[COVER PAGE]
[State Street Research Logo]
State Street Research
Investment Trust
Annual Report
December 31, 1996
[Illustration]
MAN CLIMBING AND LOOKING AT STARS
What's Inside
From the Chairman
Positive performance from
stocks and bonds
Portfolio Manager's Review
Another strong year
for the Trust
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
For Excellence
in
Shareholder Service
<PAGE>
FROM THE CHAIRMAN
To Our Shareholders:
1996 was another year of strong returns for many investors in the stock
market. For much of the past year, there were strong corporate profits, low
inflation and steady-but-slow economic growth. The Dow Jones Industrial
Average broke the 6000 point barrier in October, and the Standard & Poor's
500 Composite Index was up +22.95% for the 12 months ended December 31, 1996.
Investors in the bond market also enjoyed positive returns, with the Lehman
Brothers Aggregate Bond Index gaining +3.63% for the same time period.(1)
Stocks
Most of the gains in the stock market in 1996 were concentrated in the
largest companies and industry giants. The Russell 2000 Index, which measures
small-company stock performance, lagged the performance of the S&P 500 but
still returned a solid +16.50%,(1) with most of the gain occurring in the
first six months of the year. Our analysts believe that 1997 may be a year in
which more of the smaller companies, many of which have not been able to keep
pace with the larger names, may see better results.
Bonds
High-yield bonds were steady performers throughout the year, benefiting from
the stronger than expected economy, which never overheated enough to
precipitate any action by the Federal Reserve. Higher-quality bonds rallied
through the summer and fall, before losing momentum late in the fourth
quarter. In 1997, bonds should continue to take their cue from the economy
and the Fed.
Tax-Time Reminder
In closing, I'd like to remind State Street Research investors of our
extended call-in hours for tax time. Starting March 1 and continuing through
April 15, 1997, Shareholder Services representatives will be available from
8:00 a.m. until 8:00 p.m., and on Saturdays from 10:00 a.m. until 2:00 p.m.
Call them with your account and tax-related questions during these extended
hours.
Thank you for investing in State Street Research Investment Trust.
Sincerely,
Ralph F. Verni
/s/ Ralph F. Verni
Chairman
January 31, 1997
(1)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. The Lehman Brothers Aggregate Bond Index is a commonly used
measure of bond market performance. The Russell 2000 Index is a commonly used
measure of small- company stock performance. The indices are unmanaged and do
not take sales charges into consideration. Direct investment in the indices
is not possible; results are for illustrative purposes only.
(2)+20.15% for Class B shares; +21.48% for Class C shares; +20.09% for Class
D shares.
(3)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
assumes reinvestment of capital gain distributions and income dividends. No
adjustment has been made for income taxes payable by shareholders on income
dividends or capital gain distributions.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the 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.
(5)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.
(6)Cumulative total returns are not annualized nor do they reflect sales
charges, which, if reflected, would reduce performance.
Total value of $10,000 invested on January 1, 1987(3)
(Class A shares, at maximum applicable sales charge)
[DESCRIPTION OF MOUNTAIN CHART]
12/86 9550
12/87 10207
12/88 11252
12/89 14869
12/90 14272
12/91 18863
12/92 20048
12/93 22034
12/94 21188
12/95 28148
12/96 34066
SEC Average Annual Compound
Rates of Return
(at maximum applicable sales charge)(4,5)
10 Years 5 Years 1 Year
- ---------- ----------- --------- ----------
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%
Cumulative Total Returns
(do not reflect sales charge)(4,6)
10 Years 5 Years 1 Year
- ---------- ----------- --------- ----------
Class A +256.71% +80.60% +21.03%
- ---------- ----------- --------- ----------
Class B +247.62% +76.00% +20.15%
- ---------- ----------- --------- ----------
Class C +261.00% +82.77% +21.48%
- ---------- ----------- --------- ----------
Class D +247.55% +75.96% +20.09%
Top 5 Equity Industries
(by percentage of net assets)
[DESCRIPTION OF BAR CHART]
Chemicals 8.2%
Banks 7.8%
Hospital supply 7.3%
Oil 7.1%
Retail 7.1%
Total: 37.5%
<PAGE>
Portfolio Manager's Review
[Photo of John Wilson - Portfolio Manager]
The following is a discussion with John Wilson, portfolio manager of State
Street Research Investment Trust. John has 10 years of investment experience.
Q: How did the Trust perform during the year?
A: The Trust experienced another good year in 1996, in line with generally
strong performance in U.S. equity markets. For the 12 months ended December
31, 1996, Class A shares of the Trust returned +21.03% (does not reflect
sales charge),2 modestly outperforming the +20.78% average return for the 522
fund classes in Lipper Analytical Services' Growth and Income Funds category
(does not reflect sales charge).
Q: What factors contributed to the Trust's strong year?
A: Stocks in general did better than expected in 1996, with large
capitalization, high-quality companies-- those measured by the S&P
500--turning in the best results. This trend benefited the Trust, with its
strategy of investing in companies that are the dominant players in their
industries. Restructuring in the energy industry and generally higher
commodity prices helped the Trust's energy holdings. Schlumberger, the
Trust's third- largest holding, is a leading oil-service equipment provider.
In addition, our overweighting in the finance and science and technology
sectors helped performance throughout the year.
Q: What finance stocks are in the portfolio?
A: Chase Manhattan and BankAmerica, the Trust's two largest holdings, are
both in this sector. These companies showed more promise during the year, but
were still selling below average market values, so they provided good
opportunities.
Q: What about the science and technology sector?
A: We maintained an overweighting in this volatile sector throughout the
year. While these stocks sometimes provide a wild ride, we believe that the
companies we have selected have the industry position to help weather the
inevitable market turbulence. Cisco Systems, our largest science and
technology holding, is the leading producer of networking products and
services, and performed well during the year.
Q: Which sectors underperformed?
A: Both the utilities and consumer cyclical sectors were disappointing in
1996. While our exposure to utilities was minimal, the Trust's overweighting
in retail detracted from performance. We were disappointed by returns from
Home Depot, the Trust's tenth-largest holding.
And while science and technology was generally a strong sector for us this
year, it wasn't all positive. Data-processing provider Electronic Data
Systems hurt Trust performance when the stock's price fell victim to
increased competition in the marketplace and earnings reports that came in
below expectations.
Q: Stock markets have had a very strong two years. What is your outlook for
1997?
A: The Standard & Poor's 500 Index has gained 60.48% since January 1, 1995.
Much of this growth has been powered by a steady inflow of new investor money
into the markets. With valuations at their current levels, we believe there
is still room for growth, but at a more modest pace than a year ago. While we
aren't expecting any dramatic changes in overall market conditions, we
believe it makes sense to seek out lower-risk buy opportunities. In this type
of environment, we think the Trust will benefit from its high-quality
portfolio and our careful stock selection.
Top 10 Stock Positions
(by percentage of net assets)
1 Chase Manhattan National bank 3.2%
2 BankAmerica National bank 2.8%
3 Schlumberger Oil service equipment 2.7%
4 General Electric Electrical equipment 2.6%
5 Monsanto Chemical 2.3%
6 Rohm & Haas Chemical 2.2%
7 DuPont Chemical 2.2%
8 Shell Oil 2.2%
9 Anheuser-Busch Beer brewing 2.1%
10 Home Depot Home supply 2.0%
These securities represent an aggregate of 24.3% of the portfolio. Because of
active management, there is no guarantee that the Trust currently invests, or
will continue to invest, in the securities listed in this table or in the
text above.
Best and Worst Contributors to Performance
(January 1, 1996 through December 31, 1996)
Best
- --------------------------------------------------------------------------------
Monsanto
Growth of agricultural and biotech product lines helped this chemical leader.
BankAmerica
Benign interest-rate outlook and strong operating performance drove this
bank stock's price up.
Chase Manhattan
Solid operations and attractive valuations boosted this bank stock's
performance.
Worst
- --------------------------------------------------------------------------------
United Healthcare
Rising operating costs hurt earnings for this healthcare provider.
Electronic Data Systems
Poor earnings reports and competition advances hindered this data-processing
service firm's stock performance.
Pall
Uncertain near-term demand for this filter maker's products made its stock
unattractive to investors.
2
<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
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
---------------
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
---------------
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:
At December 31, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
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
=====
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
=============== ===============
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 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
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:
<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
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
=========== =========== ======================
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>
<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%+++
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 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.
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.
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
[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 RESEARCH INVESTMENT TRUST
- -----------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH MASTER
INVESTMENT TRUST
- -----------------------------------------------------------------------------
Fund Information
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 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Peter C. Bennett
Vice President
Dudley F. Wade
Vice President
James M. Weiss
Vice President
John T. Wilson
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
12
<PAGE>
[BACK COVER]
[State Street Research Logo]
State Street Research Investment Trust
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Investment Trust
prospectus. When used after March 31, 1997, this report must be accompanied by a
current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 3727-970221(0398)SSR-LD IT-396D-297-IBS
Cover Illustration by Dorothy Cullinen
