends and capital gains distributions and
finally of remaining shares held by the shareholder for the longest period of
time. The holding period for purposes of applying a contingent deferred sales
charge on Class B shares of the Trust acquired through an exchange from another
Eligible Fund will be measured from the date that such shares were initially
acquired in the other Eligible Funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gains distribution reinvestments in such other Eligible Fund. These
determinations will result in any contingent deferred sales charge being imposed
at the lowest possible rate. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any
contingent deferred sales charge will be paid to the Distributor.
Contingent Deferred Sales Charge Waivers
The contingent deferred sales charge does not apply to exchanges, or to
redemptions under a systematic withdrawal plan which meets certain conditions.
In addition, the contingent deferred sales charge will be waived for: (i)
redemptions made within one year of the death or total disability, as defined by
the Social Security
14
<PAGE>
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code for retirement accounts or plans (e.g., age 701/2 for IRAs and
Section 403(b) plans), calculated solely on the basis of assets invested in the
Trust or other Eligible Funds; and (iii) a redemption resulting from a tax-free
return of an excess contribution to an IRA. (The foregoing waivers do not apply
to a tax-free rollover or transfer of assets out of the Trust.) The Trust may
modify or terminate the waivers at any time; for example, the Trust may limit
the application of multiple waivers and establish other conditions for employee
benefit plans.
Conversion of Class B Shares to Class A Shares
A shareholder's Class B shares, including all shares received as dividends or
distributions with respect to such shares, will automatically convert to Class A
shares of the Trust at the end of eight years following the issuance of such
Class B shares; consequently, they will no longer be subject to the higher
expenses borne by Class B shares. The conversion rate will be determined on the
basis of the relative per-share net asset values of the two classes and may
result in a shareholder receiving either a greater or fewer number of Class A
shares than the Class B shares so converted. As noted above, holding periods for
Class B shares received in exchange for Class B shares of other Eligible Funds
will be counted toward the eight-year period.
Class C Shares--Institutional; No Sales Charge
The purchase price of a Class C share of the Trust is the Trust's per share net
asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase or
redemption. The Trust will receive the full amount of the investor's purchase
payment.
In general, Class C shares are only available for new investments by
certain large institutions, and employee benefit plans which acquire shares
through programs or products sponsored by Metropolitan Life Insurance Company
("Metropolitan") and/or its affiliates, for which Class C shares have been
designated. Information on the availability of Class C shares and further
conditions and limitations is available from the Distributor.
Shares held prior to February 17, 1993 are deemed to be Class C shares, but
shareholders thereof may not acquire additional Class C shares except through
reinvestment of dividends and distributions. Class C shares may have also been
issued directly or through exchanges to those shareholders of the Trust or other
Eligible Funds who previously held shares not subject to any future sales charge
or service fees or distribution fees.
Class D Shares--Spread Sales Charges
The purchase price of a Class D share of the Trust is the Trust's per share net
asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase; thus the
full amount of the investor's purchase payment will be invested in the Trust.
Class D shares are subject to a 1% contingent deferred sales charge on any
portion of the purchase redeemed within one year of the sale. The contingent
deferred sales charge will be 1% of the lesser of the net asset value of the
shares at the time of purchase or at the time of redemption. The Distributor
pays dealers a 1% commission for selling Class D shares at the time of purchase.
The proceeds of the contingent deferred sales charge and the distribution fee
are used to offset distribution expenses and thereby permit the sale of Class D
shares without an initial sales charge.
Class D shares that are redeemed within one year after purchase will not be
subject to the contingent deferred sales charge to the extent that the value of
such shares represents (1) capital appreciation of Trust assets or (2)
reinvestment of dividends or capital gains distributions. In addition, the
contingent deferred sales charge will be waived for certain other redemptions as
described under "Contingent Deferred Sales Charge Waivers" above (as otherwise
applicable to Class B shares). For federal income tax purposes, the amount of
the contingent deferred sales charge will reduce the gain or increase the loss,
as the case may be, on the amount realized on redemption. The amount of any
contingent deferred sales charge will be paid to the Distributor.
15
<PAGE>
Net Asset Value
The Trust's per share net asset values are determined Monday through Friday as
of the close of the New York Stock Exchange (the "NYSE") exclusive of days on
which the NYSE is closed. The NYSE ordinarily closes at 4 P.M. New York City
time. Assets held by the Trust are valued on the basis of the last reported sale
price or quotations as of the close of business on the valuation date, except
that securities and assets for which market quotations are not readily available
are valued as determined in good faith by or under the authority of the Trustees
of the Master Trust. In determining the value of certain assets for which market
quotations are not readily available, the Trust may use one or more pricing
services. The pricing services utilize information with respect to market
transactions, quotations from dealers and various relationships among securities
in determining value and may provide prices determined as of times prior to the
close of the NYSE. The Trustees have authorized the use of the amortized cost
method to value short-term debt instruments issued with a maturity of one year
or less and having a remaining maturity of 60 days or less when the value
obtained reflects fair value. Further information with respect to the valuation
of the Trust's assets is included in the Statement of Additional Information.
Distribution Plan
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Distribution Plan") in accordance with the regulations under the Investment
Company Act of 1940, as amended (the "1940 Act"). Under the provisions of the
Distribution Plan, the Trust makes payments to the Distributor based on an
annual percentage of the average daily value of the net assets of each class of
shares as follows:
Class Service Fee Distribution Fee
- ------- -------------- ------------------
A 0.25% None
B 0.25% 0.75%
C None None
D 0.25% 0.75%
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance or servicing of shareholder accounts. A
portion of any initial commission paid to dealers for the sale of shares of the
Trust represents payment for personal services and/or the maintenance of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B and Class D shares are eligible for further
reimbursement after the first year during which such shares have been held of
record by such dealer as nominee for its clients (or by such clients directly).
Any service fees received by the Distributor and not allocated to dealers may be
applied by the Distributor in reduction of expenses incurred by it directly for
personal services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or marketing efforts, including special
promotional fees and cash and noncash incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific fund, the Distributor allocates expenses
among the funds in a manner deemed fair and equitable to each fund.
Commissions and other cash and noncash incentives and payments to dealers,
to the extent payable out of the general profits, revenues or other sources of
the Distributor (including the advisory fees paid by the Trust), have also been
authorized pursuant to the Distribution Plan.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits the annual expenditures which the Trust may incur under the Distribution
Plan to 1%, of which 0.75% may be used to pay distribution expenses and 0.25%
may be used to pay shareholder service fees. The NASD rule also limits the
aggregate amount which the Trust may pay for such distribution costs to 6.25% of
gross share sales of a class since the inception of any asset-based sales
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charge plus interest at the prime rate plus 1% on unpaid amounts thereof (less
any contingent deferred sales charges). Such limitation does not apply to
shareholder service fees. Payments to the Distributor or to dealers funded under
the Distribution Plan may be discontinued at any time by the Trustees of the
Master Trust.
Redemption of Shares
Shareholders may redeem all or any portion of their accounts on any day the NYSE
is open for business. Redemptions will be effective at the applicable net asset
value per share next determined (see "Purchase of Shares--Net Asset Value"
herein) after receipt of the redemption request, in accordance with the
requirements described below, by Shareholder Services and delivery of the
request by Shareholder Services to the Transfer Agent. To allow time for the
clearance of checks used for the purchase of any shares which are tendered for
redemption shortly after purchase, the remittance of the redemption proceeds for
such shares could be delayed for 15 days or more after the purchase.
Shareholders who anticipate a potential need for immediate access to their
investments should, therefore, purchase shares by wire. Except as noted,
redemption proceeds from the Trust are normally remitted within seven days after
receipt of the redemption request by the Trust and any necessary documents in
good order.
Methods of Redemption
Request By Mail
A shareholder may request redemption of shares, with proceeds to be mailed to
the shareholder or wired to a predesignated bank account (see "Proceeds By Wire"
below) by sending to State Street Research Shareholder Services, P.O. Box 8408,
Boston, Massachusetts 02266-8408: (1) a written request for redemption signed by
the registered owner(s) of the shares, exactly as the account is registered; (2)
an endorsed stock power in good order with respect to the shares or, if issued,
the share certificates for the shares endorsed for transfer or accompanied by an
endorsed stock power; (3) any required signature guarantees (see "Redemption of
Shares--Signature Guarantees" below); and (4) any additional documents which may
be required for redemption in the case of corporations, trustees, etc., such as
certified copies of corporate resolutions, governing instruments, powers of
attorney, and the like. The Transfer Agent will not process requests for
redemption until it has received all necessary documents in good order. A
shareholder will be notified promptly if a redemption request cannot be
accepted. Shareholders having any questions about the requirements for
redemption should call Shareholder Services toll-free at 1-800-562-0032.
Request By Telephone
Shareholders may request redemption by telephone with proceeds to be transmitted
by check or by wire (see "Proceeds By Wire" below). A shareholder can request a
redemption for $50,000 or less to be transmitted by check. Such check for the
proceeds will be made payable to the shareholder of record and will be mailed to
the address of record. There is no fee for this service. It is not available for
shares held in certificate form or if the address of record has been changed
within 30 days of the redemption request. The Trust may revoke or suspend the
telephone redemption privilege at any time and without notice. See "Shareholder
Services--Telephone Services" for a discussion of the conditions and risks
associated with Telephone Privileges.
Proceeds By Wire
Upon a shareholder's written request or by telephone if the shareholder has
Telephone Privileges (see "Shareholder Services--Telephone Services" herein),
the Master Trust's custodian will wire redemption proceeds to the shareholder's
predesignated bank account. To make the request, the shareholder should call
1-800-562-0032 prior to 4 P.M. Boston time. A $7.50 charge against the
shareholder's account will be imposed for each wire redemption. This charge is
subject to change without notice. The shareholder's bank may also impose a
charge for receiving wires of redemption proceeds. The minimum redemption by
wire is $5,000.
Request to Dealer to Repurchase
For the convenience of shareholders, the Trust has authorized the Distributor as
its agent to accept orders from dealers by wire or telephone for the
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repurchase of shares by the Distributor from the dealer. The Trust may revoke or
suspend this authorization at any time. The repurchase price is the net asset
value for the applicable shares next determined following the time at which the
shares are offered for repurchase by the dealer to the Distributor. The dealer
is responsible for promptly transmitting a shareholder's order to the
Distributor. Payment of the repurchase proceeds is made to the dealer who placed
the order promptly upon delivery of certificates for shares in proper form for
transfer or, for Open Accounts, upon the receipt of a stock power with
signatures guaranteed as described below, and, if required, any supporting
documents. Neither the Trust nor the Distributor imposes any charge upon such a
repurchase. However, a dealer may impose a charge as agent for a shareholder in
the repurchase of his or her shares.
The Trust has reserved the right to change, modify or terminate the
services described above at any time.
Additional Information
Because of the relatively high cost of maintaining small shareholder accounts,
the Trust reserves the right to involuntarily redeem at its option any
shareholder account which remains below $1,500 for a period of 60 days after
notice is mailed to the applicable shareholder, or to impose a maintenance fee
on such account after 60 days' notice. Such involuntary redemptions will be
subject to applicable sales charges, if any. The Trust may increase such minimum
account value above such amount in the future after notice to affected
shareholders. Involuntarily redeemed shares will be priced at the net asset
value on the date fixed for redemption by the Trust, and the proceeds of the
redemption will be mailed promptly to the affected shareholder at the address of
record. Currently, the maintenance fee is $18 annually, which is paid to the
Transfer Agent. The fee does not apply to certain retirement accounts or if the
shareholder has more than an aggregate $50,000 in the Trust and other Eligible
Funds combined. Imposition of a maintenance fee on a small account could, over
time, exhaust the assets of such account.
To cover the cost of additional compliance administration, a $20 fee will
be charged against any shareholder account that has been determined to be
subject to escheat under applicable state laws.
The Trust may not suspend the right of redemption or postpone the date of
payment of redemption proceeds for more than seven days, except that (a) it may
elect to suspend the redemption of shares or postpone the date of payment of
redemption proceeds: (1) during any period that the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) during any period in which an emergency exists as a result of which disposal
of portfolio securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Trust's net asset values; or (3) during such
other periods as the Securities and Exchange Commission may by order permit for
the protection of investors; and (b) the payment of redemption proceeds may be
postponed as otherwise provided under "Redemption of Shares" herein.
Signature Guarantees
To protect shareholder accounts, the Transfer Agent, the Trust, the Investment
Manager and the Distributor from possible fraud, signature guarantees are
required for certain redemptions. Signature guarantees help the Transfer Agent
determine that the person who has authorized a redemption from the account is,
in fact, the shareholder. Signature guarantees are required for, among other
things: (1) written requests for redemptions for more than $50,000; (2) written
requests for redemptions for any amount if the proceeds are transmitted to other
than the current address of record (unchanged in the past 30 days); (3) written
requests for redemptions for any amount submitted by corporations and certain
fiduciaries and other intermediaries; and (4) requests to transfer the
registration of shares to another owner. Signatures must be guaranteed by a
bank, a member firm of a national stock exchange, or other eligible guarantor
institution. The Transfer Agent will not accept guarantees (or notarizations)
from notaries public. The above requirements may be waived in certain instances.
Please contact Shareholder Services at 1-800-562-0032 for specific requirements
relating to your account.
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Shareholder Services
The Open Account System
Under the Open Account System full and fractional shares of the Trust owned by
shareholders are credited to their accounts by the Transfer Agent, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
Certificates representing Class B or Class D shares will not be issued, while
certificates representing Class A or Class C shares will only be issued if
specifically requested in writing and, in any case, will only be issued for full
shares, with any fractional shares to be carried on the shareholder's account.
Shareholders will receive periodic statements of transactions in their account.
The Trust's Open Account System provides the following options:
1. Additional purchases of shares of the Trust may be made through dealers,
by wire or by mailing a check payable to the Trust, to Shareholder
Services under the terms set forth above under "Purchase of Shares."
2. The following methods of receiving dividends from investment income and
distributions from capital gains are available:
(a) All income dividends and capital gains distributions reinvested in
additional shares of the Trust.
(b) All income dividends in cash; all capital gains distributions
reinvested in additional shares of the Trust.
(c) All income dividends and capital gains distributions in cash.
(d) All income dividends and capital gains distributions invested in any
one available Eligible Fund designated by the shareholder as
described below. See "Dividend Allocation Plan" herein.
Dividend and distribution selections should be made on the Application
accompanying the initial investment. If no selection is indicated on the
Application, the account will automatically be coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Trust.
Selections may be changed at any time by telephone or written notice to
Shareholder Services. Dividends and distributions are reinvested at net asset
value without a sales charge.
Exchange Privilege
Shareholders of the Trust may exchange their shares for available shares with
corresponding characteristics of any of the other Eligible Funds at any time on
the basis of the relative net asset values of the respective shares to be
exchanged, subject to compliance with applicable securities laws. Shareholders
of any other Eligible Fund may similarly exchange their shares for Trust shares
with corresponding characteristics. Prior to making an exchange, shareholders
should obtain the Prospectus of the Eligible Fund into which they are
exchanging. Under the Direct Program, subject to certain conditions,
shareholders may make arrangements for regular exchanges from the Trust into
other Eligible Funds. To effect an exchange, Class A, Class B and Class D shares
may be redeemed without the payment of any contingent deferred sales charge that
might otherwise be due upon an ordinary redemption of such shares. The State
Street Research Money Market Fund issues Class E shares which are sold without
any sales charge. Exchanges of State Street Research Money Market Fund Class E
shares into Class A shares of the Trust or any other Eligible Fund are subject
to the initial sales charge or contingent deferred sales charge applicable to an
initial investment in such Class A shares, unless a prior Class A sales charge
has been paid directly or indirectly with respect to the shares redeemed. For
purposes of computing the contingent deferred sales charge that may be payable
upon disposition of the acquired Class A, Class B and Class D shares, the
holding period of the redeemed shares is "tacked" to the holding period of the
acquired shares. The period any Class E shares are held is not tacked to the
holding period of any acquired shares. No exchange transaction fee is currently
imposed on any exchange.
Shares of the Trust may also be acquired or redeemed in exchange for shares of
the Summit Cash Reserves Fund ("Summit Cash Reserves") by customers of Merrill
Lynch, Pierce, Fenner & Smith Incorporated (subject to completion of steps
neces-
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sary to implement the program). The Trust and Summit Cash Reserves are related
mutual funds for purposes of investment and investor services. Upon the
acquisition of shares of Summit Cash Reserves by exchange for redeemed shares of
the Trust, (a) no sales charge is imposed by Summit Cash Reserves, (b) no
contingent deferred sales charge is imposed by the Trust on the Trust shares
redeemed, and (c) any applicable holding period of the Trust shares redeemed is
"tolled," that is, the holding period clock stops running pending further
transactions. Upon the acquisition of shares of the Trust by exchange for
redeemed shares of Summit Cash Reserves, (a) the acquisition of Class A shares
shall be subject to the initial sales charges or contingent deferred sales
charges applicable to an initial investment in such Class A shares, unless a
prior Class A sales charge has been paid indirectly, and (b) the acquisition of
Class B or Class D shares of the Trust shall restart any holding period
previously tolled, or shall be subject to the contingent deferred sales charge
applicable to an initial investment in such shares.
For the convenience of its shareholders who have Telephone Privileges, the
Trust permits exchanges by telephone request from either the shareholder or his
or her dealer. Shares may be exchanged by telephone provided that the
registration of the two accounts is the same. The toll-free number for exchanges
is 1-800-562-0032. See "Telephone Services" herein for a discussion of
conditions and risks associated with Telephone Privileges.
The exchange privilege may be exercised only in those states where shares
of the relevant other Eligible Fund may legally be sold. For tax purposes, each
exchange actually represents the sale of shares of one fund and the purchase of
shares of another. Accordingly, exchanges may produce a capital gain or loss for
tax purposes. The exchange privilege may be terminated or suspended or its terms
changed at any time, subject, if required under applicable regulations, to 60
days' prior notice. New accounts established for investments upon exchange from
an existing account in another fund will have the same Telephone Privileges as
the existing account, unless Shareholder Services is instructed otherwise.
Related administrative policies and procedures may also be adopted with regard
to a series of exchanges, street name accounts, sponsored arrangements and other
matters.
The exchange privilege is not designed for use in connection with
short-term trading or market timing strategies. To protect the interests of
shareholders, the Trust reserves the right to temporarily or permanently
terminate the exchange privilege for any person who makes more than six
exchanges out of or into the Trust per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer identification
number, may be aggregated for purposes of the six exchange limit.
Notwithstanding the six exchange limit, the Trust reserves the right to refuse
exchanges by any person or group if, in the Investment Manager's judgment, the
Trust would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
Exchanges may be restricted or refused if the Trust receives or anticipates
simultaneous orders affecting significant portions of the Trust's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Trust. The Trust may impose these restrictions
at any time. The exchange limit may be modified for accounts in certain
institutional retirement plans because of plan exchange limits, Department of
Labor regulations or administrative and other considerations. Subject to the
foregoing, if an exchange request in good order is received by Shareholder
Services and delivered by Shareholder Services to the Transfer Agent by 12 noon
Boston time on any business day, the exchange usually will occur that day. For
further information regarding the exchange privilege, shareholders should
contact Shareholder Services.
Reinvestment Privilege
A shareholder of the Trust who has redeemed shares or had shares repurchased at
his or her request may reinvest all or any portion of the proceeds (plus that
amount necessary to acquire a fractional share to round off his or her
reinvestment to full shares) in shares, of the same class as the shares
redeemed, of the Trust or any other Eligible Fund at net asset value and without
subjecting the reinvestment to an
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initial sales charge, provided such reinvestment is made within 120 calendar
days after a redemption or repurchase. Upon such reinvestment, the shareholder
will be credited with any contingent deferred sales charge previously charged
with respect to the amount reinvested. The redemption of shares is, for federal
income tax purposes, a sale on which the shareholder may realize a gain or a
loss. If a redemption at a loss is followed by a reinvestment within 30 days,
the transaction may be a "wash sale" resulting in a denial of the loss for
federal income tax purposes.
Any reinvestment pursuant to the reinvestment privilege will be subject to
any applicable minimum account standards imposed by the fund into which the
reinvestment is made. Shares are sold to a reinvesting shareholder at the net
asset value thereof next determined following timely receipt by Shareholder
Services of such shareholder's written purchase request and delivery of the
request by Shareholder Services to the Transfer Agent. A shareholder may
exercise this reinvestment privilege only once per 12-month period with respect
to his or her shares of the Trust. No charge is imposed by the Trust for such
reinvestments; however, dealers may charge fees in connection with the
reinvestment privilege. The reinvestment privilege may be exercised with respect
to an Eligible Fund only in those states where shares of the relevant other
Eligible Fund may legally be sold.
Investment Plans
The Investamatic Program is available to Class A, Class B and Class D
shareholders. Under this Program, shareholders may make regular investments by
authorizing withdrawals from their bank accounts each month or quarter on the
Application available from Shareholder Services.
The Distributor also offers IRAs and tax-sheltered retirement plans,
including prototype and other employee benefit plans for employees, sole
proprietors, partnerships and corporations. Details of these investment plans
and their availability may be obtained from securities dealers or from
Shareholder Services.
Systematic Withdrawal Plan
A shareholder who owns noncertificated Class A or Class C shares with a value of
$5,000 or more, or Class B or Class D shares with a value of $10,000 or more,
may elect by participating in the Trust's Systematic Withdrawal Plan to have
periodic checks issued for specified amounts. These amounts may not be less than
certain minimums, depending on the class of shares held. The Plan provides that
all income dividends and capital gains distributions of the Trust shall be
credited to participating shareholders in additional shares of the Trust. Thus,
the withdrawal amounts paid can only be realized by redeeming shares of the
Trust under the Plan. To the extent such amounts paid exceed dividends and
distributions from the Trust, a shareholder's investment will decrease and may
eventually be exhausted.
In the case of shares otherwise subject to contingent deferred sales
charges, no such charges will be imposed on withdrawals of up to 8% annually of
either (a) the value, at the time the Plan is initiated, of the shares then in
the account or (b) the value, at the time of a withdrawal, of the same number of
shares as in the account when the Plan was initiated, whichever is higher.
Expenses of the Plan are borne by the Trust. A participating shareholder
may withdraw from the Plan and the Trust may terminate the Plan at any time on
written notice. Purchase of additional shares while a shareholder is receiving
payments under a Plan is ordinarily disadvantageous because of duplicative sales
charges. For this reason, a shareholder may not participate in the Investamatic
Program and the Systematic Withdrawal Plan at the same time.
Dividend Allocation Plan
The Dividend Allocation Plan allows shareholders to elect to have all of their
dividends and any other distributions from the Trust or any Eligible Fund
automatically invested at net asset value in one other such Eligible Fund
designated by the shareholder, provided the account into which the dividends and
distributions are directed is initially funded with the requisite minimum
amount. The number of shares purchased will be determined as of the dividend
payment date. The Dividend Allocation Plan is subject to state securities law
requirements, to suspension at any time, and to such policies, limitations and
restrictions, as, for instance,
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may be applicable to street name or master accounts, that may be adopted from
time to time.
Automatic Bank Connection
A shareholder may elect, by participating in the Trust's Automatic Bank
Connection ("ABC"), to have dividends and other distributions, including
Systematic Withdrawal Plan payments, automatically deposited in the
shareholder's bank account by electronic funds transfer. Some contingent
deferred sales charges may apply. See "Systematic Withdrawal Plan" herein.
Reports
Reports for the Trust will be sent to shareholders of record at least
semiannually. These reports will include a list of the securities owned by the
Trust as well as the Trust's financial statements.
Telephone Services
The following telephone privileges ("Telephone Privileges") can be used:
(1) the privilege allowing the shareholder to make telephone redemptions for
amounts up to $50,000 to be mailed to the shareholder's address of record is
available automatically;
(2) the privilege allowing the shareholder or his or her dealer to make
telephone exchanges is available automatically;
(3) the privilege allowing the shareholder to make telephone redemptions for
amounts over $5,000, to be remitted by wire to the shareholder's
predesignated bank account, is available by election on the Application
accompanying this Prospectus. A current shareholder who did not previously
request such telephone wire privilege on his or her original Application may
request the privilege by completing a Telephone Redemption-by-Wire Form
which may be obtained by calling 1-800-562-0032. The Telephone
Redemption-by-Wire Form requires a signature guarantee; and
(4) the privilege allowing the shareholder to make telephone purchases or
redemptions transmitted via the Automated Clearing House system into or from
the shareholder's predesignated bank account, is available upon completion
of the requisite initial documentation. For details and forms, call
1-800-562-0032. The documentation requires a signature guarantee.
A shareholder may decline the automatic Telephone Privileges set forth in
(1) and (2) above by so indicating on the Application accompanying this
Prospectus.
A shareholder may discontinue any Telephone Privilege at any time by
advising Shareholder Services that the shareholder wishes to discontinue the use
of such privileges in the future.
Unless such Telephone Privileges are declined, a shareholder is deemed to
authorize Shareholder Services and the Transfer Agent to: (1) act upon the
telephone instructions of any person purporting to be the shareholder to redeem,
or purporting to be the shareholder or the shareholder's dealer to exchange,
shares from any account; and (2) honor any written instructions for a change of
address regardless of whether such request is accompanied by a signature
guarantee. All telephone calls will be recorded. None of the Trust, the other
Eligible Funds, the Transfer Agent, the Investment Manager or the Distributor
will be liable for any loss, expense or cost arising out of any request,
including any fraudulent or unauthorized requests. Shareholders assume the risk
to the full extent of their accounts that telephone requests may be
unauthorized. Reasonable procedures will be followed to confirm that
instructions communicated by telephone are genuine. The shareholder will not be
liable for any losses arising from unauthorized or fraudulent instructions if
such procedures are not followed.
Shareholders may redeem or exchange shares by calling toll free
1-800-562-0032. Although it is unlikely, during periods of extraordinary market
conditions, a shareholder may have difficulty in reaching Shareholder Services
at such telephone number. In that event, the shareholder should contact
Shareholder Services at 1-617-357-7800 or otherwise at its main office at One
Financial Center, Boston, Massachusetts 02111-2690.
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Shareholder Account Inquiries:
Please call 1-800-562-0032
Call this number for assistance in answering general questions on your account,
including account balance, available shareholder services, statement information
and performance of the Trust. Account inquiries may also be made in writing to
State Street Research Shareholder Services, P.O. Box 8408, Boston, Massachusetts
02266-8408. A fee of up to $10 will be charged against an account for providing
additional account transcripts or photocopies of paid redemption checks or for
researching records in response to special requests.
Shareholder Telephone Transactions:
Please call 1-800-562-0032
Call this number for assistance in purchasing shares by wire and for telephone
redemptions or telephone exchange transactions. Shareholder Services will
require some form of personal identification prior to acting upon instructions
received by telephone. Written confirmation of each transaction will be
provided.
The Trust and its Shares
The Trust was organized in February 1989 as a series of State Street Research
Master Investment Trust, a Massachusetts business trust. The Trustees have
authorized shares of the Trust to be issued in four classes: Class A, Class B,
Class C and Class D shares. The Trust is the successor to State Street
Investment Corporation, whose assets, liabilities and business were acquired by
the Trust in May 1989. State Street Investment Corporation was organized in
1924, and registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as an open-end management investment company upon
the adoption of said Act. The Master Trust became the successor registrant in
May 1989. The fiscal year end of the Trust is December 31.
Except for those differences between the classes of shares described below
and elsewhere in the Prospectus, each share of the Trust has equal dividend,
redemption and liquidation rights with other shares of the Trust and when issued
is fully paid and nonassessable. In the future, certain classes may be
redesignated, for administrative purposes only, to conform to standard class
designations and common usage of terms which may develop in the mutual fund
industry. For example, Class C shares may be redesignated as Class Y shares and
Class D shares may be redesignated as Class C shares. Any redesignation would
not affect any substantive rights respecting the shares.
Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of the Trust, has the same rights and is
identical in all respects, except that Class B and Class D shares bear the
expenses of the deferred sales arrangement and any expenses (including the
higher service and distribution fees) resulting from such sales arrangement, and
certain other incremental expenses related to a class. Each class will have
exclusive voting rights with respect to provisions of the Rule 12b-1
distribution plan pursuant to which the service and distribution fees, if any,
are paid. Although the legal rights of holders of each class of shares are
identical, it is likely that the different expenses borne by each class will
result in different net asset values and dividends. The different classes of
shares of the Trust also have different exchange privileges.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material adverse effect on the
rights of any shareholder. On any matter submitted to the shareholders, the
holder of each Trust share is entitled to one vote per share (with proportionate
voting for fractional shares) regardless of the relative net asset value
thereof.
Under the Master Trust Agreement of the Master Trust, no annual or regular
meeting of shareholders is required. Thus, there will ordinarily be no
shareholder meetings unless required by the 1940 Act. Except as otherwise
provided under said Act, the Board of Trustees will be a self-perpetuating body
until fewer than two thirds of the Trustees serving as such are Trustees who
were elected by shareholders of the Master Trust. In the event less than a
majority of the Trustees serving as such were elected by shareholders of the
Master Trust, a meeting of shareholders will be called to elect Trustees. Under
the Master Trust Agreement, any Trustee may be removed by vote of two thirds of
the outstanding Master Trust shares; holders of 10% or more of the outstanding
shares of the Master Trust can
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require that the Trustees call a meeting of shareholders for purposes of voting
on the removal of one or more Trustees. In connection with such meetings called
by shareholders, shareholders will be assisted in shareholder communications to
the extent required by applicable law.
Under Massachusetts law, the shareholders of the Master Trust could, under
certain circumstances, be held personally liable for the obligations of the
Master Trust. However, the Master Trust Agreement of the Master Trust disclaims
shareholder liability for acts or obligations of the Master Trust and provides
for indemnification for all losses and expenses of any shareholder of the Trust
held personally liable for the obligations of the Master Trust. Thus, the risk
of a shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust would be unable to meet its
obligations. The Investment Manager believes that, in view of the above, the
risk of personal liability to shareholders is remote.
Management of the Trust
Under the provisions of the Master Trust Agreement and the laws of
Massachusetts, primary responsibility for the management and supervision of the
Trust rests with the Trustees.
The Trust's investment manager is State Street Research & Management
Company. The Investment Manager is charged with the overall responsibility for
managing the investments and business affairs of the Trust, subject to the
authority of the Board of Trustees.
State Street Research Investment Trust is the successor to State Street
Investment Corporation created in 1924 by Paul Cabot, Richard Saltonstall and
Richard Paine. Their investment management philosophy emphasized comprehensive
fundamental research and analysis, including meetings with the management of
companies under consideration for investment. After the formation of State
Street Investment Corporation, the three men founded State Street Research &
Management Company, as investment adviser to the Trust. The Investment Manager's
portfolio management group has extensive investment industry experience managing
equity and debt securities. In managing debt securities, if any, for a
portfolio, the Investment Manager may consider yield curve positioning, sector
rotation and duration, among other factors.
The Investment Manager and the Distributor are indirect wholly-owned
subsidiaries of Metropolitan and both are located at One Financial Center,
Boston, Massachusetts 02111-2690.
Under the Investment Advisory Contract between the Master Trust and the
Investment Manager, the Trust pays a quarterly advisory fee to the Investment
Manager. The advisory fee is computed as a percentage of the average of the
values of the net assets of the Trust as determined at the close of each
business day during the quarter at the following annual rates: (a) for the
period August 18, 1997 through August 17, 1998, 0.41% of such assets; and (b)
for succeeding years 0.55% of the first $500,000,000, 0.50% of the next
$500,000,000, and 0.45% of the amount over $1,000,000,000 of such assets.
The Investment Advisory Contract provides that the Investment Manager shall
furnish the Trust with suitable office space and facilities and such management,
investment advisory, statistical and research facilities and services as may be
required from time to time by the Trust. The Investment Manager compensates
Trustees of the Trust if such persons are employees or affiliates of the
Investment Manager or its affiliates.
The Trust is managed by John T. Wilson. Mr. Wilson has managed the Trust
since July 1996. His principal occupation currently is Vice President of State
Street Research & Management Company. During the past five years he has also
served as an analyst and portfolio manager at Phoenix Home Life Mutual Insurance
Company and, from 1995 to 1996, as a Vice President of Phoenix Investment
Counsel, Inc.
Subject to the policy of seeking best overall price and execution, sales of
shares of the Trust may be considered by the Investment Manager in the selection
of broker or dealer firms for the Trust's portfolio transactions.
The Investment Manager has a Code of Ethics governing personal securities
transactions of certain of its employees; see the Statement of Additional
Information.
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Dividends and Distributions; Taxes
The Trust has qualified and elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code for its most recent
fiscal year and intends to qualify as such in future fiscal years, although it
cannot give complete assurance that it will do so. As long as it so qualifies
and satisfies certain distribution requirements, it will not be subject to
federal income tax on its taxable income (including capital gains, if any)
distributed to its shareholders. Consequently, the Trust intends to distribute
annually to its shareholders substantially all of its net investment income and
any capital gain net income (capital gains net of capital losses).
The Trust declares dividends from net investment income quarterly and pays
such dividends, if any, four times each year. Distributions of capital gain net
income will generally be made on an annual basis or as otherwise required for
compliance with applicable tax regulations. Both dividends from net investment
income and distributions of capital gain net income will be declared and paid to
shareholders in additional shares of the Trust at net asset value (except in the
case of shareholders who elect a different available distribution method). The
Trust will provide its shareholders of record with annual information on a
timely basis concerning the federal tax status of dividends and distributions
during the preceding calendar year.
Dividends paid by the Trust from taxable net investment income and
distributions of net short-term capital gains, whether paid in cash or
reinvested in additional shares, will be taxable for federal income tax purposes
to shareholders as ordinary income, and a portion may be eligible for the 70%
dividends-received deduction for corporations. The percentage of the Trust's
dividends eligible for such tax treatment may be less than 100% to the extent
that less than 100% of the Trust's gross income may be from qualifying dividends
of domestic corporations. Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses) which are designated
as capital gains distributions, whether paid in cash or reinvested in additional
shares, will be taxable for federal income tax purposes to shareholders as
long-term capital gains, regardless of how long shareholders have held their
shares, and are not eligible for the dividends-received deduction.
As of December 31, 1996, approximately 30% of the net asset value per share
of the Trust consisted of net unrealized appreciation on portfolio assets. In
the event that the Trust realizes some or all of such appreciation and
distributes any net gain to shareholders, such distribution will reduce the net
asset value of the shares held by, and will be taxable to, shareholders.
Dividends and other distributions and proceeds of redemptions of Trust
shares paid to individuals and other nonexempt payees will be subject to a 31%
federal backup withholding tax if the Transfer Agent is not provided with the
shareholder's correct taxpayer identification number and certification that the
shareholder is not subject to such backup withholding.
The foregoing discussion relates only to generally applicable federal
income tax provisions in effect as of the date of this Prospectus. Therefore,
prospective shareholders are urged to consult their own tax advisers regarding
tax matters, including state and local tax consequences.
Calculation of Performance Data
From time to time, in advertisements or in communications to shareholders or
prospective investors, the Trust may compare the performance of its Class A,
Class B, Class C and Class D shares to that of other mutual funds with similar
investment objectives, to certificates of deposit and/or to other financial
alternatives. The Trust may also compare the performance of such classes to
appropriate indices such as Standard & Poor's 500 Index, Consumer Price Index
and Dow Jones Industrial Average and/or to appropriate rankings or averages such
as those compiled by Lipper Analytical Services, Inc. for the Growth and Income
category and the Long-Term Taxable Funds category or to those compiled by
Morningstar, Inc., Money Magazine, Business Week, Forbes Magazine, Fortune
Magazine, The Wall Street Journal, Investor's Daily or Wiesenberger Mutual Funds
Investment Report.
Total return and yield are computed separately for each class of shares of
the Trust. The average annual
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total return ("standard total return") for shares of the Trust is computed by
determining the average annual compounded rate of return for a designated
historical period as applied to a hypothetical $1,000 initial investment, which
is redeemed in total at the end of such period. In making the calculation, all
dividends and distributions are assumed to be reinvested, and all accrued
expenses and recurring charges, including management and distribution fees, are
recognized. The calculation also reflects the highest applicable initial or
contingent deferred sales charge, determined as of the assumed date of initial
investment or the assumed date of redemption, as the case may be. Standard total
return may be accompanied by nonstandard total return information computed in
the same manner, but for differing periods and with or without annualizing the
total return or taking sales charges into account.
Yield, for each of the Trust's Class A, Class B, Class C and Class D
shares, is computed by dividing the net investment income, after recognition of
all recurring charges, per share of each class earned during the most recent
month or other specified 30-day period by the applicable maximum offering price
per share of each class on the last day of such period and annualizing the
result.
The standard total return and yield results take sales charges into
account, if applicable, but do not take into account recurring and nonrecurring
charges for optional services which only certain shareholders elect and which
involve nominal fees, such as the $7.50 fee for remittance of redemption
proceeds by wire. Where sales charges are not applicable and therefore not taken
into account in the calculation of standard total return and yield, the result
will be increased.
The Trust's distribution rate is calculated by dividing the distributions
for the latest 12 months by the current maximum offering price per share. The
distribution rate is not computed in the same manner as the above described
yield, and therefore can be significantly different from it. In its supplemental
sales literature, the Trust may quote its distribution rate together with the
above described standard total return and yield information. The use of such
distribution rates would be subject to an appropriate explanation of how the
components of the distribution rate differ from the above described yield.
During the period 1945 through April 1990, and in certain years prior,
shares of the Trust were not offered to the general public and the Trust was not
subject to the cash inflows and higher level of redemptions or expenses that
could occur during a period when shares are continuously offered to the public.
In May 1990, the Trust commenced a continuous public offering.
Performance information may be useful in evaluating the Trust and for
providing a basis for comparison with other financial alternatives. Because the
performance of the Trust changes in response to fluctuations in economic and
market conditions, interest rates and Trust expenses, among other things, no
performance quotation should be considered a representation as to the Trust's
performance for any future period. In addition, the net asset value of shares of
the Trust will fluctuate so that shares of the Trust, when redeemed, may be
worth more or less than their original cost. Neither an investment in the Trust
nor its performance is insured or guaranteed; such lack of insurance or
guarantees should accordingly be given appropriate consideration when comparing
the Trust to financial alternatives which have such features.
Shares of the Trust had no class designations until February 17, 1993, when
Class A and Class C designations were assigned, and March 15, 1993, when Class B
and Class D designations were assigned, based on the pricing and Rule 12b-1 fees
applicable to shares sold thereafter. Performance data for a specified class
includes periods prior to the adoption of class designations.
Performance data for periods prior to February 17, 1993 do not reflect
additional Rule 12b-1 Distribution Plan fees, if any, of up to 1% per year
depending on the class of shares, which will adversely affect performance
results for periods after such date. Performance data or rankings for a given
class of shares should be interpreted carefully by investors who hold or may
invest in a different class of shares.
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[cover]
[State Street Research logo]
State Street Research
Investment Trust
August 18, 1997
P R O S P E C T U S
STATE STREET RESEARCH
INVESTMENT TRUST
One Financial Center
Boston, MA 02111
INVESTMENT ADVISER
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
DISTRIBUTOR
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
SHAREHOLDER SERVICES
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266
800-562-0032
CUSTODIAN
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
LEGAL COUNSEL
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
INDEPEDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
SS-701D-597IBS CONTROL NUMBER: 3790-970428(0598)SSR-LD
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
a Series of
STATE STREET RESEARCH MASTER INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 18, 1997
TABLE OF CONTENTS
Page
----
Additional Investment Policies and Restrictions............ 2
Additional Information Concerning Certain
Investment Techniques.................................... 4
Debt Instruments and Permitted Cash Investments............ 14
Trustees and Officers...................................... 20
Investment Advisory Services............................... 23
Purchase and Redemption of Shares.......................... 25
Net Asset Value............................................ 27
Portfolio Transactions..................................... 28
Certain Tax Matters........................................ 32
Distribution of Shares of the Trust........................ 35
Calculation of Performance Data............................ 39
Custodian.................................................. 44
Independent Accountants.................................... 44
Financial Statements....................................... 44
The following Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of State Street Research
Investment Trust (the "Trust") dated August 18, 1997, which may be obtained
without charge from the offices of State Street Research Master Investment Trust
(the "Master Trust") or State Street Research Investment Services, Inc. (the
"Distributor"), One Financial Center, Boston, Massachusetts 02111-2690.
CONTROL NUMBER: 12850-970502 (0698) SSR-LD SS-879D-597
<PAGE>
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As set forth in part under "The Trust's Investment Objective" and "Limiting
Investment Risk" in the Trust's Prospectus, the Trust has adopted certain
investment restrictions.
All of the Trust's fundamental investment restrictions are set forth below.
These fundamental investment restrictions may not be changed except by the
affirmative vote of a majority of the Trust's outstanding voting securities as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(Under the 1940 Act, a "vote of the majority of the outstanding voting
securities" means the vote, at a meeting of security holders duly called, (i) of
67% or more of the voting securities present at a meeting if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy or (ii) of more than 50% of the outstanding voting securities, whichever
is less.) Under these restrictions, it is the Trust's policy:
(1) not to purchase a security of any one issuer (other than securities
issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities or mixed-ownership
Government corporations) if such purchase would, with respect to 75%
of the Trust's total assets, cause more than 5% of the Trust's total
assets to be invested in the securities of such issuer or cause more
than 10% of the voting securities of such issuer to be held by the
Trust;
(2) not to purchase securities of any issuer that has a record of less
than three years' continuous operation if such purchase would cause
more than 5% of the Trust's total assets (taken at market value) to be
invested in the securities of such issuers, provided that any such
three year period may include the operation of any predecessor
company, partnership, or individual enterprise if the issuer whose
securities are to be purchased came into existence as a result of a
merger, consolidation, reorganization, or the purchase of
substantially all the assets of such predecessor;
(3) not to make any investment that would cause more than 25% of the
Trust's total assets, taken at market value, to be invested in any one
industry;
(4) not to issue senior securities other than in connection with the
borrowing of money as permitted under sub-paragraph (10) of this
paragraph;
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(5) not to underwrite or participate in the marketing of securities of
other issuers although the Trust may, acting alone or in syndicates or
groups, purchase or otherwise acquire securities of other issuers for,
investment, either from issuers or from persons in a control
relationship with the issuers or from underwriters of such securities
[as a matter of interpretation, which is not part of the fundamental
policy, this restriction does not apply to the extent that, in
connection with the disposition of the Trust's securities, the Trust
may be deemed to be an underwriter under certain federal securities
laws];
(6) not to make any investment in real property, although the Trust may
purchase and sell other interests in real estate, including securities
which are secured by real estate, or securities of companies which own
or invest or deal in real estate;
(7) not to invest in commodities or commodity contracts except for futures
and options on futures with respect to securities and securities
indices;
(8) not to lend money; however, the Trust may lend portfolio securities
and purchase bonds, debentures, notes, bills and any other debt-
related instruments or interests (and enter into repurchase
agreements with respect thereto);
(9) not to borrow money except on an unsecured basis and then only up to
an amount equal to 10% of its net assets (see "Additional Information
Concerning Certain Investment Techniques -- Other Techniques" herein);
(10) not to purchase securities for its portfolio on margin, except that
this shall not prevent such short term credits as are necessary for
the clearance of transactions, and except that the Trust may use
escrow or custodian receipts or letters, margin or safekeeping
accounts, or enter into similar industry arrangements in connection
with trading futures and options;
(11) not to make a short sale of any securities, or purchase or write puts,
calls, straddles or spreads except in connection with options on
securities and securities indices and options on futures with respect
to securities and securities indices;
(12) not to invest directly as a joint venturer or general partner in oil,
gas or other mineral exploration or development joint ventures or
general partnerships (provided that the Trust may invest in securities
issued by companies which invest in or sponsor such
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programs and in securities indexed to the price of oil, gas or other
minerals);
(13) not to purchase securities for its portfolio issued by another
investment company except by a purchase in the open market involving
no more than customary brokers' commissions or to complete a merger,
consolidation or other acquisition of assets; and
(14) not to purchase or retain any securities of an issuer if, to the
knowledge of the Trust, those of its officers and Trustees and those
officers and Directors of its investment adviser who individually own
more than 1/2 of 1% of the securities of such issuer, when combined,
own more than 5% of such issuer taken at market.
The following investment restrictions may be changed by a vote of a
majority of the Trustees. Under these restrictions it is the Trust's policy:
(1) not to purchase any security or enter into a repurchase agreement if
as a result more than 15% of its net assets would be invested in
securities that are illiquid (including repurchase agreements not
entitling the holder to payment of principal and interest within
seven days);
(2) not to invest in warrants, valued at the lower of cost or market, more
than 5% of the value of its total assets (warrants initially attached
to securities and acquired by the Trust upon original issuance thereof
shall be deemed to be without value), provided that warrants that are
not listed on the New York or American Stock Exchange may not exceed
2% of the value of the Trust's net assets; and
(3) not to make investments for the purpose of exercising control or
management of other companies although the Trust may from time to time
present its views on various matters to the management of companies in
which it holds an investment.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Among other investments described below, the Trust may buy and sell
options, futures contracts, and options on futures contracts with respect to
securities, securities indices, and currencies, and may enter into closing
transactions with respect to each of the foregoing, and invest in other
derivatives, under circumstances in which such instruments and techniques are
expected by State Street Research & Management Company (the
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"Investment Manager") to aid in achieving the investment objective of the Trust.
The Trust on occasion may also purchase instruments with characteristics of both
futures and securities (e.g., debt instruments with interest and principal
payments determined by reference to the value of a commodity or a currency at a
future time) and which, therefore, possess the risks of both futures and
securities investments.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell
underlying assets, such as certain securities, currencies, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a "long" position while a contract to sell establishes a "short" position.
The purchase of a futures contract on securities or an index of
securities normally enables a buyer to participate in the market movement of the
underlying asset or index after paying a transaction charge and posting margin
in an amount equal to a small percentage of the value of the underlying asset or
index. The Trust will initially be required to deposit with the Master Trust's
custodian or the broker effecting the futures transaction an amount of "initial
margin" in cash or U.S. Treasury obligations.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Trust has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Trust will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Trust has taken a long position in a
futures contract and the value of the underlying instrument has declined, the
position would be less valuable, and the Trust would be required to make a
maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Trust may
elect to close the position by taking an opposite position which will terminate
the Trust's position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by or
released to the Trust, and the Trust realizes a loss or a gain. While futures
contracts with respect to securities do provide for the delivery and acceptance
of such securities, delivery and acceptance are seldom made.
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<PAGE>
Futures contracts will be executed primarily (a) to establish a short
position, and thus protect the Trust from experiencing the full impact of an
expected decline in market value of portfolio holdings without requiring the
sale of holdings, or (b) to establish a long position, and thus to participate
in an expected rise in market value of securities which the Trust intends to
purchase. Subject to the limitations described below, the Trust may also enter
into futures contracts for purposes of enhancing return. In transactions
establishing a long position in a futures contract, money market instruments
equal to the face value of the futures contract will be identified by the Trust
to the Master Trust's custodian for maintenance in a separate account to insure
that the use of such futures contracts is unleveraged. Similarly, a
representative portfolio of securities having a value equal to the aggregate
face value of the futures contract will be identified with respect to each short
position. The Trust will employ any other appropriate method of cover which is
consistent with applicable regulatory and exchange requirements.
Options on Securities
The Trust may use options on securities to implement its investment
strategy. A call option on a security, for example, gives the purchaser of the
option the right to buy, and the writer the obligation to sell, the underlying
asset at the exercise price during the option period. Conversely, a put option
on a security gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period.
Purchased options have defined risk, i.e., the premium paid for the
option, no matter how adversely the price of the underlying security moves,
while affording an opportunity for gain corresponding to the increase or
decrease in the value of the optioned asset.
Written options have varying degrees of risk. An uncovered written call
option theoretically carries unlimited risk, as the market price of the
underlying asset could rise far above the exercise price before its expiration.
This risk is tempered when the call option is covered, i.e., when the option
writer owns the underlying asset. In this case, the writer runs the risk of the
lost opportunity to participate in the appreciation in value of the asset rather
than the risk of an out-of-pocket loss. A written put option has defined risk,
i.e., the difference between the agreed-upon price that the Trust must pay to
the buyer upon exercise of the put and the value, which could be zero, of the
asset at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
his obligation to deliver the underlying asset in the case of a call option, or
to pay for the
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<PAGE>
underlying asset in the case of a put option, a covered writer is required to
deposit in escrow the underlying security or other asset in accordance with the
rules of the applicable clearing corporation and exchanges.
Options on Securities Indices
The Trust may engage in transactions in call and put options on
securities indices. For example, the Trust may purchase put options on indices
of securities in anticipation of or during a market decline to attempt to offset
the decrease in market value of its securities that might otherwise result.
Put options on indices of securities are similar to put options on the
securities themselves except that the delivery requirements are different.
Instead of giving the right to make delivery of a security at a specified price,
a put option on an index of securities gives the holder the right to receive an
amount of cash upon exercise of the option if the value of the underlying index
has fallen below the exercise price. The amount of cash received will be equal
to the difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. As with options
on securities, the Trust may offset its position in index options prior to
expiration by entering into a closing transaction on an exchange or it may let
the option expire unexercised.
A securities index assigns relative values to the securities included
in the index and the index options are based on a broad market index. Although
there are at present few available options on indices of fixed income
securities, other than tax-exempt securities, or futures and related options
based on such indices, such instruments may become available in the future. In
connection with the use of such options the Trust may cover its position by
identifying a representative portfolio of securities having a value equal to the
aggregate face value of the option position taken. However, the Trust may employ
any appropriate method to cover its positions that is consistent with applicable
regulatory and exchange requirements.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Options Strategy
A basic option strategy for protecting the Trust against a decline in
securities prices could involve (a) the purchase of a put -- thus "locking in"
the selling price of the underlying securities or securities indices -- or (b)
the writing of a call
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<PAGE>
on securities or securities indices held by the Trust -- thereby generating
income (the premium paid by the buyer) by giving the holder of such call the
option to buy the underlying asset at a fixed price. The premium will offset, in
whole or in part, a decline in portfolio value; however, if prices of the
relevant securities or securities indices rose instead of falling, the call
might be exercised, thereby resulting in a potential loss of appreciation in the
underlying securities or securities indices.
A basic option strategy when a rise in securities prices is anticipated
is the purchase of a call -- thus "locking in" the purchase price of the
underlying security or other asset. In transactions involving the purchase of
call options by the Trust, money market instruments equal to the aggregate
exercise price of the options will be identified by the Trust to the Master
Trust's custodian to insure that the use of such investments is unleveraged.
The Trust may write options in connection with buy-and-write
transactions; that is, the Trust may purchase a security and concurrently write
a call option against that security. If the call option is exercised in such a
transaction, the Trust's maximum gain will be the premium received by it for
writing the option, adjusted upward or downward by the difference between the
Trust's purchase price of the security and the exercise price of the option. If
the option is not exercised and the price of the underlying security declines,
the amount of such decline will be offset in part, or entirely, by the premium
received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Trust's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Trust's return will be the premium received
from writing the put option minus the amount by which the market price of the
security is below the exercise price.
Limitations and Risks of Options and Futures Activity
The Trust will engage in transactions in futures contracts or options
only as a hedge against changes resulting from market conditions which produce
changes in the values of its securities or the securities which it intends to
purchase (e.g., to replace portfolio securities which will mature in the near
future) or, subject to the limitations described below, to enhance return. The
Trust will not purchase any futures contract or purchase any call option if,
immediately thereafter, more than one third of the Trust's net assets would be
represented by long futures contracts or call options. The Trust will not write
a covered call or put option if, immediately thereafter, the aggregate value of
the assets (securities in the case of written calls and
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cash or cash equivalents in the case of written puts) underlying all such
options, determined as of the dates such options were written, would exceed 25%
of the Trust's net assets. In addition, the Trust may not establish a position
in a commodity futures contract or purchase or sell a commodity option contract
for other than bona fide hedging purposes if immediately thereafter the sum of
the amount of initial margin deposits and premiums required to establish such
positions for such nonhedging purposes would exceed 5% of the market value of
the Trust's net assets.
Although effective hedging can generally capture the bulk of a desired
risk adjustment, no hedge is completely effective. The Trust's ability to hedge
effectively through transactions in futures and options depends on the degree to
which price movements in its holdings correlate with price movements of the
futures and options.
Some positions in futures and options may be closed out only on an
exchange which provides a secondary market therefor. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Trust's ability to
effectively hedge its securities and might in some cases require the Trust to
deposit cash to meet applicable margin requirements. The Trust will enter into
an option or futures position only if it appears to be a liquid investment.
Foreign Investments
To the extent the Trust invests in securities of issuers in less
developed countries or emerging foreign markets, it will be subject to a variety
of additional risks, including risks associated with political instability,
economies based on relatively few industries, lesser market liquidity, high
rates of inflation, significant price volatility of portfolio holdings and high
levels of external debt in the relevant country.
Although the Trust may invest in securities denominated in foreign
currencies, the Trust values its securities and other assets in U.S. dollars. As
a result, the net asset value of the Trust's shares may fluctuate with U.S.
dollar exchange rates as well as with price changes of the Trust's securities in
the various local markets and currencies. Thus, an increase in the value of the
U.S. dollar compared to the currencies in which the Trust makes its investments
could reduce the effect of increases and magnify the effect of decreases in the
prices of the Trust's securities in their local markets. Conversely, a decrease
in the value of the U.S. dollar will have the opposite effect of magnifying the
effect of increases and reducing the effect of decreases in the prices of the
Trust's securities in the local markets.
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Currency Transactions
The Trust's dealings in forward currency exchange contracts will be
limited to hedging involving either specific transactions or aggregate portfolio
positions. A forward currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are not commodities and are entered into
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. Although spot and forward contracts
will be used primarily to protect the Trust from adverse currency movements,
they also involve the risk that anticipated currency movements will not be
accurately predicted, which may result in losses to the Trust. This method of
protecting the value of the Trust's portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange that can be achieved
at some future point in time. Although such contracts tend to minimize the risk
of loss due to a decline in the value of hedged currency, they tend to limit any
potential gain that might result should the value of such currency increase.
Repurchase Agreements
The Trust may enter into repurchase agreements. Repurchase agreements
occur when the Trust acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Trust will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Trust's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Trust's total assets, except
that repurchase agreements extending for more than seven days and other illiquid
securities will be limited to 10% of the Trust's total assets.
Reverse Repurchase Agreements
The Trust may enter into reverse repurchase agreements. However, the
Trust has no present intention of engaging in reverse repurchase agreements in
excess of 5% of the Trust's total assets. In a reverse repurchase agreement the
Trust
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transfers possession of a portfolio instrument to another person, such as a
financial institution, broker or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Trust will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed-upon rate. The ability to use
reverse repurchase agreements may enable, but does not ensure the ability of,
the Trust to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous.
When effecting reverse repurchase agreements, assets of the Trust in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Trust's records at the trade date and maintained until the
transaction is settled.
When-Issued Securities
The Trust may purchase "when-issued" equity securities, which are
traded on a price basis prior to actual issuance. Such purchases will be made
only to achieve the Trust's investment objective and not for leverage. The
when-issued trading period generally lasts from a few days to months, or over a
year or more; during this period dividends on equity securities are not payable.
No income accrues to the Trust prior to the time it takes delivery. A frequent
form of when-issued trading occurs when corporate securities to be created by a
merger of companies are traded prior to the actual consummation of the merger.
Such transactions may involve a risk of loss if the value of the securities
falls below the price committed to prior to the actual issuance. The Master
Trust's custodian will establish a segregated account for the Trust when it
purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by the
Trust.
Restricted Securities
Currently, the Trust's policy is to not make an investment in Rule 144A
securities if as a result more than 25% of its total assets are invested in such
securities. Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in the rule, and
the markets and trading practices for such securities are still developing;
depending on the development of such markets, such Rule 144A securities may be
deemed to be liquid as determined by or in accordance with methods adopted by
the Trustees. Under such methods the following factors are considered, among
others: the frequency of trades and quotes for the security, the number of
dealers and potential purchasers in the market, marketmaking activity, and the
nature of the security and marketplace trades. Investments in Rule 144A
securities could have the effect of increasing the level of the Trust's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, the Trust may be
adversely impacted by the possible illiquidity and subjective valuation of such
securities in the absence of a market for them.
11
<PAGE>
Also, under current policy, the Trust will not invest in other
restricted securities if as a result more than 10% of its total assets are
invested in such other restricted securities. Restricted securities which are
not resalable under Rule 144A can be subject to risks of illiquidity and
subjective valuations to a greater degree than Rule 144A securities.
Swap Arrangements
The Trust may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and collars as described below. In an
interest rate swap the Trust could agree for a specified period to pay a bank or
investment banker the floating rate of interest on a so-called notional
principal amount (i.e. an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay the
Trust a fixed rate of interest on the notional principal amount. In a currency
swap the Trust would agree with the other party to exchange cash flows based on
the relative differences in values of a notional amount of two (or more)
currencies; in an index swap, the Trust would agree to exchange cash flows on a
notional amount based on changes in the values of the selected indices. Purchase
of a cap entitles the purchaser to receive payments from the seller on a
notional amount to the extent that the selected index exceeds an agreed upon
interest rate or amount whereas purchase of a floor entitles the purchaser to
receive such payments to the extent the selected index falls below an
agreed-upon interest rate or amount. A collar combines a cap and a floor.
Most swaps entered into by the Trust will be on a net basis; for
example, in an interest rate swap, amounts generated by application of the fixed
rate and the floating rate to the notional principal amount would first offset
one another, with the Trust either receiving or paying the difference between
such amounts. In order to be in a position to meet any obligations resulting
from swaps, the Trust will set up a segregated custodial account to hold
appropriate liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value equal to any
excess of the Trust's accrued obligations over the accrued obligations of the
other party, while for swaps on other than a net basis assets will be segregated
having a value equal to the total amount of the Trust's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a part of the Trust's portfolio.
However, the Trust may enter into such arrangements for income purposes to the
extent permitted by the CFTC for entities which are not commodity pool
operators, such as the Trust. In entering a swap arrangement, the Trust is
dependent upon the creditworthiness and good faith of the
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<PAGE>
counterparty. The Trust attempts to reduce the risks of nonperformance by the
counterparty by dealing only with established, reputable institutions. The swap
market is still relatively new and emerging; positions in swap arrangements may
become illiquid to the extent that nonstandard arrangements with one
counterparty are not readily transferable to another counterparty or if a market
for the transfer of swap positions does not develop. The use of interest rate
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Investment Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Trust would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the Investment Manager is
correct in its forecasts, there is a risk that the swap position may correlate
imperfectly with the price of the asset or liability being hedged.
Industry Classifications
In determining how much of the portfolio is invested in a given
industry, the following industry classifications are currently used. Securities
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities or mixed-ownership Government corporations or
sponsored enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
Companies engaged in the business of financing may be classified according to
the industries of the parent companies or industries that otherwise most affect
such financing companies. Issuers of asset-backed pools will be classified as
separate industries based on the nature of the underlying assets, such as
mortgages and credit card receivables. "Asset-backed--Mortgages" includes
private pools of nongovernment backed mortgages.
13
<PAGE>
<TABLE>
<CAPTION>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
<S> <C> <C>
Chemical Business Service Aerospace
Diversified Container Computer Software &
Electrical Equipment Drug Service
Forest Products Food & Beverage Electronic Components
Machinery Hospital Supply Electronic Equipment
Metal & Mining Personal Care Office Equipment
Railroad Printing & Publishing
Truckers Tobacco
Utility Energy Consumer Cyclical
- ------- ------ -----------------
Electric Oil Refining & Marketing Airline
Gas Oil Production Automotive
Gas Transmission Oil Service Building
Telephone Hotel & Restaurant
Photography
Other Finance Recreation
- ----- ------- Retail Trade
Trust Certificates-- Bank Textile & Apparel
Government Related Lending Financial Service
Asset-backed--Mortgages Insurance
Asset-backed--Credit
Card Receivables
</TABLE>
Other Investment Limitations
Although the Trust is permitted to borrow up to 10% of its net assets,
the Trust has no present intention to engage in any borrowing except for
temporary purposes and has no intention to borrow for leverage purposes. For
purposes of this restriction, reverse repurchase agreements shall constitute
borrowings subject to the 10% limitation on all borrowing. The Trust will not
purchase any securities for its portfolio while outstanding borrowings exceed 5%
of the Trust's net assets; any borrowing in excess of 5% of its total assets
would be from banks.
DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS
As indicated in the Trust's Prospectus, the Trust may invest in
long-term and short-term debt securities. The Trust may invest in cash and
short-term securities for temporary defensive purposes when, in the opinion of
the Investment Manager, such a position is more likely to provide protection
against unfavorable market conditions than adherence to other investment
policies. Certain money market instruments in which the Trust may invest in such
circumstances are described below.
U.S. Government and Related Securities. U.S. Government securities are
securities which are issued or guaranteed as to principal or interest by the
U.S. Government, a U.S. Government agency or instrumentality, or certain
mixed-ownership Government
14
<PAGE>
corporations as described herein. The U.S. Government securities in which the
Trust invests include, among others:
o direct obligations of the U.S. Treasury, i.e., Treasury bills,
notes, certificates and bonds;
o obligations of U.S. Government agencies or instrumentalities such
as the Federal Home Loan Banks, the Federal Farm Credit Banks, the
Federal National Mortgage Association, the Government National
Mortgage Association and the Federal Home Loan Mortgage
Corporation; and
o obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.
U.S. Government securities which the Trust may buy are backed in a
variety of ways by the U.S. Government, its agencies or instrumentalities. Some
of these obligations, such as Government National Mortgage Association
mortgage-backed securities, are backed by the full faith and credit of the U.S.
Treasury. Other obligations, such as those of the Federal National Mortgage
Association, are backed by the discretionary authority of the U.S. Government to
purchase certain obligations of agencies or instrumentalities, although the U.S.
Government has no legal obligation to do so. Obligations such as those of the
Federal Home Loan Banks, the Federal Farm Credit Bank, the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation are backed
by the credit of the agency or instrumentality issuing the obligations. Certain
obligations of Resolution Funding Corporation, a mixed-ownership Government
corporation, are backed with respect to interest payments by the U.S. Treasury,
and with respect to principal payments by U.S. Treasury obligations held in a
segregated account with a Federal Reserve Bank. Except for certain
mortgage-related securities, the Trust will only invest in obligations issued by
mixed-ownership Government corporations where such securities are guaranteed as
to payment of principal or interest by the U.S. Government or a U.S. Government
agency or instrumentality, and any unguaranteed principal or interest is
otherwise supported by U.S. Government obligations held in a segregated account.
U.S. Government securities may be acquired by the Trust in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
15
<PAGE>
principal and interest components and maintained as such on the book entry
records of the Federal Reserve Banks.
In addition, the Trust may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs") and "Certificates of Accrual on Treasury Securities ("CATS"), and may
not be deemed U.S. Government securities.
The Trust may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as Government trust certificates.
Bank Money Investments. Bank money investments include but are not
limited to certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are generally short-term (i.e., less than one year),
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution. A
banker's acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). A banker's acceptance may be
obtained from a domestic or foreign bank, including a U.S. branch or agency of a
foreign bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Most acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
nonnegotiable deposits for a fixed period of time at a stated interest rate. The
Trust will not invest in any such bank money investment unless the investment is
issued by a U.S. bank that is a member of the Federal Deposit Insurance
Corporation ("FDIC"), including any foreign branch thereof, a U.S. branch or
agency of a foreign bank, a foreign branch of a foreign bank, or a savings bank
or savings and loan association that is a member of the FDIC and which at the
date of investment has capital, surplus and undivided profits (as of the date of
its most recently published financial statements) in excess of $50 million. The
Trust will not invest in time deposits maturing in more than seven days and will
not invest more than 10% of its total assets in time deposits maturing in two to
seven days.
U.S. branches and agencies of foreign banks are offices of foreign
banks and are not separately incorporated entities. They are chartered and
regulated either federally or under state law. U.S. federal branches or agencies
of foreign banks are chartered and regulated by the Comptroller of the Currency,
while state
16
<PAGE>
branches and agencies are chartered and regulated by authorities of the
respective states or the District of Columbia. U.S. branches of foreign banks
may accept deposits and thus are eligible for FDIC insurance; however, not all
such branches elect FDIC insurance. Unlike U.S. branches of foreign banks, U.S.
agencies of foreign banks may not accept deposits and thus are not eligible for
FDIC insurance. Both branches and agencies can maintain credit balances, which
are funds received by the office incidental to or arising out of the exercise of
their banking powers and can exercise other commercial functions, such as
lending activities.
Short-Term Corporate Debt Instruments. Short-term corporate debt
instruments include commercial paper to finance short-term credit needs (i.e.,
short-term, unsecured promissory notes) issued by corporations including but not
limited to (a) domestic or foreign bank holding companies or (b) their
subsidiaries or affiliates where the debt instrument is guaranteed by the bank
holding company or an affiliated bank or where the bank holding company or the
affiliated bank is unconditionally liable for the debt instrument. Commercial
paper is usually sold on a discounted basis and has a maturity at the time of
issuance not exceeding nine months.
Commercial Paper Ratings. Commercial paper investments at the time of
purchase will be rated within the "A" major rating category by Standard & Poor's
Corporation ("S&P") or within the "Prime" category by Moody's Investor's
Service, Inc. ("Moody's"), or, if not rated, issued by companies having an
outstanding long-term unsecured debt issue rated at least within the "A"
category by S&P or by Moody's. The money market investments in corporate bonds
and debentures (which must have maturities at the date of settlement of one year
or less) must be rated at the time of purchase at least within the "A" category
by S&P or "Prime" category by Moody's.
Commercial paper rated within the "A" category (highest quality) by S&P
is issued by entities which have liquidity ratios which are adequate to meet
cash requirements. Long-term senior debt is rated A or better, although in some
cases credits within the "BBB" category may be allowed. The issuer has access to
at least two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
The relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. (Those A-1 issues determined
to possess overwhelming safety characteristics are denoted with a plus (+) sign:
A-1+.)
The rating Prime is the highest commercial paper rating category
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: evaluation of the management of the issuer; economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks
17
<PAGE>
which may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
Prime-1, Prime-2 or Prime-3.
Rating Categories of Debt Securities
Set forth below is a description of S&P corporate bond and debenture
rating categories for securities which are deemed to be investment grade:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
S&P may attach the "r" symbol to derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks created by the terms of the
obligation, such as securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only (IO) and principal only (PO) mortgage securities.
Set forth below is a description of Moody's corporate bond and
debenture ratings for securities which are deemed to be investment grade:
18
<PAGE>
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally know as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger then in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
In the event applicable rating agencies lower the ratings of debt
instruments held by the Trust, resulting in a material decline in the overall
quality of the Trust's portfolio, the situation will be reviewed and necessary
action, if any, will be taken, including changes in the composition of the
portfolio.
1, 2, or 3: The ratings from Aa through Baa may be modified by the
addition of a numeral indicating a bond's rank within its major rating category.
19
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Master Trust, their
addresses, and their principal occupations and positions with certain affiliates
of the Investment Manager are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Master Trust. He is 58. His principal occupation is
Executive Vice President and Director of State Street Research & Management
Company. During the past five years he has also served as Senior Vice President
of State Street Research & Management Company. Mr. Bennett's other principal
business affiliation is Director, State Street Research Investment Services,
Inc.
+Steve A. Garban, The Pennsylvania State University, 208 Old Main,
University Park, PA 16802, serves as Trustee of the Master Trust. He is 59. He
is retired and was formerly Senior Vice President Finance and Operations and
Treasurer Emeritus of The Pennsylvania State University.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Master Trust. He is 68. He is engaged
principally in private investments. Previously, he was Vice Chairman of the
Board and Chief Financial Officer of St. Regis Corp.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Master Trust. He is 70. He is engaged principally in
private investments and civic affairs, and is an author of business history.
Previously, he was with Morgan Guaranty Trust Company of New York.
+Robert A. Lawrence, Saltonstall & Co., 50 Congress Street, Boston, MA
02109, serves as Trustee of the Master Trust. He is 70. His principal occupation
is Associate of Saltonstall & Co., a private investment firm. During the past
five years he has also served as Partner of that firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Master Trust. He is 46. His principal occupation is Executive
Vice President, Treasurer, Chief Financial Officer and Director of State Street
Research & Management Company. During the past five years he has also served as
Executive Vice President and Chief Financial Officer of New England Investment
Companies and Senior Vice President and Vice President of New England Mutual
Life Insurance Company. Mr. Maus's other principal business affiliations include
Executive Vice President, Treasurer, Chief Financial Officer and Director of
State Street Research Investment Services, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111,
serves as Secretary and General Counsel of the Master Trust. He is 41. His
principal occupation is Executive Vice President, General Counsel and Secretary
of State Street Research & Management Company. During the past five years he has
also served as Senior Vice President of State Street Research & Management
Company and as Senior Vice President, General Counsel and Assistant Secretary of
The Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Senior Vice President, Clerk and General Counsel of State Street
Research Investment Services, Inc.
- ----------
* or + See footnotes on page 22.
20
<PAGE>
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Master Trust. He is 65. He is retired, having served during the
past five years, until October 1992, as Executive Vice President, Chief
Operating Officer and Director, Hewlett-Packard Company.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173, serves as
Trustee of the Master Trust. He is 72. He is retired and was formerly Chairman
of the Board and Chief Executive Officer of Raytheon Company, of which he
remains a Director.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Master Trust. He is 58. His principal occupations during the
past five years have been President of The Glen Ellen Company, a private
investment company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Master
Trust. He is 59. His principal occupation during the past five years has been
Jay W. Forrester Professor of Management at Sloan School of Management,
Massachusetts Institute of Technology.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Master Trust. He is 54. His principal occupation is Chairman of the Board,
President, Chief Executive Officer and Director of State Street Research &
Management Company. During the past five years he also served as President and
Chief Executive Officer of New England Investment Companies and Chief Investment
Officer and Director of New England Mutual Life Insurance Company. Mr. Verni's
other principal business affiliations include Chairman of the Board and Director
of State Street Research Investment Services, Inc. and until February 1996,
prior positions as President and Chief Executive Officer.
*+Dudley F. Wade, One Financial Center, Boston, MA 02111, serves as
Vice President of the Master Trust. He is 78. His principal occupation during
the past five years has been Senior Vice President of State Street Research &
Management Company.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Master Trust. He is 72. He is retired and was formerly Of Counsel
for the law firm Choate, Hall & Stewart. He was a partner of that firm from 1960
to 1987.
- ----------
* or + See footnotes on page 22.
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<PAGE>
*+James M. Weiss, One Financial Center, Boston, MA 02111, serves as
Vice President of the Master Trust. He is 50. His principal occupation is Senior
Vice President of State Street Research & Management Company. During the past
five years he has also served as President and Chief Investment Officer of IDS
Equity Advisors and as Senior Vice President of Stein, Roe & Farnham.
*+John T. Wilson, One Financial Center, Boston, MA 02111, serves as
Vice President of the Master Trust. He is 33. His principal occupation is Vice
President of State Street Research & Management Company. During the past five
years he has also served as an analyst and portfolio manager at Phoenix Home
Life Mutual Insurance Company and, from 1995 to 1996, as a Vice President of
Phoenix Investment Counsel, Inc.
As of May 31, 1997, the Trustees and principal officers of the Master
Trust owned as a group less than 1% of the outstanding Class A shares of the
Trust and approximately 2.1% of the outstanding Class C shares of the Trust.
They owned none of the Trust's outstanding Class B or Class D shares.
As of May 31, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc.
("Merrill Lynch"), One Liberty Plaza, 165 Broadway, New York, New York 10080,
was the record owner of approximately 8.2% and 44.6% of the Trust's outstanding
Class B and Class D shares, respectively, as to which shares the Trust believes
Merrill Lynch disclaims beneficial ownership.
- ----------
* These Trustees and/or officers are or may be deemed to be "interested persons"
of the Master Trust under the 1940 Act because of their affiliations with the
Trust's investment adviser.
+ Serves as a Trustee and/or officer of one or more of the following investment
companies, each of which has an advisory or distribution relationship with the
Investment Manager or its affiliates: State Street Research Equity Trust, State
Street Research Financial Trust, State Street Research Income Trust, State
Street Research Money Market Trust, State Street Research Tax-Exempt Trust,
State Street Research Capital Trust, State Street Research Exchange Trust, State
Street Research Growth Trust, State Street Research Master Investment Trust,
State Street Research Securities Trust, State Street Research Portfolios, Inc.
and Metropolitan Series Fund, Inc.
22
<PAGE>
The Trustees were compensated as follows:
Total
Compensation
Aggregate From Master Trust
Name of Compensation and Complex Paid
Trustee From Master Trust(a) to Trustees (b)
------- -------------------- -----------------
Edward M. Lamont $4,000 $ 59,375
Robert A. Lawrence $4,000 $ 92,125
Dean O. Morton $4,200 $ 96,125
Thomas L. Phillips $4,000 $ 59,375
Toby Rosenblatt $4,000 $ 59,375
Michael S. Scott Morton $4,400 $100,325
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $4,200 $ 63,375
(a) For the Trust's fiscal year ended December 31, 1996.
(b) Includes compensation on behalf of all series of 12 investment companies
for which the Investment Manager served directly or indirectly as
investment adviser or for which State Street Research Investment
Services, Inc. served as distributor. "Total Compensation from Master
Trust and Complex Paid to Trustees" is for the 12 months ended December
31, 1996. The Master Trust does not provide any pension or retirement
benefits for the Trustees.
INVESTMENT ADVISORY SERVICES
State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Trust. The Advisory
Contract provides that the Investment Manager shall furnish the Trust with ans
investment program, suitable office space and facilities and such investment
advisory, research and administrative services as may be required from time to
time. The Investment Manager compensates all executive and clerical personnel
and Trustees of the Master Trust if such persons are employees of the Investment
Manager or its affiliates. The Investment Manager is an indirect wholly owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan").
The advisory fee payable monthly by the Trust to the Investment Manager
is computed as a percentage of the average of the value of the net assets of the
Trust, as determined at the close of the New York Stock Exchange (the "NYSE") on
each day the NYSE is open for trading, at the annual rates set forth in the
Prospectus. The total dollar amounts paid by the Trust to the
23
<PAGE>
Investment Manager for the fiscal years ended December 31, 1996, 1995 and 1994
were $3,866,070, $3,158,324 and $2,940,754, respectively.
The Advisory Contract provides that in the event that the total
expenses incurred by the Trust in any fiscal year, excluding interest, taxes,
brokerage commissions, extraordinary litigation costs and expenses pursuant to
the Trust's Plan of Distribution Pursuant to Rule 12b-1, but including payments
to the Investment Manager, shall exceed 1% of the average value of the net
assets (computed without deducting amounts borrowed for investment purposes) of
the Trust during said fiscal year, based upon computations of such value made as
of the close of business on each business day during such fiscal year, then the
Investment Manager shall reimburse the Trust for such excess expenses by making
a payment to the Trust in the amount of such excess expenses within 30 days
following the close of such fiscal year.
The Advisory Contract further provides that it shall remain in effect
from year to year only so long as (1) such continuance is specifically approved
at least annually by either (A) the Board of Trustees of the Master Trust, or
(B) "vote of a majority of the outstanding voting securities" (as defined in
Section 2(a)(42) of the 1940 Act) of the Trust, and (2) the terms of the
Advisory Contract are approved at least annually by the vote of a majority of
the Trustees of the Master Trust, who are not parties to the Advisory Contract
or "interested persons" of any such party (as such terms are used in Section
15(c) of the 1940 Act), cast in person at a meeting called for the purpose of
voting on such approval.
The Advisory Contract may be terminated at any time without the payment
of any penalty by vote of the Board of Trustees of the Master Trust or by "vote
of a majority of the outstanding voting securities" (as defined in Section
2(a)(42) of the 1940 Act) of the Trust, or by the Investment Manager, in each
case upon sixty calendar days' prior written notice to the other party to the
Advisory Contract.
Under a Shareholders' Administrative Services Agreement between the
Master Trust and the Distributor, the Distributor provides shareholders'
administrative services, such as responding to inquiries and instructions from
investors respecting the purchase and redemption of shares of the Trust, and is
entitled to reimbursements of its costs for providing such services. Under
certain arrangements for Metropolitan to provide subadministration services,
Metropolitan may receive a fee for the maintenance of certain share ownership
records for participants in sponsored arrangements, employee benefit plans, and
similar programs or plans, through or under which the Trust's shares may be
purchased.
Under the Code of Ethics of the Investment Manager, its employees in
Boston, where investment management operations are conducted, are only permitted
to engage in personal securities
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transactions in accordance with certain conditions relating to an employee's
position, the identity of the security, the timing of the transaction, and
similar factors. Such employees must report their personal securities
transactions quarterly and supply broker confirmations of such transactions to
the Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Trust are distributed by the Distributor. The Trust
offers four classes of shares which may be purchased at the next determined net
asset value per share plus, in the case of all classes except Class C shares, a
sales charge which, at the election of the investor, may be imposed (i) at the
time of purchase (the Class A shares) or (ii) on a deferred basis (the Class B
and Class D shares). General information on how to buy shares of the Trust, as
well as sales charges involved, are set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
Public Offering Price. The public offering price for each class of
shares of the Trust is based on their net asset value determined as of the close
of the NYSE on the day the purchase order is received by State Street Research
Shareholder Services provided that the order is received prior to the close of
the NYSE on that day; otherwise the net asset value used is that determined as
of the close of the NYSE on the next day it is open for unrestricted trading.
When a purchase order is placed through a dealer, that dealer is responsible for
transmitting the order promptly to State Street Research Shareholder Services in
order to permit the investor to obtain the current price. Any loss suffered by
an investor which results from a dealer's failure to transmit an order promptly
is a matter for settlement between the investor and the dealer.
Reduced Sales Charges. For purposes of determining whether a purchase
of Class A shares qualifies for reduced sales charges, the term "person"
includes: (i) an individual, or an individual combining with his or her spouse
and their children and purchasing for his, her or their own account; (ii) a
"company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee or
other fiduciary purchasing for a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Internal Revenue Code);
(iv) a tax-exempt organization under Section 501(c)(3) or (13) of the Internal
Revenue Code; and (v) an employee benefit plan of a single employer or of
affiliated employers.
Investors may purchase Class A shares of the Trust at reduced sales
charges by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of the Trust or any combination of Class A shares of "Eligible Funds"
as designated
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<PAGE>
by the Distributor within a 13-month period. The sales charge applicable to each
purchase made pursuant to a Letter of Intent will be that which would apply if
the total dollar amount set forth in the Letter of Intent were being bought in a
single transaction. Purchases made within a 90-day period prior to the execution
of a Letter of Intent may be included therein; in such case the date of the
earliest of such purchases marks the commencement of the 13-month period.
An investor may include toward completion of a Letter of Intent the
value (at the current public offering price) of all of his or her Class A shares
of the Trust and of any of the other Class A shares of Eligible Funds held of
record as of the date of his or her Letter of Intent, plus the value (at the
current offering price) as of such date of all of such shares held by any
"person" described herein as eligible to join with the investor in a single
purchase. Class B, Class C and Class D shares may also be included in the
combination under certain circumstances.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 5% of the specified amount will, however, be taken
from the initial purchase (or, if necessary, subsequent purchases) and held in
escrow in the investor's account as collateral against the higher sales charge
which would apply if the total purchase is not completed within the allotted
time. The escrowed shares will be released when the Letter of Intent is
completed or, if it is not completed, when the balance of the higher sales
charge is, upon notice, remitted by the investor. All dividends and capital
gains distributions with respect to the escrowed shares will be credited to the
investor's account.
Investors may purchase Class A shares of the Trust or a combination of
Eligible Funds at reduced sales charges pursuant to a Right of Accumulation. The
applicable sales charge under the right is determined on the amount arrived at
by combining the dollar amount of the purchase with the value (at the current
public offering price) of all Class A shares of the Trust and Class A shares of
the other Eligible Funds owned as of the purchase date by the investor plus the
value (at the current public offering price) of all such shares owned as of such
date by any "person" described herein as eligible to join with the investor in a
single purchase. Class B, Class C and Class D shares may also be included in the
combination under certain circumstances. Investors must submit sufficient
information to show that they qualify for the Right of Accumulation.
Class C Shares. Class C shares are currently available to certain
employee benefit plans, such as qualified retirement plans, which meet criteria
relating to number of participants (currently a minimum of 100 eligible
employees), service arrangements, or similar factors; insurance companies;
investment companies; endowment funds of nonprofit organizations with
26
<PAGE>
substantial minimum assets (currently a minimum of $10,000,000); and other
similar institutional investors.
Reorganizations. In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined in the 1940 Act, the Trust may issue its shares at net asset value
(or more) to such entities or to their security holders.
Redemptions. The Trust reserves the right to pay redemptions in kind
with portfolio securities in lieu of cash. In accordance with its election
pursuant to Rule 18f-1 under the 1940 Act, the Trust may limit the amount of
redemption proceeds paid in cash. Although it has no present intention to do so,
the Trust may, under unusual circumstances, limit redemptions in cash with
respect to each shareholder during any ninety-day period to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Trust at the beginning of such
period. In connection with any redemptions paid in kind with portfolio
securities, brokerage and other costs may be incurred by the redeeming
shareholder in the sale of the securities received.
NET ASSET VALUE
The net asset values of the shares of the Trust are determined once
daily as of the close of the NYSE, ordinarily 4 P.M. New York City time, Monday
through Friday, on each day during which the NYSE is open for unrestricted
trading. The NYSE is currently closed for New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of the Trust is computed by dividing the
sum of the market value of the securities held by the Trust plus any cash or
other assets minus all liabilities by the total number of outstanding shares of
the Trust at such time. Any expenses, except for extraordinary or nonrecurring
expenses, borne by the Trust, including the investment management fee payable to
the Investment Manager, are accrued daily.
In determining the values of the portfolio assets as provided below,
the Trustees may utilize one or more pricing services in lieu of market
quotations for certain securities which are not readily available on a daily
basis. Such services may provide prices determined of times prior to the close
of the NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the NYSE are valued at the price of the last quoted sale on
the respective exchange for that day. Securities which are listed or traded on a
national securities exchange or exchanges, but not on the New York or American
Stock Exchange, are valued at the price of the last quoted sale on the
27
<PAGE>
exchange for that day prior to the close of the NYSE. Securities not listed on
any national securities exchange which are traded "over the counter" and for
which quotations are available on the National Association of Securities
Dealers' NASDAQ System, or other system, are valued at the closing price
supplied through such system for that day at the close of the NYSE. Other
securities are, in general, valued at the mean of the bid and asked quotations
last quoted prior to the close of the NYSE if there are market quotations
readily available, or in the absence of such market quotations, then at the fair
value thereof as determined by or under authority of the Trustees of the Master
Trust with the use of such pricing services as may be deemed appropriate or
methodologies approved by the Trustees.
Short-term debt instruments issued with a maturity of one year or less
which have a remaining maturity of 60 days or less are valued using the
amortized cost method, provided that during any period in which more than 25% of
the Fund's total assets is invested in short-term debt securities the current
market value of such securities will be used in calculating net asset value per
share in lieu of the amortized cost method. The amortized cost method is used
when the value obtained is fair value. Under the amortized cost method of
valuation, the security is initially valued at cost on the date of purchase (or
in the case of short-term debt instruments purchased with more than 60 days
remaining to maturity, the market value on the 61st day prior to maturity), and
thereafter a constant amortization to maturity of any discount or premium is
assumed regardless of the impact of fluctuating interest rates on the market
value of the security.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Trust's portfolio turnover rate is determined by dividing the
lesser of securities purchases or sales for a year by the monthly average value
of securities held by the Trust (excluding, for purposes of this determination,
securities the maturities of which as of the time of their acquisition were one
year or less). The portfolio turnover rates for the fiscal years ended December
31, 1995 and 1996 were 39.21% and 73.51%, respectively. The Investment Manager
believes the portfolio turnover rate was significantly higher for the fiscal
year ended December 31, 1996 compared to the previous fiscal year due to
increased market volatility and the Investment Manager's efforts to take
advantage of the resulting opportunities to purchase certain securities at
attractive prices and to sell certain securities in order to realize gains.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including
the Trust, what in the Investment Manager's judgment
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<PAGE>
will be the best overall execution of purchase or sale orders and the most
favorable net prices in securities transactions consistent with its judgment as
to the business qualifications of the various broker or dealer firms with whom
the Investment Manager may do business, and the Investment Manager may not
necessarily choose the broker offering the lowest available commission rate.
Decisions with respect to the market where the transaction is to be completed,
to the form of transaction (whether principal or agency), and to the allocation
of orders among brokers or dealers are made in accordance with this policy. In
selecting brokers or dealers to effect portfolio transactions, consideration is
given to their proven integrity and financial responsibility, their demonstrated
execution experience and capabilities both generally and with respect to
particular markets or securities, the competitiveness of their commission rates
in agency transactions (and their net prices in principal transactions), their
willingness to commit capital, and their clearance and settlement capability.
The Investment Manager makes every effort to keep informed of commission rate
structures and prevalent bid/ask spread characteristics of the markets and
securities in which transactions for the Trust occur. Against this background,
the Investment Manager evaluates the reasonableness of a commission or a net
price with respect to a particular transaction by considering such factors as
difficulty of execution or security positioning by the executing firm. The
Investment Manager may or may not solicit competitive bids based on its judgment
of the expected benefit or harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon the Investment Manager's judgment of the
rate which reflects the execution requirements of the transaction without regard
to whether the broker provides services in addition to execution. Among such
other services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases (including those used for
portfolio analysis and modeling and including software providing investment
personnel with efficient access to current and historical data from a variety of
internal and external sources); portfolio evaluation services; and data
relating to the relative performance of accounts.
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<PAGE>
In the case of the Trust and other registered investment companies
advised by the Investment Manager, the above services may include data relating
to performance, expenses and fees of those investment companies and other
investment companies; this information is used by the Trustees or directors of
the investment companies to fulfill their responsibility to oversee the quality
of the Investment Manager's advisory services and to review the fees and other
provisions contained in the advisory contracts between the investment companies
and the Investment Manager. The Investment Manager considers these investment
company services only in connection with the execution of transactions on behalf
of its investment company clients and not its other clients.
Certain of the nonexecution services provided by broker-dealers may in
turn be obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. The Investment Manager has an investment in less
than ten percent of the outstanding equity of one such third party which is
engaged in the development and licensing of trading systems which include
portfolio analysis and modeling and other research and investment
decision-making capabilities. The Investment Manager may allocate brokerage to
broker-dealers who in turn pay this third party for the portion of the third
party's trading system provided to the Investment Manager which is estimated by
the Investment Manager to provide appropriate assistance in the investment
decision-making process. Because of its minority interest in the third party,
the Investment Manager could be said to benefit indirectly from such brokerage
allocation.
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Among other measures, the Investment Manager's
investment management personnel seek to evaluate the quality of research and
other services received, and the results of this effort are made available to
the equity trading department which sometimes uses this information as a
consideration in the selection of brokers to execute portfolio transactions.
Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and the
Investment Manager pays for that proportion directly from its own funds. Some
research and execution services may benefit the Investment Manager's clients as
a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
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<PAGE>
The Investment Manager has no fixed agreements or understandings with
any broker-dealer as to the amount of brokerage business which that firm may
expect to receive for services supplied to the Investment Manager or otherwise.
There may be, however, understandings with certain firms that in order for such
firms to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934, to the extent applicable.
Brokerage commissions paid by the Trust in secondary trading during the fiscal
years ended December 31, 1994, 1995 and 1996, amounted to approximately
$697,000, $815,000 and $2,015,000, respectively. The Investment Manager believes
the amount of brokerage commissions paid by the Trust during the fiscal year
ended December 31, 1996 was significantly higher than during the previous fiscal
year because of increased market volatility and the Investment Manager's efforts
to take advantage of the resulting opportunities to purchase certain securities
at attractive prices and to sell certain securities in order to realize gains.
During and at the end of its most recent fiscal year, the Trust held in its
portfolio no securities of any entity that might be deemed to be a regular
broker-dealer of the Trust as defined under the 1940 Act.
In the case of the purchase of fixed income securities in underwriting
transactions, the Investment Manager follows any instructions received from its
clients as to the allocation of new issue discounts, selling concessions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, the Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.
When more than one client of the Investment Manager is seeking to buy
or sell the same security, the sale or purchase is carried out in a manner which
is considered fair and equitable to all accounts. In allocating investments
among various clients (including in what sequence orders for trades are placed),
the Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each client
to a specific
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<PAGE>
investment and the relative risks of the investments, all in order to provide on
balance a fair and equitable result to each client over time. Although sharing
in large transactions may sometimes affect price or volume of shares acquired or
sold, overall it is believed there may be an advantage in execution. The
Investment Manager may follow the practice of grouping orders of various clients
for execution to get the benefit of lower prices or commission rates. In certain
cases where the aggregate order may be executed in a series of transactions at
various prices, the transactions are allocated as to amount and price in a
manner considered equitable to each so that each receives, to the extent
practicable, the average price of such transactions. Exceptions may be made
based on such factors as the size of the account and the size of the trade. For
example, the Investment Manager may not aggregate trades where it believes that
it is in the best interests of clients not to do so, including situations where
aggregation might result in a large number of small transactions with consequent
increased custodial and other transactional costs which may disproportionately
impact smaller accounts. Such disaggregation, depending on the circumstances,
may or may not result in such accounts receiving more or less favorable
execution relative to other clients.
CERTAIN TAX MATTERS
Federal Income Taxation of the Trust -- In General
The Trust intends to qualify and elect to be treated each taxable year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), although it cannot give complete
assurance that it will do so. Accordingly, the Trust must, among other things,
(a) derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive less than 30% of its gross
income in each taxable year from the sale or other disposition of any of the
following held for less than three months (the "30% test"): (i) stocks or
securities; (ii) options, futures or forward contracts (other than options,
futures, or forward contracts on foreign currencies) or (iii) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts) are not directly
related to the Trust's principal business of investing in stocks or securities
(or options and futures with respect to stocks or securities); (c) satisfy
certain diversification requirements; and (d) in order to be entitled to utilize
the dividends paid deduction, distribute annually at least 90% of its investment
company
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taxable income (determined without regard to the deduction for dividends paid).
The 30% test will limit the extent to which the Trust may sell
securities held for less than three months, write options which expire in less
than three months, and effect closing transactions with respect to call or put
options that have been written or purchased within the preceding three months.
(If the Trust purchases a put option for the purpose of hedging an underlying
portfolio security, the acquisition of the option is treated as a short sale of
the underlying security unless, for purposes only of the 30% test, the option
and the security are acquired on the same date.) Finally, as discussed below,
this requirement may also limit investments by the Trust in options on stock
indices, listed options on nonconvertible debt securities, futures contracts,
options on interest rate futures contracts and certain foreign currency
contracts.
If the Trust should fail to qualify as a regulated investment company
in any year, it would lose the beneficial tax treatment accorded regulated
investment companies under Subchapter M of the Code and all of its taxable
income would be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Trust's current or
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in excess of current or accumulated earnings and profits, would
receive a return of capital that would reduce the basis of their shares of the
Trust.
The Trust will be liable for a nondeductible 4% excise tax on amounts
not distributed on a timely basis in accordance with a calendar year
distribution requirement. To avoid the tax, during each calendar year the Trust
must distribute an amount equal to at least 98% of the sum of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, and its capital gain net income for the 12-month period ending on October
31 in addition to any undistributed portion of the respective balances from the
prior year. The Trust intends to make sufficient distributions to avoid this 4%
excise tax.
Federal Income Taxation of the Trust's Investments
Original Issue Discount. For federal income tax purposes, debt
securities purchased by the Trust may be treated as having original issue
discount. Original issue discount represents interest for federal income tax
purposes and can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price. Original issue
discount is treated for federal income tax purposes as income earned by the
Trust, whether or not any income is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
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<PAGE>
issue discount is determined on the basis of a constant yield to maturity which
takes into account the compounding of accrued interest. Under section 1286 of
the Code, an investment in a stripped bond or stripped coupon may result in
original issue discount.
Debt securities may be purchased by the Trust at a discount that
exceeds the original issue discount plus previously accrued original issue
discount remaining on the securities, if any, at the time the Trust purchases
the securities. This additional discount represents market discount for income
tax purposes. In the case of any debt security issued after July 18, 1984,
having a fixed maturity date of more than one year from the date of issue and
having market discount, the gain realized on disposition will be treated as
interest income to the extent it does not exceed the accrued market discount on
the security (unless the Trust elects to include such accrued market discount in
income in the tax year to which it is attributable). Generally, market discount
is accrued on a daily basis. The Trust may be required to capitalize, rather
than deduct currently, part or all of any direct interest expense incurred to
purchase or carry any debt security having market discount, unless the Trust
makes the election to include market discount currently. Because the Trust must
include original issue discount in income, it will be more difficult for the
Trust to make the distributions required for the Trust to maintain its status as
a regulated investment company under Subchapter M of the Code and to avoid the
4% excise tax described above.
Options and Futures Transactions. Certain of the Trust's investments
may be subject to provisions of the Code that (i) require inclusion of
unrealized gains or losses in the Trust's income for purposes of the 90% test,
the 30% test, the excise tax and the distribution requirements applicable to
regulated investment companies; (ii) defer recognition of realized losses; and
(iii) characterize both realized and unrealized gain or loss as short-term or
long-term gain or loss. Such provisions generally apply to, among other
investments, options on debt securities, indices on securities and futures
contracts.
Federal Income Taxation of Shareholders
Dividends paid by the Trust may be eligible for the 70%
dividends-received deduction for corporations. The percentage of the Trust's
dividends eligible for such tax treatment may be less than 100% to the extent
that less than 100% of the Trust's gross income may be from qualifying dividends
of domestic corporations. Any dividend declared in October, November or December
and made payable to shareholders of record in any such month is treated as
received by such shareholders on December 31, provided that the Trust pays the
dividend during January of the following calendar year.
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Distributions by the Trust can result in a reduction in the fair market
value of the Trust's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless may be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE TRUST
State Street Research Master Investment Trust is currently comprised of
one series, State Street Research Investment Trust. The Trustees have authorized
shares of the Trust to be issued in four classes: Class A, Class B, Class C and
Class D shares. The Trustees of the Master Trust have authority to issue an
unlimited number of shares of beneficial interest of separate series, $.001 par
value per share. A "series" is a separate pool of assets of the Master Trust
which is separately managed and has a different investment objective and
different investment policies from those of another series. The Trustees have
authority, without the necessity of a shareholder vote, to create any number of
new series or classes or to commence the public offering of shares of any
previously established series classes.
The Master Trust has entered into a Distribution Agreement with State
Street Research Investment Services, Inc., as Distributor, whereby the
Distributor acts as agent to sell and distribute shares of the Trust. Shares of
the Trust are sold through dealers who have entered into sales agreements with
the Distributor. The Distributor distributes shares of the Trust on a continuous
basis at an offering price which is based on the net asset value per share of
the Trust plus (subject to certain exceptions) a sales charge which, at the
election of the investor, may be imposed (i) at the time of purchase (the Class
A shares) or (ii) on a deferred basis (the Class B and Class D shares). The
Distributor may reallow all or portions of such sales charges as concessions to
dealers. For the fiscal years ended December 31, 1994, 1995 and 1996, total
sales charges on Class A shares paid to the Distributor amounted to $1,138,191,
$1,155,661 and $2,411,055, respectively, of which $133,340, $140,645 and
$292,754, respectively, was retained by the Distributor after reallowance of
concessions to dealers.
The differences in the price at which the Trust's Class A shares are
offered due to scheduled variations in sales charges, as described in the
Trust's Prospectus, result from cost savings inherent in economies of scale.
Management believes that the
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cost of sales efforts of the Distributor and broker-dealers tends to decrease as
the size of purchases increases, or does not involve any incremental sales
expenses as in the case of, for example, exchanges, reinvestments or dividend
investments at net asset value. Similarly, no significant sales effort is
necessary for sales of shares at net asset value to certain Directors, Trustees,
officers, employees, their relatives and other persons directly or indirectly
related to the Trust or associated entities. Where shares of the Trust are
offered at a reduced sales charge or without a sales charge pursuant to
sponsored arrangements and managed fee-based programs, the amount of the sales
charge reduction will similarly reflect the anticipated reduction in sales
expenses associated with such arrangements. The reduction in sales expenses, and
therefore the reduction in sales charges, will vary depending on factors such as
the size and other characteristics of the organization or program, and the
nature of its membership or the participants. The Trust reserves the right to
make variations in, or eliminate, sales charges at any time or to revise the
terms of or to suspend or discontinue sales pursuant to sponsored arrangements
at any time.
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
making such sale a commission based on the aggregate of such sales. Such
commission also is payable to authorized securities dealers upon sales of Class
A shares made pursuant to a Letter of Intent to purchase shares having a net
asset value of $1,000,000 or more. Shares sold with such commissions payable are
subject to a one-year contingent deferred sales charge of 1% on any portion of
such shares redeemed within one year following their sale. After a particular
purchase of Class A shares is made under the Letter of Intent, the commission
will be paid only in respect of that particular purchase of shares. If the
Letter of Intent is not completed, the commission paid will be deducted from any
discounts or commissions otherwise payable to such dealer in respect of shares
actually sold. If an investor is eligible to purchase shares at net asset value
on account of the Right of Accumulation, the commission will be paid only in
respect of the incremental purchase at net asset value.
For the periods shown below, the Distributor received contingent
deferred sales charges upon redemption of Class A, Class B and Class D shares of
the Trust and paid initial commissions to securities dealers for sales of such
shares as follows:
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<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
Contingent Commissions Contingent Commissions Contingent Commissions
Deferred Paid to Deferred Paid to Deferred Paid to
Sales Charge Dealers Sales Charge Dealers Sales Charge Dealers
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Class A $0 $2,118,301 $0 $1,015,016 $0 $1,004,851
Class B $329,954 $4,092,738 $688,624 $1,815,979 $172,481 $2,076,146
Class D $6,250 $77,583 $5,125 $40,514 $593 $50,402
</TABLE>
For information on the amount of distribution fees paid by the Trust to the
Distributor, see below.
The Trust has adopted a "Plan of Distribution Pursuant to Rule 12b-1"
(the "Distribution Plan") under which the Trust may engage, directly or
indirectly, in financing any activities primarily intended to result in the sale
of Class A, B and D shares, including, but not limited to, (1) the payment of
commissions and/or reimbursement to underwriters, securities dealers and others
engaged in the sale of shares, including payments to the Distributor to be used
to pay commissions and/or reimbursement to securities dealers (which securities
dealers may be affiliates of the Distributor) engaged in the distribution and
marketing of shares and furnishing ongoing assistance to investors, (2)
reimbursement of direct out-of-pocket expenditures incurred by the Distributor
in connection with the distribution and marketing of shares and the servicing of
investor accounts including expenses relating to the formulation and
implementation of marketing strategies and promotional activities such as direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising, the preparation, printing and distribution of Prospectuses of the
Trust and reports for recipients other than existing shareholders of the Trust,
and obtaining such information, analyses and reports with respect to marketing
and promotional activities and investor accounts as the Trust may, from time to
time, deem advisable, and (3) reimbursement of expenses incurred by the
Distributor in connection with the servicing of shareholder accounts including
payments to securities dealers and others in consideration of the provision of
personal services to investors and/or the maintenance or servicing of
shareholder accounts and expenses associated with the provision of personal
services by the Distributor directly to investors. In addition, the Distribution
Plan is deemed to authorize the Distributor to make payments out of its general
profits, revenues or other sources to underwriters, securities dealers and
others in connection with sales of shares, to the extent, if any, that such
payments may be deemed to be within the scope of Rule 12b-1 under the 1940 Act.
The expenditures to be made pursuant to the Distribution Plan may not
exceed (i) with respect to Class A shares, an annual rate of 0.25% of the
average daily value of net assets
37
<PAGE>
represented by such Class A shares, and (ii) with respect to Class B and Class D
shares, an annual rate of 0.75% of the average daily value of the net assets
represented by such Class B or Class D shares (as the case may be) to finance
sales or promotion expenses and an annual rate of 0.25% of the average daily
value of the net assets represented by such Class B or Class D shares (as the
case may be) to make payments for personal services and/or the maintenance or
servicing of shareholder accounts. Proceeds from the service fee will be used by
the Distributor to compensate securities dealers and others selling shares of
the Trust for rendering service to shareholders on an ongoing basis. Such
amounts are based on the net asset value of shares of the Trust held by such
dealers as nominee for their customers or which are owned directly by such
customers for so long as such shares are outstanding and the Distribution Plan
remains in effect with respect to the Trust. Any amounts received by the
Distributor and not so allocated may be applied by the Distributor as
reimbursement for expenses incurred in connection with the servicing of investor
accounts. The distribution and servicing expenses of a particular class will be
borne solely by that class.
During the fiscal year ended December 31, 1996, the Trust paid the
Distributor fees under the Distribution Plan and the Distributor used all of
such payments for expenses incurred on behalf of the Trust as follows:
Class A Class B Class D
Advertising $ 1,821 $ 46,040 $ 3,977
Printing and mailing
of prospectuses to
other than current
shareholders 484 12,243 1,058
Compensation to
dealers 435,894 2,163,218 185,600
Compensation to
sales personnel 5,944 148,331 14,286
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses:
marketing; general: 3,015 76,120 6,652
--------- ---------- --------
Total fees $447,158 $2,445,952 $211,573
======== ========== ========
38
<PAGE>
The Distributor may have also used additional resources of its own for further
expenses on behalf of the Trust.
No interested Trustee of the Master Trust has any direct or indirect
financial interest in the operation of the Distribution Plan or any related
agreements thereunder. The Distributor's interest in the Distribution Plan is
described above.
To the extent that the Glass-Steagall Act may be interpreted as
prohibiting banks and other depository institutions from being paid for
performing services under the Distribution Plan, the Trust will make alternative
arrangements for such services for shareholders who acquire shares through such
institutions.
CALCULATION OF PERFORMANCE DATA
The average annual total return ("standard total return") and yield of
the Class A, Class B, Class C and Class D shares of the Trust will be calculated
as set forth below. Total return and yield are computed separately for each
class of shares of the Trust. Performance data for a specified class includes
periods prior to the adoption of class designations. Shares of the Trust had no
class designations until February 17, 1993, when Class A and Class C
designations were assigned, and March 15, 1993, when Class B and Class D
designations were assigned based on the pricing and Rule 12b-1 fees applicable
to shares sold thereafter.
39
<PAGE>
The performance data reflects Rule 12b-1 fees and, where applicable,
sales charges as set forth below:
Rule 12b-1 Fees Sales Charges
----------------- ------------------
Current
Class Amount Period
- ----- ------ ------
A 0.25% February 17, 1993 Maximum 4.5% sales
to present; fee charge reflected
will reduce
performance for
periods after
February 17, 1993
B 1.00% March 15, 1993 to 1-and 5-year periods
present; fee will reflect a 5% and a
reduce performance 2% contingent
for periods after deferred sales
March 15, 1993 charge, respectively
C 0.00% Since commencement None
of operations to
present
D 1.00% March 15, 1993 to 1-year period
present; fee will reflects a 1%
reduce performance contingent deferred
for periods after sales charge
March 15, 1993
Total Return
- ------------
The standard total return of each class of the Trust's shares was as
follows:
Ten Years Five Years One Year
Ended Ended Ended
December 31, 1996 December 31, 1996 December 31, 1996
----------------- ----------------- -----------------
Class A 13.04% 11.52% 15.58%
Class B 13.27% 11.71% 15.21%
Class C 13.70% 12.82% 21.48%
Class D 13.27% 11.96% 19.10%
Standard total return is computed by determining the average annual
compounded rates of return over the designated periods that, if applied to the
initial amount invested, would produce the ending redeemable value in accordance
with the following formula:
40
<PAGE>
n
P(1+T) = ERV
Where: P = a hypothetical initial payment
of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of
the designated period assuming a
hypothetical $1,000 payment made at the
beginning of the designated period
The calculation is based on the further assumptions that the highest
initial or contingent deferred sales charge applicable to the investment is
deducted, and that all dividends and distributions by the Trust are reinvested
at net asset value on the reinvestment dates during the periods. All accrued
expenses and recurring charges are also taken into account as described later
herein.
Yield
From time to time, the Trust may advertise its yield. If the Trust were
to advertise yield for each of its Class A, Class B, Class C and Class D shares,
such figures would be computed by dividing the net investment income, after
recognition of all recurring charges, per share earned during a recent month or
other specified 30-day period by the applicable maximum offering price per share
on the last day of the period and annualizing the result in accordance with the
following formula:
YIELD = 2[(a-b + 1)6 -1]
----
cd
Where: a = dividends and interest earned
during the period
b = expenses accrued for the period
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per
share on the last day of the period
To calculate interest earned (for purposes of "a" above) on debt
obligations, the Trust computes the yield to maturity of each obligation held by
the Trust based on the market value of the obligation (including actual accrued
interest) at the close
41
<PAGE>
of the last business day of the preceding period, or, with respect to
obligations purchased during the period, the purchase price (plus actual accrued
interest). The yield to maturity is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) to determine the interest income on the obligation for each day of the
period that the obligation is in the portfolio. Dividend income is recognized
daily based on published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), the Trust accounts for gain or
loss attributable to actual monthly paydowns as a realized capital gain or loss
during the period. The Trust has elected not to amortize discount or premium on
such securities.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter. The maximum offering
price includes a maximum sales charge of 4.5% with respect to Class A shares.
All accrued expenses are taken into account as described later herein.
Yield information is useful in reviewing the Trust's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in the Trust's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Trust's
portfolio, portfolio maturity and operating expenses and market conditions.
Accrued Expenses
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return and yield results take sales charges, if applicable, into
account, although the results do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders elect
and which involve nominal fees, such as the $7.50 fee for wire orders.
42
<PAGE>
Nonstandardized Total Return
The Trust may provide the above described standard total return results
for Class A, Class B, Class C and Class D shares for periods which end no
earlier than the most recent calendar quarter end and which begin one, five and
ten years before. In addition, the Trust may provide nonstandardized total
return results for differing periods, such as for the period since the Trust
commenced operations in 1924, and/or without taking sales charges into account.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except the result may or may not be annualized, and as noted any
applicable sales charge may not be taken into account and therefore not deducted
from the hypothetical initial payment of $1,000 or ending value. For example,
the Trust's nonstandardized total returns for the six months ended December 31,
1996, without taking sales charges into account, were as follows:
Class A 9.56%
Class B 9.21%
Class C 9.75%
Class D 9.08%
Distribution Rates
From time to time, the Trust may advertise its distribution rate. If
the Trust were to advertise a distribution rate for each of its Class A, Class
B, Class C and Class D shares, such figures would be calculated by dividing the
distributions for the latest 12 months by the maximum current offering price per
share. A distribution can include gross investment income from debt obligations
purchased at a premium and in effect include a portion of the premium paid. A
distribution can also include nonrecurring, gross short-term capital gains
without recognition of any unrealized capital losses. Further, a distribution
can include income from the sale of options by the Trust even though such option
income is not considered investment income under generally accepted accounting
principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Investment Manager through transactions designed to increase the amount of
such items. Also, because the distribution rate is calculated in part by
dividing the latest distribution by the offering price, which is based on net
asset value plus any applicable sales charge, the distribution rate will
increase as the net asset value declines. A distribution rate can be greater
than the yield rate calculated as described above.
43
<PAGE>
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Master Trust's custodian. As custodian, State Street
Bank and Trust Company is responsible for, among other things, safeguarding and
controlling the Trust's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on the Trust's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, serves as the Master Trust's independent accountants, providing
professional services including (1) audits of certain financial statements, (2)
assistance and consultation in connection with Securities and Exchange
Commission filings and (3) review of the annual income tax returns filed on
behalf of the Trust.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a
semiannual basis, other supplementary financial reports may be made available
from time to time through electronic or other media. Shareholders with
substantial holdings in one or more State Street Research Funds may also receive
reports and other information which reflect or analyze their positions in a
consolidated manner. For more information, call State Street Research
Shareholder Services.
The following financial statements are for the Trust's fiscal year
ended December 31, 1996.
44
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
December 31, 1996
---------------------------------------------------------------------
Value
Shares (Note 1)
---------------------------------------------------------------------
COMMON STOCKS 98.8%
Basic Industries 16.7%
Chemical 8.2%
E.I. Du Pont De Nemours & Co. 312,600 $ 29,501,625
Monsanto Co. 786,600 30,579,075
Rhone-Poulenc SA ADR 601,100 20,362,262
Rohm & Haas Co. 370,000 30,201,250
---------------
110,644,212
---------------
Electrical Equipment 2.6%
General Electric Co. 358,800 35,476,350
---------------
Forest Product 0.6%
James River Corp. 225,200 7,459,750
---------------
Machinery 1.6%
Case Corp. 395,400 21,549,300
---------------
Metal & Mining 2.8%
Aluminum Company of America 268,300 17,104,125
Reynolds Metals Co. 369,100 20,808,013
---------------
37,912,138
---------------
Railroad 0.9%
Canadian National Railway Co. 322,900 12,270,200
---------------
Total Basic Industries 225,311,950
---------------
Consumer Cyclical 14.5%
Automotive 2.3%
General Motors Corp. 243,500 13,575,125
Magna International, Inc. Cl. A 329,000 18,341,750
---------------
31,916,875
---------------
Hotel & Restaurant 1.5%
Hilton Hotels Corp. 359,400 9,389,325
Mirage Resorts Inc.* 503,900 10,896,838
---------------
20,286,163
---------------
Recreation 3.6%
Harley Davidson Inc. 197,800 9,296,600
Mattel Inc. 117,300 3,255,075
Time Warner Inc. 375,900 14,096,250
<PAGE>
Walt Disney Co. 313,332 21,815,740
---------------
48,463,665
---------------
Retail Trade 7.1%
Gucci Group NV* 139,300 8,897,788
Home Depot Inc. 543,100 27,222,887
J.C. Penney Inc. 139,800 6,815,250
Kroger Co.* 351,200 16,330,800
Retail Trade (cont'd)
Rite Aid Corp. 264,300 $ 10,505,925
Sears Roebuck & Co. 275,600 12,712,050
Toys R Us Inc.* 424,000 12,720,000
---------------
95,204,700
---------------
Total Consumer Cyclical 195,871,403
---------------
Consumer Staple 24.3%
Business Service 2.3%
HBO & Co. 187,500 11,132,813
Interpublic Group of Companies, Inc. 413,900 19,660,250
---------------
30,793,063
---------------
Drug 5.0%
American Home Products Corp. 201,000 11,783,625
Amgen Inc.* 120,400 6,546,750
Eli Lilly & Co. 213,456 15,582,288
Novartis AG ADR* 406,397 23,199,402
Pfizer Inc. 120,900 10,019,588
---------------
67,131,653
---------------
Food & Beverage 3.8%
Anheuser-Busch Companies, Inc. 691,500 27,660,000
Coca-Cola Co. 438,300 23,065,538
---------------
50,725,538
---------------
Hospital Supply 7.3%
Aetna Inc. 143,600 11,488,000
Baxter International Inc. 612,900 25,128,900
Columbia/HCA Healthcare Corp. 534,450 21,778,837
Guidant Corp. 246,600 14,056,200
Johnson & Johnson 533,700 26,551,575
---------------
99,003,512
---------------
Personal Care 3.9%
Avon Products Inc. 292,700 16,720,487
Gillette Co. 231,800 18,022,450
Procter & Gamble Co. 164,000 17,630,000
---------------
52,372,937
---------------
Tobacco 2.0%
Philip Morris Companies, Inc. 235,800 26,556,975
---------------
Total Consumer Staple 326,583,678
---------------
<PAGE>
Energy 9.8%
Oil 7.1%
Burlington Resources Inc. 466,100 23,479,788
Exxon Corp. 149,400 14,641,200
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
---------------------------------------------------------------------
Value
Shares (Note 1)
---------------------------------------------------------------------
Oil (cont'd)
Oryx Energy Co. 262,100 $ 6,486,975
Shell Transport & Trading PLC 283,500 29,023,312
Total SA Cl. B ADR 557,608 22,443,722
---------------
96,074,997
---------------
Oil Service 2.7%
Schlumberger Ltd. 362,012 36,155,949
---------------
Total Energy 132,230,946
Finance 13.4%
Bank 7.8%
BankAmerica Corp. 376,000 37,506,000
Chase Manhattan Corp. 481,100 42,938,175
NationsBank Corp. 246,600 24,105,150
---------------
104,549,325
---------------
Insurance 5.6%
Ace Ltd. 399,800 24,037,975
American General Corp. 423,642 17,316,367
General Re Corp. 13,900 2,192,725
Saint Paul Companies, Inc. 254,300 14,908,337
Travelers Group Inc. 368,600 16,725,225
---------------
75,180,629
---------------
Total Finance 179,729,954
---------------
Science & Technology 19.2%
Aerospace 1.0%
Raytheon Co. 272,800 13,128,500
---------------
Computer Software & Service 4.2%
Cisco Systems Inc.* 427,500 27,199,687
Electronic Data Systems Corp. 384,500 16,629,625
First Data Corp. 339,950 12,408,175
---------------
<PAGE>
56,237,487
---------------
Electronic Components 2.3%
Intel Corp.* 121,300 15,882,719
Texas Instruments Inc. 232,600 14,828,250
---------------
30,710,969
---------------
Electronic Equipment 6.2%
L.M. Ericsson Telephone Co. ADR Cl. B* 590,140 17,814,851
Lucent Technologies Inc.* 467,900 21,640,375
Motorola Inc. 127,300 7,813,038
Perkin-Elmer Corp. 375,600 22,113,450
Teradyne Inc.* 600,800 14,644,500
---------------
84,026,214
---------------
Office Equipment 5.5%
Compaq Computer Corp.* 253,600 $ 18,829,800
Diebold Inc. 301,700 18,969,387
Hewlett-Packard Co. 264,000 13,266,000
International Business Machines Corp. 150,800 22,770,800
---------------
73,835,987
---------------
Total Science & Technology 257,939,157
---------------
Utility 0.9%
Electric 0.9%
FPL Group Inc. 252,000 11,592,000
---------------
Total Utility 11,592,000
---------------
Total Common Stocks (Cost $926,604,034) 1,329,259,088
---------------
- -------------------------------------------------------------------------------
Principal Maturity
Amount Date
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS 3.9%
American Express Credit Corp.,
5.90% $13,601,000 1/02/1997 13,601,000
American Express Credit Corp.,
6.55% 11,157,000 1/02/1997 11,157,000
Chevron Oil Finance Co., 6.15% 3,125,000 1/02/1997 3,125,000
Ford Motor Credit Co., 5.72% 20,000,000 1/02/1997 20,000,000
Ford Motor Credit Co., 5.90% 4,742,000 1/02/1997 4,742,000
---------------
Total Short-Term Obligations (Cost $52,625,000) 52,625,000
---------------
Total Investments (Cost $979,229,034)--102.7% 1,381,884,088
Cash and Other Assets, Less Liabilities--(2.7%) (35,964,013)
---------------
Net Assets--100.0% $1,345,920,075
===============
Federal Income Tax Information:
AtDecember 31, 1996, the net unrealized appreciation of investments based on
cost for Federal income tax purposes
<PAGE>
of $976,227,873 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 410,133,394
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (4,477,179)
---------------
$ 405,656,215
===============
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
-----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------------
December 31, 1996
Assets
Investments, at value (Cost $979,229,034) (Note 1) $1,381,884,088
Cash 21
Receivable for securities sold 34,740,340
Receivable for fund shares sold 8,884,960
Dividends and interest receivable 1,523,456
Other assets 17,640
---------------
1,427,050,505
Liabilities
Capital gains distribution payable 75,716,954
Dividends payable 3,059,683
Accrued management fee (Note 2) 1,071,270
Accrued transfer agent and shareholder services (Note 2) 499,898
Accrued distribution and service fees (Note 4) 327,406
Payable for fund shares redeemed 253,602
Accrued trustees' fee (Note 2) 9,185
Other accrued expenses 192,432
---------------
81,130,430
---------------
Net Assets $1,345,920,075
===============
Net Assets consist of:
Unrealized appreciation of investments $ 402,655,054
Shares of beneficial interest 943,265,021
---------------
$1,345,920,075
===============
Net Asset Value and redemption price per share of Class A
shares ($223,868,253 / 24,671,409 shares of beneficial
interest) $9.07
=====
Maximum Offering Price per share of Class A shares ($9.07
/ .955) $9.50
=====
<PAGE>
Net Asset Value and offering price per share of Class B
shares ($315,766,393 / 34,972,059 shares of beneficial
interest)* $9.03
=====
Net Asset Value, offering price and redemption price per
share of Class C shares ($780,627,471 / 85,721,290
shares of beneficial interest) $9.11
=====
Net Asset Value and offering price per share of Class D
shares ($25,657,958 / 2,833,901 shares of beneficial
interest)* $9.05
=====
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATION
- -------------------------------------------------------------------------------
For the year ended December 31, 1996
Investment Income
Dividends, net of foreign taxes of $292,432 $ 20,824,118
Interest 2,939,668
---------------
23,763,786
Expenses
Management fee (Note 2) 3,866,070
Transfer agent and shareholder services (Note 2) 1,613,046
Reports to shareholders 232,532
Custodian fee 224,676
Service fee--Class A (Note 4) 447,158
Distribution and service fees--Class B (Note 4) 2,445,952
Distribution and service fees--Class D (Note 4) 211,573
Registration fees 135,260
Trustees' fees (Note 2) 29,826
Audit fee 29,779
Legal fees 2,279
Miscellaneous 57,885
---------------
9,296,036
---------------
Net investment income 14,467,750
---------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments (Notes 1 and 3) 240,753,684
Net unrealized depreciation of investments (18,848,278)
---------------
Net gain on investments 221,905,406
---------------
Net increase in net assets resulting from operations $236,373,156
===============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Year ended December 31
-------------------------------
1996 1995
- ------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 14,467,750 $ 15,680,523
Net realized gain on
investments* 240,753,684 107,441,660
Net unrealized appreciation
(depreciation) of investments (18,848,278) 151,473,174
--------------- ---------------
Net increase resulting from
operations 236,373,156 274,595,357
--------------- ---------------
Dividends from net investment income:
Class A (2,367,239) (1,619,460)
Class B (1,492,489) (1,064,520)
Class C (11,670,468) (11,601,780)
Class D (139,420) (97,145)
--------------- ---------------
(15,669,616) (14,382,905)
--------------- ---------------
Distributions from net realized gains:
Class A (38,241,853) (13,126,874)
Class B (54,345,452) (17,847,503)
Class C (144,043,972) (74,984,305)
Class D (4,419,675) (1,639,766)
--------------- ---------------
(241,050,952) (107,598,448)
--------------- ---------------
Distributions in excess of net realized gains:
Class A (151,663) --
Class B (215,528) --
Class C (571,263) --
Class D (17,528) --
--------------- ---------------
(955,982) --
--------------- ---------------
Net increase from fund share
transactions (Note 5) 292,610,905 77,302,381
--------------- ---------------
Total increase in net assets 271,307,511 229,916,385
Net Assets
Beginning of year 1,074,612,564 844,696,179
--------------- ---------------
End of year (including
undistributed net investment
income of $0 and $1,207,644,
respectively) $1,345,920,075 $1,074,612,564
=============== ===============
*Net realized gain for Federal
income tax purposes (Note 1) $ 241,083,322 $ 107,598,448
=============== ===============
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
December 31, 1996
Note 1
State Street Research Investment Trust (the "Trust"), is a series of State
Street Research Master Investment Trust (the "Master Trust"), which is a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust was
organized in February, 1989 as a successor to State Street Investment
Corporation, a Massachusetts corporation. The Trust is presently the only series
of the Master Trust.
The investment objective of the Trust is to provide long-term growth of capital
and, secondarily, long-term growth of income. In seeking to achieve its
investment objective, the Trust invests primarily in common stocks, or
securities convertible into common stocks, that have long-term growth potential.
The Trust offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and pay
annual distribution and service fees of 1.00%. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after the issuance of the Class B shares. Class C shares are only
offered to certain employee benefit plans and large institutions. No sales
charge is imposed at the time of purchase or redemption of Class C shares. Class
C shares do not pay any distribution or service fees. Class D shares are subject
to a contingent deferred sales charge of 1.00% on any shares redeemed within one
year of their purchase. Class D shares also pay annual distribution and service
fees of 1.00%. The Trust'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 accounting policies are consistently followed by the
Trust 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 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
<PAGE>
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.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
- -------------------------------------------------------------------------------
NOTES (cont'd)
- -------------------------------------------------------------------------------
B. Federal Income Taxes
No provision for Federal income taxes is necessary since the Trust has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. It is also the intention of the Trust to
distribute an amount sufficient to avoid imposition of any Federal Excise Tax
under Section 4982 of the Internal Revenue Code.
C. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains are distributed annually. For the year
ended December 31, 1996, the Fund has designated as long-term $225,077,488 of
the distributions from net realized gains.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is due to the disposition of securities
that have different bases for financial reporting and tax purposes.
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.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into a contract under which the Adviser receives
a quarterly fee equal to 1/8 of one percent of the average market value of the
net assets up to and including $200,000,000, 3/32 of one percent of the average
net assets in excess of $200,000,000 up to and including $300,000,000, 3/40 of
one percent of the average net assets in excess of $300,000,000 up to and
including $500,000,000, and 1/16 of one percent of the average net assets in
excess of $500,000,000. In consideration of these fees, the Adviser furnishes
the Trust with management, investment advisory, statistical and research
facilities and services. The Adviser also pays all salaries, rent and certain
other expenses of management. During the year ended December 31, 1996, the fees
pursuant to such agreement amounted to $3,866,070.
State Street Research Shareholder Services, a division of State Street
<PAGE>
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Trust such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Trust. 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 Trust may be purchased. During the year ended December
31, 1996 the amount of such shareholder servicing and account maintenance
expenses was $402,641.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$29,826 during the year ended December 31, 1996.
Note 3
For the year ended December 31, 1996, exclusive of short-term investments and
U.S. Government obligations, purchases and sales of securities aggregated
$930,677,454 and $881,140,877, 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, as amended. Under the Plan, the Trust
pays annual service fees to the Distributor at a rate of 0.25% of average daily
net assets for Class A, Class B and Class D shares. In addition, the Trust pays
annual distribution fees of 0.75% of average daily net assets for Class B and
Class D shares. The Distributor uses such payments for personal services and/or
the maintenance or servicing of shareholder accounts, to reimburse securities
dealers for distribution and marketing services, to furnish ongoing assistance
to investors and to defray a portion of its distribution and marketing expenses.
For the year ended December 31, 1996, fees pursuant to such plan amounted to
$447,158, $2,445,952 and $211,573 for Class A, Class B and Class D shares,
respectively.
The Trust has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $292,754 and $1,834,870, respectively, on sales of Class A shares of
the Trust during the year ended December 31, 1996, and that MetLife Securities,
Inc. earned commissions aggregating $3,065,517 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $329,954 and
$6,250 on redemptions of Class B and Class D shares, respectively, during the
same period.
7
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At December 31, 1996, the Adviser owned one share of each of Class A, Class B
and Class D of the Trust.
Share transactions were as follows:
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------------------
1996 1995
-------------------------------------------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,496,436 $ 85,083,629 4,201,602 $ 38,277,703
Issued upon reinvestment of:
Distributions from net realized gains 4,105,073 37,233,009 1,381,863 12,657,868
Dividends from net investment income 238,083 2,245,230 137,038 1,344,573
Shares redeemed (2,981,620) (29,917,407) (2,806,953) (24,998,577)
-------------- --------------- -------------- ---------------
Net increase 9,857,972 $ 94,644,461 2,913,550 $ 27,281,567
============== =============== ============== ===============
Class B Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
Shares sold 11,730,491 $117,507,067 5,971,626 $ 54,108,058
Issued upon reinvestment of:
Distributions from net realized gains 5,847,959 52,807,070 1,883,350 17,194,984
Dividends from net investment income 153,378 1,415,675 95,588 906,920
Shares redeemed (2,861,202) (28,467,433) (2,523,352) (22,537,142)
-------------- --------------- -------------- ---------------
Net increase 14,870,626 $143,262,379 5,427,212 $ 49,672,820
============== =============== ============== ===============
Class C Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
Shares sold 1,551,667 $ 15,248,056 1,267,679 $ 11,473,904
Issued upon reinvestment of:
Distributions from net realized gains 8,570,372 78,065,167 4,060,874 37,278,822
Dividends from net investment income 468,693 4,537,303 701,086 6,244,388
<PAGE>
Shares redeemed (5,305,991) (52,618,228) (6,464,579) (57,645,171)
-------------- --------------- -------------- ---------------
Net increase (decrease) 5,284,741 $ 45,232,298 (434,940) $ (2,648,057)
============== =============== ============== ===============
Class D Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
Shares sold 910,947 $ 9,099,923 500,160 $ 4,432,731
Issued upon reinvestment of:
Distributions from net realized gains 466,008 4,217,370 168,699 1,543,548
Dividends from net investment income 13,599 126,917 8,708 81,712
Shares redeemed (397,252) (3,972,443) (349,866) (3,061,940)
-------------- --------------- -------------- ---------------
Net increase 993,302 $ 9,471,767 327,701 $ 2,996,051
============== =============== ============== ===============
</TABLE>
8
<PAGE>
State Street Research Investment Trust
Financial Highlights
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
----------------------------------------------
Year ended December 31
----------------------------------------------
1996*** 1995*** 1994 1993*
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.16 $ 7.74 $ 8.69 $ 8.75
Net investment income 0.12 0.14 0.11 0.10
Net realized and unrealized gain
(loss) on investments 1.80 2.39 (0.44) 0.81
Dividends from net investment income (0.13) (0.13) (0.12) (0.13)
Distributions from net realized gains (1.87) (0.98) (0.50) (0.84)
Distributions in excess of net
realized gains (0.01) -- -- --
----------- ----------- ----------------------
Net asset value, end of year $ 9.07 $ 9.16 $ 7.74 $ 8.69
=========== =========== ======================
<PAGE>
Total return 21.03%+ 32.85%+ (3.84)%+ 10.53%+++
Net assets at end of year (000s) $223,868 $135,676 $92,137 $75,259
Ratio of operating expenses to
average net assets 0.75% 0.78% 0.89% 0.75%++
Ratio of net investment income to
average net assets 1.17% 1.54% 1.26% 1.27%++
Portfolio turnover rate 73.51% 39.21% 33.08% 43.57%
Average commission rate@ $ 0.05 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------
Year ended December 31
---------------------------------------------
1996*** 1995*** 1994 1993**
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.13 $ 7.72 $ 8.66 $ 9.15
Net investment income 0.04 0.07 0.06 0.06
Net realized and unrealized gain
(loss) on investments 1.80 2.38 (0.44) 0.39
Dividends from net investment income (0.06) (0.06) (0.06) (0.10)
Distributions from net realized gains (1.87) (0.98) (0.50) (0.84)
Distributions in excess of net
realized gains (0.01) -- -- --
----------- ----------- ---------------------
Net asset value, end of year $ 9.03 $ 9.13 $ 7.72 $ 8.66
=========== =========== =====================
Total return 20.15%+ 31.86%+ (4.43)%+ 4.95%+++
Net assets at end of year (000s) $315,766 $183,446 $113,301 $73,110
Ratio of operating expenses to
average net assets 1.50% 1.53% 1.64% 1.51%++
Ratio of net investment income to
average net assets 0.41% 0.79% 0.51% 0.48%++
Portfolio turnover rate 73.51% 39.21% 33.08% 43.57%
Average commission rate@ $ 0.05 -- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------------------------------- ----------
Year ended
December
Year ended December 31 31
---------------------------------------------------------- ----------
1996*** 1995*** 1994 1993 1992 1996***
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.18 $ 7.76 $ 8.70 $ 8.80 $ 9.04 $ 9.15
Net investment income 0.14 0.16 0.13 0.15 0.16 0.04
Net realized and unrealized gain
(loss) on investments 1.82 2.39 (0.43) 0.74 0.40 1.79
Dividends from net investment income (0.15) (0.15) (0.14) (0.15) (0.16) (0.05)
Distributions from net realized gains (1.87) (0.98) (0.50) (0.84) (0.64) (1.87)
Distributions in excess of net
realized gains (0.01) -- -- -- -- (0.01)
----------- ----------- ---------------------- ----------- ----------
Net asset value, end of year $ 9.11 $ 9.18 $ 7.76 $ 8.70 $ 8.80 $ 9.05
=========== =========== ====================== =========== ==========
Total return 21.48%+ 33.07%+ (3.47)%+ 10.20%+ 6.28%+ 20.09%+
Net assets at end of year (000s) $780,627 $738,649 $627,551 $729,536 $726,671 $25,658
Ratio of operating expenses to
average net assets 0.50% 0.54% 0.65% 0.49% 0.51% 1.50%
Ratio of net investment income to
average net assets 1.44% 1.81% 1.54% 1.63% 1.92% 0.42%
Portfolio turnover rate 73.51% 39.21% 33.08% 43.57% 23.99% 73.51%
Average commission rate@ $ 0.05 -- -- -- -- $ 0.05
</TABLE>
Class D
--------------------------------
1995*** 1994 1993**
----------------------------------------------------------------------
Net asset value, beginning of year $ 7.74 $ 8.68 $ 9.15
Net investment income 0.07 0.05 0.06
Net realized and unrealized gain
(loss) on investments 2.38 (0.43) 0.40
Dividends from net investment income (0.06) (0.06) (0.09)
Distributions from net realized gains (0.98) (0.50) (0.84)
Distributions in excess of net
realized gains -- -- --
--------- ----------- ----------
Net asset value, end of year $ 9.15 $ 7.74 $ 8.68
========= =========== ==========
Total return 31.75%+ (4.45)%+ 5.10%+++
<PAGE>
Net assets at end of year (000s) $16,841 $11,707 $9,729
Ratio of operating expenses to
average net assets 1.53% 1.64% 1.51%++
Ratio of net investment income to
average net assets 0.79% 0.51% 0.51%++
Portfolio turnover rate 39.21% 33.08% 43.57%
Average commission rate@ -- -- --
++ Annualized
* February 17, 1993 (commencement of share class designations) to December 31,
1993.
** March 15, 1993 (commencement of share class designations) to December 31,
1993.
*** Per-share figures have been calculated using the average shares method.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
@ For fiscal years beginning on or after January 1, 1996, the Fund is required
to disclose its average commission rate per share paid for security trades.
9
<PAGE>
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Trustees of State Street Research Master Investment Trust and
Shareholders of State Street Research Investment Trust:
We have audited the accompanying statement of assets and liabilities of State
Street Research Investment Trust, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Street Research Investment Trust as of December 31, 1996, the results of
operations for the year then ended, the changes in its net assets for
<PAGE>
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 7, 1997
10
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- -------------------------------------------------------------------------------
Investment Trust had a good year in 1996, in line with generally strong
performance in U.S. equity markets. For the 12 months ended December 31, 1996,
the Trust outperformed the average return for Lipper Analytical Services' Growth
and Income Funds category.
The stocks of large-capitalization, high-quality companies generally turned in
the best results in 1996, a trend that benefited the Trust, with its strategy of
investing in companies that have strong positions in their industries.
Restructuring in the energy industry combined with generally higher commodity
prices to help the Trust's energy holdings.
Investment Trust's overweighting in the finance and science and technology
sectors helped performance throughout the year. The Trust's management
maintained an overweighting in science and technology stocks, many of which
performed well during the year.
Both the utilities and consumer cyclicals sectors were disappointing in 1996.
Exposure to utilities was minimal, but the Trust's overweighting in retail
detracted from performance.
December 31, 1996
All returns represent past performance, which is no guarantee of future results.
The investment return and principal value of an investment made in the Trust
will fluctuate and shares, when redeemed, may be worth more or less than their
original cost. All returns assume reinvestment of capital gain distributions and
income dividends. Performance for a class may include periods prior to the
adoption of class designations in 1993, which resulted in new or increased 12b-1
fees of up to 1% per class thereafter and which will reduce subsequent
performance. During the periods prior to 1990 that shares of the Trust were not
offered to the general public, the Trust was not subject to the cash inflows and
higher redemptions and expenses that have occurred during the Trust's current
continuous public offering. "C" shares, offered without a sales charge, are
available only to certain employee benefit plans and large institutions.
Performance reflects maximum 4.5% "A" share front-end sales charge or 5% "B"
share or 1% "D" share contingent deferred sales charges where applicable. The
Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely traded
common stocks and is a commonly used measure of U.S. stock market performance.
<PAGE>
Change In Value of $10,000
Based On The S&P 500 Compared
to Change In Value Of $10,000
Invested In Investment Trust
[DESCRIPTION OF CLASS A LINE CHART]
Class A Shares
Average Annual Total Return
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
+15.58% +11.52% +13.04%
- --------------------------------------------------------------------------------
Investment Trust S & P 500
12/86 9550 10000
12/87 10207 10525
12/88 11252 12268
12/89 14869 16149
12/90 14727 15647
12/91 18863 20403
12/92 20048 21956
12/93 22034 24164
12/94 21188 24481
12/95 28148 33670
12/96 34066 41396
[DESCRIPTION OF CLASS B LINE CHART]
Class B Shares
Average Annual Total Return
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
+15.21% +11.71% +13.27%
- --------------------------------------------------------------------------------
Investment Trust S & P 500
12/86 910000 10000
12/87 110688 10525
12/88 111782 12268
12/89 115570 16149
12/90 115421 15647
12/91 119752 20403
12/92 220993 21956
12/93 222957 24164
12/94 221941 24481
12/95 228932 33670
12/96 334762 41396
<PAGE>
[DESCRIPTION OF CLASS C LINE CHART]
Class C Shares
Average Annual Total Return
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
+21.48% +12.82% +13.70%
- --------------------------------------------------------------------------------
Investment Trust S & P 500
12/86 10000 10000
12/87 10688 10525
12/88 11782 12268
12/89 15570 16149
12/90 15421 15647
12/91 19752 20403
12/92 20993 21956
12/93 23135 24164
12/94 22331 24481
12/95 29717 33670
12/96 36100 41396
[DESCRIPTION OF CLASS D LINE CHART]
Class D Shares
Average Annual Total Return
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
+19.10% +11.96% +13.27%
- --------------------------------------------------------------------------------
Investment Trust S & P 500
12/86 110000 10000
12/87 110688 10525
12/88 111782 12268
12/89 115570 16149
12/90 115421 15647
12/91 119752 20403
12/92 220993 21956
12/93 222990 24164
12/94 221967 24481
12/95 228942 33670
12/96 334755 41396
11
<PAGE>
STATE STREET MASTER INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in PART A (Prospectus) of this
Registration Statement:
Financial Highlights for State Street Research Investment Trust
for the fiscal years ended December 31, 1987 through December
31, 1996.
(2) Financial Statements included in PART B (Statement of
Additional Information) of this Registration Statement for
State Street Research Investment Trust for the fiscal year
ended December 31, 1996 (except as provided below):
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets (fiscal years ended December
31, 1996 and December 31, 1995)
Notes to Financial Statements
Report of Independent Accountants
Management's Discussion of Fund Performance
(b) Exhibits:
(1) First Amended and Restated Master Trust Agreement and
Amendment No. 1 to First Amended and Restated Master Trust
Agreement (x)
(2)(a) By-Laws (i)
(2)(b) Amendment to By-Laws effective September 30, 1992 (v)
(4) Specimen Share Certificate (ii)
(5)(a) Investment Advisory Contract (iii)
(5)(b) Form of First Amended and Restated Investment Advisory
Contract
C-1
<PAGE>
(6)(a) Distribution Agreement with State Street Research
Investment Services, Inc. (formerly MetLife - State Street
Investment Services, Inc.) (iii)
(6)(b) Form of Selected Dealer Agreement and Form of Supplement
No. 1 to Selected Dealer Agreement (xi)
(6)(c) Form of Bank and Bank Affiliated Broker-Dealer Agreement
(ix)
(8)(a) Custodian Contract (iii)
(9) Agreement and Plan of Reorganization and Liquidation (iii)
(10) Opinion and Consent of Counsel (v)
(11) Consent of Independent Accountants (xi)
(14)(a) State Street Research IRA: Forms Booklet, Transfer of
Assets/Direct Rollover Form (ix)
(14)(b) State Street Research 403(b) Plan Materials (xi)
(15) Plan of Distribution Pursuant to Rule 12b-1 (vii)
(16) Calculation of Performance Data (ii)
(17) First Amended and Restated Multiple Class Expense
Allocation Plan (xi)
(18)(a) Powers of Attorney (x)
(18)(b) Certificate of Board Resolution Respecting Powers of
Attorney (x)
C-2
<PAGE>
(19) Application Forms (xi)
(27) Financial Data Schedules (xi)
- -----------------------
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote
Reference Registration/Amendment Date Filed
i Amendment No. 12 to April 28, 1989
Registration Statement
under Investment Company
Act of 1940
ii Registration Statement December 22, 1989
under Securities Act of
1933
iii Post-Effective Amendment April 30, 1991
No. 1
iv Post-Effective Amendment April 27, 1992
No. 2
v Post-Effective Amendment November 25, 1992
No. 3
vi Post-Effective Amendment January 22, 1993
No. 4
vii Post-Effective Amendment March 18, 1993
No. 5
viii Post-Effective Amendment April 29, 1994
No. 6
ix Post-Effective Amendment April 28, 1995
No. 7
x Post-Effective Amendment April 26, 1996
No. 8
xi Post-Effective Amendment March 25, 1997
No. 9
C-3
<PAGE>
Item 25. Persons Controlled by or under Common Control
with Registrant
Inapplicable
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders (at 5/31/97)
-------------- --------------------
Shares of Beneficial
Interest
Class A 23,164
Class B 24,443
Class C 18,330
Class D 985
Item 27. Indemnification
Under Article VI of the Registrant's First Amended and Restated Master Trust
Agreement, as further amended ("Master Trust Agreement") each of its Trustees
and officers or persons serving in such capacity with another entity at the
request of the Registrant ("Covered Person") shall be indemnified against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such conduct
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
C-4
<PAGE>
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion.
Under the Distribution Agreement between the Registrant and State Street
Research Investment Services, Inc., the Registrant's distributor, the Registrant
has agreed to indemnify and hold harmless State Street Research Investment
Services, Inc. and each person who has been, is, or may hereafter be an officer,
director, employee or agent of State Street Research Investment Services, Inc.
against any loss, damage or expense reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to arise
out of or is based upon a violation of any of its convenants herein contained or
any untrue or alleged untrue statement of material fact, or the omission or
alleged omission to state a material fact necessary to make the statements made
not misleading, in a Registration Statement or Prospectus of the Registrant, or
any amendment or supplement thereto, unless such statement or omission was made
in reliance upon written information furnished by State Street Research
Investment Services, Inc.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, underwriters and
controlling persons of the Registrant, pursuant to Article VI of the
Registrant's Master Trust Agreement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy expressed in the Act and will be governed by the final
adjudication of such issue.
C-5
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Investment Adviser Various investment Boston, MA
Research & advisory clients
Management
Company
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Bennett, Peter C. Executive Vice GFM International Investors
Director and President Limited London, England
Executive Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Financial Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust
Vice President State Street Research Income Trust Boston, MA
Director State Street Research Investment Services, Inc Boston, MA
Director Boston Private Bank & Trust Co. Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea Project Manager BankBoston Boston, MA
Vice President (until 12/96)
Managing Director State Street Global Advisors Boston, MA
(until 12/95)
Burbank, John F. None
Senior Vice President
(Vice President until
7/96)
Cabrera, Jesus A. Vice President First Chicago Investment Management Co. Chicago, IL
Vice President (until 5/96)
Vice President State Street Research Capital Trust Boston, MA
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
C-6
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carmen, Michael Portfolio Manager Montgomery Asset Management San Francisco, CA
Vice President (until 11/96)
Vice President State Street Research & Management Company Boston, MA
(until 4/96)
Vice President State Street Research Capital Trust Boston, MA
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
D'Vari, Ronald None
Vice President
DeVeuve, Donald None
Vice President
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Dillman, Thomas J Director of Research Bank of New York New York, NY
Senior Vice President (until 6/95)
Drake, Susan W. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President (until 2/96)
Duggan, Peter J. None
Senior Vice
President
Evans, Gordon Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President (Vice President until 3/96)
Federoff, Alex G. None
Vice President
Feliciano, Rosalina None
Vice President
Gardner, Michael D. Partner Prism Group Seattle, WA
Senior Vice President
(Vice President until
6/95)
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Govoni, Electra None
Vice President
C-7
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Granger, Allison None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. None
Senior Vice President
Heineke, George R. None
Vice President
Jackson, Jr., Trustee Certain trusts of related and
F. Gardner non-related individuals
Senior Vice President Trustee and Chairman Vincent Memorial Hospital Boston, MA
of the Board
Jamieson, Frederick H. Vice President and Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Vice President and Asst. Treasurer SSRM Holdings, Inc. Boston, MA
(Vice President Vice President and Controller MetLife Securities, Inc. New York, NY
until 6/95) Assistant Treasurer State Street Research Energy, Inc. Boston, MA
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Director and President K&G Enterprises Washington, D.C.
Kasper, M. Katherine None
Vice President
C-8
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Vice President
Kobrick, Frederick R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Member Harvard Business School Association Cambridge, MA
Member National Alumni Council, Boston University Boston, MA
Koski, Karen None
Vice President
Langholm, Knut None
Vice President
Leary, Eileen M. None
Vice President
McNamara, III, Francis J. Director and Executive GFM International Investors
Executive Vice Vice President Limited London, England
President, Senior Vice President, Clerk State Street Research Investment Services, Inc. Boston, MA
Secretary and and General Counsel
General Counsel Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
(Senior Vice President, Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Counsel until 7/96) Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Clerk and Director State Street Research Energy, Inc. Boston, MA
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Executive Vice President GFM International Investors
Director, Executive and Director Limited London, England
Vice President, Treasurer State Street Research Equity Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Financial Trust Boston, MA
Financial Officer and Treasurer State Street Research Income Trust Boston, MA
Chief Administrative Treasurer State Street Research Money Market Trust Boston, MA
Officer Treasurer State Street Research Tax-Exempt Trust Boston, MA
Treasurer State Street Research Capital Trust Boston, MA
Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Treasurer and Chief Financial Officer
Director and Treasurer State Street Research Energy, Inc. Boston, MA
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief Financial SSRM Holdings, Inc. Boston, MA
Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Milder, Judith J. None
Senior Vice President
(Vice President
until 6/95)
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President
until 7/96)
Moore, Jr., Thomas P. Vice President State Street Research Capital Trust Boston, MA
Senior Vice (until 11/96)
President Vice President State Street Research Exchange Trust Boston, MA
(until 2/97)
Vice President State Street Research Growth Trust Boston, MA
(until 2/97)
Vice President State Street Research Master Investment Trust Boston, MA
(until 2/97)
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Energy, Inc. Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Association for Investment Management
Board of Governors and Research Charlottesville, VA
Mulligan, JoAnne C. Vice President State Street Research Money Market Trust Boston, MA
Senior Vice President
(Vice President
until 7/96)
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Paddon, Steven W. Employee Metropolitan Life Insurance Company New York, NY
Vice President (until 10/96)
Pannell, James C. None
Vice President
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Ragsdale, E.K. Easton None
Senior Vice President
(Vice President
until 7/96)
Rawlins, Jeffrey A. None
Senior Vice President
(Vice President
until 7/96)
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
Saperstone, Paul None
Vice President
C-11
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice Member Association of Investment
President Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President and Chief Executive State Street Research Investment Services, Inc. Boston, MA
Executive Vice Officer
President President and Chief Executive John Hancock Funds, Inc. Boston, MA
Officer (until 1/96)
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Strelow, Dan R. None
Senior Vice President
C-12
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
(Vice President
until 6/95)
Verni, Ralph F. Chairman, President, GFM International Investors
Chairman, President, CEO and Director Limited London, England
Chief Executive Chairman, President, Chief State Street Research Capital Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
President and Director State Street Research Energy, Inc. Boston, MA
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board and Director MetLife Securities, Inc. New York, NY
(until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director CML Group, Inc. Boston, MA
Director Colgate University Hamilton, NY
C-13
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President
Wallace, Julie K. None
Vice President
Ward, Geoffrey None
Senior Vice President
Weiss, James M. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
President and Chief Investment IDS Equity Advisors Minneapolis, MN
Officer (until 12/95)
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
(Vice President
until 7/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Vice President Vice President State Street Research Master Investment Trust Boston, MA
Vice President Phoenix Investment Counsel, Inc. Hartford, CT
(until 6/96)
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President, Asst. Clerk (Vice President
Assistant Secretary until 6/95)
and Assistant Assistant Secretary State Street Research Capital Trust Boston, MA
General Counsel Assistant Secretary State Street Research Exchange Trust Boston, MA
Assistant Secretary State Street Research Growth Trust Boston, MA
Assistant Secretary State Street Research Master Investment Trust Boston, MA
Assistant Secretary State Street Research Securities Trust Boston, MA
Assistant Secretary State Street Research Equity Trust Boston, MA
Assistant Secretary State Street Research Financial Trust Boston, MA
Assistant Secretary State Street Research Income Trust Boston, MA
Assistant Secretary State Street Research Money Market Trust Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust Boston, MA
Assistant Secretary SSRM Holdings, Inc. Boston, MA
Woodbury, Robert S. Employee Metropolitan Life Insurance Company New York, NY
Vice President
Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President (until 2/96)
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
</TABLE>
C-15
<PAGE>
Item 29. Principal Underwriters
(a) State Street Research Investment Services, Inc. serves as a
principal underwriter for Registrant, and also acts as principal
underwriter for State Street Research Equity Trust, State Street
Research Financial Trust, State Street Research Income Trust,
State Street Research Money Market Trust, State Street Research
Tax-Exempt Trust, State Street Research Growth Trust, State
Street Research Capital Trust, State Street Research Securities
Trust and State Street Research Portfolios, Inc.
(b) Directors and Officers of State Street Research Investment
Services, Inc. are as follows:
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
- ---------------- ---------------- ---------------
Ralph F. Verni Chairman of Chairman of
One Financial Center the Board the Board,
Boston, MA 02111 and Director President,
Chief Executive
Officer and
Trustee
Peter C. Bennett Director Vice President
One Financial Center
Boston, MA 02111
Gerard P. Maus Executive Vice Treasurer
One Financial Center President,
Boston, MA 02111 Treasurer,
Chief Financial
Officer and Director
Thomas A. Shively Director None
One Financial Center
Boston, MA 02111
C. Troy Shaver, Jr. President and None
One Financial Center Chief Executive
Boston, MA 02111 Officer
Dennis C. Barghaan Senior Vice None
One Financial Center President
Boston, MA 02111
C-16
<PAGE>
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
- ---------------- ---------------- ---------------
Peter Borghi Senior Vice None
One Financial Center President
Boston, MA 02111
Paul V. Daly Senior Vice None
One Financial Center President
Boston, MA 02111
Susan M.W. DiFazio Senior Vice None
One Financial Center President
Boston, MA 02111
Gordon Evans Senior Vice None
One Financial Center President
Boston, MA 02111
Robert Haeusler Senior Vice None
One Financial Center President
Boston, MA 02111
Gregory R. McMahan Senior Vice None
One Financial Center President
Boston, MA 02111
Francis J. McNamara, III Senior Vice Secretary
One Financial Center President, General
Boston, MA 02111 Counsel and Clerk
Joan D. Miller Senior Vice None
One Financial Center President
Boston, MA 02111
Richard P. Samartin Senior Vice None
One Financial Center President
Boston, MA 02111
Darman A. Wing Senior Vice President, Assistant
One Financial Center Assistant General Secretary
Boston, MA 02111 Counsel and Assistant
Clerk
Linda Grasso Vice President None
One Financial Center
Boston, MA 02111
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
Susan V. Martin Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant
One Financial Center Secretary
Boston, MA 02111
C-17
<PAGE>
Item 30. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10% of the Registrant's
outstanding shares and, in connection with such meeting, to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(b) The Registrant has elected to include the information required by
Item 5A of Form N-1A in its annual report to shareholders. The Registrant
undertakes to furnish each person to whom a prospectus is delivered with a copy
of the applicable fund's latest annual report to shareholders upon request and
without charge.
C-18
<PAGE>
NOTICE
A copy of the Declaration of Trust of the Registrant is on file with the
Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that the obligations of the Registrant hereunder, and the authorization,
execution and delivery of this amendment to the Registrant's Registration
Statement, shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant as individuals or
personally, but shall bind only the property of the Funds comprising the series
of the Registrant, as provided in the Declaration of Trust. Each Fund of the
Registrant shall be solely and exclusively responsible for all of its direct or
indirect debts, liabilities, and obligations, and no other Fund shall be
responsible for the same.
C-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 10 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston and The Commonwealth of Massachusetts on the 19th day of June, 1997.
STATE STREET RESEARCH
MASTER INVESTMENT TRUST
By: *
---------------------------------------
Ralph F. Verni
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed on the
above date by the following persons in the capacities indicated.
Signature Capacity
* Trustee, Chairman of
______________________________ the Board and Chief
Ralph F. Verni Executive Officer
(principal executive
officer)
* Treasurer (principal
______________________________ financial and
Gerard P. Maus accounting officer)
* Trustee
- ------------------------------
Edward M. Lamont
* Trustee
- ------------------------------
Robert A. Lawrence
* Trustee
- ------------------------------
Dean O. Morton
<PAGE>
* Trustee
- ------------------------------
Thomas L. Phillips
* Trustee
- ------------------------------
Toby Rosenblatt
* Trustee
- ------------------------------
Michael S. Scott Morton
* Trustee
- ------------------------------
Jeptha H. Wade
*By: /s/ Francis J. McNamara, III
--------------------------------------------------
Francis J. McNamara, III,
Attorney-in-Fact under Powers of
Attorney dated April 25, 1996, incorporated by reference from Post-Effective
Amendment No. 8 filed April 26, 1996.
<PAGE>
1933 Act Registration No. 33-32729
1940 Act File No. 811-84
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 24 [X]
-------------------
STATE STREET RESEARCH MASTER INVESTMENT TRUST
(Exact Name of Registrant as Specified in
Master Trust Agreement)
---------------------
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(5)(b) Form of First Amended and Restated Investment Advisory Contract
EXHIBIT (5)(b)
FIRST AMENDED AND RESTATED
INVESTMENT ADVISORY CONTRACT
Contract entered into this ______ day of __________, between State
Street Research Master Investment Trust, a Massachusetts business trust, having
its principal place of business in Boston, Massachusetts (the "Trust"), and
State Street Research & Management Company, a Delaware corporation, having its
principal place of business in Boston, Massachusetts (the "Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained and the
performance herein required, the Trust and the Adviser hereby mutually agree as
follows:
1. Appointment of Adviser. The Trust hereby appoints and employs the
Adviser to act as investment adviser for the State Street Research Investment
Trust ("Fund") series of the Trust for the term, with the duties, and subject to
the conditions as provided in this Contract, and the Adviser hereby accepts such
appointment and employment.
2. Duties of Adviser. The Adviser shall furnish to the Trust such
management, investment advisory, statistical and research facilities and
services as may be required from time to time by the Trust in operating the
Fund.
3. Allocation of Expenses.
(a) The Adviser, at its own expense, shall furnish to the Trust
suitable office space and facilities, including all necessary equipment and
clerical personnel for managing the affairs and investments of the Fund, in the
offices maintained by the Adviser in Boston, Massachusetts or in such other
place as may be agreed on from time to time. The Adviser shall also pay the
reasonable salaries and fees of the officers of the Trust and all salaries,
expenses and costs connected with investment research and statistical work and
the operation of the business of the Adviser.
(b) The Fund shall pay all other expenses of the operation of the
Fund, including, without implied limitation, governmental fees, Trustees' fees,
interest charges, taxes, membership dues in the Investment Company Institute,
fees of independent auditors, of legal counsel and of any transfer agent,
registrar and dividend disbursing agent of the Trust, expenses of preparing,
printing and mailing share certificates, shareholders' reports, notices, proxy
statements and reports to governmental officers and commissions, brokerage
expenses, insurance premiums, fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities, keeping of
books and accounts and calculation of the net
A-1
<PAGE>
asset value of shares of the Fund, expenses of shareholders meetings, and
expenses relating to the issuance, registration and qualification of shares of
the Fund.
4. Compensation of the Adviser.
(a) For the services to be provided by the Adviser as set forth
herein, the Fund shall pay to the Adviser a monthly fee as soon as practical
after the last day of each calendar month, which fee shall be paid
(1) for the one year period after approval by shareholders
of the Fund, at a rate equal to 0.41% on an annual basis of the average daily
net asset value of the Fund for such month, and
(2) thereafter, at a rate equal to, on an annual basis
0.55% of first $500,000,000 of average daily net
assets, 0.50% of the next $500,000,000 of average
daily net assets, and 0.45% on all average daily net
assets in excess of $1,000,000,000 of the Fund for
such month,
In the case of termination of this Agreement with respect to the Fund during any
calendar month, the fee for that month shall be reduced proportionately based
upon the number of calendar days during which this Agreement is in effect with
respect to the Fund, and the fee shall be computed based upon the average daily
net asset value of the Fund during such period.
(b) In the event that the total expenses incurred by the Fund in
any fiscal year, excluding interest, taxes, brokerage commissions, extraordinary
litigation costs, and expenses pursuant to the Fund's Plan of Distribution
Pursuant to Rule 12b-1, but including payments to the Adviser, shall exceed 1%
of the average value of the net assets (computed without deducting amounts
borrowed for investment purposes) of the Fund during said fiscal year, based
upon computations of such value made as of the close of business on each
business day during such fiscal year, then the Adviser shall reimburse the Fund
for such excess expenses by making payment to the Fund in the amount of such
excess expenses within thirty days following the close of such fiscal year.
5. Redemption and Repurchase Fee. In consideration for handling the
details connected with any redemption of shares of the Fund by a shareholder or
with any repurchase of such shares from a shareholder by the Fund, the Adviser
will be allowed such portion of the fee, if any, charged the shareholder for
said redemption or repurchase pursuant to the provisions of the Master Trust
Agreement or By-Laws of the Trust, as amended, as may be agreed on from time to
time.
A-2
<PAGE>
6. Covenants of the Adviser.
(a) The Adviser covenants that it and its officers and directors
shall comply with the provisions of Article X of the By-Laws of the Trust during
the term of this Contract, to the extent that such provisions are applicable to
them.
(b) The Adviser covenants that during the term of this Contract
each of its officers and directors, and each of its employees who is an officer
or trustee of the Trust, shall keep the Secretary of the Trust advised on a
monthly basis of the names of those issuers (the securities of which are owned
by the Fund) in which such officer, director or employee owns more then one half
of one percent (1/2 of 1%) of the outstanding shares or securities, or both
(taken at market value), of such issuer.
7. Effective Date, Duration and Termination of This Contract.
(a) This Contract shall become effective at the commencement of
business on ________________________, and shall remain in effect (unless
terminated as hereinafter provided) until ______________________, and from year
to year thereafter; provided that this Contract shall continue in effect after
___________________, only so long as
(1) such continuance is specifically approved at least
annually by either (A) the Board of Trustees of the Trust,
or (B) "vote of a majority of the outstanding voting
securities" (as defined in Section 2(a)(42) of the
Investment Company Act of 1940) of the Fund, and
(2) the terms of this Contract are approved at least annually
by the vote of a majority of the Trustees of the Trust,
who are not parties to the Contract or "interested
persons" of any such party (as such terms are used in
Section 15(c) of the Investment Company Act of 1940), cast
in person at a meeting called for the purpose of voting on
such approval.
(b) This Contract may be terminated at any time without the payment
of any penalty by vote of the Board of Trustees of the Trust or by "vote of a
majority of the outstanding voting securities" (as defined in Section 2(a)(42)
of the Investment Company Act of 1940) of the Fund, or by the Adviser, in each
case upon sixty calendar days' prior written notice to the other party to the
Contract.
(c) This Contract shall terminate automatically in the event of its
"assignment" (as defined in Section 2(a)(4) of the Investment Company Act of
1940).
8. Amendments. This Contract may be amended at any time or from time
to time by an instrument in writing signed by a duly authorized officer of the
Trust and by the Adviser, but no amendment to this Contract shall be effective
until
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(1) such amendment is approved by the affirmative "vote of a
majority of the outstanding voting securities" (as defined
in Section 2(a)(42) of the Investment Company Act of 1940)
of the Fund and
(2) the terms of such amendments are approved by the vote of a
majority of the Trustees of the Trust, who are not parties
to the Contract or "interested persons" of any such party
(as such terms are used in Section 15(c) of the Investment
Company Act of 1940), cast in person at a meeting called
for the purpose of voting on such approval.
9. Miscellaneous Provisions.
(a) For all purposes of this Contract the Adviser shall be deemed
to be an independent contractor and not an agent of the Trust, and shall have no
authority to act for or represent the Trust in any way.
(b) The duties of the Adviser under this Contract shall not prevent
the Adviser from rendering similar services to other persons, firms, trusts,
corporations or other entities.
(c) The Adviser shall not be subject to liability for any act or
omission in the course of, or connected with, its performance of this Contract,
except in the case of willful misfeasance, bad faith or gross negligence on the
part of the Adviser, or the reckless disregard by the Adviser of its obligations
and duties under this Contract.
(d) Notices under this Contract shall be in writing and shall be
addressed, and delivered or mailed postage prepaid, to the other party at such
address as such other party may designate from time to time for the receipt of
such notices. Until further notice to the other party, the address of each party
to this Contract for this purpose shall be One Financial Center, Boston,
Massachusetts 02111.
(e) It is expressly agreed that the obligations of the Trust
hereunder, and the authorization, execution and delivery to this document, shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust as individuals or personally, but shall bind
only the property of the Fund, as provided in the Master Trust Agreement of the
Trust. The Master Trust Agreement of the Trust provides, and it is expressly
agreed, that the Fund of the Trust shall be solely and exclusively responsible
for the payment of any direct or indirect debts, liabilities and obligations
relating to the Fund, and that no other fund shall be responsible for the same.
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IN WITNESS WHEREOF, STATE STREET MASTER INVESTMENT TRUST has caused this
instrument to be signed in duplicate on its behalf by a duly authorized officer,
and STATE STREET RESEARCH & MANAGEMENT COMPANY has caused this instrument to be
signed in duplicate on its behalf by a duly authorized officer, all as of the
day and year first above written.
STATE STREET RESEARCH
MASTER INVESTMENT TRUST
By: __________________
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: __________________
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