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: 811-09599
----------
STATE STREET MASTER FUNDS
(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:
Karen Jacoppo-Wood, Vice President Timothy W. Diggins, Esq.
and Managing Counsel Ropes & Gray
State Street Bank and Trust Company One International Place
2 Avenue de Lafayette, 6th Floor Boston, Massachusetts 02110-2624
Boston, Massachusetts 02111
Registrant's telephone number, including area code: (617) 662-3966
Date of fiscal year end: December 31
Date of reporting period: December 31, 2006
ITEM 1. SHAREHOLDER REPORT.
STATE STREET EQUITY 500 INDEX PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2006
STATE STREET EQUITY 500 INDEX PORTFOLIO
MANAGEMENT DISCUSSION OF FUND PERFORMANCE AND ANALYSIS, YEAR ENDING 12/31/2006
The State Street Equity 500 Index Portfolio's (the "Portfolio") 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(R) Index"). The Portfolio uses a passive management strategy designed to
track the performance of the S&P 500(R) Index. The S&P 500(R) Index is a well-
known unmanaged stock market 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. For the year ended
December 31, 2006, the Portfolio gained 15.75%. For the same period, the S&P
500(R) Index gained 15.79%.
Global financial markets closed out the year 2006 with a stellar fourth quarter.
Stocks rallied consistently through the period, and bonds generated positive
returns before retreating a bit in December. After soft activity data boosted
government debt at the end of November, yields rose steadily into the end of the
year as employment and wages continued to climb. Fresh inflation data came in
mixed, but core measures remained well above the 2% level deemed comfortable by
the Federal Reserve. With inflation risks still prominent in official comments,
futures traders pushed the expected arrival date for a cut in fed funds beyond
the first quarter of 2007. Equities showed scant concern about any delay in
accommodation, as a flurry of takeover activity reflected buoyant liquidity
conditions and kept sentiment bullish. Announced transactions for Equity Office
Properties and copper giant Phelps Dodge made headlines in November, while a
buyout of real estate services firm Realogy and an increased bid for benefit
manager Caremark highlighted December dealings.
With enthusiasm for stocks resilient through December, the Dow Jones Industrial
Average(R) achieved a string of record highs, ending 2006 just below 12,500. As
for the S&P 500(R) Index, December marked its seventh consecutive month in
positive territory; its only negative month during 2006 came back in May. The
S&P 500(R) Index returned 1.40% for December, 6.70% for the fourth quarter, and
15.79% for the whole of 2006. Tracking the S&P 500(R) Index closely, the Russell
1000(R) Index added 1.28% in December, 6.95% during the fourth quarter, and
15.46% for the entire year.
Smaller stocks raced forward at the start of 2006, but their road turned rougher
after policy uncertainty sparked a correction in May. Even though broad market
strength helped the Russell 2000(R) Index to finish 2006 at a record high, the
popular small-company benchmark only eked out a 0.33% gain for December. Its
earlier strength, however, lifted the Russell 2000(R) Index to an 8.90% return
for the fourth quarter and an 18.37% result for the entire year. Still, budding
relative strength in larger company stocks took a visible toll on the S&P 400(R)
Index of mid cap stocks and the small cap S&P 600(R) Index, both of which
slipped slightly in December and underperformed the S&P 500(R) Index for all of
2006. Although the S&P 400(R) Index returned 6.99% for the fourth quarter, it
ended the year with a barely double-digit gain of 10.32%. The S&P 600(R) Index
gained 7.84% in the fourth quarter and 15.12% for the full year.
Signs of recovery in large cap themes did little for the relative performance of
growth-oriented stocks, as fresh strength in financial issues boosted value
benchmarks. Banks and brokers, shaking off the challenges of an inverted yield
curve, continued to benefit from fee-driven businesses. Although growth plays
showed some flashes of brilliance in the second half of 2006, they still had a
relatively rough year.
1
STATE STREET EQUITY 500 INDEX PORTFOLIO
MANAGEMENT DISCUSSION OF FUND PERFORMANCE AND ANALYSIS, YEAR ENDING 12/31/2006
(CONTINUED)
The Russell 1000(R) Growth Index added 0.34% for December, 5.93% for the fourth
quarter, and 9.07% for the whole of 2006. But the Russell 1000(R) Value Index
gained 2.24% in December, 8.00% for the fourth quarter, and 22.25% for the year
as a whole.
The strong positive trends for equities in 2006 meant gains across all sectors,
but there were clear leaders and laggards. The telecommunications services group
was the full-year winner. Solid dividends, stable cash flow, and the prospective
consolidation of BellSouth into AT&T helped the sector recover from several
years of sluggish performance. Telecom was also the leading group in December,
but its gain for the full fourth quarter was more middle-of-the-pack. Energy was
the second best performer in 2006 even though oil prices stabilized in the
second half, their average level through the year was easily high enough to
bring gushing profits to energy firms. Energy also shone in the fourth quarter,
rebounding from a third-quarter drubbing, but the same warm weather that
pressured fuel prices made energy stocks the weakest group in December.
The top sector performer for the fourth quarter was the materials group, which
used its December return to lift its three-month result to double digits. Fresh
gains in metals names and renewed interest in chemicals were major contributing
factors. For all of 2006, materials as well as Consumer discretionary also
outperformed the S&P 500(R) Index. Despite tough times in housing and retailing,
resurgence of shares in many mainstream media concerns gave the discretionary
sector a solid boost during 2006.
The weakest sectors in 2006, ironically enough, were two traditional growth
areas: health care and information technology. They were the only S&P 500(R)
Index sectors to languish in single digits. Both also lagged the benchmark in
December and for the fourth quarter. Although there were numerous companies in
these sectors that did demonstrate impressive growth in profits and prospects,
others confronted challenging competition, and some option incentive schemes
were subjected to increased scrutiny. Health care services firms and
semiconductor companies were among the more vulnerable.
The largest contributor to return for 2006 was energy firm Exxon Mobil Corp,
also the largest holding in the benchmark. Cisco Systems and AT&T were also
large contributors. The largest detractors to return were three firms intimately
connected to the internet and technology world. Intel, Yahoo, and eBay all
suffered double digit losses.
The best individual performing security in the S&P 500(R) Index for the year
2006 was Allegheny Technologies. Other notable contributors were Terex and
NVIDIA. Whole Foods Market posted the worst return for the year in the S&P
500(R) Index followed by Apollo Group and ADC Telecommunications.
2
STATE STREET EQUITY 500 INDEX PORTFOLIO
GROWTH OF A $10,000 INVESTMENT (a)
(GRAPH)
INVESTMENT PERFORMANCE (a)
For the Year Ended December 31, 2006
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN
AVERAGE ANNUALIZED
TOTAL RETURN TOTAL RETURN SINCE COMMENCEMENT
ONE YEAR ENDED FIVE YEARS ENDED OF OPERATIONS
DECEMBER 31, 2006 DECEMBER 31, 2006 (MARCH 1, 2000)
- ------------------------------------------------------------------------------------------------------
State Street Equity 500 Index
Portfolio 15.75% 6.14% 2.02%
S&P 500(R) Index (b) 15.79% 6.19% 2.20%
- ------------------------------------------------------------------------------------------------------
</Table>
(a) Total returns and performance graph information represent past performance
and are not indicative of future results, which may be lower or higher than
performance data quoted. 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.
(b) The Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index")
is an unmanaged capitalization-weighted index of 500 widely held stocks
recognized by investors to be representative of the U.S. stock market in
general.
3
STATE STREET EQUITY 500 INDEX PORTFOLIO
EXPENSE EXAMPLE
As a shareholder of the State Street Equity 500 Index Portfolio (the
"Portfolio"), you incur ongoing costs, which include costs for portfolio
management and administrative services, among others. This example is intended
to help you understand your ongoing costs (in dollars) of investing in the
Portfolio and to compare these costs with the ongoing costs of investing in
other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period shown and held for the entire period from July 1, 2006 to December 31,
2006.
The table below illustrates your Portfolio's costs in two ways:
- - BASED ON ACTUAL FUND RETURN. This section helps you to estimate the actual
expenses that you paid over the period. The "Ending Account Value" shown is
derived from the actual return of the Portfolio, and the third column shows
the dollar amount that would have been paid by an investor who started with
$1,000 in the Portfolio. You may use the information here, together with the
amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for the Portfolio under the heading "Expenses Paid During Period".
- - BASED ON HYPOTHETICAL 5% RETURN. This section is intended to help you compare
your Portfolio's costs with those of other mutual funds. It assumes that the
Portfolio had a yearly return of 5% before expenses, but that the expense
ratio is unchanged. In this case-because the return used is not the
Portfolio's actual return- the results do not apply to your investment. The
example is useful in making comparisons because the Securities and Exchange
Commission requires all mutual funds to calculate expenses based on a 5%
return. You can assess your Portfolio's costs by comparing this hypothetical
example with the hypothetical examples that appear in shareholder reports of
other funds.
4
STATE STREET EQUITY 500 INDEX PORTFOLIO
EXPENSE EXAMPLE (CONTINUED)
Six Months Ended December 31, 2006
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID
JULY 1, 2006 DECEMBER 31, 2006 DURING PERIOD*
- -----------------------------------------------------------------------------------------------------
BASED ON ACTUAL PORTFOLIO RETURN $1,000.00 $1,027.10 $0.24
- -----------------------------------------------------------------------------------------------------
BASED ON HYPOTHETICAL (5% RETURN BEFORE
EXPENSES) $1,000.00 $1,024.98 $0.23
- -----------------------------------------------------------------------------------------------------
</Table>
* The calculations are based on expenses incurred in the most recent fiscal
period of the Portfolio. The annualized average weighted expense ratio as of
December 31, 2006 was 0.045%. The dollar amounts shown as "Expenses Paid" are
equal to the annualized average weighted expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent six-month period, then divided by the number of days in the most
recent 12-month period.
5
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO STATISTICS (UNAUDITED)
<Table>
<Caption>
PORTFOLIO COMPOSITION* DECEMBER 31, 2006
- ---------------------------------------------------------------------------------
Common Stocks 97.2%
- ---------------------------------------------------------------------------------
Money Market Funds 2.5
- ---------------------------------------------------------------------------------
U.S. Government Securities 0.2
- ---------------------------------------------------------------------------------
Liabilities less cash and other assets 0.1
- ---------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
TOP FIVE SECTORS (EXCLUDING SHORT-TERM INVESTMENTS)* DECEMBER 31, 2006
- ---------------------------------------------------------------------------------
Financials 21.9%
- ---------------------------------------------------------------------------------
Information Technology 14.4
- ---------------------------------------------------------------------------------
Health Care 11.6
- ---------------------------------------------------------------------------------
Industrials 10.6
- ---------------------------------------------------------------------------------
Consumer Discretionary 10.5
- ---------------------------------------------------------------------------------
Total 69.0%
- ---------------------------------------------------------------------------------
</Table>
* As a percentage of net assets as of the date indicated. The Portfolio's
composition may vary over time.
6
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
COMMON STOCKS -- 97.2%
CONSUMER DISCRETIONARY -- 10.5%
Amazon.Com, Inc.(a) 65,208 2,573
Apollo Group, Inc. Class
A(a) 29,567 1,152
AutoNation, Inc.(a) 30,237 645
AutoZone, Inc.(a) 11,422 1,320
Bed Bath & Beyond, Inc.(a) 59,201 2,256
Best Buy Co., Inc. 84,650 4,164
Big Lots, Inc.(a) 24,510 562
Black & Decker Corp. 14,082 1,126
Brunswick Corp. 19,991 638
Carnival Corp. 93,213 4,572
CBS Corp. Class B 163,615 5,102
Centex Corp. 25,855 1,455
Circuit City Stores, Inc. 31,532 598
Clear Channel
Communications, Inc. 103,193 3,667
Coach, Inc.(a) 77,242 3,318
Comcast Corp. Class A(a) 441,651 18,695
D.R. Horton, Inc. 56,880 1,507
Darden Restaurants, Inc. 29,706 1,193
Dillard's, Inc. Class A 13,693 479
DIRECTV Group, Inc.(a) 162,100 4,043
Dollar General Corp. 64,322 1,033
Dow Jones & Co., Inc. 12,569 478
Eastman Kodak Co. 61,027 1,574
eBay, Inc.(a) 243,697 7,328
EW Scripps Co. Class A 18,055 902
Family Dollar Stores, Inc. 33,168 973
Federated Department
Stores, Inc. 113,240 4,318
Ford Motor Co.(a) 401,099 3,012
Fortune Brands, Inc. 31,265 2,670
Gannett Co., Inc. 50,094 3,029
Gap, Inc. 114,286 2,229
General Motors Corp. 118,147 3,629
Genuine Parts Co. 35,606 1,689
Goodyear Tire & Rubber
Co.(a) 38,059 799
H&R Block, Inc. 69,033 1,591
Harley-Davidson, Inc. 55,312 3,898
Harman International
Industries, Inc. 13,943 1,393
Harrah's Entertainment,
Inc. 38,556 3,189
Hasbro, Inc. 33,195 905
Hilton Hotels Corp. 81,798 2,855
Home Depot, Inc. 430,622 17,294
International Game
Technology 72,177 3,335
Interpublic Group of Cos.,
Inc.(a) 88,768 1,087
JC Penney & Co., Inc. 47,336 3,662
Johnson Controls, Inc. 41,725 3,585
Jones Apparel Group, Inc. 24,054 804
KB HOME 15,914 816
Kohl's Corp.(a) 69,127 4,730
Leggett & Platt, Inc. 38,373 917
Lennar Corp. Class A 28,791 1,510
Limited Brands 71,194 2,060
Liz Claiborne, Inc. 22,110 961
Lowe's Cos., Inc. 324,557 10,110
Marriot International, Inc.
Class A 71,406 3,407
Mattel, Inc. 81,695 1,851
McDonald's Corp. 260,413 11,544
McGraw-Hill, Inc. 74,259 5,051
Meredith Corp. 8,973 506
New York Times Co. Class A 30,840 751
Newell Rubbermaid, Inc. 57,904 1,676
News Corp. Class A 496,345 10,661
NIKE, Inc. Class B 39,839 3,945
Nordstrom, Inc. 47,327 2,335
Office Depot, Inc.(a) 59,858 2,285
OfficeMax, Inc. 14,368 713
Omnicom Group, Inc. 35,730 3,735
Pulte Homes, Inc. 45,012 1,491
Radioshack Corp. 28,742 482
Sears Holdings Corp.(a) 17,607 2,957
Sherwin-Williams Co. 23,645 1,503
Snap-On, Inc. 12,587 600
Stanley Works 16,186 814
Staples, Inc. 152,606 4,075
Starbucks Corp.(a) 159,552 5,651
Starwood Hotels & Resorts
Worldwide, Inc. 45,356 2,835
Target Corp. 182,425 10,407
Tiffany & Co. 30,159 1,183
Time Warner, Inc. 845,437 18,414
TJX Cos., Inc. 93,610 2,670
Tribune Co. 40,281 1,240
</Table>
7
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
CONSUMER DISCRETIONARY -- (CONTINUED)
Univision Communications,
Inc. Class A(a) 53,184 1,884
V.F. Corp. 18,547 1,522
Viacom, Inc. Class B(a) 147,967 6,071
Walt Disney Co. 436,355 14,954
Wendy's International,
Inc. 19,445 643
Whirlpool Corp. 16,314 1,354
Wyndham Worldwide Corp.(a) 41,656 1,334
Yum! Brands, Inc. 56,301 3,310
----------
291,284
----------
CONSUMER STAPLES -- 9.0%
Altria Group, Inc. 443,148 38,031
Anheuser-Busch Cos., Inc. 163,576 8,048
Archer-Daniels-Midland Co. 138,600 4,430
Avon Products, Inc. 94,744 3,130
Brown-Forman Corp. Class B 17,234 1,142
Campbell Soup Co. 45,335 1,763
Clorox Co. 31,410 2,015
Coca-Cola Co. 429,883 20,742
Coca-Cola Enterprises,
Inc. 58,182 1,188
Colgate-Palmolive Co. 107,777 7,031
ConAgra Foods, Inc. 108,384 2,926
Constellation Brands, Inc.
Class A(a) 42,839 1,243
Costco Wholesale Corp. 98,160 5,190
CVS Corp. 173,828 5,373
Dean Foods Co.(a) 28,488 1,204
Estee Lauder Cos, Inc.
Class A 26,085 1,065
General Mills, Inc. 72,098 4,153
H.J. Heinz Co. 70,540 3,175
Hershey Foods Corp. 37,424 1,864
Kellogg Co. 51,894 2,598
Kimberly-Clark Corp. 95,667 6,501
Kroger Co. 152,500 3,518
McCormick & Co., Inc. 27,487 1,060
Molson Coors Brewing Co.,
Class B 9,674 739
Pepsi Bottling Group, Inc. 28,442 879
PepsiCo, Inc. 347,700 21,749
Procter & Gamble Co. 669,257 43,013
Reynolds American, Inc. 35,793 2,343
Safeway, Inc. 93,987 3,248
Sara Lee Corp. 159,220 2,712
SuperValu, Inc. 43,143 1,542
Sysco Corp. 129,690 4,767
Tyson Foods, Inc., Class A 53,967 888
UST Corp. 33,653 1,959
Wal-Mart Stores, Inc. 518,655 23,952
Walgreen Co. 214,277 9,833
Whole Foods Market, Inc. 29,093 1,365
Wrigley Wm., Jr. Co. 46,515 2,406
----------
248,785
----------
ENERGY -- 9.4%
Anadarko Petroleum Corp. 96,412 4,196
Apache Corp. 69,248 4,606
Baker Hughes, Inc. 67,398 5,032
BJ Services Co. 63,108 1,850
Chesapeake Energy Corp. 88,050 2,558
ChevronTexaco Corp. 461,642 33,944
ConocoPhillips 347,586 25,009
Devon Energy Corp. 93,214 6,253
El Paso Corp. 145,854 2,229
EOG Resources, Inc. 50,728 3,168
ExxonMobil Corp. 1,232,334 94,434
Halliburton Co. 212,954 6,612
Hess Corp. 57,066 2,829
Kinder Morgan, Inc. 22,209 2,349
Marathon Oil Corp. 74,794 6,918
Murphy Oil Corp. 39,623 2,015
Nabors Industries, Ltd.(a) 65,339 1,946
National Oilwell Varco,
Inc.(a) 36,416 2,228
Noble Corp. 28,613 2,179
Occidental Petroleum Corp. 183,115 8,941
Rowan Cos., Inc. 23,312 774
Schlumberger, Ltd. 249,997 15,790
Smith International, Inc. 42,332 1,738
Sunoco, Inc. 25,642 1,599
Transocean, Inc.(a) 61,904 5,007
Valero Energy Corp. 127,305 6,513
Weatherford International
Ltd.(a) 73,029 3,052
Williams Cos., Inc. 126,532 3,305
XTO Energy, Inc. 77,341 3,639
----------
260,713
----------
</Table>
8
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
FINANCIALS -- 21.9%
ACE, Ltd. 68,370 4,141
AFLAC, Inc. 103,444 4,758
Allstate Corp. 131,623 8,570
Ambac Financial Group,
Inc. 22,117 1,970
American Express Co. 256,477 15,560
American International
Group, Inc. 550,102 39,420
Ameriprise Financial, Inc. 52,055 2,837
AON Corp. 66,231 2,341
Apartment Investment &
Management Co. Class A 20,565 1,152
Archstone-Smith Trust 46,242 2,692
Bank of America Corp. 951,021 50,775
Bank of New York Co., Inc. 161,084 6,342
BB&T Corp. 113,373 4,980
Bear Stearns Cos., Inc. 25,379 4,131
Boston Properties, Inc. 24,276 2,716
Capital One Financial
Corp. 86,384 6,636
CB Richard Ellis Group,
Inc. Class A(a) 38,900 1,291
Charles Schwab Corp. 215,277 4,163
Chicago Mercantile Exchange
Holdings, Inc. 7,459 3,802
Chubb Corp. 87,049 4,606
Cincinnati Financial Corp. 36,619 1,659
CIT Group, Inc. 42,131 2,350
Citigroup, Inc. 1,040,542 57,958
Comerica, Inc. 33,939 1,992
Commerce Bancorp, Inc. 38,423 1,355
Compass Bancshares, Inc. 27,185 1,622
Countrywide Financial
Corp. 131,490 5,582
E*Trade Financial Corp.(a) 89,682 2,011
Equity Office Properties
Trust 73,873 3,558
Equity Residential 61,100 3,101
Fannie Mae 205,469 12,203
Federal Home Loan Mortgage
Corp. 146,803 9,968
Federated Investors, Inc.
Class B 18,160 613
Fidelity National
Information Services,
Inc. 34,498 1,383
Fifth Third Bancorp 117,969 4,828
First Horizon National
Corp. 26,198 1,095
Franklin Resources, Inc. 35,354 3,895
Genworth Financial, Inc.
Class A 96,501 3,301
Goldman Sachs Group, Inc. 89,885 17,919
Hartford Financial Services
Group, Inc. 67,089 6,260
Huntington Bancshares,
Inc. 50,711 1,204
J.P. Morgan Chase & Co. 735,016 35,501
Janus Capital Group, Inc. 45,056 973
KeyCorp 83,775 3,186
Kimco Realty Corp. 47,843 2,151
Legg Mason, Inc. 27,686 2,632
Lehman Brothers Holdings,
Inc. 113,292 8,850
Lincoln National Corp. 59,782 3,970
Loews Corp. 96,944 4,020
M & T Bank Corp. 16,052 1,961
Marsh & McLennan Cos.,
Inc. 116,800 3,581
Marshall & Ilsley Corp. 53,960 2,596
MBIA, Inc. 28,847 2,108
Mellon Financial Corp. 86,595 3,650
Merrill Lynch & Co., Inc. 187,113 17,420
MetLife, Inc. 161,409 9,525
MGIC Investment Corp. 18,418 1,152
Moody's Corp. 49,487 3,418
Morgan Stanley 223,352 18,188
National City Corp. 133,791 4,891
Northern Trust Corp. 38,964 2,365
Plum Creek Timber Co.,
Inc. 38,698 1,542
PNC Financial Services
Group, Inc. 62,042 4,594
Principal Financial Group,
Inc. 56,228 3,301
Progressive Corp. 161,699 3,916
ProLogis 51,362 3,121
Prudential Financial, Inc. 100,521 8,631
Public Storage, Inc. 25,680 2,504
Realogy Corp.(a) 43,639 1,323
Regions Financial Corp. 153,917 5,756
SAFECO Corp. 21,841 1,366
Simon Property Group, Inc. 46,909 4,751
SLM Corp. 85,313 4,161
Sovereign Bancorp, Inc. 73,343 1,862
St. Paul Travelers Cos.,
Inc. 145,882 7,832
State Street Corp.(b) 69,744 4,704
SunTrust Banks, Inc. 76,113 6,428
</Table>
9
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
FINANCIALS -- (CONTINUED)
Synovus Financial Corp. 67,819 2,091
T. Rowe Price Group, Inc. 55,753 2,440
Torchmark Corp. 20,742 1,323
U.S. Bancorp 370,737 13,417
UnumProvident Corp. 70,362 1,462
Vornado Realty Trust 27,180 3,302
Wachovia Corp. 403,744 22,993
Washington Mutual, Inc. 199,150 9,059
Wells Fargo Co. 714,949 25,424
Western Union Co. 162,410 3,641
XL Capital, Ltd. Class A 37,851 2,726
Zions Bancorp 22,290 1,838
----------
604,386
HEALTH CARE -- 11.6%
Abbott Laboratories 325,078 15,835
Aetna, Inc. 110,591 4,775
Allergan, Inc. 32,090 3,842
AmerisourceBergen Corp. 41,365 1,860
Amgen, Inc.(a) 247,049 16,876
Applera Corp. -- Applied
Biosystems Group 38,487 1,412
Barr Pharmaceuticals,
Inc.(a) 22,471 1,126
Bausch & Lomb, Inc. 11,361 591
Baxter International, Inc. 138,557 6,428
Becton, Dickinson & Co. 51,991 3,647
Biogen Idec, Inc.(a) 71,901 3,537
Biomet, Inc. 52,003 2,146
Boston Scientific Corp.(a) 248,691 4,273
Bristol-Myers Squibb Co. 417,718 10,994
C.R. Bard, Inc. 21,663 1,797
Cardinal Health, Inc. 85,634 5,517
Caremark Rx, Inc. 90,090 5,145
Celgene Corp.(a) 79,000 4,545
CIGNA Corp. 21,763 2,863
Coventry Health Care,
Inc.(a) 33,705 1,687
Eli Lilly & Co. 208,848 10,881
Express Scripts, Inc.(a) 29,091 2,083
Forest Laboratories,
Inc.(a) 66,417 3,361
Genzyme Corp.(a) 55,278 3,404
Gilead Sciences, Inc.(a) 97,402 6,324
Health Management
Associates, Inc. Class A 50,557 1,067
Hospira, Inc.(a) 32,339 1,086
Humana, Inc.(a) 34,534 1,910
IMS Health, Inc. 42,014 1,155
Johnson & Johnson 613,981 40,535
King Pharmaceuticals,
Inc.(a) 50,093 798
Laboratory Corp. of America
Holdings(a) 26,382 1,938
Manor Care, Inc. 14,700 690
McKesson Corp. 62,129 3,150
Medco Health Solutions,
Inc.(a) 62,067 3,317
MedImmune, Inc.(a) 48,823 1,580
Medtronic, Inc. 243,962 13,054
Merck & Co., Inc. 459,042 20,014
Millipore Corp.(a) 10,763 717
Mylan Laboratories Inc. 43,339 865
Patterson Cos., Inc.(a) 29,591 1,051
Pfizer, Inc. 1,526,997 39,549
Quest Diagnostics, Inc. 33,907 1,797
Schering-Plough Corp. 314,004 7,423
St. Jude Medical, Inc.(a) 74,428 2,721
Stryker Corp. 61,705 3,401
Tenet Healthcare Corp.(a) 99,321 692
Thermo Electron Corp.(a) 85,997 3,895
UnitedHealth Group, Inc. 284,559 15,289
Watson Pharmaceuticals,
Inc.(a) 22,071 575
Wellpoint, Inc.(a) 131,688 10,363
Wyeth 284,221 14,473
Zimmer Holdings, Inc.(a) 51,281 4,019
----------
322,073
----------
INDUSTRIALS -- 10.6%
3M Co. 155,982 12,156
Allied Waste Industries,
Inc.(a) 50,835 625
American Power Conversion
Corp. 36,779 1,125
American Standard Cos.,
Inc. 37,436 1,716
Avery Dennison Corp. 19,933 1,354
Boeing Co. 167,871 14,914
Burlington Northern Santa
Fe Corp. 76,490 5,646
Caterpillar, Inc. 137,003 8,402
Cintas Corp. 28,572 1,135
Cooper Industries, Ltd. 19,182 1,735
CSX Corp. 92,941 3,200
Cummins, Inc. 11,508 1,360
</Table>
10
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
INDUSTRIALS -- (CONTINUED)
Danaher Corp. 49,582 3,592
Deere & Co. 48,394 4,601
Dover Corp. 42,847 2,100
Eaton Corp. 32,077 2,410
Emerson Electric Co. 169,008 7,452
Equifax, Inc. 26,852 1,090
FedEx Corp. 64,549 7,011
Fluor Corp. 18,164 1,483
General Dynamics Corp. 85,678 6,370
General Electric Co. 2,177,851 81,038
Goodrich Co. 25,837 1,177
Honeywell International,
Inc. 172,884 7,821
Illinois Tool Works, Inc. 87,506 4,042
Ingersoll-Rand Co. Class A 64,113 2,509
ITT Industries, Inc. 38,526 2,189
L-3 Communications
Holdings, Inc. 25,281 2,068
Lockheed Martin Corp. 75,007 6,906
Masco Corp. 83,337 2,489
Monster Worldwide, Inc.(a) 26,276 1,226
Norfolk Southern Corp. 83,334 4,191
Northrop Grumman Corp. 71,806 4,861
PACCAR, Inc. 53,220 3,454
Pall Corp. 26,856 928
Parker-Hannifin Corp. 25,303 1,945
Pitney Bowes, Inc. 46,085 2,129
R.R. Donnelley & Sons Co. 45,803 1,628
Raytheon Co. 93,511 4,937
Robert Half International,
Inc. 36,327 1,348
Rockwell Automation, Inc. 37,236 2,274
Rockwell Collins, Inc. 35,532 2,249
Ryder Systems, Inc. 12,821 655
Southwest Airlines Co. 166,660 2,553
Terex Corp.(a) 21,500 1,388
Textron, Inc. 27,058 2,537
Tyco International, Ltd. 421,181 12,804
Union Pacific Corp. 56,518 5,201
United Parcel Service, Inc.
Class B 228,116 17,104
United Technologies Corp. 213,583 13,353
W.W. Grainger, Inc. 16,159 1,130
Waste Management, Inc. 112,537 4,138
----------
291,749
----------
INFORMATION
TECHNOLOGY -- 14.4%
ADC Telecommunications,
Inc.(a) 25,096 365
Adobe Systems, Inc.(a) 122,225 5,026
Advanced Micro Devices,
Inc.(a) 116,605 2,373
Affiliated Computer
Services, Inc. Class A(a) 24,679 1,205
Agilent Technologies,
Inc.(a) 86,267 3,006
Altera Corp.(a) 76,216 1,500
Analog Devices, Inc. 75,095 2,468
Apple Computer, Inc.(a) 179,554 15,233
Applied Materials, Inc. 289,679 5,345
Autodesk, Inc.(a) 48,583 1,966
Automatic Data Processing,
Inc. 117,306 5,777
Avaya, Inc.(a) 92,417 1,292
BMC Software, Inc.(a) 44,771 1,442
Broadcom Corp. Class A(a) 97,879 3,162
CA, Inc. 86,100 1,950
CIENA Corp.(a) 18,068 501
Cisco Systems, Inc.(a) 1,282,397 35,048
Citrix Systems, Inc.(a) 38,274 1,035
Cognizant Technology
Solutions Corp. Class A 29,900 2,307
Computer Sciences Corp.(a) 36,295 1,937
Compuware Corp.(a) 78,803 656
Comverse Technology,
Inc.(a) 42,971 907
Convergys Corp.(a) 28,696 682
Corning, Inc.(a) 331,317 6,199
Dell, Inc.(a) 481,994 12,093
Electronic Arts, Inc.(a) 63,803 3,213
Electronic Data Systems
Corp. 108,129 2,979
EMC Corp. 466,362 6,156
First Data Corp. 162,410 4,145
Fiserv, Inc.(a) 36,462 1,911
Google, Inc. Class A(a) 45,351 20,883
Hewlett-Packard Co. 577,631 23,793
IAC(a) 46,900 1,743
Intel Corp. 1,216,018 24,624
International Business
Machines Corp. 318,025 30,896
Intuit, Inc.(a) 72,828 2,222
Jabil Circuit, Inc. 37,335 917
Juniper Networks, Inc.(a) 117,475 2,225
KLA-Tencor Corp. 41,996 2,089
</Table>
11
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
MARKET
VALUE
SHARES (000)
---------- ------------
INFORMATION TECHNOLOGY -- (CONTINUED)
Lexmark International
Group, Inc. Class A(a) 21,769 1,593
Linear Technology Corp. 63,875 1,937
LSI Logic Corp.(a) 82,199 740
Maxim Integrated Products,
Inc. 67,368 2,063
Micron Technology, Inc.(a) 159,715 2,230
Microsoft Corp. 1,832,017 54,704
Molex, Inc. 29,603 936
Motorola, Inc. 509,619 10,478
National Semiconductor
Corp. 62,815 1,426
NCR Corp.(a) 38,303 1,638
Network Appliance, Inc.(a) 78,313 3,076
Novell, Inc.(a) 69,067 428
Novellus Systems, Inc.(a) 27,450 945
NVIDIA Corp.(a) 74,136 2,744
Oracle Corp.(a) 851,387 14,593
Paychex, Inc. 70,251 2,778
PerkinElmer, Inc. 27,340 608
PMC-Sierra, Inc.(a) 43,362 291
QLogic Corp.(a) 34,395 754
QUALCOMM, Inc. 350,570 13,248
Sabre Holdings Corp. Class
A 28,511 909
SanDisk Corp.(a) 48,429 2,084
Sanmina-SCI Corp.(a) 113,211 391
Solectron Corp.(a) 187,819 605
Sun Microsystems, Inc.(a) 735,209 3,985
Symantec Corp.(a) 198,688 4,143
Symbol Technologies, Inc. 52,353 782
Tektronix, Inc. 16,785 490
Tellabs, Inc.(a) 93,871 963
Teradyne, Inc.(a) 41,522 621
Texas Instruments, Inc. 314,217 9,049
Unisys Corp.(a) 73,007 572
VeriSign, Inc.(a) 51,462 1,238
Waters Corp.(a) 21,925 1,074
Xerox Corp.(a) 206,489 3,500
Xilinx, Inc. 72,429 1,724
Yahoo!, Inc.(a) 262,402 6,702
----------
397,313
----------
MATERIALS -- 3.0%
Air Products & Chemicals,
Inc. 46,035 3,235
Alcoa, Inc. 180,719 5,423
Allegheny Technologies,
Inc. 21,296 1,931
Ashland, Inc. 13,322 922
Ball Corp. 21,739 948
Bemis Co., Inc. 21,698 737
Consol Energy, Inc. 38,421 1,235
Dow Chemical Co. 204,034 8,149
E.I. Du Pont de Nemours &
Co. 195,949 9,545
Eastman Chemical Co. 16,917 1,003
Ecolab, Inc. 38,344 1,733
Freeport-McMoRan Copper &
Gold, Inc. Class B 40,644 2,265
Hercules, Inc.(a) 24,773 478
International Flavors &
Fragrances, Inc. 16,257 799
International Paper Co. 94,457 3,221
MeadWestvaco Corp. 37,708 1,134
Monsanto Co. 113,151 5,944
Newmont Mining Corp. 94,339 4,259
Nucor Corp. 64,112 3,504
Pactiv Corp.(a) 29,855 1,066
Peabody Energy Corp. 55,400 2,239
Phelps Dodge Corp. 42,645 5,105
PPG Industries, Inc. 34,599 2,222
Praxair, Inc. 67,634 4,013
Rohm & Haas Co. 29,991 1,533
Sealed Air Corp. 17,090 1,110
Sigma-Aldrich Corp. 13,837 1,075
Temple-Inland, Inc. 23,000 1,059
United States Steel Corp. 26,183 1,915
Vulcan Materials Co. 19,760 1,776
Weyerhaeuser Co. 49,587 3,503
----------
83,081
----------
TELECOMMUNICATION
SERVICES -- 3.4%
ALLTEL Corp. 80,854 4,890
AT&T, Inc. 811,422 29,008
BellSouth Corp. 386,329 18,200
CenturyTel, Inc. 23,885 1,043
Citizens Communications
Co. 69,090 993
Embarq Corp. 31,143 1,637
JDS Uniphase Corp.(a) 44,204 736
Qwest Communications
International, Inc.(a) 332,980 2,787
Sprint Corp. (Fon Group) 613,076 11,581
12
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006
<Caption>
MARKET
VALUE
SHARES (000)
-------- ---------
TELECOMMUNICATION SERVICES -- (CONTINUED)
Verizon Communications,
Inc. 618,227 23,023
Windstream Corp. 99,356 1,413
----------
95,311
----------
UTILITIES -- 3.4%
AES Corp.(a) 138,351 3,049
Allegheny Energy, Inc.(a) 34,008 1,561
Ameren Corp. 42,678 2,293
American Electric Power
Co., Inc. 82,514 3,513
CenterPoint Energy, Inc. 64,100 1,063
CMS Energy Corp.(a) 46,751 781
Consolidated Edison, Inc. 54,385 2,614
Constellation Energy Group,
Inc. 37,222 2,563
Dominion Resources, Inc. 74,121 6,214
DTE Energy Co. 37,063 1,794
Duke Energy Corp. 266,428 8,848
Dynegy Inc. Class A(a) 77,580 562
Edison International 67,978 3,092
Entergy Corp. 44,181 4,079
Exelon Corp. 142,321 8,808
FirstEnergy Corp. 69,031 4,163
FPL Group, Inc. 85,845 4,672
KeySpan Corp. 36,721 1,512
Nicor, Inc. 9,343 437
NiSource, Inc. 58,048 1,399
Peoples Energy Corp. 8,157 364
PG&E Corp. 73,854 3,495
Pinnacle West Capital
Corp. 20,647 1,047
PPL Corp. 79,488 2,849
Progress Energy, Inc. 52,576 2,580
Public Service Enterprise
Group, Inc. 52,589 3,491
Questar Corp. 18,000 1,495
Sempra Energy 54,262 3,041
Southern Co. 154,849 5,708
TECO Energy, Inc. 43,414 748
TXU Corp. 96,201 5,215
Xcel Energy, Inc. 84,065 1,939
----------
94,989
----------
TOTAL COMMON STOCKS
(Cost $1,689,558,213) 2,689,684
----------
<Caption>
PAR
AMOUNT
(000)
----------
U.S. GOVERNMENT SECURITIES -- 0.2%
United States Treasury Bill
4.83% due 03/08/07(c)(d) $ 4,299 4,261
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $4,260,932) 4,261
----------
<Caption>
SHARES
(000)
----------
MONEY MARKET FUNDS -- 2.5%
AIM Short Term Investment
Prime Portfolio 68,244 $ 68,244
Federated Money Market
Obligations Trust 526 526
----------
TOTAL MONEY MARKET FUNDS
(Cost $68,770,218) 68,770
----------
TOTAL INVESTMENTS -- 99.9%
(identified cost
$1,762,589,363) $2,762,715
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1% 3,981
----------
NET ASSETS -- 100% $2,766,696
==========
- --------
(a) Non-income producing security.
(b) Affiliated issuer. See table that follows for more information.
(c) Rate represents annualized yield at date of purchase.
(d) Security held as collateral in relation to initial margin requirements on
futures contracts.
13
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2006
<Table>
<Caption>
NUMBER UNREALIZED
OF APPRECIATION
CONTRACTS (000)
---------- ------------
SCHEDULE OF FUTURES
CONTRACTS
S&P 500 Financial Futures
Contracts (long)
Expiration Date
03/2007 1,070 $ 12
----------
Total unrealized
appreciation on
open futures contracts
purchased $ 12
==========
</Table>
AFFILIATE TABLE
<Table>
<Caption>
INCOME EARNED
NUMBER OF SHARES PURCHASED FOR THE
SHARES HELD FOR THE YEAR SHARES SOLD NUMBER OF YEAR ENDED REALIZED GAIN
AT ENDED THE YEAR ENDED SHARES HELD AT 12/31/06 ON SHARES SOLD
SECURITY DESCRIPTION 12/31/2005 12/31/06 12/31/06 12/31/06 (000) (000)
- -------------------- ----------- --------------- -------------- --------------- ------------- --------------
State Street Corp. 70,325 1,419 2,000 69,744 $56 $42
</Table>
See Notes to Financial Statements.
14
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006
(Amounts in thousands)
<Table>
ASSETS
Investments in unaffiliated issuers at market (identified cost $1,760,261) $2,758,011
Investments in non-controlled affiliates at market (identified cost $2,328) (Note 4) 4,704
----------
2,762,715
Receivables:
Investment securities sold 421
Dividends and interest 3,949
----------
Total assets 2,767,085
LIABILITIES
Payables:
Daily variation margin on futures contracts 285
Management fees (Note 4) 104
----------
Total liabilities 389
----------
NET ASSETS $2,766,696
==========
15
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(Amounts in thousands)
<Table>
INVESTMENT INCOME
Dividend income -- unaffiliated issuers $ 47,819
Dividend income -- non-controlled affiliated issuer 56
Interest 2,803
--------
Total Investment Income 50,678
--------
EXPENSES
Management fees (Note 4) $ 1,146
--------
Total Expenses 1,146
--------
NET INVESTMENT INCOME 49,532
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments -- unaffiliated issuers 4,724
Investments -- non-controlled affiliated issuer 42
Futures contracts 5,128
--------
9,894
Net change in net unrealized appreciation (depreciation) on:
Investments 317,818
Futures contracts 778
--------
318,596
--------
Net realized and unrealized gain 328,490
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $378,022
========
</Table>
See Notes to Financial Statements.
16
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in thousands)
<Table>
<Caption>
For the For the
Year Ended Year Ended
December 31, 2006 December 31, 2005
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income $ 49,532 $ 45,936
Net realized gain (loss) on investments and futures
contracts 9,894 (7,186)
Net change in net unrealized appreciation (depreciation) 318,596 63,727
---------- ----------
Net increase in net assets resulting from operations 378,022 102,477
---------- ----------
CAPITAL TRANSACTIONS
Proceeds from contributions 310,574 278,352
Contributions in-kind 8,054 --
Fair value of withdrawals (383,063) (457,339)
Withdrawals in-kind -- (237,848)
---------- ----------
Net decrease in net assets from capital transactions (64,435) (416,835)
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 313,587 (314,358)
NET ASSETS
Beginning of period 2,453,109 2,767,467
---------- ----------
End of period $2,766,696 $2,453,109
========== ==========
</Table>
See Notes to Financial Statements.
17
STATE STREET EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
<Table>
<Caption>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in
thousands) $2,766,696 $2,453,109 $2,767,467 $2,714,672 $1,992,548
Ratios to average net assets:
Operating expenses 0.045% 0.045% 0.045% 0.045% 0.045%
Net investment income 1.94% 1.84% 1.97% 1.74% 1.57%
Portfolio turnover rate* 10% 8% 9% 12% 13%
Total return(a) 15.75% 4.87% 10.86% 28.62% (22.16)%
</Table>
- --------
* The portfolio turnover rate excludes in-kind security transactions.
(a) Results represent past performance and are not indicative of future results.
See Notes to Financial Statements.
18
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. ORGANIZATION
The State Street Master Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, and was organized as a business trust under the laws of the
Commonwealth of Massachusetts on July 27, 1999. The Trust comprises six
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 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 December 31, 2006, only
the Portfolio and State Street Money Market Portfolio were in operation. The
Portfolio is authorized to 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(R) Index"). The Portfolio uses a passive management
strategy designed to track the performance of the S&P 500(R) Index. The S&P
500(R) 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.
There is no assurance that the Portfolio will achieve its objective.
2. SIGNIFICANT ACCOUNTING POLICIES
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, INVESTMENT INCOME AND EXPENSES: Securities
transactions are recorded on a trade date basis for financial statement
purposes. Dividend income is recorded on the ex-dividend date.
19
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2006
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.
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(R) 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 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.
USE OF ESTIMATES: The Portfolio's financial statements are prepared in
accordance with U.S. generally accepted accounting principles that require the
use of management estimates. Actual results could differ from those estimates.
3. SECURITIES TRANSACTIONS
For the year ended December 31, 2006, purchases and sales of investment
securities, excluding short-term investments, futures contracts, and in-kind
contributions and withdrawals, aggregated to $237,271,572 and $269,069,491,
respectively. The aggregate value of in-kind contributions and withdrawals were
$8,053,539 and $0, respectively.
At December 31, 2006, the book cost of investments was $1,762,589,363 which
approximates cost computed on a federal tax basis. The aggregate gross
unrealized appreciation and gross unrealized
20
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2006
depreciation was $1,064,901,605 and $64,775,938, respectively, resulting in net
appreciation of $1,000,125,667 for all securities as computed on a federal
income tax basis.
The difference between book and tax cost amounts are primarily due to wash sale
loss deferrals.
4. RELATED PARTY FEES AND TRANSACTIONS
The Portfolio has entered into an investment advisory agreement with SSgA Funds
Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street
Corp. and an affiliate of State Street, under which SSgA FM 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 FM'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, audit
and trustees expense), 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 were made in securities affiliated
with State Street and SSgA FM. Investments in State Street Corp., the holding
company of State Street, were made according to its representative portion of
the S&P 500(R) Index. The market value of this investment at December 31, 2006
is listed in the Portfolio of Investments.
5. INDEMNIFICATIONS
Like many other companies, the Trust's organizational documents provide that its
officers and trustees are indemnified against certain liabilities arising out of
the performance of their duties to the Trust. In addition, both in some of its
principal service contracts and in the normal course of its business, the Trust
enters into contracts that provide indemnifications to other parties for certain
types of losses or liabilities. The Trust's maximum exposure under these
arrangements is unknown as this could involve future claims against the Trust.
6. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board issued Interpretation No.
48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB
Statement No. 109" (the "Interpretation"). The Interpretation establishes for
all entities, including pass-through entities such as the Portfolio, a minimum
threshold for financial statement recognition of the benefit of positions taken
in filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. The Interpretation
is effective for fiscal years beginning after December 15, 2006, and is to be
applied to all open tax years as of the date of effectiveness. On December 22,
2006, the
21
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2006
Securities and Exchange Commission notified the industry that the
implementation of the Interpretation must be incorporated no later than the last
day on which a NAV is calculated preceding the Portfolio's 2007 semi-annual
report, June 29, 2007. Management continues to evaluate the application of the
Interpretation to the Portfolio, and is not in a position at this time to
estimate the significance of its impact, if any, on the Portfolio's financial
statements.
In addition, in September 2006, Statement of Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Portfolio's financial statement disclosures.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of State Street Master Funds and
Owners of Beneficial Interest of State Street Equity 500 Index Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the State Street Equity 500 Index Portfolio
(one of the portfolios constituting State Street Master Funds) (the Portfolio)
as of December 31, 2006, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
State Street Equity 500 Index Portfolio of State Street Master Funds at December
31, 2006, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
-s- Ernst & Young LLP
Boston, Massachusetts
February 22, 2007
23
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION (UNAUDITED)
DECEMBER 31, 2006
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
The Trust has adopted proxy voting procedures relating to portfolio securities
held by the Portfolio. A description of the policies and procedures are
available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on
the website of the Securities and Exchange Commission (the "SEC") at
www.sec.gov. Information on how the Portfolio voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available by August 31 (i) without charge, upon request, by (i) calling (877)
521-4083 or (ii) on the SEC's website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of its fiscal year (as of March and September of each
year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at
www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. and information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most
recent Form N-Q is available without charge, upon request, by calling (877) 521-
4083.
ADVISORY AGREEMENT RENEWAL
The Board of Trustees of the Trust met on November 30, 2006 (the "Meeting") to
consider the renewal of the investment advisory agreement for the Portfolio (the
"Advisory Agreement"). In preparation for considering the Advisory Agreement,
the Trustees had thoroughly reviewed the renewal materials provided by the
Adviser, which they had requested through independent counsel. In deciding
whether to renew the Advisory Agreement, the Trustees considered various
factors, including (i) the nature, extent and quality of the services provided
by the SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement,
(ii) the investment performance of the Portfolio, (iii) the costs to the Adviser
of its services and the profits realized by the Adviser and its affiliates from
their relationship with the Trust, (iv) the extent to which economies of scale
would be realized if and as the Trust grows and whether the fee levels in the
Advisory Agreement reflect these economies of scale, and (v) any additional
benefits to the Adviser from its relationship with the Trust.
In considering the nature, extent and quality of the services provided by the
Adviser, the Trustees relied on their prior direct experience as Trustees of the
Trust as well as on the materials provided at the Meeting. The Board reviewed
the Adviser's responsibilities under the Advisory Agreement and noted the
experience and expertise that would be appropriate to expect of an adviser to
the Portfolio, which is an index fund. The Trustees reviewed the background and
experience of the Adviser's senior management, including those individuals
responsible for the investment and compliance operations relating to the
investments of the Portfolio, and the responsibilities of the latter with
respect to the Portfolio. They also considered the resources, operational
structures and practices of the Adviser in
24
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION (UNAUDITED) (CONTINUED)
DECEMBER 31, 2006
managing the Portfolio's investments, in monitoring and securing the Portfolio's
compliance with its investment objective and policies with respect to its
investments and with applicable laws and regulations, and in seeking best
execution of portfolio transactions. The Trustees also considered information
about the Adviser's overall investment management business, noting that the
Adviser manages assets for a variety of institutional investors and that the
Adviser and its affiliates had over $1.6 trillion in assets under management as
of September 30, 2006. They reviewed information regarding State Street's
business continuity and disaster recovery program. Drawing upon the materials
provided and their general knowledge of the business of the Adviser, the
Trustees determined that the experience, resources and strength of the Adviser
in the management of index products is exceptional. As discussed more fully
below, they also determined that the advisory fee for the Portfolio was fair and
reasonable and that its performance and expense ratio was satisfactory. On the
basis of this review, the Trustees determined that the nature and extent of the
services provided by the Adviser to the Portfolio was appropriate, had been of
uniformly high quality, and could be expected to remain so.
The Trustees noted that, in view of the investment objective of the Portfolio,
the investment performance was satisfactory. The Trustees noted that the
performance of the Portfolio in absolute terms was not of the importance that
normally attaches to that of actively-managed funds. Of more importance to the
Trustees was the extent to which the Portfolio achieved its objective of
replicating, before expenses, the total return of the S&P 500 Index. Drawing
upon information provided at the Meeting and upon reports provided to the
Trustees by the Adviser throughout the preceding year, they determined that the
Portfolio had in fact tracked the index within an acceptable range of tracking
error. Accordingly, they concluded that the performance the Portfolio was
satisfactory.
The Trustees considered the profitability to the Adviser and its affiliate,
State Street, of the advisory relationships with the Trust. The Trustees had
been provided with data regarding the profitability to the Adviser and its
affiliated service providers with respect to the Portfolio individually, and on
an aggregate basis, for the year ended September 30, 2006. Having discussed with
representatives of the Adviser the methodologies used in computing the costs
that formed the bases of the profitability calculations, they concluded that
these methodologies were reasonable and turned to the data provided. After
discussion and analysis they concluded that, to the extent that the Adviser's
and State Street's relationships with the Trust had been profitable to either or
both of those entities, the profitability was in no case such as to render the
advisory fee excessive.
In order better to evaluate the Portfolio's advisory fee, the Trustees had
requested comparative information from Lipper Inc. with respect to fees paid by,
and expense ratios of, similar funds. The Trustees found that that the
Portfolio's advisory fee and total expense ratio were lower than the average for
its peer group. The Trustees concluded that the data available provided
confirmation of the reasonableness of the Adviser's fee. The Board determined
that the Adviser's fees were fair and reasonable.
25
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION (UNAUDITED) (CONTINUED)
DECEMBER 31, 2006
In considering whether the Adviser benefits in other ways from its relationship
with the Trust, the Trustees also considered whether the Adviser's affiliates
may benefit from the Trust' relationship with State Street as fund
administrator, custodian and transfer agent. They noted that the Adviser
utilizes no soft-dollar arrangements in connection with the Portfolio's
brokerage transactions. The Trustees concluded that, to the extent that the
Adviser or its affiliates derive other benefits from their relationships with
the Trust, those benefits are not so significant as to render the Adviser's fees
excessive.
The Board also considered the extent to which economies of scale may be realized
by the Portfolio as assets grow and whether the Portfolio's fee levels reflect
such economies of scale, if any, for the benefit of investors. In considering
the matter, the Board determined that, to the extent economies of scale were in
fact realized, such economies of scale were shared with the Portfolio by virtue
of advisory fees of comparatively low levels that subsumed economies of scale in
the fees themselves. The Trustees also recognized, however, that should
sustained, substantial asset growth be realized in the future, it might be
necessary to consider additional measures.
26
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED).
The table below includes information about the Trustees and Executive Officers
of the State Street Master Funds, including their:
- - business addresses and ages;
- - principal occupations during the past five years; and
- - other directorships of publicly traded companies or funds.
As of December 31, 2006, none of the Trustees were considered to be an
"interested person" of the Trust, as that term is defined in the Investment
Company Act of 1940, as amended (the "Independent Trustees").
<Table>
<Caption>
NUMBER OF
FUNDS IN
FUND
NAME, ADDRESS, TERM OF OFFICE AND PRINCIPAL OCCUPATION COMPLEX
AND DATE OF POSITION(S) HELD LENGTH OF TIME DURING PAST FIVE OVERSEEN BY OTHER DIRECTORSHIPS
BIRTH ('DOB') WITH TRUST SERVED YEARS TRUSTEE* HELD BY TRUSTEE
-------------- ---------------- ------------------ --------------------- ----------- ---------------------
INDEPENDENT
TRUSTEES
Michael F. Trustee and Term: Indefinite Chairman, Holland & 12 Trustee, State Street
Holland Chairman of the Elected: 2/00 Company L.L.C. Institutional
Holland & Board (investment adviser) Investment Trust;
Company, LLC (1995-present). Director, the Holland
375 Park Avenue Series Fund, Inc.;
New York, NY Director, the China
10152 Fund, Inc.; Chairman
DOB: July 7, and Trustee, Scottish
1944 Widows Investment
Partnership Trust;
and Director, Reaves
Utility Income Fund
William L. Trustee Term: Indefinite Trustee of Old Mutual 12 Trustee, State Street
Boyan Elected: 2/00 South Africa Master Institutional
State Street Trust (investments) Investment Trust; and
Master Funds (1995-present); Trustee, Old Mutual
P.O. Box 5049 Chairman emeritus, South Africa Master
Boston, MA Children's Hospital Trust
02206 (1984-present);
DOB: January Director, Boston Plan
20, 1937 For Excellence (non-
profit) (1994-
present); President
and Chief Operations
Officer, John Hancock
Mutual Life Insurance
Company (1959-1999).
Mr. Boyan retired in
1999.
</Table>
27
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED) (CONTINUED)
<Table>
<Caption>
NUMBER OF
FUNDS IN
FUND
NAME, ADDRESS, TERM OF OFFICE AND PRINCIPAL OCCUPATION COMPLEX
AND DATE OF POSITION(S) HELD LENGTH OF TIME DURING PAST FIVE OVERSEEN BY OTHER DIRECTORSHIPS
BIRTH ('DOB') WITH TRUST SERVED YEARS TRUSTEE* HELD BY TRUSTEE
-------------- ---------------- ------------------ --------------------- ----------- ---------------------
Rina K. Spence Trustee Term: Indefinite President of 12 Trustee, State Street
7 Acacia Street Elected: 2/00 SpenceCare Institutional
Cambridge, MA International LLC Investment Trust;
02138 (1998-present); Director, Berkshire
DOB: October Member of the Life Insurance
24, 1948 Advisory Board, Company of America;
Ingenium Corp. and Director,
(technology company) IEmily.com
(2001-present); Chief
Executive Officer,
IEmily.com (internet
company) (2000-2001);
Chief Executive
Officer of Consensus
Pharmaceutical, Inc.
(1998-1999); Founder,
President and Chief
Executive Officer of
Spence Center for
Women's Health (1994-
1998); Trustee,
Eastern Enterprise
(utilities) (1988-
2000).
Douglas T. Trustee Term: Indefinite Executive Vice 12 Trustee, State Street
Williams Elected: 2/00 President of Chase Institutional
State Street Manhattan Bank (1987- Investment Trust
Master Funds 1999). Mr. Williams
P.O. Box 5049 retired in 1999.
Boston, MA
02206
DOB: December
23, 1940
</Table>
- --------
* The "Fund Complex" consists of six series of the Trust and six series of
State Street Institutional Investment Trust.
28
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED) (CONTINUED)
<Table>
<Caption>
NUMBER OF
FUNDS IN
FUND
NAME, ADDRESS, TERM OF OFFICE AND PRINCIPAL OCCUPATION COMPLEX
AND DATE OF POSITION(S) HELD LENGTH OF TIME DURING PAST FIVE OVERSEEN BY OTHER DIRECTORSHIPS
BIRTH ('DOB') WITH TRUST SERVED YEARS* TRUSTEE HELD BY TRUSTEE
- --------------- ---------------- ------------------ --------------------- ----------- ---------------------
EXECUTIVE
OFFICERS
James E. Ross President Term: Indefinite President, SSgA Funds -- --
SSgA Funds Elected: 4/05 Management, inc.
Management, (2005-present);
Inc. State Principal, SSgA Funds
Street Management, Inc.
Financial (2001-2005); Senior
Center Managing Director,
One Lincoln State Street Global
Street Advisors (March 2006-
Boston, MA present); Principal,
02111 State Street Global
DOB: June 24, Advisers (March 2000-
1965 March 2006).
Gary L. French Treasurer Term: Indefinite Senior Vice President -- --
State Street Elected: 5/05 of State Street Bank
Bank and Trust and Trust Company
Company (2002-present);
2 Avenue de Managing Director,
Lafayette Deutsche Bank
Boston, MA (including its
02111 predecessor, Scudder
DOB: July 4, Investments), Fund
1951 Operations Unit
(2001-2002);
President, UAM Fund
Services (1995 to
2001).
</Table>
29
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED) (CONTINUED)
<Table>
<Caption>
NUMBER OF
FUNDS IN
FUND
NAME, ADDRESS, TERM OF OFFICE AND PRINCIPAL OCCUPATION COMPLEX
AND DATE OF POSITION(S) HELD LENGTH OF TIME DURING PAST FIVE OVERSEEN BY OTHER DIRECTORSHIPS
BIRTH ('DOB') WITH TRUST SERVED YEARS* TRUSTEE HELD BY TRUSTEE
- --------------- ---------------- ------------------ --------------------- ----------- ---------------------
Karen Jacoppo- Secretary Term: Indefinite Vice President and -- --
Wood Elected: 11/06 Managing Counsel of
State Street State Street Bank and
Bank and Trust Trust Company (2006-
Company present); Counsel,
2 Avenue de Pioneer Investment
Lafayette Management USA Inc.
Boston, MA (2004 to 2006); Vice
02111 President and Counsel
DOB: December of State Street Bank
29, 1966 and Trust Company
(2002-2004).
Peter A. Chief Term: Indefinite Senior Principal and -- --
Ambrosini Compliance Elected: 5/04 Chief Compliance and
SSgA Funds Officer Risk Management
Management, Officer, SSgA Funds
Inc. State Management, Inc. and
Street State Street Global
Financial Advisors (2001-
Center present); Managing
One Lincoln Director,
Street PricewaterhouseCoop-
Boston, MA ers LLP (1986-2001).
02111
DOB: December
17, 1943
</Table>
- --------
* Each officer may have served in various other capacities for the same
organization during the length of time served.
The Statement of Additional Information includes additional information about
the Trustees and is available, without charge, upon request, by calling (toll
free) 877-521-4083.
30
TRUSTEES
Michael F. Holland
William L. Boyan
Rina K. Spence
Douglas T. Williams
INVESTMENT ADVISER
SSgA Funds Management, Inc.
State Street Financial Center
One Lincoln Street
Boston, MA 02111
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
State Street Financial Cener
One Lincoln Street
Boston, MA 02110
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02109
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of shares of beneficial interest.
STATE STREET EQUITY 500 INDEX PORTFOLIO
State Street Bank and Trust Company
P.O. Box 5049
Boston, MA 02206
STATE STREET MONEY MARKET PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2006
STATE STREET MONEY MARKET PORTFOLIO
EXPENSE EXAMPLE
As a shareholder of the State Street Money Market Portfolio (the "Portfolio"),
you incur ongoing costs, which include costs for portfolio management and
administrative services, among others. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Portfolio and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period shown and held for the entire period from July 1, 2006 to December 31,
2006.
The table below illustrates your Portfolio's costs in two ways:
BASED ON ACTUAL FUND RETURN. This section helps you to estimate the actual
expenses that you paid over the period. The "Ending Account Value" shown is
derived from the Portfolio's actual return, and the third column shows the
dollar amount that would have been paid by an investor who started with
$1,000 in the Portfolio. You may use the information here, together with
the amount you invested, to estimate the expenses that you paid over the
period.
To do so, simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number given for the Portfolio under the heading "Expenses Paid During
Period".
BASED ON HYPOTHETICAL 5% RETURN. This section is intended to help you
compare your Portfolio's costs with those of other mutual funds. It assumes
that the Portfolio had a yearly return of 5% before expenses, but that the
expense ratio is unchanged. In this case-because the return used is not the
Portfolio's actual return-the results do not apply to your investment. The
example is useful in making comparisons because the Securities and Exchange
Commission requires all mutual funds to calculate expenses based on a 5%
return. You can assess your Portfolio's costs by comparing this
hypothetical example with the hypothetical examples that appear in
shareholder reports of other funds.
Six Months Ended December 31, 2006
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING
7/1/06 12/31/06 PERIOD *
------------- ------------- -------------
BASED ON ACTUAL PORTFOLIO RETURN $1,000.00 $1,030.90 $0.51
BASED ON HYPOTHETICAL
(5% RETURN BEFORE EXPENSES) $1,000.00 $1,024.70 $0.51
* The calculations are based on expenses incurred in the most recent fiscal
period of the Portfolio. The Portfolio's annualized average weighted
expense ratio as of December 31, 2006 was 0.100%. The dollar amounts shown
as "Expenses Paid" are equal to the annualized average weighted expense
ratio multiplied by the average account value over the period, multiplied
by the number of days in the most recent six-month period, then divided by
the number of days in the most recent 12-month period.
1
STATE STREET MONEY MARKET PORTFOLIO
PORTFOLIO STATISTICS (UNAUDITED)
PORTFOLIO COMPOSITION* DECEMBER 31, 2006
- ---------------------- -----------------
Yankee Certificates of Deposit 37.7%
Repurchase Agreements 21.1
Commercial Paper 16.3
Medium Term Notes 8.9
Bank Note 6.3
Certificates of Deposit 4.7
Euro Certificates of Deposit 2.8
Promissory Note 1.6
Other assets less liabilities 0.6
-----
Total 100.0%
=====
MATURITY LADDER DECEMBER 31, 2006
- --------------- -----------------
3 Days 22.5%
4-90 Days 43.7
90+ Days 33.8
-----
Total 100.0%
=====
Average maturity 40 Days
* As a percentage of net assets as of the date indicated. The Portfolio's
composition will vary over time.
2
STATE STREET MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST +
- ------------------ -------- ---------- ------------ --------------
COMMERCIAL PAPER -- 16.3%
ABCP CREDIT ARBITRAGE -- 6.3%
Ormond Quay Funding LLC (a) (b) 5.310% 02/28/2007 $200,000,000 $ 199,990,427
Surrey Funding Corp. 5.250% 02/01/2007 194,089,000 193,211,556
--------------
393,201,983
--------------
ABCP HYBRID -- 1.2%
Giro Balanced Funding 5.340% 01/29/2007 49,000,000 48,799,154
Scaldis Capital 5.230% 03/05/2007 25,000,000 24,771,188
--------------
73,570,342
--------------
ABCP RECEIVABLES AND SECURITIES -- 4.4%
Beethoven Funding Corp. 5.280% 01/25/2007 173,828,000 173,216,125
Edison Asset Security 5.310% 03/12/2007 100,000,000 98,985,000
--------------
272,201,125
--------------
BANK DOMESTIC -- 2.4%
Bank of America Corp. 5.320% 02/07/2007 150,000,000 149,191,396
--------------
BANK FOREIGN -- 0.8%
Macquarie Bank Ltd. (a) (b) 5.330% 07/20/2007 50,000,000 49,997,260
--------------
FINANCE CAPTIVE CONSUMER -- 1.2%
General Electric Capital Corp. 5.310% 03/12/2007 75,000,000 74,238,750
--------------
TOTAL COMMERCIAL PAPER 1,012,400,856
--------------
CERTIFICATES OF DEPOSIT -- 4.7%
BANK DOMESTIC -- 4.7%
Bank of America NA (a) 5.315% 02/28/2007 50,000,000 50,000,000
Citibank 5.295% 03/06/2007 52,000,000 52,000,000
Citibank 5.295% 03/07/2007 123,000,000 123,000,000
First Tenessee Bank 5.320% 01/22/2007 55,000,000 54,999,683
Washington Mutual Bank (a) 5.330% 04/20/2007 10,000,000 10,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT 289,999,683
--------------
YANKEE CERTIFICATES OF DEPOSIT -- 37.7%
BANK FOREIGN -- 37.7%
Abbey National Bank 5.300% 06/15/2007 140,000,000 140,000,000
Banco Bilbao Vizcaya NY 5.315% 01/12/2007 180,000,000 180,000,271
Barclays Bank PLC 5.310% 03/13/2007 50,000,000 50,000,000
Barclays Bank PLC 5.310% 02/01/2007 100,000,000 100,000,000
Barclays Bank PLC 5.320% 01/18/2007 60,000,000 60,000,000
Barclays Bank PLC 5.330% 01/16/2007 69,000,000 69,000,000
BNP Paribas NY (a) 5.310% 10/03/2007 100,000,000 99,985,041
BNP Paribas NY Banch 5.320% 02/14/2007 50,000,000 50,000,000
BNP Paribas NY Branch 5.340% 05/07/2007 75,000,000 75,000,000
Canadian Imperial 5.375% 10/26/2007 35,000,000 34,995,879
Caylon NY 5.260% 08/28/2007 100,000,000 100,000,000
Dexia Credit Local SA (a) 5.305% 09/28/2007 200,000,000 199,970,988
Fortis Bank 4.730% 01/03/2007 50,000,000 49,997,512
HBOS Treasury Services NY (a) 5.310% 06/19/2007 100,000,000 100,000,000
HBOS Treasury Services PLC 5.400% 02/26/2007 50,000,000 50,000,000
See Notes to Financial Statements
3
STATE STREET MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST +
- ------------------ -------- ---------- ------------ --------------
BANK FOREIGN -- (CONTINUED)
Landesbank Hessen Thuringen 5.310% 02/15/2007 $100,000,000 $ 100,000,000
Nordea Bank Finland PLC NY Branch 5.350% 05/21/2007 25,750,000 25,729,663
Royal Bank of Canada 5.310% 02/15/2007 150,000,000 150,000,000
Royal Bank Scotland (a) 4.790% 01/03/2007 29,700,000 29,698,609
Societe Generale NY (a) 5.288% 06/20/2007 95,000,000 94,989,150
Svenska Handelsbanken AB 5.240% 02/28/2007 75,000,000 74,366,833
Svenska Handelsbanken AB (a) 5.290% 02/12/2007 50,000,000 49,998,859
Svenska Handelsbanken AB (a) (b) 5.320% 01/21/2008 100,000,000 100,000,000
Toronto Dominion Bank 5.430% 05/10/2007 100,000,000 100,001,721
Toronto Dominion Bank 5.505% 05/03/2007 100,000,000 100,001,626
Unicredito Bank 5.315% 02/06/2007 75,000,000 75,000,000
Unicredito Italiano Spa NY 5.380% 02/12/2007 75,000,000 75,000,000
--------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT 2,333,736,152
--------------
EURO CERTIFICATES OF DEPOSIT -- 2.8%
BANK FOREIGN -- 2.8%
HBOS Treasury Services 5.600% 06/19/2007 79,000,000 79,052,348
Societe General Intl 5.500% 02/07/2007 75,000,000 75,000,000
Societe Generale 5.310% 04/19/2007 20,000,000 20,000,000
--------------
TOTAL EURO CERTIFICATES OF DEPOSIT 174,052,348
--------------
BANK NOTES -- 6.3%
BANK DOMESTIC -- 6.3%
American Express Bank FSB (a) 5.320% 03/15/2007 40,000,000 40,000,000
American Express Centurion Bank (a) 5.350% 10/18/2007 100,000,000 100,023,308
American Express Credit Corp. (a) 5.310% 01/09/2007 75,000,000 74,999,913
Bank of America NA (a) 5.315% 04/18/2007 50,000,000 50,000,000
Marshall & Ilsley Bank (a) 5.290% 03/07/2007 75,000,000 74,997,360
National City Bank of Indiana (a) 5.330% 04/04/2007 50,000,000 50,002,420
--------------
TOTAL BANK NOTES 390,023,001
--------------
MEDIUM TERM NOTES -- 8.9%
BANK DOMESTIC -- 1.1%
American Express Co. (a) 5.320% 01/20/2008 20,000,000 20,000,000
JPMorgan Chase & Co. (a) 5.320% 01/04/2008 50,000,000 50,000,000
--------------
70,000,000
--------------
BANK FOREIGN -- 6.6%
Alliance & Leicester PLC (a) (b) 5.330% 01/29/2008 35,000,000 35,000,000
BNP Paribas (a) (b) 5.345% 12/20/2007 25,000,000 25,000,000
Caja de Ahorros y Monte de Piedad de Madrid (a) 5.369% 10/19/2007 30,000,000 30,000,000
HBOS Treasury Services PLC (a) 5.320% 01/11/2008 25,000,000 25,000,000
National Australia Bank Ltd. (a) (b) 5.320% 01/07/2008 20,000,000 20,000,000
Unicredito Italiano Bank Ireland (a) 5.360% 01/15/2008 15,000,000 15,000,000
Westpac Banking Corp. 5.240% 02/27/2007 100,000,000 99,170,333
Westpac Banking Corp. (a) (b) 5.430% 05/25/2007 45,000,000 45,016,592
Westpac Banking Corp. (a) (b) 5.330% 01/06/2008 100,000,000 100,000,000
See Notes to Financial Statements
4
STATE STREET MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006
INTEREST MATURITY PRINCIPAL AMORTIZED
NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST +
- --------------------------------- -------- ---------- ------------ ------------
BANK FOREIGN -- (CONTINUED)
Westpac Banking Corp. (a) (b) 5.320% 01/18/2008 $ 15,000,000 $ 15,000,000
------------
409,186,925
------------
FINANCE CAPTIVE CONSUMER -- 1.2%
Toyota Motor Credit Corp. (a) 5.327% 07/02/2007 75,000,000 74,997,126
------------
TOTAL MEDIUM TERM NOTES 554,184,051
------------
PROMISSORY NOTE -- 1.6%
Goldman Sachs Group, Inc. (a) (c) 5.280% 09/07/2007 100,000,000 100,000,000
------------
TOTAL PROMISSORY NOTE 100,000,000
------------
REPURCHASE AGREEMENTS -- 21.1%
ABN AMRO Inc. Tri Party Repo, dated 12/29/06 (collateralized by
Corporate Notes, 5.875% - 8.375% due 06/01/07 - 10/15/35 valued at
$79,557,557); proceeds $75,044,688 5.363% 01/02/2007 75,000,000 75,000,000
Bank of America Tri Party Repo, dated 12/29/06 (collateralized by
Federal National Mortgage Association, 5.000% due 07/01/35 valued
at $214,200,000); proceeds $210,124,133 5.320% 01/02/2007 210,000,000 210,000,000
Bear Stearns Tri Party Repo, dated 12/29/06 (collateralized by
Asset- Backed Securities, 4.750% - 6.780% due 05/20/10 - 08/25/36
and Commercial Mortgage Obligations 0.130% - 6.730% due 08/25/20 -
11/25/46 valued at $153,000,980); proceeds $150,089,375 5.363% 01/02/2007 150,000,000 150,000,000
Credit Suisse First Boston Tri Party Repo, dated 12/29/06
(collateralized by Corporate Notes, 0.875% - 8.000% due 12/15/14 -
12/15/16 valued at $78,750,954); proceeds $75,044,688 5.363% 01/02/2007 75,000,000 75,000,000
Deutsche Bank Tri Party Repo, dated 12/29/06 (collateralized by
Equity Securities, 2.000% - 4.000% due 11/15/13 - 05/01/33, valued
at $52,501,302); proceeds $50,029,958 5.393% 01/02/2007 50,000,000 50,000,000
Goldman Sachs Tri Party Repo, dated 12/29/06 (collateralized by
Commercial Paper due 02/13/07 - 03/12/07 valued at $76,500,000);
proceeds $75,044,833 5.380% 01/02/2007 75,000,000 75,000,000
Goldman Sachs Tri Party Repo, dated 12/29/06 (collateralized by
Federal Home Loan Mortgage Coporation, 5.670% - 5.770% due
08/15/30 - 05/15/36 valued at $127,500,000); proceeds $125,074,167 5.340% 01/02/2007 125,000,000 125,000,000
Lehman Brothers Tri Party Repo, dated 12/29/06 (collateralized by
Corporate Notes, 5.300% - 5.500% due 11/16/11 - 07/22/15 valued at
$122,402,781); proceeds $120,071,367 5.353% 01/02/2007 120,000,000 120,000,000
Morgan Stanley Tri Party Repo, dated 12/29/06 (collateralized by
Corporte Notes, 1.500% - 9.600% due 01/15/10 - 10/25/14 valued at
$105,000,945); proceeds $100,060,417 5.438% 01/02/2007 100,000,000 100,000,000
See Notes to Financial Statements
5
STATE STREET MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006
INTEREST MATURITY PRINCIPAL AMORTIZED
NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST +
- --------------------------------- -------- ---------- ------------ --------------
Morgan Stanley Tri Party Repo, dated 12/29/06 (collateralized by
Federal National Mortgage Association, 4.500% - 5.500% due
07/01/18 - 07/01/33 and Federal Home Loan Mortgage Corporation,
4.000%- 7.000% due 12/01/13 - 06/01/33 valued at $102,419,882);
proceeds $100,059,111 5.320% 01/02/2007 $100,000,000 $ 100,000,000
UBS Warburg LLC Tri Party Repo, dated 12/29/06 (collateralized by
Federal National Mortgage Association, 5.250% due 06/15/08 valued
at $109,004,329); proceeds $106,928,220 5.240% 01/02/2007 106,866,000 106,866,000
UBS Warburg Tri Party Repo, dated 12/29/06 (collateralized by
Federal National Mortgage Association, 3.500% -11.500% due
06/01/07 - 12/01/36 valued at $122,401,144); proceeds $120,070,933 5.320% 01/02/2007 120,000,000 120,000,000
--------------
TOTAL REPURCHASE AGREEMENTS 1,306,866,000
--------------
TOTAL INVESTMENTS -- 99.4% 6,161,262,091
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6% 35,855,025
--------------
NET ASSETS -- 100.0% $6,197,117,116
==============
(a) Floating Rate Note-Interest rate shown is rate in effect at December 31,
2006.
(b) Security subject to restrictions on resale under federal securities laws,
which may only be resold upon registration under the Securities Act of
1933, as amended ("1933 Act") or in transactions exempt from registration,
including sales to qualified institutional buyers pursuant to Rule 144A of
the 1933 Act. The Portfolio does not have the right to demand that this
security be registered.
(c) Security subject to restrictions on resale that has been deemed by the
Adviser to be illiquid. The Portfolio may not invest more than 10% of its
net assets in illiquid securities. At December 31, 2006, this security
represented 1.61% of net assets.
+ See Note 2 to the Notes to Financial Statements.
See Notes to Financial Statements
6
STATE STREET MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006
ASSETS
Investments in unaffiliated issuers, at amortized cost (Note 2) $4,854,396,091
Repurchase agreements (cost $1,306,866,000) (Note 2) 1,306,866,000
--------------
6,161,262,091
Cash 1,658
Receivables:
Interest receivable 36,410,720
Receivable from adviser (Note 3) 133,154
Prepaid expenses 1,197
--------------
Total assets 6,197,808,820
LIABILITIES
Payables:
Management fee (Note 3) 525,785
Administration, custody and transfer agent fees (Note 3) 110,253
Professional fees 41,390
Accrued expenses and other liabilities 14,276
--------------
Total Liabilities 691,704
--------------
NET ASSETS $6,197,117,116
==============
See Notes to Financial Statements.
7
STATE STREET MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
INVESTMENT INCOME
Interest $231,183,007
------------
EXPENSES
Management fees (Note 3) 4,486,501
Administration, custody and transfer agent fees (Note 3) 957,095
Professional fees 45,397
Trustees' fees 63,734
Printing fees 22,045
Other expenses 61,691
------------
Total Expenses 5,636,463
Less: Fee waivers/reimbursements by investment adviser (Note 3) (1,149,962)
------------
Total Net Expenses 4,486,501
------------
NET INVESTMENT INCOME $226,696,506
------------
See Notes to Financial Statements.
8
STATE STREET MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
For the Year For the Year
Ended Ended
December 31, December 31,
2006 2005
---------------- ---------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 226,696,506 $ 26,739,971
Net realized gain on investments -- 2,656
---------------- ---------------
Net increase in net assets resulting from
operations 226,696,506 26,742,627
---------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from contributions 16,774,127,323 8,537,558,832
Fair value of withdrawals (12,443,577,980) (7,306,145,697)
---------------- ---------------
Net increase in net assets from capital transactions 4,330,549,343 1,231,413,135
---------------- ---------------
TOTAL NET INCREASE IN NET ASSETS 4,557,245,849 1,258,155,762
NET ASSETS
Beginning of period 1,639,871,267 381,715,505
---------------- ---------------
End of period $ 6,197,117,116 $ 1,639,871,267
================ ===============
See Notes to Financial Statements.
9
STATE STREET MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/2006 12/31/2005 12/31/2004*
---------- ---------- ------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $6,197,117 $1,639,871 $381,716
Ratios to average net assets:
Gross operating expenses 0.13% 0.14% 0.18%**
Net operating expenses 0.10% 0.10% 0.10%**
Net investment income 5.08% 3.33% 1.71%**
Total return (a) 5.09% 3.31% 0.68%
- ----------
* The Portfolio commenced operations on August 12, 2004.
** Annualized.
(a) Results represent past performance and are not indicative of future
results. Total return for periods of less than one year are not annualized.
See Notes to Financial Statements.
10
STATE STREET MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. ORGANIZATION
The State Street Master Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, and was organized as a business trust under the laws of the
Commonwealth of Massachusetts on July 27, 1999. The Trust comprises six
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 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 Money Market Portfolio (the "Portfolio"). At December 31, 2006, only the
Portfolio and State Street Equity 500 Index Portfolio were in operation. The
Portfolio commenced operations on August 12, 2004. The Portfolio is authorized
to issue an unlimited number of non-transferable beneficial interests.
The Portfolio's investment objective is to maximize current income to the extent
consistent with the preservation of capital and liquidity by investing in dollar
denominated securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements.
SECURITY VALUATION: As permitted under Rule 2a-7 of the 1940 Act and certain
conditions therein, securities of the Portfolio are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
SECURITIES TRANSACTIONS, INVESTMENT INCOME AND EXPENSES: Securities transactions
are recorded on a trade date basis for financial statement purposes. 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.
All of the net investment income and realized 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, 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.
At December 31, 2006, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes.
11
STATE STREET MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
REPURCHASE AGREEMENTS: A repurchase agreement customarily obligates the seller
at the time it sells securities to the Portfolio to repurchase the securities at
a mutually agreed upon price and time which, in the case of the Portfolio's
transactions, is within seven days. The total amount received by the Portfolio
on repurchase is calculated to exceed the price paid by the Portfolio,
reflecting an agreed-upon market rate of interest for the period of time to the
settlement date, and is not necessarily related to the interest rate on the
underlying securities. The underlying securities are ordinarily United States
Government securities, but may consist of other securities in which the
Portfolio is permitted to invest. Repurchase agreements are fully collateralized
at all times. The use of repurchase agreements involves certain risks. For
example, if the seller of securities under a repurchase agreement defaults on
its obligation to repurchase the underlying securities (as a result of its
bankruptcy or otherwise) the Portfolio will seek to dispose of such securities;
this action could involve costs or delays. The Portfolio may enter into
repurchase agreements maturing within seven days with domestic dealers, banks
and other financial institutions deemed to be creditworthy by SSgA Funds
Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street
Corporation and an affiliate of State Street Bank and Trust Company ("State
Street").
EXPENSE ALLOCATION: Certain expenses are applicable to multiple Portfolios.
Expenses directly attributable to a Portfolio are charged to that Portfolio.
Expenses of the Trust that are not directly attributed to a Portfolio are
allocated among the Portfolios, on the basis of relative net assets, except
where a more appropriate allocation of expenses to each of the Portfolios can
otherwise be made fairly.
USE OF ESTIMATES: The Portfolio's financial statements are prepared in
accordance with U.S. generally accepted accounting principles that require the
use of management estimates. Actual results could differ from those estimates.
3. RELATED PARTY FEES
The Portfolio has entered into an investment advisory agreement with SSgA FM.
The Adviser directs the investments of the Portfolio in accordance with its
investment objective, policies, and limitations. In compensation for the
Adviser's services as investment adviser, the Portfolio pays the Adviser an
annual fee of 0.10% of the Portfolio's average daily net assets. The Adviser has
contractually agreed to cap the total operating expenses of the Portfolio at
0.10% of the Portfolio's average daily net assets until November 1, 2007. For
the period ended December 31, 2006, SSgA FM reimbursed the Portfolio $1,134,158
under this agreement.
State Street is the administrator, custodian and transfer agent for the
Portfolio. In compensation for State Street's services as administrator,
custodian and transfer agent, the Portfolio pays State Street an annual fee,
accrued daily at the rate of 1/365th of the applicable fee rate described below
and payable monthly, of the following annual percentages of the Portfolio's
average daily net assets during the month as follows:
12
STATE STREET MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
Annual percentage of
Asset Levels average daily net assets
- ------------ --------------------------
First $200 Million 0.04%
Next $200 Million 0.03
Thereafter 0.02
Minimum annual fee:
Assets of $500 million and less $150,000
Assets of $500 million - $2 billion $200,000 with 0.01% waiver
State Street has contractually agreed to waive 0.01% of its fees on an annual
basis when the Portfolio's assets are between $500 million and $2 billion. For
the period ended December 31, 2006, State Street waived $15,804 under this
agreement.
Beginning February 1, 2007, the Trust will pay State Street an annual fee,
accrued daily at the rate of 1/365th of the applicable fee rate described below
and payable monthly, of the following annual percentages of the Trust's average
aggregate daily net assets during the month as follows:
Annual percentage of
Asset Levels average aggregate daily net assets
- ------------ ----------------------------------
First $400 Million 0.03%
Thereafter 0.02
Minimum annual fee per portfolio: $150,000
4. TRUSTEES' FEES
The Trust pays each trustee who is not an officer or employee of SSgA FM or
State Street $2,500 for each meeting of the Board of Trustees and an additional
$500 for each telephonic meeting attended. The Trust also pays each trustee an
annual retainer of $20,000. Beginning with the fiscal year ending December 31,
2007, the Trust will pay each trustee an annual retainer of $30,000. Each
trustee is reimbursed for out-of-pocket and travel expenses.
5. INDEMNIFICATIONS
Like many other companies, the Trust's organizational documents provide that its
officers and trustees are indemnified against certain liabilities arising out of
the performance of their duties to the Trust. In addition, both in some of its
principal service contracts and in the normal course of its business, the Trust
enters into contracts that provide indemnifications to other parties for certain
types of losses or liabilities. The Trust's maximum exposure under these
arrangements in unknown as this could involve future claims against the Trust.
6. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board issued Interpretation No.
48, "Accounting for Uncertainty in Income Taxes--an Interpretation of FASB
Statement No. 109" (the "Interpretation"). The Interpretation establishes for
all entities, including pass-through
13
STATE STREET MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
entities such as the Portfolio, a minimum threshold for financial statement
recognition of the benefit of positions taken in filing tax returns (including
whether an entity is taxable in a particular jurisdiction), and requires certain
expanded tax disclosures. The Interpretation is effective for fiscal years
beginning after December 15, 2006, and is to be applied to all open tax years as
of the date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission notified the industry that the implementation of the Interpretation
must be incorporated no later than the last day on which a NAV is calculated
preceding the Portfolio's 2007 semi-annual report, June 29, 2007. Management
continues to evaluate the application of the Interpretation to the Portfolio,
and is not in a position at this time to estimate the significance of its
impact, if any, on the Portfolio's financial statements.
In addition, in September 2006, Statement of Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Portfolio's financial statement disclosures.
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of State Street Master Funds and
Owners of Beneficial Interest of State Street Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the State Street Money Market Portfolio (one of
the portfolios constituting State Street Master Funds) (the Portfolio) as of
December 31, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
State Street Money Market Portfolio of State Street Master Funds at December 31,
2006, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
(ERNST & YOUNG LLP)
Boston, Massachusetts
February 22, 2007
15
STATE STREET MONEY MARKET PORTFOLIO
DECEMBER 31, 2006
GENERAL INFORMATION (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
The Trust has adopted proxy voting procedures relating to portfolio securities
held by the Portfolio. A description of the policies and procedures is available
(i) without charge, upon request, by calling (877) 521-4083 or (ii) on the
website of the Securities and Exchange Commission (the "SEC") at www.sec.gov.
Information on how the Portfolio voted proxies relating to portfolio securities
during the most recent 12-month period ending June 30 is available by August 31
(i) without charge, upon request, by calling (877) 521-4083 or (ii) on the SEC's
website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Trust files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of its fiscal year (as of March and September of each
year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at
www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. and information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most
recent Form N-Q is available without charge, upon request, by calling (877)
521-4083.
ADVISORY AGREEMENT RENEWAL
The Board of Trustees of the Trust met on November 30, 2006 (the "Meeting") to
consider the renewal of the investment advisory agreement for the Portfolio (the
"Advisory Agreement"). In preparation for considering the Advisory Agreement,
the Trustees had thoroughly reviewed the renewal materials provided by the
Adviser, which they had requested through independent counsel. In deciding
whether to renew the Advisory Agreement, the Trustees considered various
factors, including (i) the nature, extent and quality of the services provided
by the SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement,
(ii) the investment performance of the Portfolio, (iii) the costs to the Adviser
of its services and the profits realized by the Adviser and its affiliates from
their relationship with the Trust, (iv) the extent to which economies of scale
would be realized if and as the Trust grows and whether the fee levels in the
Advisory Agreement reflect these economies of scale, and (v) any additional
benefits to the Adviser from its relationship with the Trust.
In considering the nature, extent and quality of the services provided by the
Adviser, the Trustees relied on their prior direct experience as Trustees of the
Trust as well as on the materials provided at the Meeting. The Board reviewed
the Adviser's responsibilities under the Advisory Agreement and noted the
experience and expertise that would be appropriate to expect of an adviser to
the Portfolio, which is a money-market fund. The Trustees reviewed the
background and experience of the Adviser's senior management, including those
individuals responsible for the investment and compliance operations relating to
the investments of the Portfolio, and the responsibilities of the latter with
respect to the Portfolio. They also considered the resources, operational
structures and practices of the Adviser in managing the
16
STATE STREET MONEY MARKET PORTFOLIO
DECEMBER 31, 2006
Portfolio's investments, in monitoring and securing the Portfolio's compliance
with its investment objective and policies with respect to its investments and
with applicable laws and regulations, and in seeking best execution of portfolio
transactions. The Trustees also considered information about the Adviser's
overall investment management business, noting that the Adviser manages assets
for a variety of institutional investors and that the Adviser and its affiliates
had over $1.6 trillion in assets under management as of September 30, 2006. They
reviewed information regarding State Street's business continuity and disaster
recovery program. Drawing upon the materials provided and their general
knowledge of the business of the Adviser, the Trustees determined that the
experience, resources and strength of the Adviser in the management of money
market products is exceptional. As discussed more fully below, they also
determined that the advisory fee for the Portfolio was fair and reasonable and
that its performance and expense ratio were satisfactory. On the basis of this
review, the Trustees determined that the nature and extent of the services
provided by the Adviser to the Portfolio was appropriate, had been of uniformly
high quality, and could be expected to remain so.
The Trustees noted that, in view of the investment objective of the Portfolio,
the investment performance was satisfactory. The Trustees noted that materials
provided by Lipper Inc. at the Meeting indicated that the Portfolio's
performance had been above average for its Lipper peer group for the one-year
and year-to-date periods ending September 30, 2006. Accordingly, they concluded
that the performance of the Portfolio was satisfactory.
The Trustees considered the profitability to the Adviser and its affiliate,
State Street, of the advisory relationships with the Trust. The Trustees had
been provided with data regarding the profitability to the Adviser and its
affiliated service providers with respect to the Portfolio individually, and on
an aggregate basis, for the year ended September 30, 2006. Having discussed with
representatives of the Adviser the methodologies used in computing the costs
that formed the bases of the profitability calculations, they concluded that
these methodologies were reasonable and turned to the data provided. After
discussion and analysis they concluded that, to the extent that the Adviser's
and State Street's relationships with the Trust had been profitable to either or
both of those entities, the profitability was in no case such as to render the
advisory fee excessive.
In order better to evaluate the Portfolio's advisory fee, the Trustees had
requested comparative information from Lipper Inc. with respect to fees paid by,
and expense ratios of, similar funds. The Trustees found that that the
Portfolio's advisory fee and total expense ratio were lower than the average for
the peer group. The Trustees concluded that the data available provided
confirmation of the reasonableness of the Adviser's fee. The Trustees also
considered that to help limit expenses of the Portfolio, the Adviser had reduced
its advisory fee or otherwise reimbursed expenses for the Portfolio. The Board
determined that the Adviser's fees were fair and reasonable.
In considering whether the Adviser benefits in other ways from its relationship
with the Trust, the Trustees also considered whether the Adviser's affiliates
may benefit from the Trust's relationship with State Street as fund
administrator, custodian and transfer agent. They noted that the Adviser
utilizes no soft-dollar arrangements in connection with the Portfolio's
brokerage transactions. The Trustees concluded that, to the extent that the
Adviser or its
17
STATE STREET MONEY MARKET PORTFOLIO
DECEMBER 31, 2006
affiliates derive other benefits from their relationships with the Trust, those
benefits are not so significant as to render the Adviser's fees excessive.
The Board also considered the extent to which economies of scale may be realized
by the Portfolio as assets grow and whether the Portfolio's fee levels reflect
such economies of scale, if any, for the benefit of investors. In considering
the matter, the Board determined that, to the extent economies of scale were in
fact realized, such economies of scale were shared with the Portfolio by virtue
of advisory fees of comparatively low levels that subsumed economies of scale in
the fees themselves. The Trustees also recognized, however, that should
sustained, substantial asset growth be realized in the future, it might be
necessary to consider additional measures
18
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED).
The table below includes information about the Trustees and Executive Officers
of the State Street Master Funds, including their:
business addresses and ages;
principal occupations during the past five years; and
other directorships of publicly traded companies or funds.
As of December 31, 2006, none of the Trustees were considered to be an
"interested person" of the Trust, as that term is defined in the Investment
Company Act of 1940, as amended (the "Independent Trustees").
NUMBER OF
FUNDS IN FUND
NAME, ADDRESS, POSITION(S) TERM OF OFFICE COMPLEX
AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY OTHER DIRECTORSHIPS HELD
("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* BY TRUSTEE
- ----------------- ----------- ---------------- ------------------------------ ------------- -------------------------
INDEPENDENT TRUSTEES
Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & Company 12 Trustee, State Street
Holland & Company, LLC Chairman of L.L.C. (investment adviser) Institutional Investment
375 Park Avenue the Board Elected: 2/00 (1995 - present). Trust; Director, the
New York, NY 10152 Holland Series Fund,
Inc.; Director, the China
DOB: July 7, 1944 Fund, Inc.; Chairman and
Trustee, Scottish Widows
Investment Partnership
Trust; and Director,
Reaves Utility Income
Fund
William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual South 12 Trustee, State Street
State Street Master Africa Master Trust Institutional Investment
Funds Elected: 2/00 (investments) (1995 - Trust; and Trustee, Old
P.O. Box 5049 present); Chairman emeritus, Mutual South Africa
Boston, MA 02206 Children's Hospital (1984 - Master Trust
present); Director, Boston
DOB: January 20, 1937 Plan For Excellence
(non-profit) (1994 - present);
President and Chief Operations
Officer, John Hancock Mutual
Life Insurance Company (1959 -
1999). Mr. Boyan retired in
1999.
Rina K. Spence Trustee Term: Indefinite President of SpenceCare 12 Trustee, State Street
7 Acacia Street International LLC (1998 - Institutional Investment
Cambridge, MA 02138 Elected: 2/00 present); Member of the Trust; Director,
Advisory Board, Ingenium Corp. Berkshire Life Insurance
DOB: October 24, 1948 (technology company) (2001 - Company of America; and
present); Chief Executive Director, IEmily.com
Officer, IEmily.com (internet
company) (2000 - 2001); Chief
Executive Officer of Consensus
Pharmaceutical, Inc. (1998 -
1999); Founder, President and
Chief Executive Officer of
Spence Center for Women's
Health (1994 - 1998); Trustee,
Eastern Enterprise (utilities)
(1988 - 2000).
Douglas T. Williams Trustee Term: Indefinite Executive Vice President of 12 Trustee, State Street
State Street Master Chase Manhattan Bank (1987 - Institutional Investment
Funds Elected: 2/00 1999). Mr. Williams retired in Trust
P.O. Box 5049 1999.
Boston, MA 02206
DOB: December 23, 1940
* The "Fund Complex" consists of six series of the Trust and six series of
State Street Institutional Investment Trust.
19
NUMBER OF
FUNDS IN FUND
NAME, ADDRESS, POSITION(S) TERM OF OFFICE COMPLEX
AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY OTHER DIRECTORSHIPS HELD
("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS* TRUSTEE BY TRUSTEE
- ----------------- ----------- ---------------- ------------------------------ ------------- -------------------------
EXECUTIVE OFFICERS
James E. Ross President Term: Indefinite President, SSgA Funds _____ _____
SSgA Funds Management, inc. (2005 -
Management, Inc. Elected: 4/05 present); Principal, SSgA
State Street Financial Funds Management, Inc. (2001 -
Center 2005); Senior Managing
One Lincoln Street Director, State Street Global
Boston, MA 02111 Advisors (March 2006 -
present); Principal, State
DOB: June 24, 1965 Street Global Advisers (March
2000 - March 2006).
Gary L. French Treasurer Term: Indefinite Senior Vice President of State _____ _____
State Street Bank and Street Bank and Trust Company
Trust Company Elected: 5/05 (2002 - present); Managing
2 Avenue de Lafayette Director, Deutsche Bank
Boston, MA (including its predecessor,
02111 Scudder Investments), Fund
Operations Unit (2001-2002);
DOB: July 4, 1951 President, UAM Fund Services
(1995 to 2001).
Karen Jacoppo-Wood Secretary Term: Indefinite Vice President and Managing _____ _____
State Street Bank and Counsel of State Street Bank
Trust Company Elected: 11/06 and Trust Company (2006 -
2 Avenue de Lafayette present); Counsel, Pioneer
Boston, MA 02111 Investment Management USA Inc.
(2004 to 2006); Vice President
DOB: December 29, 1966 and Counsel of State Street
Bank and Trust Company
(2002-2004).
Peter A. Ambrosini Chief Term: Indefinite Senior Principal and Chief _____ _____
SSgA Funds Compliance Compliance and Risk Management
Management, Inc. Officer Elected: 5/04 Officer, SSgA Funds
State Street Financial Management, Inc. and State
Center Street Global Advisors
One Lincoln Street (2001-present); Managing
Boston, MA 02111 Director,
PricewaterhouseCoopers LLP
DOB: December 17, 1943 (1986 - 2001).
* Each officer may have served in various other capacities for the same
organization during the length of time served.
The Statement of Additional Information includes additional information about
the Trustees and is available, without charge, upon request, by calling (toll
free) 877-521-4083.
20
TRUSTEES
Michael F. Holland
William L. Boyan
Rina K. Spence
Douglas T. Williams
INVESTMENT ADVISER
SSgA Funds Management, Inc.
State Street Financial Center
One Lincoln Street
Boston, MA 02111
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
State Street Financial Center
One Lincoln Street
Boston, MA 02111
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02109
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of shares of beneficial interest.
STATE STREET MONEY MARKET PORTFOLIO
State Street Bank and Trust Company
P.O. Box 5049
Boston, MA 02206
ITEM 2. CODE OF ETHICS.
As of the end of the period, December 31, 2006, State Street Master Funds (the
"Trust" or "Registrant") has adopted a code of ethics, as defined in Item 2(b)
of Form N-CSR, that applies to the Trust's principal executive officer and
principal financial officer. The Trust has not made any amendments to its code
of ethics during the covered period. The Trust has not granted any waivers from
any provisions of the code of ethics during the covered period. A copy of the
Trust's code of ethics is filed as Exhibit 12(a)(1) to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees (the "Board") has determined that the Trust has
the following "audit committee financial experts" as defined in Item 3 of Form
N-CSR serving on its Audit Committee: Messrs. Michael F. Holland, William L.
Boyan and Douglas T. Williams and Ms. Rina K. Spence. Each of the audit
committee financial experts is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
For the fiscal years ended December 31, 2006 and December 31, 2005,
the aggregate audit fees billed for professional services rendered by
Ernst & Young LLP ("E&Y"), the Trust's principal accountant, for the
audit of the Trust's annual financial statements and services normally
provided by E&Y in connection with the Trust's statutory and
regulatory filings or engagement were $66,000 and $63,500,
respectively.
(b) Audit-Related Fees
For the fiscal years ended December 31, 2006 and December 31, 2005,
there were no fees for assurance and related services by E&Y
reasonably related to the performance of the audit of the Trust's
financial statements that were not reported under (a) of this Item.
(c) Tax Fees
For the fiscal years ended December 31, 2006 and December 31, 2005,
the aggregate tax fees billed for professional services rendered by
E&Y for tax compliance, tax advice, and tax planning were $10,000 and
$19,250, respectively. Such tax services included the review of income
and excise tax returns for the Trust.
(d) All Other Fees
For the fiscal years ended December 31, 2006 and December 31, 2005,
there were no fees billed for professional services rendered by E&Y
for products and services provided by E&Y to the Trust, other than the
services reported in (a) through (c).
For the fiscal years ended December 31, 2006 and December 31, 2005,
there were no fees billed for professional services rendered by E&Y
for products and services provided by E&Y to SSgA Funds Management,
Inc. (the "Adviser") and any entity controlling, controlled by, or
under common control with the Adviser that provides ongoing services
to the Trust that (i) relate directly to the operations and financial
reporting of the Trust and (ii) were pre-approved by the Trust's audit
committee.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The Trust's Audit Committee Charter states the following with respect
to pre-approval procedures:
"Pre-Approval Requirements. Before the independent accountants
are engaged by the Trust to render audit or non-audit services,
either:
1. The Audit Committee shall pre-approve all auditing
services and permissible non-audit services (e.g., tax
services) provided to the Trust. The Audit Committee
may delegate to one or more of its members the
authority to grant pre-approvals. Any decision of any
member to whom authority is delegated under this
section shall be presented to the full Audit Committee
at its next regularly scheduled meeting; or
2. The engagement to render the auditing service or
permissible non-audit service is entered into pursuant
to pre-approval policies and procedures established by
the Audit Committee. Any such policies and procedures
must (1) be detailed as to the particular service and
(2) not involve any delegation of the Audit Committee's
responsibilities to the investment adviser. The Audit
Committee must be informed of each service entered into
pursuant to the policies and procedures. A copy of any
such policies and procedures shall be attached as an
exhibit to the Audit Committee Charter.
De Minimis Exceptions to Pre-Approval Requirements. Pre-Approval
for a service provided to the Trust other than audit, review or
attest services is not required if: (1) the aggregate amount of
all such non-audit services provided to the Trust constitutes not
more than 5 percent of the total amount of revenues paid by the
Trust to the independent accountants during the fiscal year in
which the non-audit services are provided; (2) such services were
not
recognized by the Trust at the time of the engagement to be
non-audit services; and (3) such services are promptly brought to
the attention of the Audit Committee and are approved by the
Audit Committee or by one or more members of the Audit Committee
to whom authority to grant such approvals has been delegated by
the Audit Committee prior to the completion of the audit.
Pre-Approval of Non-Audit Services Provided to the Adviser and
Certain Control Persons. The Audit Committee shall pre-approve
any non-audit services proposed to be provided by the independent
accountants to (a) the investment adviser and (b) any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Trust,
if the independent accountants' engagement with the investment
adviser or any such control persons relates directly to the
operations and financial reporting of the Trust. It shall be the
responsibility of the independent accountants to notify the Audit
Committee of any non-audit services that need to be pre-approved.
Application of De Minimis Exception: The De Minimis exception set
forth above applies to pre-approvals under this Section as well,
except that the "total amount of revenues" calculation is based
on the total amount of revenues paid to the independent
accountants by the Trust and any other entity that has its
services approved under this Section (i.e., the investment
adviser or any control person)."
(e)(2) Percentages of Services
None of the services described in paragraphs (b) through (d) of
this Item were performed in reliance on paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X during the period of time for which
such rule was effective.
(f) Not applicable.
(g) Total Fees Paid By Adviser and Certain Affiliates
For the fiscal years ended December 31, 2006 and December 31,
2005, the aggregate non-audit fees billed by E&Y for services
rendered to the Trust and the Adviser and any entity controlling,
controlled by, or under common control with the Adviser that
provided ongoing services to the Trust were $4,500,000 and
$3,561,000, respectively.
(h) E&Y notified the Trust's Audit Committee of all non-audit
services that were rendered by E&Y to the Adviser and any entity
controlling, controlled by, or under common control with the
Adviser that provides services to the Trust, which services were
not required to be pre-approved pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X, allowing the Trust's Audit
Committee to consider whether such services were compatible with
maintaining E&Y's independence.
ITEM 5. AUDIT COMMITTEES OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant does not have procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act")) are effective, as of a date within 90 days of the filing date of the
report that includes the disclosure required by this paragraph, based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under the
1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of
1934.
(b) There were no changes in the Trust's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the Trust's second fiscal quarter covered by this Form N-CSR filing that has
materially affected, or is reasonably likely to materially affect, the Trust's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is attached hereto.
(a)(2) Certifications of principal executive officer and principal financial
officer of the Trust as required by Rule 30a-2(a) under the 1940 Act are
attached hereto.
(a)(3) Not applicable to the Registrant.
(b) Certifications of principal executive officer and principal financial
officer of the Trust as required by Rule 30a-2(b) under the 1940 Act 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, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: STATE STREET MASTER FUNDS
By: /s/ James E. Ross
---------------------------------
James E. Ross
President (Principal Executive
Officer)
Date: February 23, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ James E. Ross
---------------------------------
James E. Ross
President (Principal Executive
Officer)
Date: February 23, 2007
By: /s/ Gary L. French
---------------------------------
Gary L. French (Principal
Financial Officer)
Treasurer
Date: February 23, 2007