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As filed with the Securities and Exchange Commission on March 3, 1999
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. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 26 [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:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
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 May 1, 1999, 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.
================================================================================
<PAGE>
[front cover]
[logo: State Street Research]
Investment Trust
- --------------------------------------------------------------------------------
[background photo of Boston's Custom House tower]
This prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records.
Although these securities have been registered with the Securities and Exchange
Commission, the SEC has not approved or disapproved them and does not guarantee
the accuracy or adequacy of the information in this prospectus. Anyone who
informs you otherwise is committing a federal crime.
One of America's oldest mutual
funds, investing for long-term
growth of capital and income.
Prospectus
May 1, 1999
<PAGE>
Contents
- --------------------------------------------------------------------------------
1 The Fund
---------
1 Goal and Strategies
2 Principal Risks
4 Volatility and Performance
6 Investor Expenses
8 Investment Management
9 Your Investment
---------------
9 Opening an Account
9 Choosing a Share Class
10 Sales Charges
13 Dealer Compensation
14 Buying and Selling Shares
18 Account Policies
20 Distributions and Taxes
21 Investor Services
22 Other Information
-----------------
22 Other Securities and Risks
24 Financial Highlights
26 Board of Trustees
Back Cover For Additional Information
<PAGE>
The Fund 1
- --------------------------------------------------------------------------------
[chesspiece graphic]
Goal and Strategies
Fundamental Goal The fund seeks to provide long-term growth of capital and,
secondarily, long-term growth of income.
Principal Strategies Under normal market conditions, the fund invests at least
65% of net assets in stocks and convertible securities that have long-term
growth potential.
In selecting stocks, the fund generally attempts to identify the industries that
over the long term will grow faster than the economy as a whole. It looks for
companies within those industries and others that appear most capable of
sustained growth. These companies usually are large, established entities whose
size, financial resources and market share may enable them to maintain
competitive advantages and leadership positions. The fund may also invest in
stocks that are selling below what the portfolio manager believes to be their
intrinsic values as well as cyclical stocks believed to be at attractive points
in their market cycles. In keeping with its secondary goal, the fund also
considers a company's potential for paying dividends.
The fund reserves the right to invest up to 35% of net assets in other
securities. These may include U.S. government securities, as well as corporate
bonds rated investment-grade at the time of purchase and their unrated
equivalents.
The fund may adjust the composition of its portfolio as market conditions and
economic outlooks change. For more information about the fund's investments and
practices, see page 22.
[sidebar]
[magnifying glass graphic]
Who May Want to Invest
State Street Research Investment Trust is designed for investors who seek one or
more of the following:
[bullet] a less aggressive long-term stock investment
[bullet] a fund that takes a growth and income approach to stock investing
[bullet] a fund with an exceptionally long track record
The fund is NOT appropriate for investors who:
[bullet] want to avoid moderate to high volatility or possible losses
[bullet] are making short-term investments
[bullet] are investing emergency reserve money
[end sidebar]
<PAGE>
2 The Fund continued
- --------------------------------------------------------------------------------
[traffic sign graphic]
Principal Risks
Because the fund invests primarily in stocks, its major risks are those of stock
investing, including sudden, unpredictable drops in value and the potential for
periods of lackluster performance.
Larger, more established companies may be unable to respond quickly to new
competitive challenges, such as changes in technology and consumer tastes. Many
larger companies also cannot sustain the high growth rates of successful smaller
companies, especially during extended periods of economic expansion.
[sidebar]
[magnifying glass graphic]
Growth and
Income Investing
Compared to a pure growth strategy, a growth and income strategy is considered a
less aggressive approach to equity investing. This strategy weighs the potential
for capital growth against the opportunity to earn current income. In making
this trade-off, different growth and income funds assign different levels of
importance to these two goals. This fund, for example, attaches primary
importance to growth of capital and secondary importance to income.
Although the goals of investing for capital growth and current income are very
different, they can be complementary. Stocks, especially growth stocks,
historically have offered long-term investors greater overall returns than many
other types of securities, but have also shown greater volatility. With dividend
stocks, the dividend income tends to support the stock's value during economic
downturns, thus reducing short-term volatility. Even when market conditions make
capital growth appear unlikely, dividend stocks may remain attractive to
investors because of their current income.
While this fund does not emphasize income or bonds, other growth and income
funds may.
[end sidebar]
<PAGE>
3
----
Because of these and other risks, the fund may underperform certain other stock
funds (those emphasizing small company stocks, for example) during periods when
growth and income stocks are out of favor. The success of the fund's investment
strategy depends largely on the portfolio manager's skill in assessing the
potential of the stocks the fund buys.
Because the fund may invest in U.S. companies with some international business,
and also may invest in foreign companies, it is subject to the risks associated
with international investing.
The fund's shares will rise and fall in value and there is a risk that you could
lose money by investing in the fund.
Also, the fund cannot be certain that it will achieve its goal. Finally, fund
shares are not bank deposits and are not guaranteed, endorsed or insured by any
financial institution, government entity or the FDIC.
Information on other securities and risks appears on page 22.
A "snapshot" of the fund's investments may be found in the current annual or
semiannual report (see back cover).
<PAGE>
4 Volatility and Performance
- --------------------------------------------------------------------------------
[bar chart]
<TABLE>
<CAPTION>
Years ended December 31
- ---------------------------------------------------------------------------------------------------------------------------------
Year-by-Year Total Return (Class A) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
32.14 (0.95) 28.08 6.28 9.90 (3.84) 32.85 21.03 28.91 29.12
</TABLE>
[arrow up] Best quarter: fourth quarter 1998, up 20.50%
[arrow down] Worst quarter: third quarter 1990, down 12.94%
<TABLE>
<CAPTION>
As of December 31, 1998
------------------------------------
Average Annual Total Return 1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (%) 21.70% 19.39% 16.86%
- --------------------------------------------------------------------------------
Class B(1) (introduced January 1, 1999) -- -- --
- --------------------------------------------------------------------------------
Class B (%) 23.26 19.75 17.07
- --------------------------------------------------------------------------------
Class C (%) 27.15 19.90 17.07
- --------------------------------------------------------------------------------
Class S (%) 29.51 21.14 17.75
- --------------------------------------------------------------------------------
S&P 500 Index (%) 28.60 24.05 19.19
- --------------------------------------------------------------------------------
Lipper Growth & Income Funds Index (%) 13.58 17.83 15.54
</TABLE>
<PAGE>
5
----
[magnifying glass graphic]
Understanding
Volatility and
Performance
The information on the opposite page is designed to show two aspects of the
fund's track record:
[bullet] Year-by-Year Total Return shows how volatile the fund has been: how
much the difference has been, historically, between its best years and
worst years. In general, funds with higher average annual total returns
will also have higher volatility. The graph includes the effects of
fund expenses, but not sales charges.
[bullet] Average Annual Total Return is a measure of the fund's performance over
time. It is determined by taking the fund's performance over a given
period and expressing it as an average annual rate. Average annual
total return includes the effects of fund expenses and maximum sales
charges for each class, and assumes that you sold your shares at the
end of the period.
Also included are two independent measures of performance. The S&P 500
(officially, the "Standard & Poor's 500 Composite Stock Price Index") is an
unmanaged index of 500 domestic stocks. The Lipper Growth & Income Funds Index
shows the performance of a category of mutual funds with similar goals. The
Lipper Index shows you how well the fund has done compared to competing funds.
While the fund does not seek to match the returns or the volatility of the S&P
500, this index is a good indicator of general stock market performance and can
be used as a rough guide when gauging the return of this and other investments.
When making comparisons, keep in mind that neither the S&P 500 nor the Lipper
Index includes the effects of sales charges. Also, even if your stock portfolio
were identical to the S&P 500, your returns would always be lower, because the
S&P 500 doesn't include brokerage and administrative expenses.
In both the chart and the table, the returns shown for the fund include
performance from before the creation of certain share classes in 1993. If the
returns for Class A, Class B and Class C from before 1993 had reflected their
current distribution/service (12b-1) fees as described on page 10), these
returns would have been lower.
Keep in mind that past performance is not guarantee of future results.
<PAGE>
6 Investor Expenses
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class descriptions begin on page 9
----------------------------------------------------------
Shareholder Fees
(% of offering price) Class A Class B(1) Class B Class C Class S
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum front-end sales charge 5.75 0.00 0.00 0.00 0.00
Maximum deferred sales charge 0.00(a) 5.00 5.00 1.00 0.00
<CAPTION>
Annual Fund Operating Expenses
(% of average net assets) Class A Class B(1) Class B Class C Class S
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management fee(b) 0.48 0.48 0.48 0.48 0.48
Distribution/service (12b-1) fees 0.25 1.00 1.00 1.00 0.00
Other expenses 0.16 0.16 0.16 0.16 0.16
---- ---- ---- ---- ----
Total annual fund operating expenses 0.89 1.64 1.64 1.64 0.64
==== ==== ==== ==== ====
<CAPTION>
Example Year Class A Class B(1) Class B Class C Class S
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1 $661 $667/$167 $667/$167 $267/$167 $65
3 $843 $817/$517 $817/$517 $517 $205
5 $1,040 $1,092/$892 $1,092/$892 $892 $357
10 $1,608 $1,743 $1,743 $1,944 $798
</TABLE>
(a) Except for investments of $1 million or more; see page 13.
(b) Reflects fee schedule that became effective August 18, 1998 as if it had
been in place during the Fund's previous fiscal year.
<PAGE>
7
----
[magnifying glass graphic]
Understanding
Investor Expenses
The information on the opposite page is designed to give you an idea of what you
should expect to pay in expenses as an investor in the fund:
[bullet] Shareholder Fees are costs that are charged to you directly. These fees
are not charged on reinvestments or exchanges.
[bullet] Annual Fund Operating Expenses are deducted from the fund's assets
every year, and are thus paid indirectly by all fund investors.
[bullet] The Example is designed to allow you to compare the costs of this fund
with those of other funds. It assumes that you invested $10,000 over
the years indicated, reinvested all distributions, earned a
hypothetical 5% annual return and paid the maximum applicable sales
charges. For Class B(1) and Class B shares, it also assumes the
automatic conversion to Class A after eight years.
When two numbers are shown separated by a slash, the first one assumes you sold
all your shares at the end of the period, while the second assumes you stayed in
the fund. Where there is only one number, the costs would be the same either
way.
Investors should keep in mind that the example is for comparison purposes only.
The fund's actual performance and expenses may be higher or lower.
<PAGE>
8 The Fund continued
- --------------------------------------------------------------------------------
["The Thinker" graphic]
Investment
Management
The fund's investment manager is State Street Research & Management Company, One
Financial Center, Boston, MA 02111. The firm traces its heritage back to 1924
and the founding of this fund, one of America's first mutual funds. Today the
firm has more than $__ billion in assets under management (as of March 31,1999),
including $__ billion in mutual funds.
The investment manager is responsible for the fund's investment and business
activities, and receives the management fee as compensation. The management fee
is 0.55% of the first $500 million of fund assets, annually, 0.50% of the next
$500 million, and 0.45% of any amount over $1 billion. The investment manager is
a subsidiary of Metropolitan Life Insurance Company.
John T. Wilson has had primary responsibility for the fund's day-to-day
portfolio management since July 1996. A senior vice president, he joined the
firm in 1996 and has worked as an investment professional since 1990.
<PAGE>
Your Investment 9
- --------------------------------------------------------------------------------
[key graphic]
Opening an Account
If you are opening an account through a financial professional, he or she can
assist you with all phases of your investment.
If you are investing through a large retirement plan or other special program,
follow the instructions in your program materials.
To open an account without the help of a financial professional, please use the
instructions on these pages.
[checklist graphic]
Choosing a Share Class
The fund generally offers four share classes, each with its own sales charge and
expense structure: Class A, Class B(1), Class C and Class S. The fund also
offers Class B shares, but only to current Class B shareholders through
reinvestment of dividends and distributions or through exchanges from existing
Class B accounts of State Street Research funds.
If you are investing a substantial amount and plan to hold your shares for a
long period, Class A shares may make the most sense for you. If you are
investing a lesser amount, you may want to consider Class B(1) shares (if
investing for at least six years) or Class C shares (if investing for less than
six years). If you are investing through a special program, such as a large
employer-sponsored retirement plan or certain programs available through
financial professionals, you may be eligible to purchase Class S shares.
Because all future investments in your account will be made in the share class
you designate when opening the account, you should make your decision carefully.
Your financial professional can help you choose the share class that makes the
most sense for you.
<PAGE>
10 Your Investment continued
- --------------------------------------------------------------------------------
Class A -- Front Load
[bullet] Initial sales charge of 5.75% or less;
[bullet] Lower sales charges for larger investments; see sales charge schedule
on facing page
[bullet] Lower annual expenses than Class B(1) or C shares because of lower
distribution/service (12b-1) fee of 0.25%
Class B(1) -- Back Load
[bullet] No initial sales charge
[bullet] Deferred sales charge of 5% or less on shares you sell within six
years;
[bullet] Annual distribution/service (12b-1) fee of 1.00%
[bullet] Automatic conversion to Class A shares after eight years, reducing
future annual expenses
Class B -- Back Load
[bullet] Available only to current Class B shareholders, see page 11 for details
Class C -- Level Load
[bullet] No initial sales charge
[bullet] Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
[bullet] Lower deferred sales charge than Class B(1) shares
[bullet] Annual distribution/service (12b-1) fee of 1.00%
[bullet] No conversion to Class A shares after eight years, so annual expenses
do not decrease
Class S -- Special Programs
[bullet] Available only through certain retirement accounts, advisory accounts
of the investment manager and other special programs, including
programs through financial professionals with recordkeeping and other
services; these programs usually involve special conditions and
separate fees (consult your financial professional or your program
materials)
[bullet] No sales charges of any kind
[bullet] No distribution/service (12b-1) fees; annual expenses are lower than
other share classes
Sales Charges
Class A -- Front Load
<TABLE>
<CAPTION>
when you invest this % is which equals
this amount deducted this % of
for sales your net
charges investment
- -------------------------------------------------------
<S> <C> <C>
Up to $50,000 5.75 6.10
$50,000 to $100,000 4.50 4.71
$100,000 to $250,000 3.50 3.63
$250,000 to $500,000 2.50 2.56
$500,000 to $1 million 2.00 2.04
$1 million or more see below
</TABLE>
With Class A shares, you pay a sales charge only when you buy shares.
If you are investing $1 million or more (either as a lump sum or through any of
the methods described on the application), you can purchase Class A shares
without any sales charge. However, you may be charged a "contingent deferred
<PAGE>
11
----
sales charge" (CDSC) of 1% if you sell any shares within one year of purchasing
them. See "Other CDSC Policies" on page 12.
Class A shares are also offered with low or no sales charges through various
wrap-fee programs and other sponsored arrangements (consult your financial
professional or your program materials).
Class B(1) -- Back Load
<TABLE>
<CAPTION>
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- ---------------------------------------------------------
<S> <C>
First year 5.00
Second year 4.00
Third year 3.00
Fourth year 3.00
Fifth year 2.00
Sixth year 1.00
Seventh or eighth year None
</TABLE>
With Class B(1) shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for six years or less, as described in the table above.
Class B(1) shares automatically convert to Class A shares after eight years;
Class A shares have lower annual expenses.
Class B -- Back Load
Class B(1) shares are available only to current shareholders through
reinvestment of dividends and distributions or through exchanges from existing
Class B accounts of the State Street Research funds. Other investments made by
current Class B shareholders will be in Class B(1) shares.
With Class B shares, you are charged a "contingent deferred sales charge" (CDSC)
when you sell shares you have held for five years or less. The CDSC is a
percentage of net asset value at the time of purchase (or of sale, if lower) and
is deducted from your proceeds. When you sell shares in the first year after you
bought them, the CDSC is 5.00%; second year, 4.00%; third year, 3.00%; fourth
year, 3.00%; fifth year, 2.00%; sixth year or later, none. See "Other CDSC
Policies" on page 12.
Class B shares automatically convert to Class A shares after eight years.
Class C -- Level Load
<TABLE>
<CAPTION>
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- ---------------------------------------------------------
<S> <C>
First year 1.00
Second year or later None
</TABLE>
<PAGE>
12 Your Investment continued
- --------------------------------------------------------------------------------
With Class C shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for one year or less, as described in the table above. See "Other CDSC
Policies" on this page.
Class C shares currently have the same annual expenses as Class B(1) shares,
but never convert to Class A shares.
Class S -- Special Programs
Class S shares have no sales charges.
Other CDSC Policies
The CDSC will be based on the net asset value of the shares at the time of
purchase (or sale, if lower). Any shares acquired through reinvestment are not
subject to the CDSC. There is no CDSC on exchanges into other State Street
Research funds, and the date of your initial investment will continue to be used
as the basis for CDSC calculations when you exchange. To ensure that you pay the
lowest CDSC possible, the fund will always use the shares with the lowest CDSC
to fill your sell requests.
The CDSC is waived on shares sold for participant initiated distributions from
State Street Research prototype retirement plans. In other cases, the CDSC is
waived on shares sold for mandatory retirement distributions or because of
disability or death. Consult your financial professional or the State Street
Research Service Center for more information.
[sidebar]
[magnifying glass graphic]
Understanding Distribution/Service Fees
As noted in the descriptions on pages 9 to 11, all share classes except Class S
have an annual distribution/service fee, also called a 12b-1 fee.
Under its current 12b-1 plans, the fund may pay certain distribution and service
fees for these classes out of fund assets. Because 12b-1 fees are an ongoing
expense, they will increase the cost of your investment and, over time, could
potentially cost you more than if you had paid other types of sales charges. For
that reason, you should consider the effects of 12b-1 fees as well as sales
loads when choosing a share class.
Some of the 12b-1 fee is used to compensate those financial professionals who
sell fund shares and provide ongoing service to shareholders. The table on the
next page shows how these professionals' compensation is calculated.
The fund may continue to pay 12b-1 fees even if the fund is subsequently closed
to new investors.
[end sidebar]
<PAGE>
13
----
[check graphic]
Dealer Compensation
Financial professionals who sell shares of State Street Research funds and
perform services for fund investors may receive sales commissions and annual
fees. These are paid by the fund's distributor, using money from sales charges,
distribution/service (12b-1) fees and its other resources.
Brokers and agents may charge a transaction fee on orders of fund shares placed
directly through them. The distributor may pay its affiliate MetLife Securities,
Inc. additional compensation of up to 0.25% of certain sales or assets.
<TABLE>
<CAPTION>
Maximum Dealer Compensation (%) Class A Class B(1) Class B Class C Class S
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commission See below 4.00 4.00 1.00 0.00
Investments up to $50,000 5.00 -- -- -- --
$50,000 to $100,000 4.00 -- -- -- --
$100,000 to $250,000 3.00 -- -- -- --
$250,000 to $500,000 2.00 -- -- -- --
$500,000 to $1 million 1.75 -- -- -- --
First $1 to $3 million 1.00(a) -- -- -- --
Next $2 million 0.75(a) -- -- -- --
Next $2 million 0.50(a) -- -- -- --
Next $1 and above 0.25(a) -- -- -- --
Annual fee 0.25 0.25 0.25 1.00 0.00
</TABLE>
(a) If your financial professional declines this commission, the one-year CDSC
on your investment is waived.
Brokers for Portfolio Trades
When placing trades for the fund's portfolio, State Street Research chooses
brokers that provide the best execution (a term defined by service as well as
price), but may also consider a broker's sales of fund shares.
<PAGE>
14 Buying and Selling Shares
- --------------------------------------------------------------------------------
[old-fashioned cash register graphic]
Policies for
Buying Shares
Once you have chosen a share class, the next step is to determine the amount you
want to invest.
Minimum Initial Investments:
[bullet] $1,000 for accounts that use the Investamatic program
[bullet] $2,000 for Individual Retirement Accounts
[bullet] $2,500 for all other accounts
Minimum Additional Investments:
[bullet] $50 for any account
Complete the enclosed application. You can avoid future inconvenience by signing
up now for any services you might later use.
Timing of Requests All requests received in good order by State Street Research
before the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. eastern time) will be executed the same day, at that day's closing share
price. Orders received thereafter will be executed the following day, at that
day's closing share price.
Wire Transactions Funds may be wired between 8:00 a.m. and 4:00 p.m. eastern
time. To make a same-day wire investment, please notify State Street Research by
12:00 noon of your intention to wire funds, and make sure your wire arrives by
4:00 p.m. If the New York Stock Exchange closes before 4 p.m. eastern time, you
may be unable to make a same-day wire investment. Your bank may charge a fee for
wiring money.
<PAGE>
Instructions for Buying Shares 15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Open an Account To Add to an Account
<S> <C> <C> <C>
[briefcase Through a Consult your financial professional or Consult your financial professional or
graphic] Professional your program materials. your program.materials.
or Program
By Mail [mailbox graphic] Make your check payable to "State Street Fill out an investment slip or indicate
Research Funds." Forward the check and the fund name and account number on your
your application to State Street Research. check. Make your check payable to "State
Street Research Funds." Forward the check
and slip to State Street Research.
[fedwire By Federal Call to obtain an account number, and Call State Street Research to obtain a
graphic] Funds Wire forward your application to State Street control number. Instruct your bank to
Research. Wire funds using the wire funds to:
instructions at right.
[bullet] State Street Bank and Trust
Company, Boston, MA
[bullet] ABA: 011000028
[bullet] BNF: fund name and share class
you want to buy
[bullet] AC: 99029761
[bullet] OBI: your name and your account
number
[bullet] Control: the number given to you
by State Street Research
By Electronic [plug graphic] Verify that your bank is a member of the Call State Street Research to verify that
Funds Transfer ACH (Automated Clearing House) system. the necessary bank information is on file
(ACH) Forward your application to State Street for your account. If it is, you may
Research. Please be sure to include the request a transfer with the same phone
appropriate bank information. Call State call. If not, please ask State Street
Street Research to request a purchase. Research to provide you with an
EZ Trader application.
[calendar By Investamatic Forward your application, with all Call State Street Research to verify that
graphic] appropriate sections completed, to State Investamatic is in place on your account,
Street Research, along with a check for or to request a form to add it. Investments
your initial investment payable to "State are automatic once Investamatic is in
Street Research Funds." place.
By Exchange [exchange graphic] Call State Street Research or visit our Call State Street Research or visit our
Web site. Web site.
State Street Research Service Center PO Box 8408, Boston, MA 02266-8408 Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern time)
</TABLE>
<PAGE>
16 Your Investment continued
- --------------------------------------------------------------------------------
[old-fashioned adding machine graphic]
Policies for
Selling Shares
Circumstances that Require Written Requests Please submit instructions in
writing when any of the following apply:
[bullet] you are selling more than $100,000 worth of shares
[bullet] the name or address on the account has changed within the last 30 days
[bullet] you want the proceeds to go to a name or address not on the account
registration
[bullet] you are transferring shares to an account with a different registration
or share class
[bullet] you are selling shares held in a corporate or fiduciary account; for
these accounts, additional documents are required:
corporate accounts: certified copy of a corporate resolution
fiduciary accounts: copy of power of attorney or other governing
document
To protect your account against fraud, all signatures on these documents must be
guaranteed. You may obtain a signature guarantee at most banks and securities
dealers. A notary public cannot provide a signature guarantee.
Incomplete Sell Requests State Street Research will attempt to notify you
promptly if any information necessary to process your request is missing.
Timing of Requests All requests received in good order by State Street Research
before the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. eastern time) will be executed the same day, at that day's closing share
price. Requests received thereafter will be executed the following day, at that
day's closing share price.
Wire Transactions Proceeds sent by federal funds wire must total at least
$5,000. A fee of $7.50 will be deducted from all proceeds sent by wire, and your
bank may charge an additional fee to receive wired funds.
Selling Recently Purchased Shares If you sell shares before the check or
electronic funds transfer (ACH) for those shares has been collected, you will
not receive the proceeds until your initial payment has cleared. This may take
up to 15 days after your purchase was recorded (in rare cases, longer). If you
open an account with shares purchased by wire, you cannot sell those shares
until your application has been processed.
<PAGE>
Instructions for Selling Shares 17
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
[briefcase Through a Consult your financial professional or your program materials.
graphic] Professional
or Program
By Mail [mailbox graphic] Send a letter of instruction, an endorsed stock power or share certificates
(if you hold certificate shares) to State Street Research. Specify the
fund, the account number and the dollar value or number of shares. Be sure
to include all necessary signatures and any additional documents, as well
as signature guarantees if required (see facing page).
[fedwire By Federal Check with State Street Research to make sure that a wire redemption
graphic] Funds Wire privilege, including a bank designation, is in place on your account. Once
this is established, you may place your request to sell shares with
State Street Research. Proceeds will be wired to your pre-designated bank
account. (See "Wire Transactions" on facing page.)
By Electronic [plug graphic] Check with State Street Research to make sure that the EZ Trader feature,
Funds Transfer including a bank designation, is in place on your account. Once this is ACH)
established, you may place your request to sell shares with State Street
Research. Proceeds will be sent to your pre-designated bank account.
[telephone By Telephone As long as the transaction does not require a written request (see facing
graphic page), you or your financial professional can sell shares by calling State
Street Research. A check will be mailed to your address of record on the
following business day.
By Exchange [exchange graphic] Read the prospectus for the fund into which you are exchanging. Call State
Street Research or visit our Web site.
[calendar By Systematic See plan information on page 21.
graphic] Withdrawal Plan
State Street Research Service Center PO Box 8408, Boston, MA 02266-8408 Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern time)
</TABLE>
<PAGE>
18 Your Investment continued
- --------------------------------------------------------------------------------
[stack of papers graphic]
Account Policies
Telephone Requests When you open an account you automatically receive telephone
privileges, allowing you to place requests on your account by telephone. Your
financial professional can also use these privileges to request exchanges on
your account and, with your written permission, redemptions. For your
protection, all telephone calls are recorded.
As long as State Street Research takes certain measures to authenticate
telephone requests on your account, you may be held responsible for unauthorized
requests. Unauthorized telephone requests are rare, but if you want to protect
yourself completely, you can decline the telephone privilege on your
application. The fund may suspend or eliminate the telephone privilege at any
time.
Exchange Privileges There is no fee to exchange shares among State Street
Research funds. Your new fund shares will be the equivalent class as your
current shares. Any contingent deferred sales charges will continue to be
calculated from the date of your initial investment.
You must hold Class A shares of any fund for at least 30 days before you may
exchange them at net asset value for Class A shares of a different fund with a
higher applicable sales charge.
Frequent exchanges can interfere with fund management and drive up costs for all
shareholders. Because of this, the fund currently limits each account, or group
of accounts under common ownership or control, to six exchanges per calendar
year. The fund may change or eliminate the exchange privilege at any time, may
limit or cancel any shareholder's exchange privilege and may refuse to accept
any exchange request, particularly those associated with "market timing"
strategies.
For Merrill Lynch customers, exchange privileges extend to Summit Cash Reserves
Fund, which is related to the fund for purposes of investment and investor
services.
Accounts with Low Balances If the value of your account falls below $1,500,
State Street Research may mail you a notice asking you to bring the account back
up to $1,500 or close it out. If you do not take action within 60 days, State
Street Research may either sell your shares and mail
<PAGE>
19
----
the proceeds to you at the address of record or, depending on the circumstances,
may deduct an annual maintenance fee (currently $18).
The Fund's Business Hours The fund is open the same days as the New York Stock
Exchange (generally Monday through Friday). Fund representatives are available
from 8:00 a.m. to 6:00 p.m. eastern time on these days.
Calculating Share Price The fund calculates its net asset value per share (NAV)
every business day at the close of regular trading on the New York Stock
Exchange (usually at 4:00 p.m. eastern time). NAV is calculated by dividing the
fund's net assets by the number of its shares outstanding.
In calculating its NAV, the fund uses the last reported sale price or quotation
for portfolio securities. However, in cases where these are unavailable, or when
the investment manager believes that subsequent events have rendered them
unreliable, the fund may use fair-value estimates instead.
Because foreign securities markets are sometimes open on different days from
U.S. markets, there may be instances when the value of the fund's portfolio
changes on days when you cannot buy or sell fund shares.
Reinstating Recently Sold Shares For 120 days after you sell shares, you have
the right to "reinstate" your investment by putting some or all of the proceeds
into any currently available State Street Research fund at net asset value. Any
CDSC you paid on the amount you are reinstating will be credited to your
account. You may only use this privilege once in any twelve-month period with
respect to your shares of a given fund.
Additional Policies Please note that the fund maintains additional policies and
reserves certain rights, including:
[bullet] The fund may vary its requirements for initial or additional
investments, exchanges, reinvestments, periodic investment plans,
retirement and employee benefit plans, sponsored arrangements and other
similar programs.
[bullet] All orders to purchase shares are subject to acceptance by the fund.
[bullet] At any time, the fund may change or discontinue its sales charge
waivers and any of its order acceptance practices, and may suspend the
sale of its shares.
[bullet] The fund may delay sending you redemption proceeds for up to seven
days, or longer if permitted by the SEC.
[bullet] To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the State Street Research
Service Center promptly.
<PAGE>
20 Your Investment continued
- --------------------------------------------------------------------------------
[sidebar]
[magnifying glass graphic]
Tax Considerations
Unless your investment is in a tax deferred account, you may want to avoid:
[bullet] investing a large amount in the fund close to the end of its fiscal
year (if the fund makes a distribution, you will receive some of your
investment back as a taxable distribution)
[bullet] selling shares at a loss for tax purposes and investing in a
substantially identical investment within 30 days before or after that
sale (such a transaction is usually considered a "wash sale," and you
will not be allowed to claim a tax loss)
[end sidebar]
[Uncle Sam graphic]
Distributions and Taxes
Income and Capital Gains Distributions The fund typically distributes any net
income to shareholders four times a year. Net capital gains, if any, are
typically distributed around the end of the fund's fiscal year, which is
December 31.
You may have your distributions reinvested in the fund, invested in a different
State Street Research fund, deposited in a bank account, or mailed out by check.
If you do not give State Street Research other instructions, your distributions
will automatically be reinvested in the fund.
Tax Effects of Distributions and Transactions In general, any dividends and
short-term capital gain distributions you receive from the fund are taxable as
ordinary income. Distributions of other capital gains are generally taxable as
capital gains - in most cases, at different rates from those that apply to
ordinary income.
Every year, the fund will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a taxable
event. For tax purposes, an exchange is the same as a sale.
<PAGE>
21
----
Your investment in the fund could have additional tax consequences. Please
consult your tax professional for assistance.
Backup Withholding By law, the fund must withhold 31% of your distributions and
proceeds if you have not provided complete, correct taxpayer information.
[hands graphic]
Investor Services
Investamatic Program Use Investamatic to set up regular automatic investments in
the fund from your bank account. You determine the frequency and amount of your
investments.
Systematic Withdrawal Plan This plan is designed for retirees and other
investors who want regular withdrawals from a fund account. The plan is free and
allows you to withdraw up to 8% of your fund assets a year without incurring any
contingent deferred sales charges. Certain terms and minimums apply.
EZ Trader This service allows you to purchase or sell fund shares over the
telephone through the ACH (Automated Clearing House) system.
Dividend Allocation Plan This plan automatically invests your distributions from
the fund into another fund of your choice, without any fees or sales charges.
Automatic Bank Connection This plan lets you route any distributions or
Systematic Withdrawal Plan payments directly to your bank account.
Retirement Plans State Street Research also offers a full range of prototype
retirement plans for individuals, sole proprietors, partnerships, corporations
and employees.
Call 1-800-562-0032 for information on any of the services described above.
<PAGE>
22 Other Information
- --------------------------------------------------------------------------------
[certificate graphic]
Other Securities
and Risks
Each of the fund's portfolio securities and investment practices offers certain
opportunities and carries various risks. Major investments and risk factors are
outlined in the fund description starting on page 1. Below are brief
descriptions of other securities and practices, along with their associated
risks.
Restricted and Illiquid Securities Any securities that are thinly traded or
whose resale is restricted can be difficult to sell at a desired time and price.
Some of these securities are new and complex, and trade only among institutions;
the markets for these securities are still developing, and may not function as
efficiently as established markets. Owning a large percentage of restricted and
illiquid securities could hamper the fund's ability to raise cash to meet
redemptions. Also, because there may not be an established market price for
these securities, the fund may have to estimate their value, which means that
their valuation (and, to a much smaller extent, the valuation of the fund) may
have a subjective element.
International Exposure Many U.S. companies in which the fund may invest generate
significant revenues and earnings from abroad. As a result, these companies and
the prices of their securities may be affected by weaknesses in global and
regional economies and the relative value of foreign currencies to the U.S.
dollar. These factors, taken as a whole, could adversely affect the price of
fund shares.
Foreign Investments Foreign securities are generally more volatile than their
domestic counterparts, in part because of higher political and economic risks,
lack of reliable information, and fluctuations in currency exchange rates. These
risks are usually higher in less developed countries. The fund may use foreign
currencies and related instruments to hedge its foreign investments.
In addition, foreign securities may be more difficult to resell and the markets
for them less efficient than for comparable U.S. securities. Even where a
foreign security increases in price in its local currency, the appreciation may
be diluted by the negative effect of exchange rates when the security's value is
converted to U.S. dollars. Foreign withholding taxes also may apply and errors
and delays may occur in the settlement process for foreign securities.
Derivatives Derivatives, a category that includes options and futures, are
financial instruments whose value derives from one or more securities, indicies
or currencies. The fund may use certain derivatives for hedging (attempting to
offset a potential loss in
<PAGE>
23
----
one position by establishing an interest in an opposite position). This includes
the use of currency-based derivatives for hedging its positions in foreign
securities. The fund may also use derivatives for speculation (investing for
potential income or capital gain).
While hedging can guard against potential risks, it adds to the fund's expenses
and can eliminate some opportunities for gains. There is also a risk that a
derivative intended as a hedge may not perform as expected.
The main risk with derivatives is that some types can amplify a gain or loss,
potentially earning or losing substantially more money than the actual cost of
the derivative.
With some derivatives, whether used for hedging or speculation, there is also
the risk that the counterparty may fail to honor its contract terms, causing a
loss for the fund.
Securities Lending The fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the fund could realize additional gains or
losses. If the borrower fails to return the securities and the collateral is
insufficient to cover the loss, the fund could lose money.
Short-term Trading While the fund ordinarily does not trade securities for
short-term profits, it will sell any security at the time it believes best,
which may result in short-term trading. Short-term trading can increase the
fund's transaction costs and may increase your tax liability if there are
capital gains. In addition, foreign securities generally involve higher
transaction costs per share traded.
Bonds The value of any bonds held by the fund is likely to decline when interest
rates rise; this risk is greater for bonds with longer maturities. A less
significant risk is that a bond issuer could default on principal or interest
payments, causing a loss for the fund.
When-issued Securities The fund may invest in securities prior to their date of
issue. These securities could fall in value by the time they are actually
issued, which may be any time from a few days to over a year.
Defensive Investing During unusual market conditions, the fund may place up to
100% of total assets in cash or high-quality, short-term debt securities. To the
extent the fund does this, it is not pursuing its goal.
Year 2000 The investment manager does not currently anticipate that computer
problems related to the year 2000 will have a material effect on the fund.
However, there can be no assurances in this area, including the possibility that
year 2000 computer problems could negatively affect communication systems,
investment markets or the economy in general.
<PAGE>
24 Financial Highlights
- --------------------------------------------------------------------------------
These highlights are intended to help you understand the fund's performance over
the past five years. The information in these tables has been audited by
PricewaterhouseCoopers LLP, the fund's independent accountants. Their report and
the fund's financial statements are included in the fund's annual report, which
is available upon request.
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------------------------------------------------
Years ended December 31 Years ended December 31
Per Share Data 1994 1995(a) 1996(a) 1997(a) 1998(a) 1994 1995(a) 1996(a) 1997(a) 1998(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 8.69 7.74 9.16 9.07 10.41 8.66 7.72 9.13 9.03 10.34
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) ($) 0.11 0.14 0.12 0.10 0.07 0.06 0.07 0.04 0.02 (0.01)
Net realized and unrealized gain (loss)
on investments ($) (0.44) 2.39 1.80 2.54 2.89 (0.44) 2.38 1.80 2.51 2.87
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations ($) (0.33) 2.53 1.92 2.64 2.96 (0.38) 2.45 1.84 2.53 2.86
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.12) (0.13) (0.13) (0.10) (0.06) (0.06) (0.06) (0.06) (0.02) --
Distribution from capital gains ($) (0.50) (0.98) (1.87) (1.20) (0.95) (0.50) (0.98) (1.87) (1.20) (0.95)
Distribution in excess of capital gains ($) -- -- (0.01) -- -- -- -- (0.01) -- --
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions ($) (0.62) (1.11) (2.01) (1.30) (1.01) (0.56) (1.04) (1.94) (1.22) (0.95)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year ($) 7.74 9.16 9.07 10.41 12.36 7.72 9.13 9.03 10.34 12.25
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return (%)(b) (3.84) 32.85 21.03 28.91 29.12 (4.43) 31.86 20.15 27.80 28.26
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets at end of year ($ thousands) 92,137 135,676 223,868 367,759 574,858 113,301 183,446 315,766 558,568 944,388
Expense ratio (%) 0.89 0.78 0.75 0.76 0.85 1.64 1.53 1.50 1.51 1.60
Ratio of net investment income (loss)
to average net assets (%) 1.26 1.54 1.17 0.90 0.63 0.51 0.79 0.41 0.15 (0.12)
Portfolio turnover rate (%) 33.08 39.21 73.51 75.21 66.32 33.08 39.21 73.51 75.21 66.32
</TABLE>
<PAGE>
25
----
<TABLE>
<CAPTION>
Class C Class S
----------------------------------------------------------------------------------------
Years ended December 31 Years ended December 31
Per Share Data 1994 1995(a) 1996(a) 1997(a) 1998(a) 1994 1995(a) 1996(a) 1997(a) 1998(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 8.68 7.74 9.15 9.05 10.38 8.70 7.76 9.18 9.11 10.45
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) ($) 0.05 0.07 0.04 0.02 (0.01) 0.13 0.16 0.14 0.12 0.10
Net realized and unrealized gain (loss)
on investments ($) (0.43) 2.38 1.79 2.53 2.87 (0.43) 2.39 1.82 2.54 2.91
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations ($) (0.38) 2.45 1.83 2.55 2.86 (0.30) 2.55 1.96 2.66 3.01
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.06) (0.06) (0.05) (0.02) -- (0.14) (0.15) (0.15) (0.12) (0.09)
Distribution from capital gains ($) (0.50) (0.98) (1.87) (1.20) (0.95) (0.50) (0.98) (1.87) (1.20) (0.95)
Distribution in excess of capital gains ($) -- -- (0.01) -- -- -- -- (0.01) -- --
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions ($) (0.56) (1.04) (1.93) (1.22) (0.95) (0.64) (1.13) (2.03) (1.32) (1.04)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year ($) 7.74 9.15 9.05 10.38 12.29 7.76 9.18 9.11 10.45 12.42
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return (%)(b) (4.45) 31.75 20.09 27.93 28.15 (3.47) 33.07 21.48 29.08 29.51
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets at end of year ($ thousands) 11,707 16,841 25,658 36,290 55,263 627,551 738,649 780,627 883,276 1,030,011
Expense ratio (%) 1.64 1.53 1.50 1.51 1.60 0.65 0.54 0.50 0.51 0.60
Ratio of net investment income (loss)
to average net assets (%) 0.51 0.79 0.42 0.15 (0.13) 1.54 1.81 1.44 1.17 0.88
Portfolio turnover rate (%) 33.08 39.21 73.51 75.21 66.32 33.08 39.21 73.51 75.21 66.32
</TABLE>
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
<PAGE>
26 Board of Trustees
- --------------------------------------------------------------------------------
[column graphic]
The Board of Trustees is responsible for the operation of the fund. They
establish the fund's major policies, review investments, and provide guidance to
the investment manager and others who provide services to the fund. The Trustees
have diverse backgrounds and substantial experience in business and other areas.
Ralph F. Verni
Chairman of the Board, President,
Chief Executive Officer and Director,
State Street Research & Management
Company
Bruce R. Bond
Chairman of the Board,
Chief Executive Officer and President,
PictureTel Corporation
Steve A. Garban
Former Senior Vice President for Finance
and Operations and Treasurer,
The Pennsylvania State University
Malcolm T. Hopkins
Former Vice Chairman of the Board
and Chief Financial Officer,
St. Regis Corp.
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Susan M. Phillips
Dean, School of Business and Public
Management, George Washington
University; former Member of the Board of
Governors of the Federal Reserve System
and Chairman and Commissioner
of the Commodity Futures Trading Commission
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
<PAGE>
Notes 27
- --------------------------------------------------------------------------------
<PAGE>
For Additional Information
- --------------------------------------------------------------------------------
If you have questions about the fund or would like to request a free copy of the
current annual/semiannual report or SAI, contact State Street Research or your
financial professional.
[State Street Research logo]
Service Center
P.O. Box 8408, Boston, MA 02266
Telephone: 1-800-562-0032
Internet: www.ssrfunds.com
You can also obtain information about the fund, including the SAI and certain
other fund documents, on the Internet at www.sec.gov, in person at the SEC's
Public Reference Room in Washington, DC (telephone 1-800-SEC-0330) or by mail by
sending your request, along with a duplicating fee, to the SEC's Public
Reference Section, Washington, DC 20549-6009.
prospectus
- ----------------------------
SEC File Number: 811-84
You can find additional information on the fund's structure and its performance
in the following documents:
Annual/Semiannual Reports While the prospectus describes the fund's potential
investments, these reports detail the fund's actual investments as of the report
date. Reports include a discussion by fund management of recent economic and
market trends and fund performance. The annual report also includes the report
of the fund's independent accountants.
Statement of Additional Information (SAI) A supplement to the prospectus, the
SAI contains further information about the fund and its investment limitations
and policies. A current SAI for this fund is on file with the Securities and
Exchange Commission and is incorporated by reference (is legally part of this
prospectus).
<TABLE>
<CAPTION>
Ticker Symbols
- ---------------------------------------
<S> <C>
Class A SITAX
Class B(1) (proposed) SIVPX
Class B SITBX
Class C SITDX
Class S STSTX
</TABLE>
prospectus
----------
Control Number: (exp0500)SSR-LD
<PAGE>
STATE STREET RESEARCH INVESTMENT TRUST
a Series of
STATE STREET RESEARCH MASTER INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVE..............................................2
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS...................2
ADDITIONAL RISKS AND INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES............................4
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS..................16
THE TRUST, THE FUND AND ITS SHARES...............................21
TRUSTEES AND OFFICERS............................................22
MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY SERVICES..........26
PURCHASE AND REDEMPTION OF SHARES................................28
SHAREHOLDER ACCOUNTS.............................................35
NET ASSET VALUE..................................................39
PORTFOLIO TRANSACTIONS...........................................40
CERTAIN TAX MATTERS..............................................44
DISTRIBUTION OF SHARES OF THE FUND...............................46
CALCULATION OF PERFORMANCE DATA..................................51
CUSTODIAN........................................................53
INDEPENDENT ACCOUNTANTS..........................................53
FINANCIAL STATEMENTS.............................................53
</TABLE>
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 "Fund") dated May 1, 1999, which may be obtained without
charge from the offices of State Street Research Master Investment Trust (the
"Trust") or State Street Research Investment Services, Inc. (the "Distributor"),
One Financial Center, Boston, Massachusetts 02111-2690.
The Fund's financial statements as of and for the fiscal year ended
December 31, 1998, which are included in the Fund's Annual Report to
Shareholders for that year, are incorporated by reference. The Annual Report is
available without charge, upon request by calling 1-800-562-0032.
CONTROL NUMBER: 1285O-980501(0500)SSR-LD IT-879D-599
<PAGE>
INVESTMENT OBJECTIVE
As set forth under "The Fund--Goal and Strategies--Fundamental Goal" in the
Prospectus of State Street Research Investment Trust (the "Fund"), the Fund's
investment goal, which is to seek long-term growth of capital and, secondarily,
long-term growth of income, is fundamental and may not be changed by the Fund
except by the affirmative vote of a majority of the outstanding voting
securities of the Fund, 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 the annual or a special
meeting of security holders duly called, (i) of 67% or more of the voting
securities present at the 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.)
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As set forth under "The Fund--Principal Risks" and "Other
Information--Other Securities and Risks" in the Fund's Prospectus, the Fund has
adopted certain investment restrictions, and those investment restrictions are
either fundamental or not fundamental. Fundamental restrictions may not be
changed by the Fund except by the affirmative vote of a majority of the
outstanding voting securities of the Fund. Restrictions that are not fundamental
may be changed by a vote of a majority of the Trustees of the Trust.
The Fund's fundamental investment restrictions are set forth below. Under
these restrictions, it is the Fund'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 Fund's total assets, cause more than 5% of the Fund'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
Fund;
(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 Fund'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;
2
<PAGE>
(3) not to make any investment that would cause more than 25% of the
Fund'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 (9) of this
paragraph;
(5) not to underwrite or participate in the marketing of securities of
other issuers although the Fund 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 Fund's securities, the Fund may
be deemed to be an underwriter under certain federal securities laws];
(6) not to make any investment in real property, although the Fund 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 Fund 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 Fund 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 Fund may invest in securities
issued by companies which
3
<PAGE>
invest in or sponsor such 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 Fund, 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 without shareholder
approval. Under these restrictions, it is the Fund'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); and
(2) not to make investments for the purpose of exercising control or
management of other companies although the Fund may from time to time present
its views on various matters to the management of companies in which it holds an
investment.
ADDITIONAL RISKS AND INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Derivatives.
The Fund may buy and sell certain types of derivatives, such as options,
futures contracts, options on futures contracts, and swaps under circumstances
in which such instruments are expected by State Street Research & Management
Company (the "Investment Manager") to aid in achieving the Fund's investment
objective. The Fund 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.
Derivatives, such as options, futures contracts, options on futures
contracts, and swaps enable the Fund to take both "short" positions (positions
which anticipate a decline in the market value of a particular asset or index)
and "long" positions (positions which anticipate an increase in the market value
of a particular asset or index). The Fund may also use strategies
4
<PAGE>
which involve simultaneous short and long positions in response to specific
market conditions, such as where the Investment Manager anticipates unusually
high or low market volatility.
The Investment Manager may enter into derivative positions for the Fund for
either hedging or non-hedging purposes. The term hedging is applied to defensive
strategies designed to protect the Fund from an expected decline in the market
value of an asset or group of assets that the Fund owns (in the case of a short
hedge) or to protect the Fund from an expected rise in the market value of an
asset or group of assets which it intends to acquire in the future (in the case
of a long or "anticipatory" hedge). Non-hedging strategies include strategies
designed to produce incremental income (such as the option writing strategy
described below) or "speculative" strategies, which are undertaken to profit
from (i) an expected decline in the market value of an asset or group of assets
which the Fund does not own or (ii) expected increases in the market value of an
asset which it does not plan to acquire. Information about specific types of
instruments is provided below.
Futures Contracts.
Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency 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 an equity security or an index of
equity 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 Fund will initially be required to deposit with the Trust's
custodian or the futures commission merchant effecting the futures transaction
an amount of "initial margin" in cash or securities, as permitted under
applicable regulatory policies.
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 Fund 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 Fund will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Fund 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 Fund would be required to make a
maintenance margin payment to the broker.
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<PAGE>
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will terminate the
Fund'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 Fund, and the Fund realizes a loss or a gain. While futures contracts with
respect to securities do provide for the delivery and acceptance of such
securities, such delivery and acceptance are seldom made.
In transactions establishing a long position in a futures contract, assets
equal to the face value of the futures contract will be identified by the Fund
to the Trust's custodian for maintenance in a separate account to insure that
the use of such futures contracts is unleveraged. Similarly, assets having a
value equal to the aggregate face value of the futures contract will be
identified with respect to each short position. The Fund will utilize such
assets and methods of cover as appropriate under applicable exchange and
regulatory policies.
Options
The Fund may use options to implement its investment strategy. There are
two basic types of options: "puts" and "calls." Each type of option can
establish either a long or a short position, depending upon whether the Fund is
the purchaser or the writer of the option. 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, that is, the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset. In general, a purchased put increases in value
as the value of the underlying security falls and a purchased call increases in
value as the value of the underlying security rises.
The principal reason to write options is to generate extra income (the
premium paid by the buyer). 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,
that is, 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, that is, the difference between the agreed-upon
price that the Fund 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
its obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a
6
<PAGE>
put option, a covered writer is required to deposit in escrow the underlying
security or other assets in accordance with the rules of the applicable clearing
corporation and exchanges.
Among the options which the Fund may enter are options on securities
indices. In general, options on indices of securities are similar to options on
the securities themselves except that delivery requirements are different. For
example, a put option on an index of securities does not give the holder the
right to make actual delivery of a basket of securities but instead 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 equity securities, or futures contracts,
a Fund 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. In connection
with the use of such options, the Fund may cover its position by identifying
assets having a value equal to the aggregate face value of the option position
taken.
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.
Limitations and Risks of Options and Futures Activity
The Fund 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 Fund's net assets. The Fund
applies a similar policy to options that are not commodities.
As noted above, the Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the bulk of a
desired risk adjustment, no hedge is completely effective. The Fund'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.
Nonhedging strategies typically involve special risks. The profitability of
the Fund's nonhedging strategies will depend on the ability of the Investment
Manager to analyze both the applicable derivatives market and the market for the
underlying asset or group of assets.
7
<PAGE>
Derivatives markets are often more volatile than corresponding securities
markets and a relatively small change in the price of the underlying asset or
group of assets can have a magnified effect upon the price of a related
derivative instrument.
Derivatives markets also are often less liquid than the market for the
underlying asset or group of assets. 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 Fund's ability to effectively carry out their derivative
strategies and might, in some cases, require a Fund to deposit cash to meet
applicable margin requirements. The Fund will enter into an option or futures
position only if it appears to be a liquid investment.
Short Sales Against the Box
The Fund may effect short sales, but only if such transactions are short
sale transactions known as short sales "against the box." A short sale is a
transaction in which the Fund sells a security it does not own by borrowing it
from a broker, and consequently becomes obligated to replace that security. A
short sale against the box is a short sale where the Fund owns the security sold
short or has an immediate and unconditional right to acquire that security
without additional cash consideration upon conversion, exercise or exchange of
options with respect to securities held in its portfolio. The effect of selling
a security short against the box is to insulate that security against any future
gain or loss.
Swap Arrangements
The Fund 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 Fund 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
Fund a fixed rate of interest on the notional principal amount. In a currency
swap the Fund 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 Fund 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.
8
<PAGE>
The Fund may enter credit protection swap arrangements involving the sale
by the Fund of a put option on a debt security which is exercisable by the buyer
upon certain events, such as a default by the referenced creditor on the
underlying debt or a bankruptcy event of the creditor.
Most swaps entered into by the Fund 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 Fund either receiving or paying the difference between such
amounts. In order to be in a position to meet any obligations resulting from
swaps, the Fund 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
Fund'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 Fund's obligations.
These arrangements will be made primarily for hedging purposes, to preserve
the return on an investment or on a portion of the Fund's portfolio. However,
the Fund may, as noted above, enter into such arrangements for income purposes
to the extent permitted by the Commodities Futures Trading Commission for
entities which are not commodity pool operators, such as the Fund. In entering a
swap arrangement, the Fund is dependent upon the creditworthiness and good faith
of the counterparty. The Fund 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 Fund 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.
Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements occur
when the Fund 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
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<PAGE>
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Fund 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 Fund's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Fund's net assets, except
that repurchase agreements extending for more than seven days when combined with
any other illiquid securities held by the Fund will be limited to 15% of the
Fund's net assets.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. However, the Fund
may not engage in reverse repurchase agreements in excess of 5% of the Fund's
total assets. In a reverse repurchase agreement the Fund 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 Fund 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 Fund 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 Fund in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.
When-Issued Securities
The Fund may purchase "when-issued" securities, which are traded on a price
or yield basis prior to actual issuance. Such purchases will be made only to
achieve the Fund'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 or interest on the securities are not
payable. 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 actual
issuance. The Trust's custodian will establish a segregated account when the
Fund 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 Fund.
Restricted Securities
It is the Fund's policy not to make an investment in restricted securities,
including restricted securities sold in accordance with Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities") if, as a result, more than 35%
of the Fund's total assets are invested in
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<PAGE>
restricted securities, provided not more than 10% of the Fund's total assets are
invested in restricted securities other than Rule 144A 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 relatively new and still
developing; depending on the development of such markets, 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, market making
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 Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, the Fund may be
adversely impacted by the subjective valuation of such securities in the absence
of a market for them. Restricted securities that are not resalable under Rule
144A may be subject to risks of illiquidity and subjective valuations to a
greater degree than Rule 144A Securities.
Foreign Investments
The Fund 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 Fund 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 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 Fund; (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
tradings. The Fund
11
<PAGE>
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 difficulties 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.
These risks are usually higher in less-developed countries. Such countries
include countries that have an emerging stock market on which trade a small
number of securities and/or countries with economies that are based on only a
few industries. The Fund may invest in the securities of issuers in countries
with less developed economies as deemed appropriate by the Investment Manager.
However, it is anticipated that a majority of the foreign investments by the
Fund will consist of securities of issuers in countries with developed
economies.
Currency Transactions
The Fund may engage in currency exchange transactions in order to
protect against the effect of uncertain future exchange rates on securities
denominated in foreign currencies. The Fund will conduct its 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. The Fund'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. In entering a
forward currency contract, the Fund is dependent upon the creditworthiness and
good faith of the counterparty. The Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, reputable
institutions. Although spot and forward contracts will be used primarily to
protect the Fund 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 Fund. This method of protecting the value of the Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the
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<PAGE>
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.
Securities Lending
The Fund may lend portfolio securities with a value of up to 33 1/3% of its
total assets. The Fund 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 any loaned securities plus accrued interest. Collateral
received by the Fund will generally be held in the form tendered, although cash
may be invested in unaffiliated mutual funds with quality short-term portfolios,
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or certain unaffiliated mutual funds, irrevocable stand-by
letters of credit issued by a bank, or repurchase agreements, or other similar
investments. 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
Fund's outstanding securities. Such loans may be terminated at any time.
The Fund may receive a lending fee and will retain rights to dividends,
interest or other distributions, on the loaned securities. Voting rights pass
with the lending, although the Fund 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 or its agents
to be of good financial standing.
Short-Term Trading
The Fund may engage in short-term trading of securities and reserves full
freedom with respect to portfolio turnover. In periods where there are rapid
changes in economic conditions and security price levels or when reinvestment
strategy changes significantly, portfolio turnover may be higher than during
times of economic and market price stability or when investment strategy remains
relatively constant. The Fund's portfolio turnover rate may involve greater
transaction costs, relative to other funds in general, and may have tax and
other consequences.
Temporary and Defensive Investments
The Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. The Fund 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 Fund's other investment policies. The types of short-term
instruments in which the Fund may invest for such purposes include
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<PAGE>
short-term money market securities, such as repurchase agreements, and
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, time deposits and bankers'
acceptances of certain qualified financial institutions and corporate commercial
paper, which at the time of purchase are rated at least within the "A" major
rating category by Standard & Poor's Corporation ("S&P") or the "Prime" major
rating category by Moody's Investor's Service, Inc. ("Moody's"), or, if not
rated, issued by companies having an outstanding long-term unsecured debt issued
rated at least within the "A" category by S&P or Moody's.
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 their parent or sponsor 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.
Autos & Transportation
- ----------------------
Air Transport
Auto Parts
Automobiles
Miscellaneous
Transportation
Railroad Equipment
Railroads
Recreational Vehicles &
Boats
Tires & Rubber
Truckers
Consumer Discretionary
- ----------------------
Advertising Agencies
Casino/Gambling,
Hotel/Motel
Commercial Services
Communications, Media &
Entertainment
Consumer Electronics
Consumer Products
Consumer Services
Household Furnishings
Leisure Time
Photography
Printing & Publishing
Restaurants
Retail
Shoes
Textile Apparel
Manufacturers
Toys
Consumer Staples
- ----------------
Beverages
Drug & Grocery Store
Chains
Foods
Household Products
Tobacco
Financial Services
- ------------------
Banks & Savings and Loans
Financial Data Processing
Services & Systems
Insurance
Miscellaneous Financial
Real Estate Investment
Trusts
Rental & Leasing Services:
Commercial
Securities Brokerage &
Services
Health Care
- -----------
Drugs & Biotechnology
Health Care Facilities
Health Care Services
Hospital Supply
Service Miscellaneous
Integrated Oils
- ---------------
Oil: Integrated Domestic
Oil: Integrated International
Materials & Processing
- ----------------------
Agriculture
Building & Construction
Chemicals
Containers & Packaging
Diversified Manufacturing
Engineering & Contracting
Serv.
Fertilizers
Forest Products
Gold & Precious Metals
Miscellaneous Materials &
Processing
Non-Ferrous Metals
Office Supplies
Paper and Forest Products
Real Estate & Construction
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Steel
Textile Products
Other
- -----
Trust Certificates --
Government Related
Lending
Asset-backed-Mortgages
Asset-backed-Credit Card
Receivables
Miscellaneous
Multi-Sector Companies
Other Energy
- ------------
Gas Pipelines
Miscellaneous Energy
Offshore Drilling
Oil and Gas Producers
Oil Well Equipment &
Services
Producer Durables
- -----------------
Aerospace
Electrical Equipment &
Components
Electronics: Industrial
Homebuilding
Industrial Products
Machine Tools
Machinery
Miscellaneous Equipment
Miscellaneous Producer
Durables
Office Furniture & Business
Equipment
Pollution Control and
Environmental Services
Production Technology
Equipment
Telecommunications
Equipment
Technology
- ----------
Communications Technology
Computer Software
Computer Technology
Electronics
Electronics: Semi-
Conductors/Components
Miscellaneous Technology
Utilities
- ---------
Miscellaneous Utilities
Utilities: Cable TV & Radio
Utilities: Electrical
Utilities: Gas distribution
Utilities:Telecommunications
Utilities: Water
Computer-Related Risks
Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may be
adversely affected by computer systems (whether their own systems or systems of
their service providers) that do not properly process dates beginning with
January 1, 2000 and information related to those dates.
15
<PAGE>
The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Fund, as well as the computer
systems of those service providers upon which the Fund relies, in order to
obtain reasonable assurances that the Fund will not experience a material
adverse impact related to the problem. The Fund does not currently anticipate
that the problem will have a material adverse impact on its portfolio
investments, taken as a whole. There can be no assurances in the area, however,
including the possibility that the problem could negatively affect the
investment markets or the economy generally.
Other Investment Companies
The Fund may invest in securities of other investment companies, including
affiliated investment companies, such as open- or closed-end management
investment companies, hub and spoke (master/feeder) funds, pooled accounts or
other similar, collective investment vehicles. As a shareholder of an investment
company, the Fund may indirectly bear service and other fees in addition to the
fees the Fund pays its service providers. Similarly, other investment companies
may invest in the Fund. Other investment companies that invest in the Fund may
hold significant portions of the Fund and materially affect the sale and
redemption of Fund shares and the Fund's portfolio transactions.
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS
The Fund may invest in long-term and short-term debt securities. Certain
debt securities and money market instruments in which the Fund may invest 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 corporations as described herein. The U.S. Government
securities in which the Fund invests include, among others:
o direct obligations of the U.S. Treasury, i.e., U.S. 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 Fund 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
Bank,
16
<PAGE>
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 Fund
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 Fund 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
principal and interest components and maintained as such on the book entry
records of the Federal Reserve Banks.
In addition, the Fund 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 Fund 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. The borrower
is liable for payment as well as the
17
<PAGE>
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
Fund 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
Fund 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 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.
Zero and Step Coupon Securities
Zero and step coupon securities are debt securities that may pay no
interest for all or a portion of their life but are purchased at a discount to
face value at maturity. Their return consists of the amortization of the
discount between their purchase price and their maturity value, plus in the case
of a step coupon, any fixed rate interest income. Zero coupon securities pay no
interest to holders prior to maturity even though interest on these securities
is reported as income to the Fund. The Fund will be required to distribute all
or substantially all of such amounts annually to its shareholders. These
distributions
18
<PAGE>
may cause the Fund to liquidate portfolio assets in order to make such
distributions at a time when the Fund may have otherwise chosen not to sell such
securities. The market value of such securities may be more volatile than that
of securities which pay interest at regular intervals.
Commercial Paper Ratings
Commercial paper investments at the time of purchase will be rated within
the "A" major rating category by S&P or within the "Prime" major rating category
by 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
within the "Prime" category by Moody's, within comparable categories of other
rating agencies or considered to be of comparable quality by the Investment
Manager.
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 within the "A" category 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
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.
In the event the lowering of ratings of debt instruments held by the Fund
by applicable rating agencies results in a material decline in the overall
quality of the Fund's portfolio, the Trustees of the Trust will review the
situation and take such action as they deem in the best interests of the Fund's
shareholders, including, if necessary, changing the composition of the
portfolio.
19
<PAGE>
THE TRUST, THE FUND AND ITS SHARES
The Fund was organized in 1924 and is a separate series of State Street
Research Master Investment Trust. The Trust is currently comprised of only one
series: State Street Research Investment Trust. A "series" is a separate pool of
assets of the Trust which is separately managed and has a different investment
objective and different investment policies from those of another series. The
Trustees of the Trust have authority to issue an unlimited number of shares of
beneficial interest of separate series, $.001 par value per share. The Trustees
also 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 or classes. The Trustees have authorized
shares of the Fund to be issued in five classes: Class A, Class B(1), Class B,
Class C and Class S shares.
Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of the Fund, has the same rights and is
identical in all respects, except that Class A, Class B(1), Class B and Class C
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 Fund also have different exchange privileges. Except for those
differences between classes of shares described above, in the Fund's Prospectus
and otherwise this Statement of Additional Information, each share of the Fund
has equal dividend, redemption and liquidation rights with other shares of the
Fund, and when issued, is fully paid and nonassessable by the Fund.
20
<PAGE>
Shareholder rights granted under the Master Trust Agreement may be modified
by the Trustees provided, however, that the Master Trust Agreement may not be
amended if such amendment (a) repeals the limitations on personal liability of
any shareholder, or repeals the prohibition of assessment upon shareholders,
without the express consent of each shareholder involved or (b) adversely
modifies any shareholder right without the consent of the holders of a majority
of the outstanding shares entitled to vote. On any matter submitted to the
shareholders, the holder of a Fund share is entitled to one vote per share (with
proportionate voting for fractional shares) regardless of the relative net asset
value thereof. Except as provided by law, the Trustees may otherwise modify the
rights of shareholders at any time.
Under the Master Trust Agreement, no annual or regular meeting of
shareholders is required. Thus, there ordinarily will be no shareholder meetings
unless required by the 1940 Act. Except as otherwise provided under the 1940
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 Trust. In the event less than a majority of the Trustees
serving as such were elected by shareholders of the 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 Trust
shares; holders of 10% or more of the outstanding shares of the Trust can
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 Trust could, under certain
circumstances, be held personally liable for the obligations for the Trust.
However, the Master Trust Agreement of the Trust disclaims shareholder liability
for acts or obligations of the Trust and provides for indemnification for all
losses and expenses of any shareholder of the Fund held personally liable for
the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund 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.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the 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 Trust. He is 60. His principal occupation is currently, and
during the past five years has been, Executive Vice President of State Street
Research & Management
- -------------------
* or +, see footnotes on page 24.
21
<PAGE>
Company. Mr. Bennett is also a Director of State Street Research & Management
Company. Mr. Bennett's other principal business affiliation is Director, State
Street Research Investment Services, Inc.
Bruce R. Bond, 100 Minuteman Road, Andover, MA 01810, serves as Trustee of
the Trust. He is 52. His principal occupation is Chairman of the Board, Chief
Executive Officer and President of PictureTel Corporation. During the past five
years, Mr. Bond has also served as Chief Executive Officer of ANS Communications
(a communications networking company) and as managing director of British
Telecommunications PLC. His other principal business affiliations include
Director of WITCO Corporation, a specialty chemical company, and Ceridian
Corporation, an information services company.
+Steve A. Garban, The Pennsylvania State University, 210 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 61. He is
retired and was formerly Senior Vice President for Finance and Operations and
Treasurer of The Pennsylvania State University.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 71. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 48. His principal occupation is currently, and
during the past five years has been, Executive Vice President, Treasurer, Chief
Financial Officer, Chief Administrative Officer and Director of State Street
Research & Management Company. Mr. Maus's other principal business affiliations
include Executive Vice President, Treasurer, Chief Financial Officer, Chief
Administrative 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 Trust. He is 43. 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 Executive Vice President, Clerk and General Counsel of State Street
Research Investment Services, Inc.
- -------------------
* or +, see footnotes on page 24.
22
<PAGE>
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 67. He is retired and was formerly Executive Vice
President, Chief Operating Officer and Director of Hewlett-Packard Company.
+Susan M. Phillips, The George Washington University, 710 21st Street,
Suite 206, Washington, DC 20052, serves as Trustee of the Trust. She is 56. Her
principal occupation is currently Dean of the School of Business and Public
Management at George Washington University and Professor of Finance. Dr.
Phillips's other principal business affiliations include Director of Cantor
Fitzgerald Futures Exchange, Inc. and State Farm Life Insurance Company.
Previously, she was a member of the Board of Governors of the Federal Reserve
System and Chairman and Commissioner of the Commodity Futures Trading
Commission.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves as
Trustee of the Trust. He is 60. 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 Trust. He is
61. 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
Trust. He is 56. His principal occupation is currently, and during the past five
years has been, Chairman of the Board, President, Chief Executive Officer and
Director of State Street Research & Management 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 of that company).
*+Dudley F. Wade, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 80. His principal occupation during the past five
years has been Senior Vice President of State Street Research & Management
Company.
*+James M. Weiss, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 52. His principal occupation is Executive 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.
- -------------------
* or +, see footnotes on page 24.
23
<PAGE>
*+John T. Wilson, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 35. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as a Vice President of State Street Research &
Management Company, 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.
- -----------------
* These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations
with the Fund's investment adviser.
+ Serves as a Trustee/Director and/or officer of one or more of the
following investment companies, each of which has an advisory
relationship with the Investment Manager or its parent, Metropolitan
Life Insurance Company ("Metropolitan"): 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.
24
<PAGE>
As of January 31, 1999, the Trustees and principal officers of the Trust
owned as a group less than 1% of the outstanding Class A shares of the Fund and
owned approximately 1.4% of the outstanding Class S shares. They owned none of
the Fund's outstanding Class B(1), Class B or Class C shares.
Record ownership of shares of the Fund as of January 31, 1999 was as
follows:
<TABLE>
<CAPTION>
Class Holder % of Class
- ----- ------ ----------
<S> <C> <C>
B(1) Merrill Lynch 9.6
B Merrill Lynch 9.4
C Merrill Lynch 42.3
</TABLE>
The full name and address of the above person or institution is:
Merrill Lynch, Pierce, Fenner & Smith Incorporated (a)
4800 Deerlake Drive East
East Jacksonville, FL 32246
Ownership of 25% or more of a voting security is deemed "control," as
defined in the 1940 Act. So long as 25% of a class of shares is so owned, such
owners will be presumed to be in control of such class of shares for purposes of
voting on certain matters submitted to a vote of shareholders, such as any
Distribution Plan for a given class.
- -------------------
(a) The Fund believes that each named recordholder does not have beneficial
ownership of such shares.
25
<PAGE>
The Trustees were compensated as follows:
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From Fund and
Name of Compensation Fund Complex Paid
Trustee From Fund(a) to Trustees (b)
------- ------------ -----------------
<S> <C> <C>
Bruce R. Bond* $ 0 $ 0
Steven A. Garban $ 4,500 $ 110,300
Malcolm T. Hopkins $ 4,000 $ 97,200
Dean O. Morton $ 4,600 $ 110,700
Susan M. Phillips $ 1,235 $ 12,145
Toby Rosenblatt $ 4,000 $ 72,600
Michael S. Scott Morton $ 4,800 $ 115,500
Ralph F. Verni $ 0 $ 0
</TABLE>
*Elected Trustee on January 1, 1999 and therefore did not earn any fees for the
fiscal year ended December 31, 1998.
(a) For the Fund's fiscal year ended December 31, 1998
(b) Includes compensation received on behalf of all series of 12 investment
companies for which the Investment Manager or its parent, Metropolitan,
served as investment adviser. "Total Compensation from Fund and Fund
Complex Paid to Trustees" for the 12 months ended December 31, 1998.
The Fund does not provide any pension or retirement benefits for the
Trustees.
MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY SERVICES
Under the provisions of the Trust's Master Trust Agreement and the laws of
Massachusetts, responsibility for the management and supervision of the Fund
rests with the Trustees.
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 Fund. The Investment
Manager was founded by Paul Cabot, Richard Saltonstall and Richard Paine to
serve as investment adviser to the Fund, one of the nation's first mutual funds,
which they had formed in 1924. Their investment management philosophy emphasized
comprehensive fundamental research and analysis, including meetings with the
management of companies under consideration for investment. The Investment
Manager's portfolio management group has extensive investment industry
experience managing equity and debt securities.
The Investment Manager is charged with the overall responsibility for
managing the investments and business affairs of the Fund, subject to the
authority of the Board of Trustees. The Advisory Agreement provides that the
Investment Manager shall furnish the Fund with an investment program, office
facilities and such investment advisory, research and
26
<PAGE>
administrative services as may be required from time to time. The Investment
Manager compensates all executive and clerical personnel and Trustees of the
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 Fund to the Investment Manager is
computed as a percentage of the average of the value of the net assets of the
Fund as determined at the close of regular trading on the New York Stock
Exchange (the "NYSE") on each day the NYSE is open for trading, at the annual
rate of 0.55% of the first $500 million of Fund net assets, annually, 0.50% of
the next $500 million, and 0.45% of any amount over $1 billion.
The advisory fees paid by the Fund to the Investment Manager for the last
three fiscal years, prior to the assumption of fees or expenses, were as
follows: 1998, $9,708,952; 1997, $5,717,422; and 1996, $3,866,070.
The Advisory Agreement provides that 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
Investment Manager, 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
Investment Manager shall reimburse the Fund for such excess expenses by making a
payment to the Fund in the amount of such excess expenses within 30 days
following the close of such fiscal year.
The Advisory Agreement further provides that it shall remain in effect from
year to year only so long as (i) 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 1940 Act) of the Fund, and (ii) the terms of the Advisory
Agreement are approved at least annually by the vote of a majority of the
Trustees of the Trust, who are not parties to the Advisory Agreement 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 Agreement 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 1940 Act) of the Fund, or by the Investment Manager, in each case upon
sixty calendar days' prior written notice to the other party to the Advisory
Agreement.
Under the Code of Ethics of the Investment Manager, personnel are only
permitted to engage in personal securities transactions in accordance with
certain conditions relating to such person's position, the identity of the
security, the timing of the transaction, and similar factors.
27
<PAGE>
Such personnel 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 Fund are distributed by State Street Research Investment
Services, Inc., the Distributor. The Fund offers five classes of shares. Class
A, Class B(1), Class C and Class S shares are available to all eligible
investors. Class B shares are available only to current Class B shareholders
through reinvestment of dividends and capital gains distributions or through
exchanges from existing Class B accounts of the State Street Research Funds.
Class A, Class B(1), Class C and Class S shares of the Fund may be purchased at
the next determined net asset value per share plus, in the case of all classes
except Class S 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(1) and Class C shares). General information on how
to buy shares of the Fund, as well as sales charges involved, are set forth
under "Your Investment" in the Prospectus. The following supplements that
information.
Public Offering Price. The public offering price for each class of shares
is based on their net asset value determined as of the close of regular trading
on the NYSE on the day the purchase order is received by State Street Research
Service Center (the "Service Center"), provided that the order is received prior
to the close of regular trading on 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 the Service
Center 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.
Alternative Purchase Program. 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 Fund 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 purchase price invested in the Fund with the investment being
subject thereafter to ongoing service fees and distribution fees.
As described in greater detail below, financial professionals are paid
differing amounts of compensation depending on which class of shares they sell.
28
<PAGE>
The major differences among the various classes of shares are as follows:
<TABLE>
<CAPTION>
Class A Class B(1) Class B Class C Class S
------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales Charges Paid Initial sales charge Contingent Contingent Contingent None
by Investor to at time of deferred sales deferred sales deferred sales
Distributor investment of up charge of 5% to charge of 5% to charge of 1%
to 5.75% 1% applies to any 2% applies to any applies to any
depending on shares redeemed shares redeemed shares redeemed
amount of within first six within first five within one year
investment years following years following following their
their purchase; no their purchase; no purchase
contingent contingent
deferred sales deferred sales
charge after six charge after five
years 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
Initial Commission Above described 4% 4% 1% None
Paid by initial sales
Distributor to charge
Financial less 0.25% to
Professional 0.75% retained by
distributor
On investments of
$1 million or more,
0.25% to 1% paid
to dealer by
Distributor
Rule 12b-1 Service
Fee
Paid by Fund 0.25% each year 0.25% each year 0.25% each year 0.25% each year None
to Distributor
Paid by 0.25% each year 0.25% each year 0.25% each year 0.25% each year None
Distributor to commencing after commencing after commencing after
Financial one year following one year following one year following
Professional purchase purchase purchase
Rule 12b-1
Distribution Fee
Paid by Fund None 0.75% for first 0.75% for first 0.75% each year None
to Distributor eight years; Class eight years; Class
B(1) shares convert B shares convert
automatically to automatically to
Class A shares Class A shares
after eight years after eight years
Paid by None None None 0.75% each year None
Distributor to commencing after
Financial one year following
Professional purchase
</TABLE>
29
<PAGE>
Class A Shares--Reduced Sales Charges. The reduced sales charges set forth
under "Your Investment--Choosing a Share Class" in the Prospectus apply to
purchases made at any one time by any "person," which 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 Fund at reduced sales charges
by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of the Fund or any combination of Class A shares of "Eligible Funds"
(which include the Fund and other funds as designated by the Distributor from
time to time) 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 Fund 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 S 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.
30
<PAGE>
Investors may purchase Class A shares of the Fund 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 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(1), Class B, Class C and Class S shares may also be included in the
combination under certain circumstances. Investors must submit to the
Distributor sufficient information to show that they qualify for this Right of
Accumulation.
Other Programs Related to Class A Shares. Class A shares of the Fund may be
sold or issued in an exchange at a reduced sales charge or without 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
Fund 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,
registered investment advisers, 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 Fund to the following entities and person: (A) the
Investment Manager, 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 and any other matters, as
may be adopted by the Distributor from time to time.
Conversion of Class B(1) and Class B Shares to Class A Shares. A
shareholder's Class B(1) and Class B shares of the Fund, including all shares
received as dividends or distributions with respect to such shares, will
automatically convert to Class A shares of the Fund 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(1) and Class B shares. The
conversion rate will be determined on the basis of the relative per share net
asset values of the two classes
31
<PAGE>
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(1) shares received in exchange for Class B(1) shares of
other Eligible Funds and for Class B shares received in exchange for Class B
shares of other Eligible Funds, will be counted toward the eight-year period.
Contingent Deferred Sales Charges. The amount of any contingent deferred
sales charge paid on Class A shares (on sales of $1 million or more and which do
not involve an initial sales charge) or on Class B(1), Class B or Class C shares
of the Fund will be paid to the Distributor. The Distributor will pay dealers at
the time of sale a 4% commission for selling Class B(1) shares and a 1%
commission for selling Class C shares. In certain cases, a dealer may elect to
waive the 4% commission on Class B(1) shares and receive in lieu thereof an
annual fee, usually 1%, with respect to such outstanding shares. The proceeds of
the contingent deferred sales charges and the distribution fees are used to
offset distribution expenses and thereby permit the sale of Class B(1), Class B
and Class C shares without an initial sales charge.
In determining the applicability and rate of any contingent deferred sales
charge of Class B(1), Class B or Class C shares, it will be assumed that a
redemption of the 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 shareholder
for the longest period of time. Class B(1) shares that are redeemed within a
six-year period after purchase, Class B shares that are redeemed within a
five-year period after their purchase, and Class C shares that are redeemed
within a one-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 Fund assets or (2) reinvestment of
dividends or capital gains distributions. The holding period for purposes of
applying a contingent deferred sales charge for a particular class of shares of
the Fund acquired through an exchange from another Eligible Fund will be
measured from the date that such shares were initially acquired in the other
Eligible Fund, and shares of the same class 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.
Contingent Deferred Sales Charge Waivers. With respect to Class A shares
(on sales of $1 million or more and which do not involve an initial sales
charge), and Class B(1), Class B and Class C shares of the Fund, the contingent
deferred sales charge does not apply to exchanges or to redemptions under a
systematic withdrawal plan which meets certain conditions. The contingent
deferred sales charge will be waived for participant initiated distributions
from State Street Research prototype employee retirement plans. 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
Administration, of all shareholders of an
32
<PAGE>
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 of 1986, as amended, for retirement
accounts or plans (e.g., age 70 1/2 for Individual Retirement Accounts and
Section 403(b) plans), calculated solely on the basis of assets invested in the
Fund or other Eligible Funds; and (iii) a redemption resulting from a tax-free
return of an excess contribution to an Individual Retirement Account. (The
foregoing waivers do not apply to a tax-free rollover or transfer of assets out
of the Fund). The Fund may modify or terminate the waivers at any time; for
example, the Fund may limit the application of multiple waivers and establish
other conditions for employee benefit plans. Certain employee benefit plans
sponsored by a financial professional may be subject to other conditions for
waivers under which the plans may initially invest in Class B(1) or Class B
shares and then Class A shares of certain funds upon meeting specific criteria.
Class S Shares. Class S shares are currently available to certain employee
benefit plans such as qualified retirement plans which meet criteria relating to
number of participants, service arrangements, or similar factors; insurance
companies; investment companies; advisory accounts of the Investment Manager;
endowment funds of nonprofit organizations with substantial minimum assets
(currently a minimum of $10 million); and other similar institutional investors.
Class S shares may be acquired through programs or products sponsored by
Metropolitan, its affiliates, or both for which Class S shares have been
designated. In addition, Class S shares are available through programs under
which, for example, investors pay an asset-based fee and/or a transaction fee to
intermediaries. Class S share availability is determined by the Distributor and
intermediaries based on the overall direct and indirect costs of a particular
program, expected assets, account sizes and similar considerations.
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 Fund may issue its shares at net asset value (or
more) to such entities or to their security holders.
Redemptions. The Fund 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 Fund may limit the amount of redemption
proceeds paid in cash. Although it has no present intention to do so, the Fund
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 Fund 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.
Systematic Withdrawal Plan. A shareholder who owns noncertificated Class A
or Class S shares with a value of $5,000 or more, or Class B(1), Class B or
Class C shares with a value of $10,000 or more, may elect, by participating in
the Fund's Systematic Withdrawal Plan, to have periodic checks issued for
specified amounts. These amounts may not be less than certain
33
<PAGE>
minimums, depending on the class of shares held. The Plan provides that all
income dividends and capital gains distributions of the Fund shall be credited
to participating shareholders in additional shares of the Fund. Thus, the
withdrawal amounts paid can only be realized by redeeming shares of the Fund
under the Plan. To the extent such amounts paid exceed dividends and
distributions from the Fund, 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 Systematic Withdrawal 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 Systematic Withdrawal
Plan was initiated, whichever is higher.
Expenses of the Systematic Withdrawal Plan are borne by the Fund. A
participating shareholder may withdraw from the Systematic Withdrawal Plan, and
the Fund may terminate the Systematic Withdrawal Plan at any time on written
notice. Purchase of additional shares while a shareholder is receiving payments
under a Systematic Withdrawal Plan is ordinarily disadvantageous because of
duplicative sales charges. For this reason, a shareholder may not participate in
the Investamatic Program (see "Your Investment--Investor Services--Investamatic
Program" in the Fund's Prospectus) and the Systematic Withdrawal Plan at the
same time.
Request to Dealer to Repurchase. For the convenience of shareholders, the
Fund has authorized the Distributor as its agent to accept orders from dealers
by wire or telephone for the repurchase of shares by the Distributor from the
dealer. The Fund 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.
Signature Guarantees. Signature guarantees are required for, among other
things: (1) written requests for redemptions for more than $100,000; (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.
Dishonored Checks. If a purchaser's 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 canceled.
34
<PAGE>
Processing Charges. Purchases and redemptions processed through securities
dealers may be subject to processing charges imposed by the securities dealer in
addition to sales charges that may be imposed by the Fund or the Distributor.
SHAREHOLDER ACCOUNTS
General information on shareholder accounts is included in the Fund's
Prospectus under "Your Investment." The following supplements that information.
Maintenance Fees and Involuntary Redemption. Because of the relatively high
cost of maintaining small shareholder accounts, the Fund reserves the right to
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
involuntarily redemptions will be subject to applicable sales charges, if any.
The Fund 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 Fund, and
the proceeds of the redemption will be mailed 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 invested in the Fund 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 Fund 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 Fund's net asset values; or (3) during such
other periods as the Securities and Exchange Commission (the "SEC") may by order
permit for the protection of investors; and (b) the payment of redemption
proceeds may be postponed as otherwise provided under "Purchase and Redemption
of Shares" in this Statement of Additional Information.
The Open Account System. Under the Open Account System full and fractional
shares of the Fund 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(1), Class B or
Class C shares will not be issued, while
35
<PAGE>
certificates representing Class A or Class S 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 accounts.
The Fund's Open Account System provides the following options:
1. Additional purchases of shares of the Fund may be made through
dealers, by wire or by mailing a check payable to "State Street
Research Funds" under the terms set forth above under "Purchase and
Redemption of Shares" in this Statement of Additional Information.
2. The following methods of receiving dividends from investment income
and distributions from capital gains generally are available:
(a) All income dividends and capital gains distributions reinvested
in additional shares of the Fund.
(b) All income dividends and capital gains distributions in cash.
(c) 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, that account will be automatically coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Fund.
Selections may be changed at any time by telephone or written notice to the
Service Center. Dividends and distributions are reinvested at net asset value
without a sales charge.
Exchange Privileges. Shareholders of the Fund may exchange their shares for
available shares with corresponding characteristics of any of the other Eligible
Funds 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
Fund 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 Fund into
other Eligible Funds. To effect an exchange, Class A, Class B(1), Class B and
Class C 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 Fund or any other Eligible
Fund are
36
<PAGE>
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. Class A shares acquired through a new investment after January 1,
1999, are subject to an incremental sales charge if exchanged within 30 days of
acquisition for Class A shares of a Fund with a higher applicable sales charge.
For purposes of computing the contingent deferred sales charge that may be
payable upon disposition of any acquired Class A, Class B(1), Class B and Class
C shares, the holding period of the redeemed shares is "tacked" to the holding
period of any acquired shares. No exchange transaction fee is currently imposed
on any exchange.
Shares of the Fund 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 necessary to implement the program). The Fund 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 Fund, (a) no sales charge is imposed by Summit Cash Reserves, (b) no
contingent deferred sales charge is imposed by the Fund on the Fund shares
redeemed, and (c) any applicable holding period of the Fund shares redeemed is
"tolled," that is, the holding period clock stops running pending further
transactions. Upon the acquisition of shares of the Fund 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(1), Class B or Class C shares of the Fund 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.
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 with
respect to the Fund (see "Your Investment--Account Policies--Telephone Requests"
in the Fund's Prospectus and "--Telephone Privileges," below) as the existing
account unless the Service Center 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 Fund 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 Fund 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 Fund reserves the right to refuse
exchanges by any person or group if, in the Investment Manager's judgment, the
Fund would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
37
<PAGE>
Exchanges may be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Fund. The Fund 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 the Service
Center and delivered by the Service Center 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 the Service Center.
Reinvestment Privilege. A shareholder of the Fund 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 Fund or any other Eligible Fund at net asset
value and without subjecting the reinvestment to an 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 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 the Service
Center of such shareholder's written purchase request and delivery of the
request by the Service Center 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 Fund.
Dividend Allocation Plan. The Dividend Allocation Plan allows shareholders
to elect to have all their dividends and any other distributions from the Fund
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.
38
<PAGE>
Telephone Privileges. The following telephone privileges are available:
o Telephone Exchange Privilege for Shareholder and Shareholder's
Financial Professional
o Shareholders automatically receive this privilege unless
declined.
o This privilege allows a shareholder or a shareholder's financial
professional to request exchanges into other State Street
Research funds.
o Telephone Redemption Privilege for Shareholder
o Shareholders automatically receive this privilege unless
declined.
o This privilege allows a shareholder to phone requests to sell
shares, with the proceeds sent to the address of record.
o Telephone Redemption Privilege for Shareholder's Financial
Professional (This privilege is not automatic; a shareholder must
specifically elect it)
o This privilege allows a shareholder's financial professional to
phone requests to sell shares, with the proceeds sent to the
address of record on the account.
A shareholder with the above telephone privileges is deemed to authorize
the Service Center and the Transfer Agent to: (1) act upon the telephone
instructions of any person purporting to be any of the shareholders of an
account or a shareholder's financial professional; 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.
Neither the Fund, the other Eligible Funds, the Transfer Agent, the Investment
Manager nor 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.
Alternative Means of Contacting the Fund. It is unlikely, during periods of
extraordinary market conditions, that a shareholder may have difficulty in
reaching the Service Center. In that event, however, the shareholder should
contact the Service Center at 1-800-562-0032, 1-617-357-7800 or otherwise at its
main office at One Financial Center, Boston, Massachusetts 02111-2690.
NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily as
of the close of regular trading on the NYSE, ordinarily 4 P.M. New York City
time, Monday through Friday,
39
<PAGE>
on each day during which the NYSE is open for unrestricted trading. The NYSE is
currently closed on New Year's Day, Martin Luther King, Jr. Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of the Fund is computed by dividing the sum
of the value of the securities held by the Fund plus any cash or other assets
minus all liabilities by the total number of outstanding shares of the Fund at
such time. Any expenses, except for extraordinary or nonrecurring expenses,
borne by the Fund, including the investment management fee payable to the
Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees 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 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.
In general, securities are valued as follows. Securities which are listed
or traded on the New York or American Stock Exchange 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 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, Inc.'s (the "NASD") NASDAQ 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 Trust with the use of such pricing services as may be deemed appropriate or
methodologies approved by the Trustees. The Trustees also reserve the right to
adopt other valuations based on fair value in pricing in unusual circumstances
where use of other methods as discussed in part above, could otherwise have a
material adverse effect on the Fund as a whole.
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 is fair
value, 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. 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.
40
<PAGE>
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund'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 Fund (excluding, for purposes of this determination,
securities the maturities of which as of the time of their acquisition were one
year or less). The Fund's portfolio turnover rates for the fiscal years ended
December 31, 1997 and 1998 were 75.21% and 66.32%, respectively.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including the
Fund, what in the Investment Manager's judgment 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 Fund 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 by the
Investment Manager 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;
41
<PAGE>
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 contained in certain trading systems and used for
portfolio analysis and modeling and also including software providing investment
personnel with efficient access to current and historical data from a variety of
internal and external sources) and portfolio evaluation services and relative
performance of accounts.
In the case of the Fund and other registered investment companies advised
by the Investment Manager or its affiliates, 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 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 regularly reviews and evaluates the services
furnished by broker-dealers. The Investment Manager's investment management
personnel seek to evaluate the quality of the research and other services
provided by various broker-dealer firms, and the results of these efforts are
made available to the equity trading department, which uses this information as
consideration to the extent described above 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 the services to determine the proportion which is allocable to research or
investment decision-making and the proportion allocable to other purposes. The
Investment Manager pays directly from its own funds for that portion allocable
to uses other than research or investment decision-making. 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 providing the services.
The Investment Manager has no fixed agreements or understandings with any
broker-dealer as to the amount of brokerage business which the 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 an
allocation of a specified amount of brokerage business. These
42
<PAGE>
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. Brokerage commissions paid
by the Fund in secondary trading during the last three fiscal years were as
follows: 1998, $3,444,238, 1997, $2,399,034, and 1996, $2,015,000.
During and at the end of its most recent fiscal year, the Fund did not hold
in its portfolio securities of any entity that might be deemed to be a regular
broker-dealer of the Fund 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 commissions 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.
In some instances, certain clients of the Investment Manager request it to
place all or part of the orders for their account with certain brokers or
dealers, which in some cases provide services to those clients. The Investment
Manager generally agrees to honor these requests to the extent practicable.
Clients may condition their requests by requiring that the Investment Manager
only effect transactions with the specified broker-dealers if the broker-dealers
are competitive as to price and execution. In other cases, the Investment
Manager may be unable to negotiate commissions or obtain volume discounts or
best execution. In addition, a disparity may exist among the commissions charged
to clients who request the Investment Manager to use particular brokers or
dealers, and also between those clients and those who do not make such requests.
A client who requests the use of a particular broker-dealer should understand
that it may lose the possible advantage which non-requesting clients derive from
aggregation of orders for several clients as a single transaction for the
purchase or sale of a particular security. Among other reasons why best
execution may not be achieved with directed brokerage is that, in an effort to
achieve orderly execution of transactions, execution of orders that have
designated particular brokers may, at the discretion of the trading desk, be
delayed until execution of other non-designated orders has been completed.
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
43
<PAGE>
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 size of the
order, the amount already committed for each client to a specific 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 Fund--In General
The Fund intends to qualify and elects 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 qualify to do so. Accordingly, the Fund 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"); and (b) satisfy certain
diversification requirements on a quarterly basis.
If the Fund 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 Fund'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
Fund to the extent thereof. Any distribution in excess of a shareholder's basis
in the shareholder's shares would be taxable as gain realized from the sale of
such shares.
44
<PAGE>
The Fund 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 Fund 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. For that purpose, any income or gain retained by the Fund that is subject
to corporate tax will be considered to have been distributed by year-end. The
Fund intends to make sufficient distributions to avoid this 4% excise tax.
Taxation of the Fund's Investments
Original Issue Discount; Market Discount. For federal income tax purposes,
debt securities purchased by the Fund 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
Fund, whether or not any income is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
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 Fund 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 Fund purchases the
securities. This additional discount represents market discount for federal
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 to the extent it does not exceed the accrued market discount on the
security (unless the Fund 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 Fund may be required to capitalize, rather than
deduct currently, part or all of any direct interest expense incurred or
continued to purchase or carry any debt security having market discount, unless
the Fund makes the election to include market discount currently. Because the
Fund must include original issue discount in income, it will be more difficult
for the Fund to make the distributions required for the Fund to maintain its
status as a regulated investment company under Subchapter M of the Code or to
avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of the Fund's investments may be
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Fund's income for purposes of the 90% test, and require
inclusion of unrealized gains in the Fund's income for the purposes of the
excise tax and the distribution requirements applicable to regulated investment
companies; (ii) defer recognition of realized losses; and (iii) characterize
45
<PAGE>
both realized and unrealized gain or loss as short-term and long-term gain,
irrespective of the holding period of the investment. Such provisions generally
apply to, among other investments, options on debt securities, indices on
securities and futures contracts. The Fund will monitor its transactions and may
make certain tax elections available to it in order to mitigate the impact of
these rules and prevent disqualification of the Fund as a regulated investment
company.
Federal Income Taxation of Shareholders
Dividends paid by the Fund may be eligible for the 70% dividends-received
deduction for corporations. The percentage of the Fund's dividends eligible for
such tax treatment may be less than 100% to the extent that less than 100% of
the Fund'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 shareholder on December 31, provided that the Fund pays the dividend during
January of the following calendar year.
Distributions by the Fund can result in a reduction in the fair market
value of the Fund'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 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 FUND
The 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 Fund. Shares of the Fund are sold
through dealers who have entered into sales agreements with the Distributor. The
Distributor distributes shares of the Fund on a continuous basis at an offering
price which is based on the net asset value per share of the Fund 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 (Class B(1) and Class C shares). The Distributor may reallow all
or portions of such sales charges as concessions to dealers.
Total sales charges on Class A shares paid to the Distributor for the last
three fiscal years were as follows: 1998, $4,258,564; 1997, $3,063,618; and
1996, $2,411,055.
46
<PAGE>
For the same periods, the Distributor retained the following amounts
after reallowance of concessions to dealers: 1998, $519,944; 1997, $382,856; and
1996, $292,754. The Distributor may also pay its affiliate Metlife Securities,
Inc. additional sales compensation of up to 0.25% of certain sales or assets.
The differences in the price at which the Fund's Class A shares are offered
due to scheduled variations in sales charges, or Class S shares are offered, as
described in the Fund's Prospectus, result from cost savings inherent in
economies of scale among other factors. Management believes that the 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 Fund or associated entities. Where shares of the Fund are offered at a
reduced sales charge or without a sales charge pursuant to sponsored
arrangements, managed fee-based programs and so-called "mutual fund
supermarkets," among other special programs, the amount of the sales charge
reduction will similarly reflect the anticipated reduction in sales expenses
associated with such arrangements. The reductions 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 Fund 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
or similar programs 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 1.00% 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 C shares of
the Fund and paid initial commissions to securities dealers for sales of such
Class A, Class B and Class C shares as follows:
47
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
Contingent Commissions Contingent Commissions Contingent Commissions
Deferred Paid to Deferred Paid to Deferred Paid to
Sales Charges Dealers Sales Charges Dealers Sales Charges Dealers
------------- ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class A $ 0 $ 3,738,620 $ 0 $ 2,688,190 $ 0 $ 2,118,301
Class B $ 1,147,614 $ 9,411,148 $ 612,487 $ 6,342,919 $ 329,954 $ 4,092,738
Class C $ 4,282 $ 128,732 $ 3,122 $ 72,365 $ 6,250 $ 77,583
</TABLE>
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1" (the
"General Distribution Plan") under which the Fund may engage, directly or
indirectly, in financing any activities primarily intended to result in the sale
of Class A, Class B and Class C 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, 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 service to investors and/or the maintenance or servicing
of shareholder accounts and expenses associated with the provision of personal
service by the Distributor directly to investors. In addition, the General
Distribution Plan is deemed to authorize the Distributor and the Investment
Manager to make payments out of 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 General 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 represented by such Class A shares, and (ii)
with respect to Class B and Class C shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class C
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 C shares (as the case may be) to make payments for
personal services and/or the maintenance or servicing of shareholder accounts.
The Fund also has adopted a "Rule 12b-1 Plan for Distribution of Shares"
(the "Share Distribution Plan") under which the Fund shall pay the Distributor
(a) a service
48
<PAGE>
fee at the end of each month at the annual rate of 0.25% of average daily net
assets attributable to the Class B(1) shares to compensate the Distributor and
any securities firms or other third parties who render personal services to
and/or maintain shareholder accounts for the shareholders of the respective
class and (b) a distribution fee at the end of each month at the annual rate of
0.75% of average daily net assets attributable to the Class B(1) shares to
compensate the Distributor for services provided and expenses incurred by it in
connection with sales, promotional and marketing activities relating to the
respective class. To the extent that any payments made by the Fund to the
Distributor or the Investment Manager, including payment of investment
management fees, should be deemed to be an indirect financing of any activity
primarily resulting in the sale of shares of the Fund within the scope of Rule
12b-1 under the 1940 Act, then such payments shall be deemed to be authorized by
the Share Distribution Plan.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits annual expenditures that the Fund may incur to 0.75% for distribution
expenses and 0.25% for service fees. The NASD Rule also limits the aggregate
amount that the Fund may pay for such distribution costs to 6.25% of gross share
sales of a class since the inception of any asset-based sales 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 the
service fees. Payments to the Distributor or to dealers funded under either the
General Distribution Plan or the Share Distribution Plan may be discontinued at
any time.
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 of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance or servicing 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(1), Class B and Class C 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).
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares and for other sales and
marketing expenditures.
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.
49
<PAGE>
The payment of service and distribution fees may continue even if the Fund
ceases, temporarily or permanently, to sell one or more classes of shares to new
accounts. During the period the Fund is closed to new accounts, the distribution
fee will not be used for promotion expenses. The service and distribution fees
are used during a closed period to cover services provided to current
shareholders and to cover the compensation of financial professionals in
connection with the prior sale of Fund shares, among other non-promotional
distribution expenditures.
The Distributor may pay certain dealers and other intermediaries additional
compensation for sales and administrative services. The Distributor may provide
cash and noncash incentives to intermediaries who, for example, sell significant
amounts of shares or develop particular distribution channels. The Distributor
may compensate dealers with clients who maintain their investments in the Fund
over a period of years. The incentives can include merchandise and trips to, and
attendance at, sales seminars at resorts. The Distributor may pay for
administrative services, such as technological and computer systems support for
the maintenance of pension plan participant records, for subaccounting, and for
distribution through mutual fund supermarkets or similar arrangements.
During the fiscal year ended December 31, 1998, the Fund paid the
Distributor fees under the Distribution Plan and the Distributor used all of
such payments for expenses incurred on behalf of the Fund as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advertising $ 0 $ 257,366 $ 9,762
Printing and mailing of prospectuses to
other than current shareholders 0 38,209 1,448
Compensation to dealers 1,158,478 5,404,689 382,067
Compensation to sales
personnel 0 576,513 23,714
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing; general 0 538,576 21,716
----------- ----------- ---------
Total fees received $ 1,158,478 $ 7,384,066 $ 438,707
=========== =========== =========
Difference $ 568,713*
===========
</TABLE>
- ------------------
*Net fees result from the timing of expenditures and are used against future
expenses.
No interested Trustee of the 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 Fund will make alternative arrangements for
such services for shareholders who acquired shares through such institutions.
50
<PAGE>
CALCULATION OF PERFORMANCE DATA
From time to time, in advertisements or in communications to shareholders
or prospective investors, the Fund may compare the performance of its Class A,
Class B(1), Class B, Class C or Class S shares to the performance of other
mutual funds with similar investment objectives, to certificates of deposit
and/or to other financial alternatives. The Fund may also compare its
performance to appropriate indices, such as Standard & Poor's 500 Index,
Consumer Price Index and Dow Jones Industrial Average and/or to appropriate
rankings and averages such as those compiled by Lipper Analytical Services,
Inc., Morningstar, Inc., Money Magazine, Business Week, Forbes Magazine, The
Wall Street Journal and Investor's Daily. For example, the performance of the
Fund might be compared to the Lipper Growth and Income Funds Index.
The average annual total return ("standard total return") of the Class A,
Class B(1), Class B, Class C and Class S shares of the Fund will be calculated
as set forth below. Total return is computed separately for each class of shares
of the Fund. Performance data for a specified class includes periods prior to
the adoption of class designations on February 17, 1993, when designations were
assigned based on the pricing and Rule 12b-1 fees applicable to shares sold
thereafter. The application of the additional Rule 12b-1 fees, if any, of up to
1% will, for periods after February 17, 1993, adversely affect Fund performance
results. Thus, 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.
All calculations of performance data in this section reflect the voluntary
measures, if any, by the Fund's affiliates to reduce fees or expenses relating
to the Fund; see "--Accrued Expenses and Recurring Charges" later in this
section.
Total Return
The Fund's standard average annual total returns ("standard total return")
of each class of shares were as follows:
<TABLE>
<CAPTION>
Five Years One Year
Ten Years Ended Ended Ended
December 31, 1998 December 31, 1998 December 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Class A 16.86% 19.39% 21.70%
Class B 17.07% 19.75% 23.26%
Class C 17.07% 19.90% 27.15%
Class S 17.75% 21.14% 29.51%
</TABLE>
51
<PAGE>
Standard total return is computed separately for each class of shares 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:
P(1+T)(n) = ERV
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
The calculation is based on the further assumptions that the highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund 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.
Accrued Expenses and Recurring Charges
Accrued expenses include all recurring charges that are charged to all
shareholder accounts during the base period. The standard total return 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.
Accrued expenses do not include the subsidization, if any, by affiliates of
fees or expenses during the subject period. In the absence of such
subsidization, the performance of the Fund would have been lower.
Nonstandardized Total Return
The Fund may provide the above described standard total return results for
Class A, Class B(1), Class B, Class C and Class S shares for periods which end
no earlier than the most recent calendar quarter end and which begin twelve
months before, five years before and ten years before. In addition, the Fund may
provide nonstandardized total return results for differing periods, such as for
the period since the Fund 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
52
<PAGE>
deducted from the hypothetical initial payment of $1,000. For example, the
Fund's nonstandardized total returns for the six months ended December 31, 1998,
without taking sales charges into account, were as follows:
<TABLE>
<S> <C>
Class A 7.72%
Class B 7.36%
Class C 7.25%
Class S 7.89%
</TABLE>
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts
02109, serves as the Trust's independent accountants, providing professional
services including (1) audits of the Fund's annual financial statements, (2)
assistance and consultation in connection with SEC filings and (3) review of the
annual income tax returns filed on behalf of the Fund.
FINANCIAL STATEMENTS
Each of the Investment Portfolio, Statement of Assets and Liabilities,
Statement of Operations and Statement of Changes in Net Assets included in the
Fund's Annual Report to Shareholders as of and for the fiscal year ended
December 31, 1998, including any notes thereto or Report of Independent
Accountants is hereby incorporated by reference from the Fund's Annual Report,
filed with the Securities and Exchange Commission (EDGAR accession number
0000950156-99-000143). Shareholder reports are available without charge upon
request. For more information, call the State Street Research Service Center at
(800) 562-0032.
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 Service Center.
53
<PAGE>
STATE STREET MASTER INVESTMENT TRUST
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23: Exhibits
<S> <C> <C>
(1)(a) First Amended and Restated Master Trust Agreement and
Amendment No. 1 to First Amended and Restated Master Trust
Agreement (x)
(1)(b) Amendment No. 2 to First Amended and Restated Master Trust
Agreement
(2)(a) By-Laws (i)*
(2)(b) Amendment to By-Laws effective September 30, 1992 (v)*
(4) Deleted
(5)(b) Form of First Amended and Restated Investment Advisory
Contract (xii)
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C>
(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)*
(6)(d) Amendment to Distribution Agreement (xiii)
(8)(a) Custodian Contract (iii)*
(8)(b) Amendment to Custodian Contract (xiii)
(8)(c) Data Access Services Addendum to Custodian Contract
(9) Agreement and Plan of Reorganization and Liquidation (iii)*
(10) Opinion and Consent of Counsel (v)*
(11) Consent of Independent Accountants
(14)(a) Deleted.
(14)(b) Deleted.
(14)(c) Deleted.
(15)(a) Plan of Distribution Pursuant to Rule 12b-1 (vii)*
(15)(b) Form of Rule 12b-1 Plan for Distribution of Shares
(16) Deleted.
(17)(a) First Amended and Restated Multiple Class Expense
Allocation Plan (xi)
(17)(b) Form of Addendum to First Amended and Restated Multiple
Class Expense Allocation Plan
(18)(a) Powers of Attorney (xiii)
(18)(b) Certificate of Board Resolution Respecting Powers of
Attorney (xiii)
(18)(c) Power of Attorney for Susan M. Phillips
(18)(d) Certificate of Board Resolution Respecting Power of
Attorney for Susan M. Phillips
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C>
(19)(a) Form of New Account Application (xiii)
(19)(b) Form of Additional Services Application (xiii)
(19)(c) Form of MetLife Securities, Inc. Application (xiii)
(27) Financial Data Schedules
</TABLE>
- -----------------------
* Restated in electronic format in Post-Effective Amendment No. 11 filed on
March 2, 1998.
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
<TABLE>
<CAPTION>
Footnote
Reference Registration/Amendment Date Filed
<S> <C> <C>
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
xii Post-Effective Amendment June 19, 1997
No. 10
xiii Post-Effective Amendment March 2, 1998
No. 11
</TABLE>
C-3
<PAGE>
Item 24. Persons Controlled by or under Common Control
with Registrant
Inapplicable
Item 25. 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 26. 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 Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Barnwell, Amy F.
Vice President
Beaudry, Matthew F.
Vice President
Bennett, Peter C. Vice President State Street Research Capital Trust Boston, MA
Director and Vice President State Street Research Exchange Trust Boston, MA
Executive Vice Vice President State Street Research Financial Trust Boston, MA
President 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 Boston, MA
Director State Street Research Investment Services, Inc. Boston, MA
Director and Chairman Boston Private Bank & Trust Co. Boston, MA
of Exec. Comm.
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Securities Trust Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Borzilleri, John Vice President Montgomery Securities San Francisco, CA
Senior Vice President (until 6/97)
(Vice President
until 4/98)
Bray, Michael J. None
Senior Vice President
(Vice President
until 4/98)
Brezinski, Karen None
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea L. None
Burbank, John F. None
Senior Vice President
Cabrera, Jesus A. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Calame, Mara D. Vice President and State Street Research Energy, Inc. Boston, MA
Vice President and Assistant Counsel
Assistant Secretary
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) 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 Treasurer State Street Research Portfolios, Inc. Boston, MA
Carstens, Linda C. Vice President State Street Research Investment Boston, MA
Vice President Services, Inc.
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Coleman, Thomas J. None
Vice President
Cullen, Terrence J. Vice President Keystone-Evergreen Boston, MA
Vice President and Counsel
and Counsel, and (until 2/98)
Assistant Secretary
D'Vari, Ronald None
Vice President
Depp, Maureen G. Vice President Wellington Management Company Boston, MA
Vice President (until 9/97)
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. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Drake, Susan W. None
Vice President
Dudley, Catherine Senior Portfolio Manager Chancellor Capital Management Boston, MA
Senior Vice President (until 2/98)
Duggan, Peter J. None
Senior Vice President
Even, Karen K. None
Vice President
Federoff, Alex G. None
Vice President
Fee, Richard E. Vice President CIGNA Retirement and Investment Services Hartford, CT
Vice President (until 3/97)
Vice President State Street Research Investment Services, Inc. Boston, MA
Feliciano, Rosalina None
Vice President
Ficco, Bonnie A. None
Vice President
Fochtman, Jr., Leo None
Vice President
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Fromm, Stuart Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Gardner, Michael D. None
Senior Vice President
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
Giroux, June M. None
Vice President
Govoni, Electra None
Vice President
Grace, Evan None
Vice President
Granger, Allison None
Vice President
Haggerty, Bryan D. 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. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
Healy, Laura J. None
Vice President
Heineke, George R. None
Vice President
Hickman, Joanne Managing Director Zurich Investment Management Chicago, IL
Senior Vice President (until 1/98)
Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Huang, Jesse C. None
Vice President
Jackson, Jr., Vice President State Street Research Equity Trust Boston, MA
F. Gardner Trustee Certain trusts of related and
Senior Vice President non-related individuals
Trustee and Chairman of the Vincent Memorial Hospital Boston, MA
Board
Jamieson, Frederick H. Vice President and
Senior Vice President Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Vice President and Asst.
Treasurer SSRM Holdings, Inc. Boston, MA
Vice President and MetLife Securities, Inc. New York, NY
Controller (until 1/97)
Jodka, Richard Portfolio Manager Frontier Capital Management Boston, MA
Senior Vice President (until 1/98)
Vice President State Street Research Capital Trust Boston, MA
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
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 Portfolios, Inc. 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.
Kasper, M. Katherine Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kern, Stephen None
Vice President
Kiessling, Dyann H. Vice President State Street Research Money Market Trust Boston, MA
Vice President
King, Stephen Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
Kuhn, Stephen P. None
Vice President
Langholm, Knut Director State Street Research Luxembourg
Vice President
Leary, Eileen M. None
Vice President
Levanson, David E. None
Vice President
Lomasney, Mary T. Business Analyst Fidelity Investments Boston, MA
Vice President (until 6/97)
Marinella, Mark A. Portfolio Manager STW Fixed Income Management, Ltd. Boston, MA
Senior Vice President (Until 8/98)
Maurer, Jacqueline J. None
Vice President
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
McNamara, III, Francis J. Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Executive Vice Clerk and General Counsel
President, Secretary Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
and General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Counsel State Street Research Exchange Trust Boston, MA
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 State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Maus, Gerard P. Treasurer State Street Research Equity Trust Boston, MA
Director, Executive Treasurer State Street Research Financial Trust Boston, MA
Vice President Treasurer State Street Research Income Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Money Market Trust Boston, MA
Financial Officer and Treasurer State Street Research Tax-Exempt Trust Boston, MA
Chief Administrative Treasurer State Street Research Capital Trust Boston, MA
Officer 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 Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice State Street Research Investment Services, Inc. Boston, MA
President, Treasurer and
Chief Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief SSRM Holdings, Inc. Boston, MA
Financial Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Director State Street Research Luxembourg
Milder, Judith J. None
Senior Vice President
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Moore, Jr., Thomas P.
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President (until 11/96)
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
Director Hibernia Savings Bank Quincy, MA
Governor on the Board Association for Investment Management Charlottesville, VA
of Governors and Research
Morey, Andrew None
Vice President
Mulligan, JoAnne C. None
Senior Vice President
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
Paddon, Steven W. None
Vice President
Pannell, James C. None
Senior Vice President
(Vice President
until 4/97)
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Pierce, James D. None
Vice President
Poritzky, Dean E. Portfolio Manager Fidelity Management Boston, MA
Vice President (until 4/97)
Pyle, David J. Analyst Oak Value Capital Management Durham, NC
Vice President (until 4/97)
Ragsdale, E.K. Easton Vice President State Street Research Financial Trust Boston, MA
Senior Vice President
Ransom, Clifford Director of NatWest Markets
Vice President Special Situations
Rawlins, Jeffrey A. None
Senior Vice President
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) 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 Treasurer State Street Research Portfolios, Inc. Boston, MA
Ryan, Michael J. Vice President Delaware Management Philadelphia, PA
Senior Vice President (until 1/98)
Sanderson, Derek Senior Vice President Freedom Capital Management Boston, MA
Senior Vice President (until 10/97)
Saperstone, Paul None
Vice President
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice President Member Association of Investment
Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President, Chief State Street Research Investment Services, Inc. Boston, MA
Executive Vice Executive Officer and
President Executive Vice President
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 Boston, MA
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Stambaugh, Kenneth None
Vice President
(Assistant Vice
President until 9/97)
Strelow, Dan R. None
Senior Vice President
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Stolberg, Thomas None
Vice President
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director 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 Portfolios, Inc. Boston, MA
Executive Officer and Director
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)
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board MetLife Securities, Inc. New York, NY
and Director (until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director Colgate University Hamilton, NY
Director State Street Research Luxembourg
Chairman and Director SSR Realty Advisors, Inc. San Francisco, CA
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
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
Walsh, Tucker None
Vice President
Watts, Evan D., Jr. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Weiss, James M. Vice President State Street Research Exchange Trust Boston, MA
Executive Vice President Vice President State Street Research Financial Trust Boston, MA
(Senior Vice President) Vice President State Street Research Growth Trust Boston, MA
until 6/98) Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Welch, Timothy None
Vice President
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
Wilkins, Kevin Senior Vice President State Street Research Investment Boston, MA
Senior Vice President (Vice President until 9/98) Services, Inc.
(Vice President Vice President Fidelity Investments Boston, MA
until 9/98) (until 7/97)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Master Investment Trust Boston, MA
(Vice President
until 4/98)
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Senior Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary and State Street Research Capital Trust Boston, MA
and Assistant Assistant General Counsel
General Counsel Assistant Secretary and State Street Research Exchange Trust Boston, MA
(Vice President Assistant General Counsel
until 4/98) Assistant Secretary and State Street Research Growth Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Master Investment Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Securities Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Equity Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Financial Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Income Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Money Market Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Tax-Exempt Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Portfolios, Inc. Boston, MA
Assistant General Counsel
Assistant Secretary and SSRM Holdings, Inc. Boston, MA
Assistant General Counsel
Woodbury, Robert S. None
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 Vice President State Street Research Securities Trust Boston, MA
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
Zuger, Peter A. Vice President State Street Research Equity Trust Boston, MA
Senior Vice Portfolio Manager American Century
President (until 9/98) Investment Management
</TABLE>
C-15
<PAGE>
Item 27. 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:
<TABLE>
<CAPTION>
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
- ---------------- ---------------- ---------------
<S> <C> <C>
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 Chief Financial
Officer, Chief
Administrative Officer,
Treasurer and Director
Thomas A. Shively Director None
One Financial Center
Boston, MA 02111
C. Troy Shaver, Jr. President, None
One Financial Center Chief Executive
Boston, MA 02111 Officer and Executive
Vice President
Francis J. McNamara, III Executive Vice Secretary
One Financial Center President, General
Boston, MA 02111 Counsel and Clerk
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
- ---------------- ---------------- ---------------
<S> <C> <C>
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
Joanne Hickman Senior Vice None
One Financial Center President
Boston, MA 02111
Russell A. Labraska Senior Vice None
One Financial Center President
Boston, MA 02111
Joan D. Miller Senior Vice None
One Financial Center President
Boston, MA 02111
Kevin Wilkins 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
Amy F. Barnwell Vice President None
One Financial Center
Boston, MA 02111
Matthew F. Beaudry Vice President None
One Financial Center
Boston, MA 02111
Linda C. Carstens Vice President None
One Financial Center
Boston, MA 02111
Terrence J. Cullen Vice President and None
One Financial Center Counsel
Boston, MA 02111
Richard E. Fee Vice President None
One Financial Center
Boston, MA 02111
Stuart Fromm Vice President None
One Financial Center
Boston, MA 02111
Patricia Howell Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
M. Katharine Kasper Vice President None
One Financial Center
Boston, MA 02111
Steven R, King Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant
One Financial Center Secretary
Boston, MA 02111
Evan D. Watts, Jr. Vice President None
One Financial Center
Boston, MA 02111
</TABLE>
C-17
<PAGE>
Item 28. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 29. Management Services
Under a Shareholders' Administrative Services Agreement between the
Registrant 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 series of the
Registrant and received the amounts set forth below:
<TABLE>
<CAPTION>
Year-end Year-end Year-end
December 31, 1996 December 31, 1997 December 31, 1998*
----------------- ----------------- ------------------
<S> <C> <C>
$310,197 $385,206 $758,718
</TABLE>
- ----------------------
* Estimate.
Item 30. 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. 12 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 3rd day of March, 1999.
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
______________________________
Steve A. Garban
* Trustee
______________________________
Malcolm T. Hopkins
* Trustee
______________________________
Edward M. Lamont
* Trustee
______________________________
Robert A. Lawrence
* Trustee
______________________________
Dean O. Morton
<PAGE>
* Trustee
______________________________
Susan M. Phillips
* Trustee
______________________________
Toby Rosenblatt
* Trustee
______________________________
Michael S. Scott Morton
*By: /s/ Francis J. McNamara, III
--------------------------------------------------
Francis J. McNamara, III,
Attorney-in-Fact under Powers of
Attorney incorporated by reference
from Post-Effective Amendment No. 11
filed March 2, 1998 and under a
Power of Attorney filed herein.
<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. 12 [X]
and/or
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 26 [X]
-------------------
STATE STREET RESEARCH MASTER INVESTMENT TRUST
(Exact Name of Registrant as Specified in
Master Trust Agreement)
---------------------
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(1)(b) Amendment No. 2 to First Amended and Restated Master Trust Agreement
(8)(c) Data Access Services Addendum to Custodian Contract
(11) Consent of Independent Accountants
(15)(b) Form of Rule 12b-1 Plan for Distribution of Shares
(17)(b) Form of Addendum to First Amended and Restated Multiple Class Expense
Allocation Plan
(18)(c) Power of Attorney for Susan M. Phillips
(18)(d) Certificate of Board Resolution Respecting Power of Attorney for Susan
M. Phillips
(27) Financial Data Schedules
EXHIBIT (1)(b)
STATE STREET RESEACH MASTER INVESTMENT TRUST
Amendment No. 2
to
First Amended and Restated Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article VII, Section 7.3 of the First Amended and Restated
Master Trust Agreement of the State Street Research Master Investment Trust (the
"Trust") dated February 5, 1993 (the "Master Trust Agreement"), as heretofore
amended, the following action is taken:
The following is added immediately prior to the last sentence of Article V,
Section 5.1:
"Execution of a proxy by a person or organization, which has
been authorized to do so by a Shareholder pursuant to
telephonic or electronically transmitted instructions, shall
constitute execution of such proxy by or on behalf of such
Shareholder."
This Amendment shall be effective as of February 23, 1999.
IN WITNESS WHEREOF, the undersigned assistant officer of the Trust hereby
adopts the foregoing on behalf of the Trust pursuant to authorization by the
Trustees of the Trust.
/s/ Darman A. Wing
-------------------------------
Darman A. Wing
Assistant Secretary
EXHIBIT (8)(c)
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
----------------------------------------------------
AGREEMENT between each fund listed on Appendix A, (individually a "Fund"
and collectively, the "Funds") as amended from time to time, and State Street
Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of each Fund pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Funds;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZON(R)
Accounting System, in its role as custodian of each Fund, and maintains certain
Fund-related data ("Fund Data") in databases under the control and ownership of
State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Fund certain Data Access
Services solely for the benefit of the Fund, and intends to provide additional
services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Fund with access to State Street's
Multicurrency HORIZON(R) Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Fund, or certain third parties approved by State Street
that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Fund and
solely with respect to the Fund or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Fund the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Fund to originate electronic
instructions to State Street on behalf of each Fund in order to (i) effect the
transfer or movement of cash or securities held under custody by State Street or
(ii) transmit accounting or other information (such transactions are referred to
herein as "Client
<PAGE>
Originated Electronic Financial Instructions"), and (iii) access data for the
purpose of reporting and analysis, shall be deemed to be Data Access Services
for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
available to a Fund additional Systems that are not described in the attachments
to this Agreement. In the absence of any other written agreement concerning such
additional systems, the term "System" shall include, and this Agreement shall
govern, a Fund's access to and use of any additional System made available by
State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Fund acknowledge that in connection with the Data
Access Services provided under this Agreement, each Fund will have access,
through the Data Access Services, to Fund Data and to functions of State
Street's proprietary systems; provided, however that in no event will the Fund
have direct access to any third party systems-level software that retrieves data
for, stores data from, or otherwise supports the System.
3 . LIMITATION ON SCOPE OF USE
a. Designated Equipment: Designated Location. The System and the
Data Access Services shall be used and accessed solely on and through
the Designated Configuration at the offices of a Fund or the Investment
Advisor or Independent Auditor located in Boston, Massachusetts
("Designated Location").
b. Designated Configuration: Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Fund agree that
each will engage or retain the services of trained personnel to enable both
State Street and the Fund to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Fund will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Fund and accessing data for purposes of reporting and
analysis. Each Fund shall not, and shall cause its employees and agents not to
(i) permit any third party to use the System or the Data Access Services, (ii)
sell, rent, license or otherwise use the System or the Data Access Services in
the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Fund) transmitted from State Street's databases, including
data from third party sources, available through use of the
2
<PAGE>
System or the Data Access Services to be redistributed or retransmitted to
another computer, terminal or other device for other than use for or on behalf
of the Fund or (vi) modify the System in any way, including without limitation,
developing any software for or attaching any devices or computer programs to any
equipment, system, software or database which forms a part of or is resident on
the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Fund's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Fund may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Fund may
secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Fund shall not modify, enhance or otherwise create derivative works based upon
the System, nor shall the Fund reverse engineer, decompile or otherwise attempt
to secure the source code for all or any part of the System.
g. Security Procedures. Each Fund shall comply with data access operating
standards and procedures and with user identification or other password control
requirements and other security procedures as may be issued from time to time by
State Street for use of the System on a remote basis and to access the Data
Access Services. Each Fund shall have access only to the Fund Data and
authorized transactions agreed upon from time to time by State Street and, upon
notice from State Street, the Fund shall discontinue remote use of the System
and access to Data Access Services for any security reasons cited by State
Street; provided, that, in such event, State Street shall, for a period not less
than 180 days (or such other shorter period specified by the Fund) after such
discontinuance, assume responsibility to provide accounting services under the
terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Fund and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Fund and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Fund's or the Investment Advisor's business.
3
<PAGE>
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Fund acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Fund by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Fund shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Fund agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder. Each Fund further acknowledges that State Street shall not be
required to provide the Investment Advisor or the Investment Auditor with access
to the System unless it has first received from the Investment Advisor of the
Investment Auditor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C and/or Attachment C-1 to this Agreement.
Each Fund shall use all commercially reasonable efforts to assist State Street
in identifying and preventing any unauthorized use, copying or disclosure of the
Proprietary Information or any portions thereof or any of the logic, formats or
designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Fund shall
advise State Street immediately in the event the Fund learns or has reason to
believe that any person to whom the Fund has given access to the Proprietary
Information, or any portion thereof, has violated or intends to violate the
terms of this Agreement, and each Fund will, at its expense, co-operate with
State Street in seeking injunctive or other equitable relief in the name of the
Fund or State Street against any such person.
c. Injunctive Relief. Each Fund acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately, compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the
termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Fund agrees
any liability of State Street to the Fund or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Fund for the preceding 24
months for such services. In no event shall State Street be liable to the Fund
or any other party for any special, indirect, punitive or consequential damages
even if
4
<PAGE>
advised of the possibility of such damages. No action, regardless of form,
arising out of this Agreement may be brought by the Fund more than two years
after the Fund has knowledge that the cause of action has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE FUND OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE FUND'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Fund, the
Fund shall be solely responsible for the accuracy of any accounting statements
or reports produced using the Data Access Services and the System and the
conformity thereof with any requirements of law.
e. Force Majeure. Neither State Street or a Fund shall be liable for any
costs or damages due to delay or nonperformance under this Agreement arising out
of any cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Fund as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
Each Fund agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Fund of the Data Access Services or the System, including any
loss incurred by State Street resulting from a security breach at the Designated
Location or committed by the Fund's employees or agents or the Investment
Advisor or the Independent Auditor of the Fund and (ii) any loss resulting from
incorrect Client Originated Electronic Financial Instructions. State Street
shall be entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time
5
<PAGE>
between the parties (the "Fee Schedule"). Any tariffs, duties or taxes imposed
or levied by any government or governmental agency by reason of the transactions
contemplated by this Agreement, including, without limitation, federal, state
and local taxes, use, value added and personal property taxes (other than
income, franchise or similar taxes which may be imposed or assessed against
State Street) shall be borne by each Fund. Any claimed exemption from such
tariffs, duties or taxes shall be supported by proper documentary evidence
delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Fund's
personnel in connection with the use of the System on the Designated
Configuration. Each Fund agrees that it will set aside, during regular business
hours or at other times agreed upon by both parties, sufficient time to enable
all operators of the System and the Data Access Services, designated by the
Fund, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Fund shall have the following responsibilities in
connection with Installation and Conversion of the System:
(i) The Fund shall be solely responsible for the timely acquisition and
maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services
at the Designated Location.
(ii) State Street and the Fund each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this
Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
6
<PAGE>
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Fund or thirty days' notice in the case of notice from the Fund to State Street
of termination; or (ii) immediately for failure of the other party to comply
with any material term and condition of the Agreement by giving the other party
written notice of termination. In the event the Fund shall cease doing business,
shall become subject to proceedings under the bankruptcy laws (other than a
petition for reorganization or similar proceeding) or shall be adjudicated
bankrupt, this Agreement and the rights granted hereunder shall, at the option
of State Street, immediately terminate with notice to the Fund. Termination of
this Agreement with respect to any given Fund shall in no way affect the
continued validity of this Agreement with respect to any other Fund. This
Agreement shall in any event terminate as to any Fund within 90 days after the
termination of the Custodian Agreement applicable to such Fund.
c. Termination of the Right to Use. Upon termination of this Agreement
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Fund shall immediately cease use of the System
and the Data Access Services. Immediately upon termination of this Agreement for
any reason, the Fund shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Fund terminates this Agreement or the
Custodian Agreement for any reason other than the Fund's breach, State Street
shall provide the Data Access Services for a period of time and at a price to be
agreed upon by State Street and the Fund.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations
of each Fund and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This
7
<PAGE>
Agreement is not intended to supersede or modify the duties and liabilities of
the parties hereto under the Custodian Agreement or any other agreement between
the parties hereto except to the extent that any such agreement specifically
refers to the Data Access Services or the System. No single waiver or any right
hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
8
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Ronald E. Logue
------------------------------------
Title: Executive Vice President
------------------------------------
Date:
------------------------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Joseph W. Canavan
-----------------------------------
Title: Senior Vice President
-----------------------------------
Date: June 5, 1998
-----------------------------------
<PAGE>
APPENDIX A
Funds (each a series of investment company named in bold)
- -----
State Street Research Capital Trust
State Street Research Capital Fund
State Street Research Emerging Growth Fund
(formerly: State Street Research Small Capitalization Growth
Fund)
State Street Research Aurora Fund
(formerly: State Street Research Small Capitalization Value Fund)
State Street Research Equity Trust
State Street Research Equity Investment Fund
State Street Research Alpha Fund
(formerly: State Street Research Equity Income Fund)
State Street Research Global Resources Fund
State Street Research Athletes Fund
State Street Research Exchange Trust
State Street Research Exchange Fund
State Street Research Financial Trust
State Street Research Government Income Fund
State Street Research Strategic Portfolios: Aggressive
State Street Research Strategic Portfolios: Conservative
State Street Research Strategic Portfolios: Moderate
State Street Research Growth Trust
State Street Research Growth Fund
State Street Research Income Trust
State Street Research High Income Fund
State Street Research Managed Assets
State Street Research Master Investment Trust
State Street Research Investment Trust
State Street Research Money Market Trust
State Street Research Money Market Fund
State Street Research Tax-Exempt Trust
State Street Research Tax-Exempt Fund
State Street Research New York Tax-Free Fund
State Street Research Securities Trust
State Street Research Intermediate Bond Fund
State Street Research Strategic Income Fund
State Street Research Legacy Fund
State Street Research Galileo Fund
State Street Research Portfolios, Inc.
State Street Research International Equity Fund
Ap. A-1
<PAGE>
Status of Funds Covered By This Agreement
- -----------------------------------------
(a) Each Fund shall be regarded for all purposes as separate from any of the
other Funds. Each Fund shall be responsible for only its own transactions.
No Fund shall participate in, or effect any transaction in connection with,
any joint enterprise or other joint arrangement or profit-sharing plan.
(b) The use of this single document to memorialize the separate arrangements
under the Agreement for each of the Funds is understood to be for clerical
convenience only and shall not constitute any basis for joining the Funds
in any respect.
(c) Each trust listed above is a Massachusetts business trust. The Master Trust
Agreement of each Massachusetts business trust of which a Fund is a series,
as the same may be amended from time to time, is on file with the Secretary
of State for the Commonwealth of Massachusetts. It is expressly agreed that
the execution and delivery of this Agreement and the obligations of each
trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the relevant
trust as individuals, or personally, but shall bind only the trust property
of the trust. The Master Trust Agreement of each trust provides, and it is
expressly agreed, that each Fund of the trust shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations, and that no other Funds shall be responsible for same.
Ap. A-2
<PAGE>
ATTACHMENT A
Multicurrency HORIZON(R) Accounting System
System Product Description
I. The Multicurrency HORIZON(R) Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) Fund's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest(R) GlobalQuest(R) is designed to provide Fund access to the
following information maintained on The Multicurrency HORIZON(R)
Accounting System: 1) cash transactions and balances; 2) purchases and
sales; 3) income receivables; 4) tax refund receivables; 5) daily
priced positions; 6) open trades; 7) settlement status; 8) foreign
exchange transactions; 9) trade history; and 10) daily, weekly and
monthly evaluation services.
III. HORIZON(R) Gateway. HORIZON(R) Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZON(R) Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZON(R)
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger
and 7) cash.
IV. SaFiRe(SM). SaFiRe(SM) is designed to provide the customer with the ability
to prepare its own financial reports by permitting the customer to access
customer information maintained on the Multicurrency HORIZON(R) Accounting
System, to organize such information in a flexible reporting format and to have
such reports printed on the customer's desktop or by its printing provider.
V. State Street Interchange. State Street Interchange is an open information
delivery architecture wherein proprietary communication products, data formats
and workstation tools are replaced by industry standards and is designed to
enable the connection of State Street's network to customer networks, thereby
facilitating the sharing of information.
<PAGE>
ATTACHMENT B
Designated Configuration
[Designated Configuration Graphic]
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each fund listed on Appendix A (individually a, "Fund",
collectively, the "Funds") it will have access to State Street Bank and Trust
Company's ("State Street") Multicurrency HORIZON Accounting System and other
information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Fund and through the
use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Darman A. Wing
---------------------------------------
Title: Senior Vice President
---------------------------------------
Date: June 4, 1998
---------------------------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Fund Designated Persons may contact State
Street's HORIZON(R) Help Desk and Fund Assistance Center between the hours of 8
a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining
answers to questions about the use of the System, or to report apparent problems
with the System. From time to time, the Fund shall provide to State Street a
list of persons, not to exceed five in number, who shall be permitted to contact
State Street for assistance (such persons being referred to as "the Fund
Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Fund in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Fund any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Fund and shall offer the Fund reasonable training
on the enhancement. Charges for system enhancements shall be as provided in the
Fee Schedule. State Street retains the right to charge for related systems or
products that may be developed and separately made available for use other than
through the System.
e. Custom Modifications. In the event the Fund desires custom
modifications in connection with its use of the System, the Fund shall make a
written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Fund's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Fund has modified the System in breach of
this Agreement.
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 12
to the registration statement (No. 33-32729) on Form N-1A (the "Registration
Statement") of our report dated February 12, 1999 relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report of State Street Research Investment Trust (a series of State Street
Research Master Investment Trust), which report is also referenced in the
Prospectus. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 3, 1999
EXHIBIT (15)(b)
STATE STREET RESEARCH MASTER INVESTMENT TRUST
RULE 12b-1 PLAN FOR DISTRIBUTION OF SHARES
WHEREAS, State Street Research Master Investment Trust, an
unincorporated association of the type commonly known as a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust is authorized to (a) issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (b)
divide the shares within each such series into two or more classes;
WHEREAS, one such class has been designated as Class B(1) (the shares
of such class being hereinafter referred to as "Shares");
WHEREAS, the Trust has established the State Street Research Investment
Trust, (each such portfolio, together with all other series made subject to this
Rule 12b-1 Plan (this "Plan"), being referred to herein individually as a
"Series" and collectively as the "Series");
WHEREAS, the Trust may be deemed a distributor of the Shares within the
meaning of Rule 12b-1 under the Act, and desires to adopt this Plan, and has
adopted a related Distribution Agreement (the "Agreement") with State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor") pursuant to such Rule; and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons (as defined in the Act) of the Trust and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
and any agreements relating to it (the "Qualified Trustees"), having determined,
in the exercise of their reasonable business judgment and in light of their
fiduciary duties under state law and under Section 36(a) and (b) of the Act,
that there is a reasonable likelihood that this Plan and the Agreement will
benefit each Series and its shareholders, have accordingly approved this Plan
and the Agreement by votes cast in person at a meeting called for the purpose of
voting on this Plan and the Agreement and any agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
<PAGE>
SECTION 1. PAYMENTS TO THE DISTRIBUTOR
- --------------------------------------
(a) Service Fees. The Trust shall pay the Distributor a service fee at
the end of each month at the annual rate of 0.25% of average daily net assets
attributable to the Shares of each Series to compensate the Distributor and any
securities firms or other third parties who render personal services to and/or
maintain shareholder accounts for the holders of Shares of such Series.
(b) Distribution Fees. The Trust shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to the Shares of each Series to
compensate the Distributor for services provided and expenses incurred by it in
connection with sales, promotional and marketing activities relating to the
Shares of such Series.
Payment of the distribution fee described in this Paragraph 1(b) shall
be subject to any limitation set forth in any applicable regulation of the
National Association of Securities Dealers, Inc.
SECTION 2. PAYMENTS FROM OTHER SOURCES
- --------------------------------------
To the extent that any payments made by the Trust to the Distributor or
State Street Research & Management Company (the "Adviser"), including payment of
investment management fees, should be deemed to be an indirect financing of any
activity primarily resulting in the sale of Shares within the scope of Rule
12b-1 under the Act, then such payments shall be deemed to be authorized by this
Plan.
SECTION 3. TERM AND TERMINATION
- -------------------------------
(a) Effectiveness. This Plan shall become effective with respect to
each Series as of the later of (i) the date on which a Registration Statement
with respect to Shares of such Series becomes effective under the Securities Act
of 1933, as amended, or (ii) the date on which such Series commences offering
its Shares to the public. This Plan shall continue in effect with respect to
each Series until one (1) year from the date of such effectiveness, unless the
continuation of this Plan shall have been approved with respect to the Series in
accordance with the provisions of Section 3(b) hereof.
(b) Continuation. This Plan and the Agreement shall continue in effect
with respect to each Series thereof subsequent to the initial term specified in
Section 3(a) for so long as such continuance is specifically approved at least
annually by votes of a majority of both (i) the Board of Trustees of the Trust
and (ii) the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on this Plan, subject to any shareholder approval requirements
existing under applicable law.
2
<PAGE>
(c) Termination.
(i) This Plan may be terminated at any time with respect to
the Trust or any Series thereof, as the case may be, by vote of a
majority of the Qualified Trustees, or by vote of a majority of the
outstanding voting securities of the Trust or that Series, as the case
may be. This Plan may remain in effect with respect to a Series thereof
even if it has been terminated in accordance with this Section 3(c)
with respect to such Series or one or more other Series of the Trust.
(ii) The Agreement may be terminated at any time, without
penalty, with respect to the Trust or any Series, as the case may be,
by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding voting securities of the Trust or that
Series, as the case may be, on sixty (60) days' written notice to the
Distributor. In addition, the Agreement provides for automatic
termination in the event of its assignment.
SECTION 4. AMENDMENTS
- ---------------------
This Plan may be amended with respect to the Trust or a Series thereof
in the manner provided for annual renewal in Section 3(b) hereof; provided,
however, that this Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 1 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities of each
Series thereof with respect to which a material increase in the amount of
distribution expenditures is proposed.
SECTION 5. INDEPENDENT TRUSTEES
- -------------------------------
While this Plan is in effect with respect to any Series, the selection
and nomination of Trustees who are not interested persons (as defined in the
Act) of the Trust shall be committed to the discretion of the Trustees who are
not interested persons.
SECTION 6. QUARTERLY REPORTS
- ----------------------------
The Treasurer of the Trust and the Treasurer of the Distributor shall
provide to the Trustees of the Trust and the Trustees shall review, at least
quarterly, a written report of the amounts expended for distribution pursuant to
this Plan and the purposes for which such expenditures were made.
3
<PAGE>
SECTION 7. RECORD KEEPING
- -------------------------
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 6 hereof, for a
period of not less than six (6) years from the date of this Plan, and the
Agreement, the agreements or such reports, as the case may be, for the first two
(2) years in an easily accessible place.
SECTION 8. LIMITATION OF LIABILITY
- ----------------------------------
The term "State Street Research Master Investment Trust" means and
refers to the Trustees of the Trust from time to time serving under the First
Amended and Restated Master Trust Agreement dated February 5, 1993 (the "Master
Trust Agreement") as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Master Trust Agreement. This
Plan and its execution and delivery have been authorized by the Trustees of the
Trust and signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Master Trust Agreement. The Master
Trust Agreement further provides, and it is expressly agreed, that each Series
shall be solely and exclusively responsible for the payment of its debts,
liabilities and obligations and that no other Series shall be responsible or
liable for the same.
4
<PAGE>
IN WITNESS WHEREOF, the Trust and the Distributor have executed this
Rule 12b-1 Plan on the day and year set forth below in Boston, Massachusetts.
ATTEST: STATE STREET RESEARCH
MASTER INVESTMENT TRUST
_____________________________ By:_______________________________
ATTEST: STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
_____________________________ By:_______________________________
Date: __________ __, ____
5
EXHIBIT (17)(b)
STATE STREET RESEARCH MASTER INVESTMENT TRUST
Addendum
to
First Amended and Restated Multiple Class Expense Allocation Plan
January 1, 1999
WHEREAS, State Street Research Master Investment Trust (the "Trust")
has adopted the First Amended and Restated Multiple Class Expense Allocation
Plan dated May 8, 1996 (the "Plan") in accordance with Rule 18f-3 under the
Investment Company Act of 1940, as amended, pursuant to which the Trust, for
each of its portfolio series (each a "Series") and separate classes thereof, may
issue multiple classes of shares representing interests in the same portfolio of
securities, assess a contingent deferred sales charge (the "CDSC") on certain
redemptions of shares and waive the CDSC in certain cases;
WHEREAS, the Trust currently has established one or more Series, and
each such series has established four classes of shares: Class A, Class B, Class
C (formerly Class D) and Class S (formerly Class C), all of which are subject to
the Plan;
WHEREAS, the Trust has established an additional class of shares, Class
B(1), for each Series, and such shares are to be made subject to the Plan;
NOW, THEREFORE, the Trust hereby adopts this Addendum pursuant to the
current terms of the Plan:
1. Class B(1) shares of each Series are made subject to the Plan pursuant to
Section 4(b) of the Plan.
2. All class differences, differences in distribution and shareholder services
and the allocation of expenses between Class B(1) shares and the other
authorized classes of shares of each Series shall be as described in the current
prospectus for such class and such Series or as otherwise described in the Plan.
EXHIBIT (18)(c)
POWER OF ATTORNEY
The undersigned, a Trustee of State Street Research Master Investment
Trust ("Trust"), a Massachusetts business trust, hereby constitutes and appoints
Francis J. McNamara, III and Darman A. Wing as the true and lawful attorneys of
the undersigned, with full power to each of them alone to sign for the
undersigned, in the name and in the capacity of the undersigned indicated below,
any Registration Statements and any and all amendments thereto of the Trust
filed with the Securities and Exchange Commission and generally to do all such
things in the name and in the indicated capacity of the undersigned as are
required to enable the Trust to comply with provisions of the Securities Act of
1933, as amended, and/or the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming the signature of the undersigned as it has been and may
be signed by said attorneys to said Registration Statements, and any and all
amendments thereto.
IN WITNESS WHEREOF, executed the 3rd day of March, 1999.
Signature Capacity
- --------- --------
/s/ Susan M. Phillips Trustee
- -----------------------------------
Susan M. Phillips
EXHIBIT (18)(d)
STATE STREET RESEARCH MASTER INVESTMENT TRUST
Certificate of Resolution
-------------------------
I, the undersigned Amy L. Simmons, hereby certify that I am Assistant
Secretary of State Street Research Master Investment Trust (the "Trust"), a
Massachusetts business trust duly authorized and validly existing under
Massachusetts law, and that the following is a true, correct and complete
statement of a vote duly adopted by the Trustees of said Trust on May 5, 1995:
"VOTED: That Francis J. McNamara, III and Darman A. Wing be,
----- and each hereby is, authorized and empowered, for and
on behalf of the Trust, its principal financial and
accounting officer, and in their name, to execute,
and file a Power of Attorney relating to, the Trust's
Registration Statements under the Investment Company
Act of 1940 and/or the Securities Act of 1933, and
amendments thereto, the execution and delivery of
such Power of Attorney, Registration Statements and
amendments thereto, to constitute conclusive proof of
such authorization."
I further certify hat said vote has not been amended or revoked and the
same is now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of March,
1999.
/s/ Amy L. Simmons
---------------------------
Amy L. Simmons
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000093755
<NAME> STATE STREET RESEARCH MASTER INVESTMENT TRUST
<SERIES>
<NUMBER> 011
<NAME> STATE STREET RESEARCH INVESTMENT TRUST CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,807,451,724
<INVESTMENTS-AT-VALUE> 2,741,588,014
<RECEIVABLES> 10,726,451
<ASSETS-OTHER> 385,967
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,752,700,432
<PAYABLE-FOR-SECURITIES> 6,825,607
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,354,889
<TOTAL-LIABILITIES> 148,180,496
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,645,393,989
<SHARES-COMMON-STOCK> 46,500,669
<SHARES-COMMON-PRIOR> 35,337,294
<ACCUMULATED-NII-CURRENT> 411,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,578,091
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 934,136,290
<NET-ASSETS> 2,604,519,936
<DIVIDEND-INCOME> 26,953,248
<INTEREST-INCOME> 5,472,332
<OTHER-INCOME> 0
<EXPENSES-NET> 22,091,882
<NET-INVESTMENT-INCOME> 10,333,698
<REALIZED-GAINS-CURRENT> 170,998,002
<APPREC-INCREASE-CURRENT> 377,577,808
<NET-CHANGE-FROM-OPS> 558,909,508
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,587,460)
<DISTRIBUTIONS-OF-GAINS> (39,822,900)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,387,705
<NUMBER-OF-SHARES-REDEEMED> (7,738,830)
<SHARES-REINVESTED> 3,514,500
<NET-CHANGE-IN-ASSETS> 758,627,302
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 39,632,205
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,708,952
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,290,772
<AVERAGE-NET-ASSETS> 2,202,682,993
<PER-SHARE-NAV-BEGIN> 10.41
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 2.89
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> (0.95)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.36
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000093755
<NAME> STATE STREET RESEARCH MASTER INVESTMENT TRUST
<SERIES>
<NUMBER> 012
<NAME> STATE STREET RESEARCH INVESTMENT TRUST CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,807,451,724
<INVESTMENTS-AT-VALUE> 2,741,588,014
<RECEIVABLES> 10,726,451
<ASSETS-OTHER> 385,967
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,752,700,432
<PAYABLE-FOR-SECURITIES> 6,825,607
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,354,889
<TOTAL-LIABILITIES> 148,180,496
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,645,393,989
<SHARES-COMMON-STOCK> 77,087,053
<SHARES-COMMON-PRIOR> 54,006,968
<ACCUMULATED-NII-CURRENT> 411,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,578,091
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 934,136,290
<NET-ASSETS> 2,604,519,936
<DIVIDEND-INCOME> 26,953,248
<INTEREST-INCOME> 5,472,332
<OTHER-INCOME> 0
<EXPENSES-NET> 22,091,882
<NET-INVESTMENT-INCOME> 10,333,698
<REALIZED-GAINS-CURRENT> 170,998,002
<APPREC-INCREASE-CURRENT> 377,577,808
<NET-CHANGE-FROM-OPS> 558,909,508
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (65,309,613)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,941,723
<NUMBER-OF-SHARES-REDEEMED> (11,279,857)
<SHARES-REINVESTED> 5,418,219
<NET-CHANGE-IN-ASSETS> 758,627,302
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 39,632,205
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,708,952
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,290,772
<AVERAGE-NET-ASSETS> 2,202,682,993
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 2.87
<PER-SHARE-DIVIDEND> 0
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