UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-9819 ---------------------------------------------- STATE STREET INSTITUTIONAL INVESTMENT TRUST ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) P.O. Box 5049 Boston, Massachusetts 02206 ------------------------------------------------------------------------------ (Address of principal executive offices)(Zip code) (Name and Address of Agent for Service) Copy to: Julie Tedesco, Secretary Timothy W. Diggins State Street Bank and Trust Company Ropes & Gray P.O. Box 5049 One International Place Boston, Massachusetts 02206 Boston, Massachusetts 02110-2624 Registrant's telephone number, including area code: (617) 662-3968 Date of fiscal year end: December 31 Date of reporting period: June 30, 2003 ITEM 1: SHAREHOLDER REPORT STATE STREET EQUITY 500 INDEX FUND SEMI - ANNUAL REPORT JUNE 30, 2003 (UNAUDITED) STATE STREET EQUITY 500 INDEX FUND CLASS A GROWTH OF A $10,000 INVESTMENT (A) (LINE GRAPH) INVESTMENT PERFORMANCE (A) For the Six Months Ended June 30, 2003 - -------------------------------------------------------------------------------- Total Return Average Annualized Total Return Total Return Since Commencement Six Months Ended One Year Ended of Operations June 30, 2003 June 30, 2003 (April 18, 2001) - -------------------------------------------------------------------------------- State Street Equity 500 Index Fund Class A 11.60% (c) -0.11% -7.55% S&P 500 Index 11.76% (c) 0.25% -7.26% - -------------------------------------------------------------------------------- (a) Total returns and performance graph information represent past performance and are not indicative of future results. Investment return and principal value of an investment will fluctuate so that an investor's share, when redeemed, may be worth more or less than its original cost. The graph and table above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Growth of $10,000 and performance for periods ended June 30, 2003 are unaudited. (b) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged capitalization-weighted index of 500 widely held stocks recognized by investors to be representative of the stock market in general. (c) Not annualized. 1 STATE STREET EQUITY 500 INDEX FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) ASSETS Investment in State Street Equity 500 Index Portfolio, at value (identified cost $172,067,155) (Note 1) $158,065,073 ------------ LIABILITIES Payable for fund shares repurchased 35,848 Distribution fees payable 20,064 Administration fees payable 6,575 ------------ 62,487 ------------ NET ASSETS $158,002,586 ============ NET ASSETS CONSIST OF: Paid-in Capital $209,350,128 Undistributed net investment income 702,543 Accumulated net realized loss (38,048,003) Net unrealized depreciation on investments (14,002,082) ------------ NET ASSETS $158,002,586 ============ CLASS A SHARES: NET ASSETS $153,590,552 Shares of beneficial interest outstanding 18,746,414 Offering, net asset value, and redemption price per share $ 8.19 ============ CLASS B SHARES: NET ASSETS $ 4,412,034 Shares of beneficial interest outstanding 538,617 Offering, net asset value, and redemption price per share $ 8.19 ============ See Notes to Financial Statements. 2 STATE STREET EQUITY 500 INDEX FUND STATEMENT OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) INCOME Dividend income allocated from Portfolio (Note 2) $ 1,219,710 Interest income allocated from Portfolio (Note 2) 29,583 Security lending income allocated from Portfolio (Note 2) 3,226 Expenses allocated from Portfolio (Note 3) (31,731) ------------ 1,220,788 ------------ EXPENSES Distribution fees (Note 3) Class A 103,845 Class B 3,085 Administration fees (Note 3) 35,242 ------------ 142,172 ------------ NET INVESTMENT INCOME 1,078,616 ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investments (5,989,538) Futures 738,519 ------------ (5,251,019) ------------ Change in unrealized appreciation (depreciation) allocated from Portfolio on: Investments 20,697,035 Futures (162,350) ------------ 20,534,685 ------------ Net realized and unrealized gain on investments 15,283,666 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 16,362,282 ============ See Notes to Financial Statements. 3 STATE STREET EQUITY 500 INDEX FUND STATEMENT OF CHANGES IN NET ASSETS For the Six Months Ended For the 06/30/03 Year Ended (Unaudited) 12/31/02 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income $ 1,078,616 $ 2,078,946 Net realized loss on investments (5,251,019) (4,970,430) Change in unrealized appreciation (depreciation) 20,534,685 (36,016,168) ------------- ------------- Net increase (decrease) in net assets resulting from operations 16,362,282 (38,907,652) ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (379,099) (2,069,646) Class B -- -- ------------- ------------- Total Distributions (379,099) (2,069,646) ------------- ------------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS CLASS A Shares sold 10,194,979 19,086,180 Reinvestment of distributions 379,099 2,069,646 Shares redeemed (8,945,842) (15,337,575) ------------- ------------- Net increase from capital share transactions 1,628,236 5,818,251 ------------- ------------- CLASS B* Shares sold 4,188,876 -- Reinvestment of distributions -- -- Shares redeemed (413,154) -- ------------- ------------- Net increase from capital share transactions 3,775,722 -- ------------- ------------- Net increase (decrease) in net assets 21,387,141 (35,159,047) NET ASSETS, BEGINNING OF PERIOD 136,615,445 171,774,492 ------------- ------------- NET ASSETS, END OF PERIOD $ 158,002,586 $ 136,615,445 ============= ============= Undistributed net investment income $ 702,543 $ 3,026 ============= ============= CHANGES IN SHARES: CLASS A Shares sold 1,349,141 18,484,437 Reinvestment of distributions 53,849 152,645 Shares redeemed (1,217,483) (783,687) ------------- ------------- Net increase in shares 185,507 17,853,395 ============= ============= CLASS B* Shares sold 593,408 -- Reinvestment of distributions -- -- Shares redeemed (54,791) -- ------------- ------------- Net increase in shares 538,617 -- ============= ============= * Class B commenced operations on March 10, 2003 See Notes to Financial Statements. 4 STATE STREET EQUITY 500 INDEX FUND FINANCIAL HIGHLIGHTS FOR A CLASS A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD Six Months Ended Year Period 06/30/03 Ended Ended (Unaudited) 12/31/02 12/31/01(a) ----------- ------------ ----------- PER SHARE OPERATING PERFORMANCE (b): NET ASSET VALUE, BEGINNING OF PERIOD $ 7.36 $ 9.62 $ 10.00 ----------- ------------ ----------- INVESTMENT OPERATIONS: Net investment income 0.06 0.11 0.08 Net realized and unrealized gain (loss) on investments 0.79 (2.26) (0.38) ----------- ------------ ----------- Total from investment operations 0.85 (2.15) (0.30) ----------- ------------ ----------- LESS DISTRIBUTIONS FROM: Net investment income (0.02) (0.11) (0.08) ----------- ------------ ----------- Total distributions (0.02) (0.11) (0.08) ----------- ------------ ----------- Net increase (decrease) in net assets 0.83 (2.26) (0.38) ----------- ------------ ----------- NET ASSET VALUE, END OF PERIOD $ 8.19 $ 7.36 $ 9.62 =========== ============ =========== TOTAL RETURN (c) (d) 11.60% (22.31)% (2.97)% =========== ============ =========== RATIOS AND SUPPLEMENTARY DATA: Net Assets, End of Period (000s) $ 153,591 $ 136,615 $ 171,774 Ratios to average net assets : Operating expenses 0.245%(e) 0.245% 0.245%(e) Net investment income 1.53%(e) 1.37% 1.18%(e) Portfolio turnover rate 9% 13% 14% - ---------- (a) The Class A commenced operations on April 18, 2001. (b) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (c) Total returns are not annualized for periods less than one year. (d) Results represent past performance and are not indicative of future results. (e) Annualized. See Notes to Financial Statements. 5 STATE STREET EQUITY 500 INDEX FUND FINANCIAL HIGHLIGHTS FOR A CLASS B SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD Period Ended 06/30/03 (Unaudited)(a) -------------- PER SHARE OPERATING PERFORMANCE (B): NET ASSET VALUE, BEGINNING OF PERIOD $ 6.94 ---------- INVESTMENT OPERATIONS: Net investment income 0.03 Net realized and unrealized gain on investments 1.22 ---------- Total from investment operations 1.25 ---------- LESS DISTRIBUTIONS FROM: Net investment income -- ---------- Total distributions -- ---------- Net increase in net assets 1.25 ---------- NET ASSET VALUE, END OF PERIOD $ 8.19 ========== TOTAL RETURN (C) (D) 18.01% ========== RATIOS AND SUPPLEMENTARY DATA: Net Assets, End of Period (000s) $ 4,412 Ratios to average net assets : Operating expenses 0.345%(e) Net investment income 1.36%(e) Portfolio turnover rate 9% - ---------- (a) The Class B commenced operations on March 10, 2003. (b) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (c) Total return is not annualized for periods less than one year. (d) Results represent past performance and are not indicative of future results. (e) Annualized. 6 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED) 1. ORGANIZATION The State Street Institutional Investment Trust (the "Trust") is a registered and diversified open-end investment company, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), that was organized as a business trust under the laws of the Commonwealth of Massachusetts on February 16, 2000. The Trust consists of the following diversified series: the State Street Equity 500 Index Fund, the State Street Equity 400 Index Fund, the State Street Equity 2000 Index Fund, the State Street MSCI(R) EAFE(R) Index Fund, the State Street Aggregate Bond Index Fund, the State Street Money Market Fund and the State Street U.S. Government Money Market Fund, each of which is a separate diversified series of the Trust. Information presented in these financial statements pertains only to the State Street Equity 500 Index Fund (the "Fund"). Pursuant to the Trust's Declaration of Trust, the Trustees are authorized to issue an unlimited number of shares, with no par value, of the Fund. The Fund commenced operations on April 18, 2001. As of June 30, 2003, the Fund was the only series of the Trust that had commenced operations. The Fund offers both Class A and Class B shares. Class A commenced operations on April 18, 2001 and Class B commenced operations on March 10, 2003. The Fund invests all of its investable assets in interests in the State Street Equity 500 Index Portfolio (the "Portfolio"). The investment objective and policies of the Portfolio are the same as the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (6.980% at June 30, 2003). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund's financial statements are prepared in accordance with generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION - The Fund records its investment in the Portfolio at value. The valuation policies of the Portfolio are discussed in Note 2 of the Portfolio's Notes to Financial Statements, which are included elsewhere within this report. 7 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES - Securities transactions are recorded on a trade date basis. Net investment income consists of the Fund's pro-rata share of the net investment income of the Portfolio, less all expenses of the Fund. Realized and unrealized gains and losses from security transactions consist of the Fund's pro-rata share of the Portfolio's realized and unrealized gains and losses. Realized gains and losses from security transactions are recorded on the basis of identified cost. Class specific distribution fees are borne by that class. Income, non-class specific expenses, and realized and unrealized gains and losses are allocated to the respective classes daily on the basis of relative net assets. DIVIDENDS AND DISTRIBUTIONS - Dividends, if any, are declared and paid, at least, annually. Net realized capital gains, if any, are distributed annually, unless additional distributions are required for compliance with applicable tax regulations. FEDERAL INCOME TAXES - The Fund intends to qualify for and elect treatment as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, the Fund will not be subject to federal income taxes to the extent it distributes its taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year substantially all of its net taxable income and capital gains, if any, the Fund will not be subject to federal excise tax. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These book tax differences are primarily due to wash sales loss deferrals. At December 31, 2002, the Fund generated a capital loss carry forward in the amount of $25,941,969, of which $18,165,550 and $7,776,419 may be utilized to offset any net realized capital gains until expiration dates of December 31, 2009 and December 31, 2010, respectively. The Fund elected to defer current year post-October losses as though the losses were incurred on the first day of the next calendar year, the amount deferred was $382,904. At December 31, 2002, the cost of investments on a tax basis was equal to cost on a book basis. 8 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) 3. RELATED PARTY FEES AND TRANSACTIONS The Portfolio pays a unitary fee of 0.045% of its average daily net assets to State Street Bank & Trust Company ("State Street") for SSgA Funds Management, Inc.'s (SSgA), a subsidiary of State Street Corporation and an affiliate of State Street, services as the investment adviser and for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal and audit expenses). For the period ended June 30, 2003, the Fund's pro-rata share of these expenses amounted to $31,731. State Street is also the administrator for the Fund, the custodian for the Fund's assets, and serves as the transfer agent to the Fund. As compensation for its services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Fund, including ordinary legal and audit expenses), State Street receives a fee at an annual rate of 0.05% of average daily net assets of the Fund. Under this arrangement, the Fund's expenses for the period ended June 30, 2003, amounted to $35,242. ALPS Distributors, Inc. serves as Distributor (the "Distributor") pursuant to a Distribution Agreement with the Trust. The Trust has adopted a plan of distribution pursuant to Rule 12b-1 under the 1940 Act, (the "Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the Fund may compensate financial intermediaries in connection with the distribution of Class A and Class B shares and for services provided to the Fund's shareholders. The Rule 12b-1 Plan calls for payments at an annual rate of up to 0.25% of daily average net assets for Class B shares of the Fund, and an annual rate of up to 0.15% of daily average net assets for Class A shares of the Fund. For the period ended June 30, 2003, the Fund made payments to financial intermediaries pursuant to the Rule 12b-1 plan in the amount of $106,930. 9 STATE STREET EQUITY 500 INDEX PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2003 (UNAUDITED) STATE STREET EQUITY 500 INDEX PORTFOLIO GROWTH OF A $10,000 INVESTMENT (A) (LINE GRAPH) INVESTMENT PERFORMANCE (A) For the Period Ended June 30, 2003 - -------------------------------------------------------------------------------- Total Return Average Annualized Total Return Total Return Since Commencement Six Months Ended One Year Ended of Operations June 30, 2003 June 30, 2003 (March 1, 2000) - -------------------------------------------------------------------------------- State Street Equity 500 Index Portfolio 11.75% (c) 0.17% -8.64% S&P 500 Index (b) 11.76% (c) 0.25% -8.59% - -------------------------------------------------------------------------------- (a) Total returns and performance graph information represent past performance and are not indicative of future results. Investment return and principal value of an investment will fluctuate so that a partner's share, when redeemed, may be worth more or less than its original cost. The graph and table above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Growth of $10,000 and performance for periods ended June 30, 2003 are unaudited. (b) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged capitalization-weighted index of 500 widely held stocks recognized by investors to be representative of the stock market in general. (c) Not annualized. 13 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- COMMON STOCKS - 95.7% CONSUMER DISCRETIONARY - 10.6% American Greetings Corp. Class A 14,414 $ 283 AOL Time Warner, Inc. 1,085,147 17,460 AutoNation, Inc. (a) 68,200 1,072 AutoZone, Inc. (a) 21,587 1,640 Bed Bath & Beyond, Inc. (a) 71,714 2,783 Best Buy Co. (a) 77,721 3,414 Big Lots, Inc. (a) 25,438 383 Black & Decker Corp. 18,233 792 Brunswick Corp. 21,529 539 Carnival Corp. 151,419 4,923 Centex Corp. 15,788 1,228 Circuit City Stores-Circuit City Group 46,839 412 Clear Channel Communications, Inc. (a) 148,165 6,281 Comcast Corp. (a) 542,667 16,378 Cooper Tire & Rubber Co. 16,437 289 Dana Corp. 33,349 386 Darden Restaurants, Inc. 40,010 759 Delphi Corp. 130,467 1,126 Dillard's, Inc. Class A 19,253 259 Dollar General Corp. 81,615 1,490 Dow Jones & Co., Inc. 19,426 836 Eastman Kodak Co. 67,837 1,855 eBay, Inc. (a) 76,580 7,978 Family Dollar Stores, Inc. 42,568 1,624 Federated Department Stores, Inc. 44,676 1,646 Ford Motor Co. 439,955 4,835 Fortune Brands, Inc. 35,466 1,851 Gannett Co., Inc. 64,838 4,980 Gap, Inc. 214,030 4,015 General Motors Corp. 134,273 4,834 Genuine Parts Co. 43,093 1,379 Goodyear Tire & Rubber Co. 37,442 197 Harley-Davidson, Inc. 73,338 2,923 Harrah's Entertainment, Inc. (a) 27,933 1,124 Hasbro, Inc. 41,787 731 Hilton Hotels Corp. 87,443 1,118 Home Depot, Inc. 554,357 18,360 International Game Technology (a) 20,588 $ 2,107 Interpublic Group Cos., Inc. 96,577 1,292 JC Penney & Co., Inc. 63,088 1,063 Johnson Controls, Inc. 20,998 1,797 Jones Apparel Group, Inc. (a) 29,279 857 KB HOME 11,631 721 Knight-Ridder, Inc. 20,191 1,392 Kohl's Corp. (a) 81,410 4,183 Leggett & Platt, Inc. 46,154 946 Limited Brands 124,578 1,931 Liz Claiborne, Inc. 26,641 939 Lowe's Cos., Inc. 188,923 8,114 Marriot International, Inc. Class A 57,339 2,203 Mattel, Inc. 106,745 2,020 May Department Stores Co. 69,167 1,540 Maytag Corp. 17,129 418 McDonald's Corp. 307,053 6,774 McGraw-Hill, Inc. 46,413 2,878 Meredith Corp. 11,147 490 New York Times Co. Class A 36,145 1,645 Newell Rubbermaid, Inc. 64,821 1,815 NIKE, Inc. Class B 64,013 3,424 Nordstrom, Inc. 30,138 588 Office Depot, Inc. (a) 74,470 1,081 Omnicom Group, Inc. 45,017 3,228 Pulte Homes, Inc. 14,718 908 Radioshack Corp. 39,053 1,027 Reebok International, Ltd. (a) 13,071 440 Sears Roebuck & Co. 75,354 2,535 Sherwin-Williams Co. 35,070 943 Snap-On, Inc. 12,948 376 Stanley Works 20,532 567 Staples, Inc. (a) 117,450 2,155 Starbucks Corp. (a) 94,626 2,320 Starwood Hotels & Resorts Worldwide, Inc. Class B 49,012 1,401 Target Corp. 219,857 8,319 Tiffany & Co. 36,268 1,185 TJX Cos., Inc. 125,013 2,355 Toys "R" Us, Inc. (a) 51,369 623 Tribune Co. 73,755 3,562 14 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- CONSUMER DISCRETIONARY - (CONTINUED) Tupperware Corp. 13,036 $ 187 Univision Communications, Inc. Class A (a) 54,918 1,670 V.F. Corp. 25,188 858 Viacom, Inc. Class B (a) 424,789 18,546 Visteon Corp. 29,453 202 Walt Disney Co. 493,673 9,750 Wendy's International, Inc. 26,767 775 Whirlpool Corp. 17,066 1,087 Yum! Brands, Inc. (a) 72,522 2,144 --------- 239,564 ========= CONSUMER STAPLES - 11.2% Adolph Coors Co. Class B 8,444 414 Alberto Culver Co. Class B 13,639 697 Albertson's, Inc. 92,013 1,767 Altria Group, Inc. 488,564 22,200 Anheuser-Busch Cos., Inc. 201,367 10,280 Archer-Daniels-Midland Co. 156,867 2,019 Avon Products, Inc. 56,374 3,506 Brown-Forman Corp. Class B 14,141 1,112 Campbell Soup Co. 98,283 2,408 Clorox Co. 53,710 2,291 Coca-Cola Co. 594,335 27,583 Coca-Cola Enterprises, Inc. 109,100 1,980 Colgate-Palmolive Co. 130,235 7,547 ConAgra Foods, Inc. 130,846 3,088 Costco Wholesale Corp. (a) 110,151 4,032 CVS Corp. 94,092 2,637 General Mills, Inc. 89,164 4,227 Gillette Co. 246,444 7,852 H.J. Heinz Co. 84,220 2,778 Hershey Foods Corp. 32,904 2,292 Kellogg Co. 98,829 3,397 Kimberly-Clark Corp. 123,164 6,422 Kroger Co. (a) 186,122 3,105 McCormick & Co., Inc. 32,700 889 Pepsi Bottling Group, Inc. 69,153 1,384 PepsiCo, Inc. 416,610 18,539 Procter & Gamble Co. 312,411 27,861 R.J. Reynolds Tobacco Holdings, Inc. 20,840 775 Safeway, Inc. (a) 105,693 2,162 Sara Lee Corp. 189,317 $ 3,561 SuperValu, Inc. 32,260 688 SYSCO Corp. 156,681 4,707 UST Corp. 41,647 1,459 Wal-Mart Stores, Inc. 1,056,628 56,709 Walgreen Co. 248,010 7,465 Winn-Dixie Stores, Inc. 31,710 390 Wrigley Wm., Jr. Co. 54,616 3,071 --------- 253,294 ========= ENERGY - 5.5% Amerada Hess Corp. 22,302 1,097 Anadarko Petroleum Corp. 60,554 2,693 Apache Corp. 38,265 2,489 Ashland, Inc. 15,580 478 Baker Hughes, Inc. 80,080 2,688 BJ Services Co. (a) 38,855 1,452 Burlington Resources, Inc. 48,928 2,645 ChevronTexaco Corp. 257,647 18,602 Conocophillips 163,641 8,967 Devon Energy Corp. 55,861 2,983 EOG Resources, Inc. 27,384 1,146 ExxonMobil Corp. 1,611,702 57,876 Halliburton Co. 104,586 2,405 Kerr-McGee Corp. 23,736 1,063 Marathon Oil Corp. 76,734 2,022 Nabors Industries, Ltd. (a) 35,515 1,405 Noble Corp. (a) 31,623 1,085 Occidental Petroleum Corp. 92,123 3,091 Rowan Cos., Inc. 21,239 476 Schlumberger, Ltd. 140,507 6,684 Sunoco, Inc. 19,228 726 Transocean, Inc. 75,995 1,670 Unocal Corp. 63,488 1,821 --------- 125,564 ========= FINANCIALS - 19.6% ACE, Ltd. 62,955 2,159 AFLAC, Inc. 124,716 3,835 Allstate Corp. 169,807 6,054 Ambac Financial Group, Inc. 25,047 1,659 American Express Co. 312,973 13,085 American International Group, Inc. 628,583 34,685 AmSouth Bancorp 86,919 1,898 15 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- FINANCIALS - (CONTINUED) AON Corp. 76,223 $ 1,835 Apartment Investment & Management Co. Class A 21,900 758 Bank of America Corp. 362,178 28,623 Bank of New York Co., Inc. 186,079 5,350 Bank One Corp. 275,662 10,249 BB&T Corp. 113,818 3,904 Bear Stearns Cos., Inc. 23,799 1,724 Capital One Financial Corp. 54,615 2,686 Charles Schwab Corp. 327,493 3,304 Charter One Financial, Inc. 55,117 1,719 Chubb Corp. 44,639 2,678 Cincinnati Financial Corp. 39,667 1,471 Citigroup, Inc. 1,242,171 53,165 Comerica, Inc. 42,832 1,992 Countrywide Credit Industries, Inc. 30,972 2,155 Equity Office Properties Trust 100,441 2,713 Equity Residential 65,907 1,710 Fannie Mae 236,429 15,945 Federal Home Loan Mortgage Corp. 165,846 8,420 Federated Investors, Inc. Class B 24,900 683 Fifth Third Bancorp 138,300 7,930 First Tennessee National Corp. 31,017 1,362 FleetBoston Financial Corp. 254,085 7,549 Franklin Resources, Inc. 62,944 2,459 Golden West Financial Corp. 37,411 2,993 Goldman Sachs Group, Inc. 114,100 9,556 Hartford Financial Services Group, Inc. 66,988 3,374 Huntington Bancshares, Inc. 56,454 1,102 J.P. Morgan Chase & Co. 490,114 16,752 Janus Capital Group, Inc. 57,319 940 Jefferson-Pilot Corp. 34,460 1,429 John Hancock Financial Services, Inc. 68,478 2,104 KeyCorp 101,009 2,553 Lehman Brothers Holdings, Inc. 58,618 $ 3,897 Lincoln National Corp. 42,431 1,512 Loews Corp. 44,414 2,100 Marsh & McLennan Cos., Inc. 128,536 6,564 Marshall & Ilsley Corp. 54,692 1,673 MBIA, Inc. 34,758 1,695 MBNA Corp. 305,902 6,375 Mellon Financial Corp. 105,123 2,917 Merrill Lynch & Co., Inc. 224,127 10,462 MetLife, Inc. 183,407 5,194 MGIC Investment Corp. 24,062 1,122 Moody's Corp. 35,965 1,896 Morgan Stanley 261,643 11,185 National City Corp. 146,591 4,795 North Fork Bancorp, Inc. 37,990 1,294 Northern Trust Corp. 54,140 2,263 Plum Creek Timber Co., Inc. 46,180 1,198 PNC Financial Services Group, Inc. 68,847 3,360 Principal Financial Group, Inc. 78,950 2,546 Progressive Corp. 52,747 3,856 Providian Financial Corp. (a) 69,973 648 Prudential Financial, Inc. 135,700 4,566 Regions Financial Corp. 52,489 1,773 SAFECO Corp. 33,364 1,177 Simon Property Group, Inc. 44,563 1,739 SLM Corp. 111,342 4,361 SouthTrust Corp. 82,779 2,252 St. Paul Cos., Inc. 55,428 2,024 State Street Corp. (Note 4) 80,925 3,188 SunTrust Banks, Inc. 68,272 4,051 Synovus Financial Corp. 71,104 1,529 T. Rowe Price Group, Inc. 31,490 1,189 Torchmark Corp. 27,576 1,027 Travelers Property Casualty Corp. Class B 243,056 3,833 U.S. Bancorp 463,261 11,350 Union Planters Corp. 47,944 1,488 UnumProvident Corp. 70,435 945 Wachovia Corp. 324,626 12,972 Washington Mutual, Inc. 224,513 9,272 16 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- FINANCIALS - (CONTINUED) Wells Fargo Co. 404,211 $ 20,372 XL Capital, Ltd. Class A 32,532 2,700 Zions Bancorp 23,319 1,180 --------- 444,102 HEALTH CARE - 14.2% ========= Abbott Laboratories 377,267 16,509 Aetna, Inc. 36,632 2,205 Allergan, Inc. 31,691 2,443 AmerisourceBergen Corp. 27,016 1,874 Amgen, Inc. (a) 303,875 20,354 Anthem, Inc. (a) 33,900 2,615 Applera Corp. - Applied Biosystems Group 52,567 1,000 Bausch & Lomb, Inc. 11,925 447 Baxter International, Inc. 144,526 3,758 Becton, Dickinson & Co. 62,029 2,410 Biogen, Inc. (a) 35,094 1,334 Biomet, Inc. 61,841 1,772 Boston Scientific Corp. (a) 98,948 6,046 Bristol-Myers Squibb Co. 467,717 12,699 C.R. Bard, Inc. 12,397 884 Cardinal Health, Inc. 108,266 6,962 Chiron Corp. (a) 45,744 2,000 CIGNA Corp. 33,989 1,595 Eli Lilly & Co. 271,097 18,698 Forest Laboratories, Inc. (a) 87,706 4,802 Genzyme Corp. (a) 52,305 2,186 Guidant Corp. 73,464 3,261 HCA, Inc. 123,759 3,965 Health Management Associates, Inc. Class A 55,698 1,028 Humana, Inc. (a) 38,225 577 IMS Health, Inc. 59,681 1,074 Johnson & Johnson 715,746 37,004 King Pharmaceuticals, Inc. (a) 56,832 839 Manor Care, Inc. (a) 23,151 579 McKesson Corp. 69,231 2,474 MedImmune, Inc. (a) 59,965 2,181 Medtronic, Inc. 294,402 14,122 Merck & Co., Inc. 541,203 32,770 Millipore Corp. 11,728 520 Pfizer, Inc. 1,905,074 65,058 Quest Diagnostics, Inc. (a) 25,200 $ 1,608 Quintiles Transnational Corp. (a) 26,218 372 Schering-Plough Corp. 354,424 6,592 St. Jude Medical, Inc. (a) 43,197 2,484 Stryker Corp. 48,004 3,330 Tenet Healthcare Corp. (a) 111,809 1,303 UnitedHealth Group, Inc. 142,984 7,185 Watson Pharmaceuticals, Inc. (a) 27,003 1,090 WellPoint Health Networks, Inc. (a) 36,089 3,042 Wyeth 319,931 14,573 Zimmer Holdings, Inc. (a) 47,920 2,159 --------- 321,783 ========= INDUSTRIALS - 10.0% 3M Co. 94,342 12,168 Allied Waste Industries, Inc. (a) 55,167 554 American Power Conversion Corp. (a) 47,767 745 American Standard Cos., Inc. (a) 17,907 1,324 Apollo Group, Inc. (a) 41,775 2,580 Avery Dennison Corp. 26,670 1,339 Boeing Co. 202,845 6,962 Burlington Northern Santa Fe Corp. 91,250 2,595 Caterpillar, Inc. 83,085 4,625 Cendant Corp. (a) 247,222 4,529 Cintas Corp. 41,582 1,474 Cooper Industries, Ltd. 23,421 967 Crane Co. 13,402 303 CSX Corp. 51,524 1,550 Cummins, Inc. 9,173 329 Danaher Corp. 37,013 2,519 Deere & Co. 58,441 2,671 Delta Air Lines, Inc. 27,793 408 Deluxe Corp. 15,220 682 Dover Corp. 47,813 1,433 Eaton Corp. 17,439 1,371 Emerson Electric Co. 100,835 5,153 Equifax, Inc. 32,469 844 17 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- INDUSTRIALS - (CONTINUED) FedEx Corp. 71,546 $ 4,438 Fluor Corp. 20,406 687 General Dynamics Corp. 48,706 3,531 General Electric Co. 2,411,623 69,165 Goodrich Co. 26,755 562 H&R Block, Inc. 42,910 1,856 Honeywell International, Inc. 207,042 5,559 Illinois Tool Works, Inc. 73,664 4,851 Ingersoll-Rand Co. Class A 39,950 1,890 ITT Industries, Inc. 22,102 1,447 Lockheed Martin Corp. 109,171 5,193 Masco Corp. 114,974 2,742 McDermott International, Inc. (a) 13,841 88 Monster Worldwide, Inc. (a) 26,292 519 Navistar International Corp. (a) 17,880 583 Norfolk Southern Corp. 94,361 1,812 Northrop Grumman Corp. 44,039 3,800 PACCAR, Inc. 28,247 1,904 Pall Corp. 31,474 708 Parker-Hannifin Corp. 29,223 1,227 Pitney Bowes, Inc. 56,639 2,176 Power-One, Inc. (a) 17,400 124 R.R. Donnelley & Sons Co. 26,460 692 Raytheon Co. 98,914 3,248 Robert Half International, Inc. (a) 39,414 747 Rockwell Automation, Inc. 43,920 1,047 Rockwell Collins, Inc. 41,219 1,015 Ryder Systems, Inc. 15,680 402 Southwest Airlines Co. 185,540 3,191 Textron, Inc. 31,875 1,244 Thomas & Betts Corp. (a) 13,042 188 Tyco International, Ltd. 482,748 9,163 Union Pacific Corp. 61,440 3,565 United Parcel Service, Inc. Class B 271,200 17,275 United Technologies Corp. 112,557 7,972 W.W. Grainger, Inc. 21,309 996 Waste Management, Inc. 144,179 3,473 --------- 226,205 ========= INFORMATION TECHNOLOGY - 15.5% ADC Telecommunications, Inc. (a) 175,727 $ 409 Adobe Systems, Inc. 56,671 1,817 Advanced Micro Devices, Inc. (a) 77,484 497 Agilent Technologies, Inc. (a) 113,727 2,223 Altera Corp. (a) 94,278 1,546 Analog Devices, Inc. (a) 88,161 3,070 Andrew Corp. (a) 22,127 204 Apple Computer, Inc. (a) 86,246 1,649 Applied Materials, Inc. (a) 399,961 6,343 Applied Micro Circuits Corp. (a) 67,542 409 Autodesk, Inc. 24,415 395 Automatic Data Processing, Inc. 143,638 4,864 Avaya, Inc. (a) 89,315 577 BMC Software, Inc. (a) 54,836 895 Broadcom Corp. (a) 67,546 1,683 CIENA Corp. (a) 113,688 590 Cisco Systems, Inc. (a) 1,693,559 28,096 Citrix Systems, Inc. (a) 41,653 848 Computer Associates International, Inc. 139,444 3,107 Computer Sciences Corp. (a) 44,982 1,715 Compuware Corp. (a) 85,557 494 Comverse Technology, Inc. (a) 45,438 683 Concord EFS, Inc. (a) 121,140 1,783 Convergys Corp. (a) 39,505 632 Corning, Inc. (a) 305,485 2,258 Dell Computer Corp. (a) 622,091 19,882 Electronic Arts, Inc. (a) 34,650 2,564 Electronic Data Systems Corp. 116,186 2,492 EMC Corp. (a) 527,041 5,518 First Data Corp. 182,002 7,542 Fiserv, Inc. (a) 45,547 1,622 Gateway, Inc. (a) 72,665 265 Hewlett-Packard Co. 736,519 15,688 Intel Corp. 1,576,603 32,768 18 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- --------- INFORMATION TECHNOLOGY - (CONTINUED) International Business Machines Corp. 416,918 $ 34,396 Intuit, Inc. (a) 49,851 2,220 Jabil Circuit, Inc. (a) 49,813 1,101 JDS Uniphase Corp. (a) 345,119 1,211 KLA Tencor Corp. (a) 45,464 2,114 Lexmark International Group, Inc. Class A (a) 30,802 2,180 Linear Technology Corp. 74,975 2,415 LSI Logic Corp. (a) 84,235 596 Lucent Technologies, Inc. 991,072 2,012 Maxim Integrated Products, Inc. 78,356 2,679 Mercury Interactive Corp. (a) 21,548 832 Micron Technology, Inc. (a) 145,732 1,695 Microsoft Corp. 2,590,604 66,345 Molex, Inc. 46,210 1,247 Motorola, Inc. 558,798 5,269 National Semiconductor Corp. (a) 45,609 899 NCR Corp. (a) 21,792 558 Network Appliance, Inc. (a) 82,567 1,338 Novell, Inc. (a) 81,042 250 Novellus Systems, Inc. (a) 36,169 1,325 NVIDIA Corp. (a) 36,951 850 Oracle Corp. (a) 1,271,438 15,283 Parametric Technology Corp. (a) 59,341 181 Paychex, Inc. 90,127 2,642 PeopleSoft, Inc. (a) 74,923 1,318 PerkinElmer, Inc. 29,357 405 PMC-Sierra, Inc. (a) 37,024 434 QLogic Corp. (a) 22,845 1,104 QUALCOMM, Inc. 190,439 6,808 Sabre Holdings Corp. Class A 33,324 821 Sanmina-SCI Corp. (a) 118,958 751 Scientific-Atlanta, Inc. 36,768 877 Siebel Systems, Inc. (a) 117,158 1,118 Solectron Corp. (a) 200,214 749 Sun Microsystems, Inc. (a) 774,388 3,562 SunGard Data Systems, Inc. (a) 67,750 $ 1,755 Symantec Corp. (a) 36,300 1,592 Symbol Technologies, Inc. 55,585 723 Tektronix, Inc. (a) 21,029 454 Tellabs, Inc. (a) 99,475 654 Teradyne, Inc. (a) 44,592 772 Texas Instruments, Inc. 418,703 7,369 Thermo Electron Corp. (a) 39,029 820 Unisys Corp. (a) 76,279 937 VERITAS Software Corp. (a) 99,983 2,866 Waters Corp. (a) 29,757 867 Xerox Corp. (a) 188,542 1,997 Xilinx, Inc. (a) 82,704 2,093 Yahoo!, Inc. (a) 145,593 4,770 --------- 350,382 ========= MATERIALS - 2.5% Air Products & Chemicals, Inc. 54,389 2,263 Alcoa, Inc. 202,446 5,162 Allegheny Technologies, Inc. 17,729 117 Ball Corp. 13,385 609 Bemis Co., Inc. 11,864 555 Boise Cascade Corp. 12,419 297 Dow Chemical Co. 220,899 6,839 E.I. Du Pont de Nemours & Co. 240,439 10,012 Eastman Chemical Co. 17,362 550 Ecolab, Inc. 63,726 1,631 Engelhard Corp. 29,430 729 Freeport-McMoRan Copper & Gold, Inc. Class B 35,114 860 Georgia-Pacific Group 58,140 1,102 Great Lakes Chemical Corp. 10,803 220 Hercules, Inc. (a) 24,298 241 International Flavors & Fragrances, Inc. 21,504 687 International Paper Co. 115,656 4,132 Louisiana Pacific Corp. (a) 23,459 253 MeadWestvaco Corp. 49,588 1,225 Monsanto Co. 60,946 1,319 Newmont Mining Corp. 97,942 3,179 19 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Market Value Shares (000) --------- ---------- MATERIALS - (CONTINUED) Nucor Corp. 20,202 $ 987 Pactiv Corp. (a) 35,864 707 Phelps Dodge Corp. (a) 20,605 790 PPG Industries, Inc. 41,090 2,085 Praxair, Inc. 38,410 2,308 Rohm & Haas Co. 53,796 1,669 Sealed Air Corp. (a) 21,136 1,007 Sigma Aldrich Corp. 17,193 932 Temple-Inland, Inc. 14,314 614 United States Steel Corp. 22,902 375 Vulcan Materials Co. 26,296 975 Weyerhaeuser Co. 52,424 2,831 Worthington Industries, Inc. 19,229 258 ---------- 57,520 ========== TELECOMMUNICATION SERVICES - 3.7% ALLTEL Corp. 75,298 3,631 AT&T Corp. 187,747 3,614 AT&T Wireless Services, Inc. (a) 653,638 5,366 BellSouth Corp. 445,828 11,873 CenturyTel, Inc. 33,608 1,171 Citizens Communications Co. (a) 68,377 881 Nextel Communications, Inc. Class A (a) 248,236 4,488 Qwest Communications International, Inc. (a) 402,622 1,925 SBC Communications, Inc. 800,704 20,458 Sprint Corp. (Fon Group) 218,284 3,143 Sprint Corp. (PCS Group) (a) 246,178 1,416 Verizon Communications, Inc. 663,598 26,179 ---------- 84,145 ========== UTILITIES - 2.9% AES Corp. (a) 147,814 939 Allegheny Energy, Inc. 28,099 237 Ameren Corp. 38,242 1,686 American Electric Power Co., Inc. 95,354 2,844 Calpine Corp. (a) 91,952 607 CenterPoint Energy, Inc. 68,593 559 Cinergy Corp. 42,458 1,562 CMS Energy Corp. 29,705 241 Consolidated Edison, Inc. 53,922 $ 2,334 Constellation Energy Group, Inc. 38,803 1,331 Dominion Resources, Inc. 74,987 4,819 DTE Energy Co. 41,046 1,586 Duke Energy Corp. 216,077 4,311 Dynegy, Inc. Class A 82,030 344 Edison International (a) 80,762 1,327 El Paso Corp. 153,494 1,240 Entergy Corp. 54,143 2,858 Exelon Corp. 77,989 4,664 FirstEnergy Corp. 71,312 2,742 FPL Group, Inc. 44,489 2,974 KeySpan Corp. 38,606 1,369 Kinder Morgan, Inc. 29,838 1,631 Mirant Corp. (a) 95,088 276 NICOR, Inc. 10,113 375 NiSource, Inc. 65,367 1,242 Peoples Energy Corp. 7,631 327 PG&E Corp. (a) 100,623 2,128 Pinnacle West Capital Corp. 21,081 789 PPL Corp. 40,668 1,749 Progress Energy, Inc. 58,008 2,547 Public Service Enterprise Group, Inc. 54,522 2,304 Sempra Energy 50,589 1,443 Southern Co. 174,158 5,427 TECO Energy, Inc. 41,176 494 TXU Corp. 75,948 1,705 Williams Cos., Inc. 124,937 987 Xcel Energy, Inc. 93,397 1,405 ---------- 65,403 ========== TOTAL COMMON STOCKS (cost $2,143,116,851) $2,167,962 ========== 20 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Par Market Amount Value (000) (000) --------- ---------- GOVERNMENT AND AGENCY SECURITIES - 0.3% United States Treasury Bills 0.90% due 09/11/03 (b) (c) $ 5,910 $ 5,900 ---------- TOTAL GOVERNMENT AND AGENCY SECURITIES (cost $5,899,362) 5,900 ---------- Shares (000) --------- SHORT TERM INVESTMENTS - 6.0% AIM Short Term Investment Prime Portfolio 81,577 81,577 Federated Money Market Obligations Trust 6,560 6,560 State Street Navigator Securities Lending Prime Portfolio (d) (Note 4) 47,883 47,883 ---------- TOTAL SHORT TERM INVESTMENTS (cost $136,020,299) 136,020 ---------- TOTAL INVESTMENTS - 102.0% (identified cost $2,285,036,512) $2,309,882 OTHER ASSETS AND LIABILITIES NET - (2.0)% (45,214) ---------- NET ASSETS - 100% $2,264,668 ========== (a) Non-income producing security (b) Held as collateral in connection with futures contracts purchased by the Portfolio. (c) Rate represents annualized yield at date of purchase. (d) Security represents investment made with cash collateral received from securities loaned. Number Unrealized of Depreciation Contracts (000) --------- ------------ SCHEDULE OF FUTURES CONTRACTS S&P 500 Financial Futures Contracts (long) Expiration date 09/2003 392 $ 2,358 ------------ Total unrealized depreciation on open futures contracts purchased $ 2,358 ============ 21 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) (Amounts in thousands) ASSETS Unaffiliated investments at market (identified cost $2,234,463) - including $46,643 of securities loaned (Note 2) $2,258,811 Affiliated investments at market (identified cost $50,574) (Note 4) 51,071 Receivables: Dividends and interest 2,753 --------- Total assets 2,312,635 LIABILITIES Payables: Due upon return of securities loaned 47,883 Management fees (Note 4) 84 --------- Total liabilities 47,967 --------- NET ASSETS $2,264,668 ========= COMPOSITION OF NET ASSETS Paid-in capital $2,242,181 Net unrealized appreciation on investments and futures contracts 22,487 --------- NET ASSETS $2,264,668 ========= See Notes to Financial Statements. 22 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) (Amounts in thousands) INVESTMENT INCOME Dividends $ 17,652 Interest 428 Security lending income 47 --------- Total Investment Income 18,127 EXPENSES Management fees (Note 4) $ 460 --------- Total Expenses 460 --------- NET INVESTMENT INCOME 17,667 --------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments (87,027) Futures contracts 10,399 --------- (76,628) Net change in unrealized appreciation (depreciation) on: Investments 297,207* Futures contracts (1,542) --------- 295,665 --------- Net realized and unrealized gain 219,037 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 236,704 ========= *Excludes unrealized appreciation of $2,385 on contributed securities. See Notes to Financial Statements. 23 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (Amounts in thousands) For the Six Months Ended For the Year June 30, 2003 Ended (Unaudited) December 31, 2002 ------------------ ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income $ 17,667 $ 34,956 Net realized loss on investments, futures contracts, and withdrawals in-kind (76,628) (70,428) Net change in unrealized appreciation (depreciation) 295,665 (532,213) ------------------ ---------------- Net increase (decrease) in net assets resulting from operations 236,704 (567,685) ------------------ ---------------- CAPITAL TRANSACTIONS Proceeds from contributions 308,450 557,561 Contributions in-kind 19,659 41,343 Fair value of withdrawals (292,693) (520,988) Withdrawals in-kind -- (209,981) ------------------ ---------------- Net increase (decrease) in net assets from capital transactions 35,416 (132,065) ------------------ ---------------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS 272,120 (699,750) NET ASSETS Beginning of period 1,992,548 2,692,298 ------------------ ---------------- End of period $ 2,264,668 $ 1,992,548 ================== ================ See Notes to Financial Statements. 24 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets: For the Six Months Ended Year Year Period 6/30/03 Ended Ended Ended (Unaudited) 12/31/02 12/31/01 12/31/00* ---------------- ---------- ---------- ---------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $2,264,668 $1,992,548 $2,692,298 $2,957,271 Ratios to average net assets: Operating expenses 0.045%+ 0.045% 0.045% 0.045%+ Net investment income 1.73%+ 1.57% 1.34% 1.14%+ Portfolio turnover rate** 9%++ 13% 14% 18%++ Total return (a) 11.75%++ (22.16%) (11.94%) (2.41%)++ - ---------- * The Portfolio commenced operations on March 1, 2000. ** The Portfolio turnover rate excludes in-kind security transactions. + Annualized. ++ Not Annualized. (a) Results represent past performance and are not indicative of future results. See Notes to Financial Statements. 25 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED) 1. ORGANIZATION The State Street Master Funds (the "Trust") is a registered and diversified open-end investment company, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), that was organized as a business trust under the laws of the Commonwealth of Massachusetts on July 27, 1999. The Trust comprises seven investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street MSCI(R) EAFE(R) Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the "Portfolio"). At June 30, 2003, only the Portfolio and State Street MSCI(R) EAFE(R) Index Portfolio had commenced operations. Pursuant to the Trust's Declaration of Trust, the Board of Trustees may issue an unlimited number of non-transferable beneficial interests. The Portfolio's investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500 Index. The S&P 500 Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. 2. SIGNIFICANT ACCOUNTING POLICIES The Portfolio's financial statements are prepared in accordance with generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements. SECURITY VALUATION: The Portfolio's investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis and includes amortization of premium and accretion of discount on investments. Realized gains and losses from securities transactions are recorded on the basis of identified cost. Expenses are accrued daily based on average daily net assets. 26 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the partners in the Portfolio based on each partner's daily ownership percentage. FEDERAL INCOME TAXES: The Portfolio is not required to pay federal income taxes on its net investment income and net capital gains because it is treated as a partnership for federal income tax purposes. All interest, dividends, gains and losses of the Portfolio are deemed to have been "passed through" to the Portfolio's partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes. FUTURES: The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500 Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission (the "SEC") requirements. The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of futures contracts and the possibility of an illiquid market. SECURITIES LENDING: The Trust, on behalf of the Portfolio, entered into a Securities Lending Agreement (the "Agreement") with State Street Bank and Trust Company ("State Street"). Under the terms of the Agreement, the Portfolio may lend portfolio securities to qualified borrowers in order to earn additional income. The Agreement requires that loans are secured at all times by cash, U.S. Government securities or irrevocable lines of credit in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities), plus accrued interest and dividends, determined on a daily basis. Proceeds collected by State Street on investment of cash collateral or any fee income is allocated as follows: 75% to the Portfolio and 25% to State Street. For the six months ended June 30, 2003, the earned income for the Portfolio and State Street was $46,723 and $15,574, respectively. The primary risk associated with securities lending is that if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Portfolio could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. At June 30, 2003, the value of the securities loaned amounted to $46,642,751. The loans were collateralized with cash of $47,883,163, which the 27 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) Portfolio then invested in the State Street Navigator Securities Lending Prime Portfolio (the "Prime Portfolio"), an affiliated investment company. 3. SECURITIES TRANSACTIONS For the period ended June 30, 2003, purchases and sales of investment securities, excluding short-term investments, futures contracts, and in-kind contributions and withdrawals, aggregated to $191,416,948 and $181,101,312, respectivily. The aggregrate value of in-kind contributions and withdrawals were $19,659,189 and $0, respectively. At June 30, 2003, the cost of investments on a book basis was $2,285,036,512. The aggregate gross unrealized appreciation and gross unrealized depreciation was $332,790,014 and $307,944,587, respectively, for all securities as computed on a book basis. 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA"), a subsidiary of State Street Corp. and an affiliate of State Street, under which SSgA directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSgA's services as investment adviser and for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal and audit expenses), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio's average daily net assets. Certain investments made by the Portfolio represent securities affiliated with State Street and SSgA. Investments made with cash collateral received from securities loaned were used to purchase shares of the Prime Portfolio, which is offered by State Street and advised by SSgA. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500 Index. The market value of each of these investments at June 30, 2003 is listed in the Portfolio of Investments. During the period, the Portfolio had investment transactions executed through State Street Global Markets LLC. For the period ended June 30, 2003, the Portfolio paid brokerage commissions to State Street Global Markets LLC, of $265,675. 28 ITEM 9. CONTROLS AND PROCEDURES. (a) Within 90 days of the filing date of this Form N-CSR, Donald A. Gignac, the registrant's President, and Janine Cohen, the registrant's Treasurer, reviewed the registrant's disclosure controls and procedures (the "Procedures") and evaluated their effectiveness. Based on their review, Mr. Gignac and Ms. Cohen determined that the Procedures adequately ensure that information required to be disclosed by the registrant in its periodic reports is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission's rules and regulations. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS (a)(1) N/A (a)(2) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended are attached hereto. (b) The certifications required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STATE STREET INSTITUTIONAL INVESTMENT TRUST By: /s/Donald A. Gignac ------------------------- Donald A. Gignac President By: /s/Janine Cohen ------------------------- Janine Cohen Treasurer Date: September 8, 2003