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
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STATE STREET INSTITUTIONAL INVESTMENT TRUST
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(Exact name of registrant as specified in charter)
P.O. Box 5049
Boston, Massachusetts 02206
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(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)
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1,220,788
------------
EXPENSES
Distribution fees (Note 3)
Class A 103,845
Class B 3,085
Administration fees (Note 3) 35,242
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142,172
------------
NET INVESTMENT INCOME 1,078,616
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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
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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
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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)
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Net increase (decrease) in net assets resulting from operations 16,362,282 (38,907,652)
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (379,099) (2,069,646)
Class B -- --
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Total Distributions (379,099) (2,069,646)
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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)
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Net increase from capital share transactions 1,628,236 5,818,251
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CLASS B*
Shares sold 4,188,876 --
Reinvestment of distributions -- --
Shares redeemed (413,154) --
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Net increase from capital share transactions 3,775,722 --
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Net increase (decrease) in net assets 21,387,141 (35,159,047)
NET ASSETS, BEGINNING OF PERIOD 136,615,445 171,774,492
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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)
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Net increase in shares 185,507 17,853,395
============= =============
CLASS B*
Shares sold 593,408 --
Reinvestment of distributions -- --
Shares redeemed (54,791) --
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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%
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(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
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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%
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(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