UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-9819 ---------- STATE STREET INSTITUTIONAL INVESTMENT TRUST (Exact name of registrant as specified in charter) P.O. Box 5049 Boston, Massachusetts 02206 (Address of principal executive offices)(Zip code) (Name and Address of Agent for Service) Copy to: Nancy L. Conlin, Vice President and Timothy W. Diggins, Esq. 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, 2007 ITEM 1. SHAREHOLDER REPORT. STATE STREET EQUITY 500 INDEX FUND ANNUAL REPORT DECEMBER 31, 2007 STATE STREET EQUITY 500 INDEX FUND ADMINISTRATIVE SHARES GROWTH OF A $10,000 INVESTMENT (a) (PERFORMANCE GRAPH) State Street Equity 500 Index Fund Administrative S&P 500 (R) Shares* Index** (b) -------------- ----------- 4/18/01 10,000 10,000 12/31/01 9,703 9,727 6/30/02 8,422 8,447 12/31/02 7,538 7,578 6/30/03 8,413 8,469 12/31/03 9,677 9,751 6/30/04 10,000 10,086 12/31/04 10,706 10,810 6/30/05 10,606 10,723 12/31/05 11,205 11,341 6/30/06 11,495 11,648 12/31/06 12,944 13,132 6/30/07 13,826 14,046 12/31/07 13,637 13,853 INVESTMENT PERFORMANCE (a) For the Fiscal Year Ended December 31, 2007 Total Return Average Annualized Total Return One Total Return Five Since Commencement Year Ended Years Ended of Operations December 31,2007 December 31, 2007 (April 18, 2001) ---------------- ----------------- ------------------ State Street Equity 500 Index Fund Administrative Shares 5.35% 12.58% 4.73% S&P 500 (R) Index (b) 5.49% 12.83% 4.98% - ---------- (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 AN INVESTOR'S SHARE, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. (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 stock market in general. It is not possible to invest directly in an index. 1 STATE STREET EQUITY 500 INDEX FUND EXPENSE EXAMPLE As a shareholder of the State Street Equity 500 Index Fund (the "Fund"), you incur ongoing costs, which include costs for administrative services and distribution (12b-l) fees, among others, in addition to the Fund's proportionate share of expenses of the State Street Equity 500 Index Portfolio. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund 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, 2007 to December 31, 2007. The table below illustrates your Fund'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 each class of the Fund, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the indicated Class. 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 Class under the heading "Expenses Paid During Period". - BASED ON HYPOTHETICAL 5% RETURN. This section is intended to help you compare your Class' costs with those of other mutual funds. It assumes that the Class 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 Class' 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 Class' costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. Six Months Ended December 31, 2007 BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID JULY 1, 2007 DECEMBER 31, 2007 DURING PERIOD * ------------- ------------------ --------------- BASED ON ACTUAL CLASS RETURN Administrative Shares $1,000.00 $986.00 $1.23 Service Shares $1,000.00 $984.20 $1.73 Class R Shares $1,000.00 $983.10 $3.47 BASED ON HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Administrative Shares $1,000.00 $1,023.97 $1.25 Service Shares $1,000.00 $1,023.47 $1.76 Class R Shares $1,000.00 $1,021.70 $3.54 - ---------- * The calculations are based on expenses incurred in the most recent fiscal period of each Class. The Administrative Shares, Service Shares and Class R Shares annualized average weighted expense ratios as of December 31, 2007 were 0.245%, 0.345% and 0.695%, respectively, which include each Class' proportionate share of the expenses of the State Street Equity 500 Index Portfolio. 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. 2 STATE STREET EQUITY 500 INDEX FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 ASSETS $269,392,006 Investment in State Street Equity 500 Index Portfolio, at value (identified cost $197,542,337) (Note 1) Receivable for Fund shares sold 317,690 ------------ 269,709,696 LIABILITIES Payable for Fund shares repurchased 684 Distribution fees payable (Note 3) 88,985 Administration fees payable (Note 3) 23,569 ------------ 113,238 ------------ NET ASSETS $269,596,458 ============ NET ASSETS CONSIST OF: Paid-in capital $222,330,176 Undistributed net investment income 31,595 Accumulated net realized loss (24,815,485) Net unrealized appreciation on investments and futures 72,050,172 ------------ NET ASSETS $269,596,458 ============ ADMINISTRATIVE SHARES: NET ASSETS $192,718,047 Shares of beneficial interest outstanding 15,750,494 Offering, net asset value, and redemption price per share $ 12.24 ============ SERVICE SHARES: NET ASSETS $ 70,964,539 Shares of beneficial interest outstanding 5,805,119 Offering, net asset value, and redemption price per share $ 12.22 ============ CLASS R SHARES: NET ASSETS $ 5,913,872 Shares of beneficial interest outstanding 483,666 Offering, net asset value, and redemption price per share $ 12.23 ============ SEE NOTES TO FINANCIAL STATEMENTS. 3 STATE STREET EQUITY 500 INDEX FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 INCOME Dividend income allocated from Portfolio (Note 2) $ 5,268,320 Interest income allocated from Portfolio (Note 2) 274,986 Expenses allocated from Portfolio (Note 3) (124,414) ----------- 5,418,892 ----------- EXPENSES Distribution fees (Note 3) Administrative Shares 305,225 Service Shares 169,964 Class R Shares 28,468 Administration fees (Note 3) 138,107 ----------- 641,764 ----------- NET INVESTMENT INCOME 4,777,128 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investments 17,660,065 Futures (110,455) ----------- 17,549,610 ----------- Change in net unrealized appreciation (depreciation) allocated from Portfolio on: Investments (8,138,154) Futures 70,267 ----------- (8,067,887) ----------- Net realized and unrealized gain 9,481,723 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,258,851 =========== SEE NOTES TO FINANCIAL STATEMENTS. 4 STATE STREET EQUITY 500 INDEX FUND STATEMENTS OF CHANGES IN NET ASSETS For the Year For the Year Ended Ended December 31, 2007 December 31, 2006 ----------------- ----------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income $ 4,777,128 $ 4,177,405 Net realized gain on investments and futures 17,549,610 929,546 Change in net unrealized appreciation (depreciation) (8,067,887) 30,112,484 ------------ ------------ Net increase in net assets resulting from operations 14,258,851 35,219,435 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Administrative Shares (3,457,438) (3,273,491) Service Shares (1,199,367) (825,229) Class R Shares (80,013) (35,241) ------------ ------------ Total Distributions (4,736,818) (4,133,961) ------------ ------------ NET INCREASE FROM CAPITAL SHARE TRANSACTIONS ADMINISTRATIVE SHARES Shares sold 8,626,335 5,970,867 Reinvestment of distributions 3,457,437 3,273,491 Shares redeemed (33,384,100) (23,617,403) ------------ ------------ Net decrease from capital share transactions (21,300,328) (14,373,045) ------------ ------------ SERVICE SHARES Shares sold 19,564,724 20,588,281 Reinvestment of distributions 1,199,367 825,229 Shares redeemed (11,631,522) (6,309,109) ------------ ------------ Net increase from capital share transactions 9,132,569 15,104,401 ------------ ------------ CLASS R SHARES Shares sold 3,797,904 2,990,069 Reinvestment of distributions 80,013 35,241 Shares redeemed (1,138,884) (255,948) ------------ ------------ Net increase from capital share transactions 2,739,033 2,769,362 ------------ ------------ Net increase in net assets 93,307 34,586,192 NET ASSETS, BEGINNING OF PERIOD 269,503,151 234,916,959 ------------ ------------ NET ASSETS, END OF PERIOD $269,596,458 $269,503,151 ============ ============ Undistributed net investment income $ 31,595 $ 24,296 ============ ============ SEE NOTES TO FINANCIAL STATEMENTS. 5 STATE STREET EQUITY 500 INDEX FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) For the Year For the Ended Year Ended December 31, 2007 December 31, 2006 ----------------- ----------------- CHANGES IN SHARES: ADMINISTRATIVE SHARES Shares sold 702,137 545,516 Reinvestment of distributions 280,636 275,315 Shares redeemed (2,692,125) (2,167,653) --------- --------- Net decrease in shares (1,709,352) (1,346,822) ========= ========= SERVICE SHARES Shares sold 1,595,084 1,799,805 Reinvestment of distributions 97,430 69,464 Shares redeemed (944,902) (570,899) --------- --------- Net increase in shares 747,612 1,298,370 ========= ========= CLASS R SHARES Shares sold 305,676 272,714 Reinvestment of distributions 6,500 2,966 Shares redeemed (91,028) (23,284) --------- --------- Net increase in shares 221,148 252,396 ========= ========= SEE NOTES TO FINANCIAL STATEMENTS. 6 STATE STREET EQUITY 500 INDEX FUND FINANCIAL HIGHLIGHTS FOR AN ADMINISTRATIVE SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIOD Year Year Year Year Year Ended Ended Ended Ended Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE (A): NET ASSET VALUE, BEGINNING OF PERIOD $ 11.83 $ 10.41 $ 10.10 $ 9.34 $ 7.36 -------- -------- -------- -------- -------- INVESTMENT OPERATIONS: Net investment income 0.22* 0.19* 0.17* 0.17* 0.13* Net realized and unrealized gain (loss) on investments 0.41 1.42 0.30 0.82 1.95 -------- -------- -------- -------- -------- Total from investment operations 0.63 1.61 0.47 0.99 2.08 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS FROM: Net investment income (0.22) (0.19) (0.16) (0.23) (0.10) -------- -------- -------- -------- -------- Net increase (decrease) in net assets 0.41 1.42 0.31% 0.76 1.98 -------- -------- -------- -------- -------- $ 12.24 $ 11.83 $ 10.41 $ 10.10 $ 9.34 ======== ======== ======== ======== ======== NET ASSET VALUE, END OF PERIOD TOTAL RETURN (B) 5.35% 15.52% 4.66 10.63% 28.37% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net Assets, End of Period (000s) $192,718 $206,607 $195,725 $200,524 $182,037 Ratios to average net assets: Operating expenses 0.245% 0.245% 0.245% 0.245% 0.245% Net investment income 1.76% 1.75% 1.64% 1.78% 1.54% Portfolio turnover rate (c) 12%(c) 10% 8% 9% 12% - ---------- (a) The per share amounts and percentages include the Fund's proportionate share of income and expenses of the State Street Equity 500 index Portfolio. (b) Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates. Total return for periods of less than one year is not annualized. Results represent past performance and are not indicative of future results. (c) Portfolio turnover rate is from the State Street Equity 500 Index Portfolio. Net investment income per share calculated using the average shares method. SEE NOTES TO FINANCIAL STATEMENTS. 7 STATE STREET EQUITY 500 INDEX FUND FINANCIAL HIGHLIGHTS FOR A SERVICE SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIOD Year Year Year Year Period Ended Ended Ended Ended Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03(a) -------- -------- -------- -------- ---------- PER SHARE OPERATING PERFORMANCE (B): NET ASSET VALUE, BEGINNING OF PERIOD $ 11.82 $ 10.40 $ 10.10 $ 9.33 $ 6.94 ------- ------- ------- ------- ------- INVESTMENT OPERATIONS: Net investment income 0.21* 0.18* 0.16* 0.16* 0.10* Net realized and unrealized gain on investments 0.40 1.42 0.30 0.83 2.38 ------- ------- ------- ------- ------- Total from investment operations 0.61 1.60 0.46 0.99 2.48 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS FROM: Net investment income (0.21) (0.18) (0.16) (0.22) (0.09) ------- ------- ------- ------- ------- Net increase in net assets 0.40 1.42 0.30 0.77 2.39 ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 12.22 $ 11.82 $ 10.40 $ 10.10 $ 9.33 ======= ======= ======= ======= ======= TOTAL RETURN (C) 5.16% 15.41% 4.56% 10.51% 35.71% ======= ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net Assets, End of Period (000s) $70,965 $59,792 $39,086 $12,964 $84,244 Ratios to average net assets: Operating expenses 0.345% 0.345% 0.345% 0.345% 0.345%(d) Net investment income 1.67% 1.65% 1.56% 1.67% 1.45%(d) Portfolio turnover rate (e) 12% 10% 8% 9% 12% - ---------- (a) Service Shares commenced operations on March 10, 2003. (b) The per share amounts and percentages include the Fund's proportionate share of income and expenses of the State Street Equity 500 Index Portfolio. (c) Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates. Total return for periods of less than one year is not annualized. Results represent past performance and are not indicative of future results. (d) Annualized. (e) Portfolio turnover rate is from the State Street Equity 500 Index Portfolio. * Net investment income per share calculated using the average shares method. SEE NOTES TO FINANCIAL STATEMENTS. 8 STATE STREET EQUITY 500 INDEX FUND FINANCIAL HIGHLIGHTS FOR A CLASS R SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIOD Year Year Period Ended Ended Ended 12/31/07 12/31/08 12/31/2005(a) -------- -------- ------------ PER SHARE OPERATING PERFORMANCE (B): $11.82 $10.40 $ 9.98 ------ ------ ------ NET ASSET VALUE, BEGINNING OF PERIOD INVESTMENT OPERATIONS: Net investment income 0.16* 0.15* 0.08* Net realized and unrealized gain on investments 0.42 1.41 0.41 ------ ------ ------ Total investment operations 0.58 1.56 0.49 ------ ------ ------ LESS DISTRIBUTIONS FROM: (0.17) (0.14) (0.07) ------ ------ ------ Total distributions 0.41 1.42 0.42 ------ ------ ------ Net increase in net assets $12.23 $11.82 $10.40 ====== ====== ====== NET ASSET VALUE, END OF PERIOD 4.88% 15.02% 4.92% ====== ====== ====== TOTAL RETURN (C) RATIOS AND SUPPLEMENTAL DATA: $5,914 $3,104 $ 105 Net Assets, End of Period (000s) Ratios to average net assets: 0.695% 0.695% 0.650%(d) 1.33% 1.33% 1.37%(d) Net investment income 12% 10% 8% Portfolio turnover rate (e) - ---------- (a) Class R Shares commenced operations on June 7, 2005. (b) The per share amounts and percentages include the Fund's proportionate share of income and expenses of the State Street Equity 500 Index Portfolio. (c) Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates. Total return for periods of less than one year is not annualized. Results represent past performance and are not indicative of future results. (d) Annualized. (e) Portfolio turnover rate is from the State Street Equity 500 Index Portfolio. * Net investment income per share calculated using the average shares method. SEE NOTES TO FINANCIAL STATEMENTS. 9 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. ORGANIZATION State Street Institutional Investment Trust (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 February 16, 2000. The Trust consists of the following series: the State Street Equity 500 Index Fund, the State Street Equity 400 Index Fund, the State Street Equity 2000 Index Fund, the State Street Aggregate Bond Index Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Tax Free Limited Duration Bond Fund, the State Street Institutional Limited Duration Bond Fund, the State Street Institutional Treasury Money Market Fund, the State Street Institutional Treasury Plus Money Market Fund and the State Street Institutional U.S. Government Money Market Fund, each of which is a separate diversified series of the Trust. Information presented in these financial statements pertains only to the State Street Equity 500 Index Fund (the "Fund"). The Fund is authorized to issue an unlimited number of shares, with no par value. The Fund commenced operations on April 18, 2001. As of December 31, 2007, the Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Tax Free Limited Duration Bond Fund, the State Street Institutional Treasury Money Market Fund, the State Street Institutional Treasury Plus Money Market Fund and the State Street U.S. Government Money Market Fund were the only series of the Trust that had commenced operations. The Fund offers Administrative Shares, Service Shares and Class R Shares, respectively. Administrative Shares commenced operations on April 18, 2001, Service Shares commenced operations on March 10, 2003, and Class R Shares commenced operations on June 7, 2005. The Fund invests all of its investable assets in interests in the State Street Equity 500 Index Portfolio (the "Portfolio"), a series of a separately registered investment company called State Street Master Funds. The investment objective and policies of the Portfolio are substantially similar to those of the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (11.12% at December 31, 2007). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Fund in preparation of its financial statements. SECURITY VALUATION - The Fund records its investment in the Portfolio at value. The valuation policies of the Portfolio are discussed in Note 2 of the Portfolio's Notes to Financial Statements, which are included elsewhere within this report. SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES - Securities transactions are recorded on a trade date basis for financial statement purposes. Net investment income consists of the Fund's pro-rata share of the net investment income of the Portfolio, less all expenses of the Fund. Realized and unrealized gains and losses from security transactions consist of the Fund's pro-rata share of the Portfolio's realized and unrealized gains and losses. Realized gains and losses from security transactions are recorded on the basis of identified cost. Class specific distribution fees are borne by each class. Income, non-class specific expenses, and realized and unrealized gains and losses are allocated to the respective classes daily on the basis of relative net assets. DIVIDENDS AND DISTRIBUTIONS - Dividends, if any, are declared and paid, at least annually. Net realized capital gains, if any, are distributed annually, unless additional distributions are required for compliance with applicable tax regulations. The tax character of distributions paid to shareholders during the year ended December 31, 2007 and 2006 was as follows:. 2007 2006 ---------- ---------- Ordinary income $4,736,818 $4,133,961 At December 31, 2007 the components of distributable earnings on a tax basis were as follows: 10 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 Capital loss carryover $(12,407,521) Post-October 2007 loss deferral $ (2,874,793) Unrealized appreciation $ 62,548,596 ------------ Total $ 47,266,282 At December 31, 2007, the difference between book basis and tax basis components of net assets were primarily attributable to wash sale loss deferrals, mark to market of futures contracts for tax purposes, REIT dividend income reallocations, and current year post-October losses deferred. FEDERAL INCOME TAXES -The Fund intends to continue to qualify for and elect treatment as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. By so electing and qualifying, the Fund will not be subject to federal income taxes to the extent it distributes its taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year substantially all of its net taxable income and capital gains, if any, the Fund will not be subject to federal excise tax. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are due in part to differing treatments for reallocation of tax gains/losses on securities and futures, reallocation adjustments due to REIT reclass from ordinary income to long term gains REIT adjustments for securities sold, REITcapital gain distributions adjustment, redemption in-kind gains/losses and tax overdistribution. For the year ended December 31, 2007, permanent differences identified and reclassified among the components of net assets were as follows: INCREASE (DECREASE) UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN CAPITAL INCOME (LOSS) GAINS (LOSSES) - --------------- -------------- ------------- $3,193,659 $(33,011) $(3,160,648) Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification. At December 31, 2007, the Fund had capital loss carry forwards in the amount of $12,407,521, of which $3,344,055, $7,776,419, $78,263, $357,924, $216,052 and $634,808 may be utilized to offset future net realized capital gains until expiration dates of December 31, 2009, December 31, 2010, December 31, 2011, December 31, 2012, December 31, 2013 and December 31, 2014, respectively. Post-October losses of $2,874,793 will be deferred to the first day of fiscal year 2008. The Fund used capital loss carryforwards of $14,821,495 to offset taxable capital gains realized during the year ended December 31, 2007. At December 31, 2007, the cost of investments computed on a federal income tax basis was $206,968,813, resulting in $62,423,193 of unrealized appreciation. The differences between book and tax cost amounts are primarily due to wash sales deferrals. The Fund adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Fund did not have a liability for any unrecognized tax expenses. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years 2004 through 2007 remain subject to examination by the fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. USE OF ESTIMATES: The Fund'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. 11 STATE STREET EQUITY 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 3. RELATED PARTY FEES AND TRANSACTIONS The Fund 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 Bank and Trust Company ("State Street"). In addition the Portfolio has entered into an investment advisory agreement with SSgA FM under which SSgA FM directs the investment of the Portfolio in accordance with the Portfolio's investment objective, policies and limitations. The Fund pays no advisory fee to SSgA FM as long as the Fund invests all of its assets in the Portfolio or another investment company. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Fund. In compensation for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary legal and audit expenses), State Street receives a fee at the annual rate of 0.05% of average daily net assets of the Fund. For the year ended December 31, 2007, the Fund paid State Street $138,107 for such services. The Portfolio pays State Street a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio's average daily net assets 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). For the year ended December 31, 2007, the Fund's pro-rata share of these expenses amounted to $124,414. The Trust has adopted a plan of distribution pursuant to Rule 12b-l under the 1940 Act (the "Rule 12b-l Plan"). Under the Rule 12b-l Plan, the Fund compensates financial intermediaries in connection with the distribution of Administrative, Service and Class R Shares and for services provided to the Fund's shareholders. The Fund made payments under the Rule 12b-l Plan at an annual rate of 0.15% of average daily net assets for Administrative Shares of the Fund, an annual rate of 0.25% of average daily net assets for Service Shares of the Fund and an annual rate of 0.60% of average daily net assets for Class R Shares of the Fund. For the year ended December 31, 2007, the Fund's Administrative Shares, Service Shares and Class R Shares accrued $305,225, $169,964, and $28,468, respectively, which is payable to financial intermediaries pursuant to the Rule 12b-l plan. 4. INDEMNIFICATIONS 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. Management does not expect anything significant. 5. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Fund and believes the impact will be limited to expanded disclosures in the Fund's Financial Statements resulting from adoption of this pronouncement. 6. TAX INFORMATION - (UNAUDITED) For federal income tax purposes, the following information is furnished with respect to the Fund's distributions for its fiscal year ended December 31, 2007: State Street Equity 500 Index Fund had 100% of 2007 ordinary dividends paid qualify for the corporate dividends received deduction. 100% of these distributions have also met the requirements needed to be considered qualified dividends under the Jobs and Growth Tax Relief Reconciliation Act of 2003. 12 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Institutional Investment Trust and Shareholders of State Street Equity 500 Index Fund: We have audited the accompanying statement of assets and liabilities of the State Street Equity 500 Index Fund (one of the funds constituting State Street Institutional Investment Trust) (the Fund) as of December 31, 2007, 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 periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund'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 Fund'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 Fund'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, 2007, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Equity 500 Index Fund of the State Street Institutional Investment Trust at December 31, 2007, 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. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 13 STATE STREET EQUITY 500 INDEX FUND DECEMBER 31, 2007 GENERAL INFORMATION (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Fund. 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 Exchange Commission (the "SEC") at www.sec.gov. Information on how the Fund 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 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 29, 2007 (the "Meeting") to consider the renewal of the investment advisory agreement for the Fund (the "Advisory Agreement"). In preparation for considering the Advisory Agreement, the Trustees had 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 SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement, (ii) the investment performance of the Fund, (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 Fund, which is a feeder index fund in a master-feeder structure. 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 Fund, and the responsibilities of the latter with respect to the Fund. They also considered the resources, operational structures and practices of the Adviser in managing the Fund's investments, in monitoring and securing the Fund'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 $1.99 trillion in assets under management as of September 30, 2007, including over $140 billion managed by the Adviser. 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 they were satisfied with the experience, resources and strength of the Adviser in the management of index products. As discussed more fully below, they also determined that the advisory fee for the Fund was fair and reasonable and that their performance and expense ratios 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 Funds and indirectly to the Funds were 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 Fund, the investment performance was satisfactory. The Trustees noted that the performance of the Fund 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 Fund 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 Fund had in fact 14 STATE STREET EQUITY 500 INDEX FUND DECEMBER 31, 2007 tracked the index within an acceptable range of tracking error. They concluded that the performance of the Fund 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 Fund individually, and on an aggregate basis, for the year ended June 30, 2007. 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 Fund'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 Fund's advisory fee was in all cases lower than the average for the respective peer group, while total expense ratios were lower than average for certain of the Fund's share classes and higher for others. The Trustees noted that the Adviser does not receive any advisory fee from the Fund so long as the Fund invests substantially all of its assets in a master portfolio or in another investment company. The Board determined that the Adviser's fee was 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' relationship with State Street as fund administrator, custodian and transfer agent and the Funds' use of State Street Global Markets to perform certain brokerage services. They noted that the Adviser utilizes no soft-dollar arrangements in connection with the Fund'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 Fund as assets grow and whether the Fund'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 Fund 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. 15 STATE STREET EQUITY 500 INDEX FUND TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED). The table below includes information about the Trustees and Executive Officers of the State Street Institutional Investment Trust, including their: - business addresses and ages; - principal occupations during the past five years; and - other directorships of publicly traded companies or funds. 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 ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - ---------------------- ----------- ---------------- ------------------------------ ----------- --------------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & Company 22 Trustee, State Street Holland & Company, Chairman of Fleeted: 7/99 L.L.C. (investment adviser) Master Funds; Director, LLC the Board (1995 -present). the Holland Series Fund, 375 Park Avenue Inc.; Director, The China New York, NY 10152 Fund, Inc.; Chairman and Trustee, Scottish Widows DOB: July 7, 1944 Investment Partnership Trust; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual South 22 Trustee, State Street State Street Elected: 7/99 Africa Master Trust Master Funds; and Institutional (investments) (1995 - Trustee, Old Mutual South Investment Trust present); Chairman emeritus, Africa Master Trust P.O. Box 5049 Boston, Children's Hospital (1984 - MA 02206 present); Director, Boston Plan For Excellence DOB: January 20, 1937 (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 22 Trustee, State Street State Street Elected: 7/99 International LLC (1998 - Master Funds; Director, Institutional present); Member of the Berkshire Life Insurance Investment Trust Advisory Board, Ingenium Corp. Company of America; and P.O.Box 5049 (technology company) (2001 - Director, IEmily.com Boston, MA 02206 present); Chief Executive Officer, IEmily.com (internet DOB: October 24, 1948 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 22 Trustee, State Street State Street Elected: 7/99 Chase Manhattan Bank (1987 Master Funds Institutional -1999). Mr. Williams retired Investment Trust in 1999. P.O. Box 5049 Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Master Funds. 16 STATE STREET EQUITY 500 INDEX FUND TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED). NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE COMPLEX OTHER DIRECTORSHIPS AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY HELD BY ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS* TRUSTEE TRUSTEE - ---------------------- ----------- ---------------- ------------------------------ ----------- --------------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: Indefinite President, SSgA Funds 22 Trustee, State Street SSgA Funds President Elected Trustee: Management, Inc. (2005 - Master Funds; Trustee, Management, Inc. 2/07 present); Principal, SSgA SPDR(R) Series Trust; State Street Financial Funds Management, Inc. (2001 - Trustee, SPDR(R) Index Center 2005); Senior Managing Shares Trust and Trustee, One Lincoln Street Director, State Street Global Select Sector SPDR(R) Boston, MA 02111- Elected Advisors (March 2006 - Trust 2900 President: 4/05 present); Principal, State Street Global Advisers DOB: June 24, 1965 (2000-2006). OFFICERS: Gary L. French Treasurer Term: Indefinite Senior Vice President of State -- -- State Street Bank and Elected: 5/05 Street Bank and Trust Company Trust Company (2002 -present); Managing 2 Avenue de Director, Deutsche Bank Lafayette (including its predecessor, Boston, MA 02111 Scudder Investments), Fund Operations Unit (2001 - 2002); DOB: July 4, 1951 President, UAM Fund Services (1995 -2001). Julie Piatelli Interim Term: Indefinite Principal and Senior -- -- SSgA Funds Chief Elected: 7/07 Compliance and Risk Management Management, Inc. Compliance Officer, SSgA Funds State Street Financial Officer Management, Inc. (2004- Center present), Vice President State One Lincoln Street Street Global Advisors Boston, MA 02111 (2004-present); Manager, PricewaterhouseCoopers LLP DOB: August 5, 1967 (1999-2004). Nancy L. Conlin Secretary Term: Indefinite Vice President and Managing -- -- State Street Bank and Elected: 9/07 Counsel, State Street Bank and Trust Company Trust Company (2007 - 2 Avenue de present); General Counsel to Lafayette Plymouth Rock Companies (2004- Boston, MA 02111 2007); and U.S. Chief Counsel to Sun Life Financial (2002 - DOB: December 11, 2004). 1953 (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 17 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross 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 02110 DISTRIBUTOR ALPS Distributors, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. A prospectus which contains this and other information about the fund can be obtained by calling 1-877-521-4083, or by talking to your financial advisor. Read the prospectus carefully before investing. 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 FUND State Street Bank and Trust Company P.O. Box 5049 Boston, MA 02206 STATE STREET EQUITY 500 INDEX PORTFOLIO ANNUAL REPORT DECEMBER 31, 2007 STATE STREET EQUITY 500 INDEX PORTFOLIO Management Discussion of Fund Performance and Analysis, year ending 12/31/2007 Overview After a burst of volatility slapped global markets at the end of February 2007, chastened investors staggered a bit in March before finishing the first quarter of 2007 with much improved composure. Although the outlook for US short-term interest rates remained squarely unchanged throughout the quarter, moves to tighter policy in the UK and Europe, and perhaps most notably in India and China, heightened concerns that favorable financial conditions and the buoyant markets they foster might have run their course. Reinforcing these worries was a deepening gloom in the US housing market, where newly obvious payment risks in subprime mortgages prompted fresh conservatism in lending practices that could in turn offer a meaningful threat to consumer spending. But US employment trends remained friendly, wage growth solid, and income resilient. As investors considered the idea that mortgage dislocations alone might not be enough to derail the US economy, equity averages snapped back nicely at the end of March to achieve positive returns for the opening quarter of 2007 Signs of stress in the fixed income markets brought a cautious end to the first half of 2007, with US stocks and bonds both slipping in June. Risk aversion tended to increase in choppy fashion throughout the second quarter, especially after hopes for an official rate cut eroded through May. But in contrast to their less discriminating behavior during the panicky episodes of April 2005 and May 2006, investors focused their dismay in spring 2007 on specific sectors and instruments rather than on the broad market. With US 10-year bond yields streaking to five-year highs in early June, interest-sensitive instruments fared most poorly. Yield spreads on riskier bonds climbed noticeably, as dislocations in the mortgage arena forced reduction of leverage by a number of hedge funds. The second quarter did bring record highs for both the Dow Jones Industrial Average and the S&P 500(R), but the underpinnings of the global liquidity that has been buoying the capital markets began to creak. With the broad averages for US stocks and bonds posting modestly positive returns for the third quarter, one might view the summer of 2007 as a placid vacation period after the mortgage markets began to unravel in June. But such a perception would completely miss the rapid transfer of risk across asset classes, the sharp rise and subsequent retreat in equity volatility, and the signal adjustment in US monetary policy by the Federal Reserve. The growing troubles in residential mortgages initially brought pressure to leveraged loans and corporate bonds during July. In August, commercial paper investors stopped rolling newly uncertain positions, and the stress spread quickly to interbank lending. Equity investors grew worried that a dysfunctional money market would crimp economic growth, but so too did the Fed, which dropped its discount rate by 50 basis points (a basis point is l/l00th of 1% or .01%) on August 17, 2007. This official response to the financial turmoil laid the groundwork for a recovery from tumbling stock prices, an upswing that gathered steam when the fed funds rate was lowered from 5.25% to 4.75% on September 18. The US dollar was a notable casualty of this more accommodative stance, but the third quarter finished on a firm note, with credit markets attempting to heal and equity averages led higher by commodity-related issues. After a tentative October and a nasty November, December brought little in the way of seasonal cheer for the financial markets, and a challenging 2007 ended in distinctly downbeat fashion. A tricky set of cross-currents kept US investors on edge throughout the quarter. Boosting market sentiment were additional cuts in short-term interest rates, solid earnings at several large growth companies, and inflows of fresh capital from flush overseas investors. On the other hand, a steady diet of bad news from the housing market, a wave of huge write-downs at financial firms, and a renewed surge in commodity prices were all much more troublesome. Lingering strains in the money markets and signs of softening employment conditions reinforced a sense of increasing recession risks. As a result, government bonds had another solid quarter. While defensive equities and energy stocks finished the year relatively strong, shares tied to financial and consumer activity suffered an ignominious end to 2007. The S&P 500 ended the year with a gain of 5.49%. 1 STATE STREET EQUITY 500 INDEX PORTFOLIO Management Discussion of Fund Performance and Analysis, year ending 12/31/2007 Fund Eight of the ten economic sectors gained ground during 2007, with seven of those eight posting double digit gains. Energy stocks were far and away the top sector, rising 34.22%, led by strong commodity prices and higher company earnings. Materials stocks gained 22.49% during the year and Utilities were the third strongest performing sector, rising 22.49%. Much like energy stocks, the materials sector benefited from strong commodity prices and company earnings. Utilities companies appeared to benefit from strong results and a flight to safety in the second part of the year. On the other end of the spectrum, financial stocks were battered during the year, falling 18.60%. These companies were hit hard by a crisis in the credit markets, particularly in the area of sub-prime mortgages. Consumer discretionary stocks fell 13.29% as investors appeared to fear a recession in the United States. Healthcare was third "worst" performing sector, but the sector actually posted a nice gain of 7.14%. The top performing stocks for 2007 were National Oilwell Varco, Amazon.Com Inc., and Apple. National Oilwell benefited from improved margins and strong gains by energy companies. Amazon posted a very strong return, especially compared to its counterparts in the consumer discretionary sector. Apple posted excellent results, boosted by i-Mac sales and the strong introduction of i-Phone. Two of the bottom three performers came from Financials and both were hard hit by the mortgage bond issues. E*Trade experienced significant losses from these bonds in its portfolio, while Countrywide (a large mortgage originator) struggled to keep afloat when its financing came under pressure. The third worst performer was Circuit City Stores which experienced poor results during the year, causing some to question the chain's long term viability. The top contributors to the fund return were Exxon Mobil, Apple, and Google. The three largest detractors from return were all large financial companies. Citigroup, Bank of America and Merrill Lynch. All of three of these companies were hit by the fixed income and mortgage crisis during the year, with Merrill Lynch and Citigroup being hit particularly hard. The views expressed in this statement reflect those of the portfolio manager only through the end of the period of this report and do not necessarily represent the views of the Adviser as a whole. Any such views are subject to change at any time based upon market or other conditions and the Adviser disclaims any responsibility to update such views. 2 STATE STREET EQUITY 500 INDEX PORTFOLIO GROWTH OF A $10,000 INVESTMENT (a) (PERFORMANCE GRAPH) State Street Equity 500 S&P 500 (R) Index Portfolio * Index ** (b) ----------------- ------------ 3/1/2000 10,000 10,000 6/30/2000 10,586 10,585 12/31/2000 9,671 9,662 6/30/2001 9,011 9,015 12/31/2001 8,510 8,514 6/30/2002 7,389 7,394 12/31/2002 6,624 6,633 6/30/2003 7,402 7,413 12/31/2003 8,519 8,535 6/30/2004 8,813 8,829 12/31/2004 9,444 9,464 6/31/2005 9,365 9,387 12/31/2005 9,904 9,930 6/31/2006 10,171 10,199 12/31/2006 11,464 11,498 6/31/2007 12,260 12,298 12/31/2007 12,093 12,129 INVESTMENT PERFORMANCE (a) For the Year Ended December 31, 2007 Total Return Total Return Total Return Average Annualized Since One Year Ended Five Years Ended Commencement of Operations December 31, 2007 December 31, 2007 (March 1, 2000) ----------------- ----------------- -------------------------- State Street Equity 500 Index Portfolio 5.49% 12.79% 2.45% S&P 500 (R) Index (b) 5.49% 12.83% 2.62% (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. It is not possible to invest directly in an index. 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, 2007 to December 31, 2007. 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. SIX MONTHS ENDED DECEMBER 31, 2007 BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING JULY 1, 2007 DECEMBER 31, 2007 PERIOD * ------------- ----------------- ----------- BASED ON ACTUAL PORTFOLIO RETURN $1,000.00 $ 986.30 $0.23 BASED ON HYPOTHETICAL (5% RETURN BEFORE EXPENSES) $1,000.00 $1,024.98 $0.23 * 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 31,2007 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. 4 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- Common Stocks 98.1% Money Market Funds 2.0 U.S. Government Securities 0.2 Liabilities less cash and other assets (0.3) ----- Total 100.0% ----- TOP FIVE SECTORS (EXCLUDING SHORT-TERM INVESTMENTS)* DECEMBER 31, 2007 - ---------------------------------------------------- ----------------- Financials 17.4% Information Technology 15.9 Energy 12.3 Health Care 11.6 industrials 11.4 ---- Total 68.6% ---- * As a percentage of net assets as of the date indicated. The Portfolio's composition may vary over time. 5 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 MARKET VALUE SHARES (000) --------- --------- COMMON STOCKS -- 98.1% CONSUMER DISCRETIONARY -- 8.7% Abercrombie & Fitch Co. 15,846 $ 1,267 Amazon.Com, Inc. (a) 56,092 5,196 Apollo Group, Inc. Class A (a) 26,529 1,861 AutoNation, Inc. (a) 23,063 361 AutoZone, Inc. (a) 7,864 943 Bed Bath & Beyond, Inc. (a) 50,745 1,491 Best Buy Co., Inc. 64,119 3,376 Big Lots, Inc. (a) 17,227 275 Black & Decker Corp. 11,837 824 Brunswick Corp. 18,586 317 Carnival Corp. 80,250 3,570 CBS Corp. Class B 125,903 3,431 Centex Corp. 24,082 608 Circuit City Stores, Inc. 28,732 121 Clear Channel Communications, Inc. 92,847 3,205 Coach, Inc. (a) 68,028 2,080 Comcast Corp. Class A (a) 568,201 10,375 D.R. Horton, Inc. 53,476 704 Darden Restaurants, Inc. 25,688 712 Dillard's, Inc. Class A 12,294 231 DIRECTV Group, Inc. (a) 128,877 2,980 Eastman Kodak Co. 54,482 1,192 eBay, Inc. (a) 210,566 6,989 EW Scripps Co. Class A 16,835 758 Expedia, Inc. (a) 35,655 1,127 Family Dollar Stores, Inc. 27,158 522 Ford Motor Co. (a) 383,580 2,581 Fortune Brands, Inc. 27,745 2,008 GameStop Corp. (a) 29,000 1,801 Gannett Co., Inc. 42,074 1,641 Gap, Inc. 91,398 1,945 General Motors Corp. 103,845 2,585 Genuine Parts Co. 31,409 1,454 Goodyear Tire & Rubber Co. (a) 45,757 1,291 H&R Block, Inc. 58,415 1,085 Harley-Davidson, Inc. 46,901 2,191 Harman International Industries, Inc. 10,521 775 Harrah's Entertainment, Inc. 33,588 2,981 Hasbro, Inc. 25,825 661 Home Depot, Inc. 312,409 8,416 Host Hotels & Resorts, Inc. 92,665 1,579 International Game Technology 56,319 2,474 Interpublic Group of Cos., Inc. (a) 83,694 679 JC Penney & Co., Inc. 40,310 1,773 Johnson Controls, Inc. 109,486 3,946 Jones Apparel Group, Inc. 13,434 215 KB HOME 14,794 320 Kohl's Corp. (a) 56,933 2,608 Leggett & Platt, Inc. 34,398 600 Lennar Corp. Class A 27,931 500 Limited Brands 58,467 1,107 Liz Claiborne, Inc. 20,797 423 Lowe's Cos., Inc. 267,062 6,041 Macy's, Inc. 78,723 2,037 MARKET VALUE SHARES (000) --------- --------- Marriot International, Inc. Class A 56,821 $ 1,942 Mattel, Inc. 66,976 1,275 McDonald's Corp. 218,804 12,890 McGraw-Hill, Inc. 60,766 2,662 Meredith Corp. 7,889 434 New York Times Co. Class A 29,122 511 Newell Rubbermaid, Inc. 51,593 1,335 News Corp. Class A 428,209 8,774 NIKE, Inc. Class B 70,852 4,552 Nordstrom, Inc. 34,633 1,272 Office Depot, Inc. (a) 51,256 713 OfficeMax, Inc. 15,131 313 Omnicom Group, Inc. 59,941 2,849 Polo Ralph Lauren Corp. 10,615 656 Pulte Homes, Inc. 42,826 451 Radioshack Corp. 27,503 464 Sears Holdings Corp. (a) 14,174 1,446 Sherwin-Williams Co. 20,596 1,195 Snap-On, Inc. 9,512 459 Stanley Works 14,583 707 Staples, Inc. 130,833 3,018 Starbucks Corp. (a) 136,861 2,802 Starwood Hotels & Resorts Worldwide, Inc. 36,747 1,618 Target Corp. 153,204 7,660 Tiffany & Co. 25,080 1,154 Time Warner, Inc. 667,238 11,016 TJX Cos., Inc. 81,106 2,330 V.F. Corp. 16,893 1,160 Viacom, Inc. Class B (a) 123,909 5,442 Walt Disney Co. 356,571 11,510 Washington Post Co. 1,060 839 Wendy's International, Inc. 17,016 440 Whirlpool Corp. 13,761 1,123 Wyndham Worldwide Corp. 34,299 808 Yum! Brands, Inc. 95,392 3,651 --------- 209,704 --------- CONSUMER STAPLES -- 10.0% Altria Group, Inc. 389,107 29,409 Anheuser-Busch Cos., Inc. 135,496 7,092 Archer-Daniels-Midland Co. 118,424 5,498 Avon Products, Inc. 80,660 3,188 Brown-Forman Corp. Class B 15,624 1,158 Campbell Soup Co. 41,465 1,482 Clorox Co. 25,743 1,678 Coca-Cola Co. 367,217 22,536 Coca-Cola Enterprises, Inc. 53,901 1,403 Colgate-Palmolive Co. 94,376 7,358 ConAgra Foods, Inc. 91,275 2,171 Constellation Brands, Inc. Class A (a) 37,226 880 Costco Wholesale Corp. 80,837 5,639 CVS Corp. 272,152 10,818 Dean Foods Co. 25,258 653 Estee Lauder Cos, Inc. Class A 20,552 896 General Mills, Inc. 62,732 3,576 See Notes to Financial Statements 6 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 MARKET VALUE SHARES (000) --------- --------- CONSUMER STAPLES -- (CONTINUED) H.J. Heinz Co. 58,369 $ 2,725 Hershey Foods Corp. 29,582 1,166 Kellogg Co. 48,435 2,539 Kimberly-Clark Corp. 76,800 5,325 Kraft Foods, Inc. 289,941 9,461 Kroger Co. 129,276 3,453 McCormick & Co., Inc. 22,353 847 Molson Coors Brewing Co., Class B 23,962 1,237 Pepsi Bottling Group, Inc. 26,453 1,044 PepsiCo, Inc. 296,067 22,471 Procter & Gamble Co. 573,613 42,115 Reynolds American, Inc. 31,887 2,103 Safeway, Inc. 80,264 2,746 Sara Lee Corp. 129,134 2,074 SuperValu, Inc. 37,648 1,413 Sysco Corp. 112,209 3,502 Tyson Foods, Inc., Class A 52,935 811 UST Corp. 28,137 1,542 Wal-Mart Stores, Inc. 439,955 20,911 Walgreen Co. 183,684 6,995 Whole Foods Market, Inc. 25,433 1,038 Wrigley Wm., Jr. Co. 39,748 2,327 --------- 243,280 --------- ENERGY -- 12.3% Anadarko Petroleum Corp. 85,626 5,625 Apache Corp. 61,311 6,593 Baker Hughes, Inc. 57,578 4,670 BJ Services Co. 54,548 1,323 Chesapeake Energy Corp. 82,282 3,225 ChevronTexaco Corp. 390,310 36,428 ConocoPhillips 294,567 26,010 Devon Energy Corp. 82,412 7,327 El Paso Corp. 130,592 2,251 ENSCO International, Inc. 26,077 1,555 EOG Resources, Inc. 44,917 4,009 ExxonMobil Corp. 1,008,814 94,516 Halliburton Co. 160,734 6,093 Hess Corp. 51,487 5,193 Marathon Oil Corp. 130,790 7,960 Murphy Oil Corp. 35,241 2,990 Nabors Industries, Ltd. (a) 52,404 1,435 National Oilwell Varco, Inc. (a) 65,557 4,816 Noble Corp. 48,918 2,764 Noble Energy, Inc. 31,210 2,482 Occidental Petroleum Corp. 152,638 11,752 Range Resources Corp. 27,200 1,397 Rowan Cos., Inc. 19,520 770 Schlumberger, Ltd. 221,006 21,740 Smith International, Inc. 37,534 2,772 Sunoco, Inc. 21,584 1,564 Tesoro Corp. 26,365 1,258 Transocean, Inc. 58,799 8,417 Valero Energy Corp. 101,906 7,137 Weatherford International Ltd. (a) 62,555 4,291 MARKET VALUE SHARES (000) --------- --------- Williams Cos., Inc. 110,168 $ 3,942 XTO Energy, Inc. 89,221 4,582 --------- 296,887 --------- FINANCIALS -- 17.4% ACE, Ltd. 60,483 3,737 AFLAC, Inc. 90,470 5,666 Allstate Corp. 105,579 5,514 Ambac Financial Group, Inc. 20,232 521 American Capital Strategies Ltd. 34,302 1,131 American Express Co. 217,379 11,308 American International Group, Inc. 469,749 27,386 Ameriprise Financial, Inc. 43,007 2,370 AON Corp. 54,747 2,611 Apartment Investment & Management Co. Class A 16,714 580 Assurant, Inc. 17,131 1,146 AvalonBay Communities, Inc. 14,753 1,389 Bank of America Corp. 819,839 33,827 Bank of New York Mellon Corp. 209,203 10,201 BB&T Corp. 101,370 3,109 Bear Stearns Cos., Inc. 21,168 1,868 Boston Properties, Inc. 21,667 1,989 Capital One Financial Corp. 70,163 3,316 CB Richard Ellis Group, Inc. Class A (a) 37,475 808 Charles Schwab Corp. 174,693 4,463 Chubb Corp. 72,375 3,950 Cincinnati Financial Corp. 31,514 1,246 CIT Group, Inc. 35,142 844 Citigroup, Inc. 919,107 27,059 CME Group, Inc. 10,141 6,957 Comerica, Inc. 27,144 1,182 Commerce Bancorp, Inc. 34,174 1,303 Countrywide Financial Corp. 100,246 896 Developers Diversified Realty Corp. 23,024 882 Discover Financial Services 85,605 1,291 E*Trade Financial Corp. (a) 81,315 289 Equity Residential 49,057 1,789 Fannie Mae 181,144 7,242 Federal Home Loan Mortgage Corp. 123,039 4,192 Federated Investors, Inc. Class B 15,270 629 Fidelity National Information Services, Inc. 30,977 1,288 Fifth Third Bancorp 95,716 2,405 First Horizon National Corp. 25,172 457 Franklin Resources, Inc. 29,680 3,396 General Growth Properties, Inc. 45,893 1,890 Genworth Financial, Inc. Class A 80,451 2,047 Goldman Sachs Group, Inc. 74,399 16,000 Hartford Financial Services Group, Inc. 57,297 4,996 Hudson City Bancorp, Inc. 95,292 1,431 Huntington Bancshares, Inc. 64,656 954 IntercontinentalExchange, Inc. (a) 12,680 2,441 J.P. Morgan Chase & Co. 619,837 27,056 See Notes to Financial Statements 7 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 MARKET VALUE SHARES (000) --------- --------- FINANCIALS -- (CONTINUED) Janus Capital Group, Inc. 29,407 $ 966 KeyCorp 70,475 1,653 Kimco Realty Corp. 45,869 1,670 Legg Mason, Inc. 25,142 1,839 Lehman Brothers Holdings, Inc. 98,213 6,427 Leucadia National Corp. 31,736 1,495 Lincoln National Corp. 49,592 2,887 Loews Corp. 81,290 4,092 M & T Bank Corp. 14,137 1,153 Marsh & McLennan Cos., Inc. 100,753 2,667 Marshall & Ilsley Corp. 49,593 1,313 MBIA, Inc. 21,584 402 Merrill Lynch & Co., Inc. 158,458 8,506 MetLife, Inc. 137,145 8,451 MGIC Investment Corp. 16,800 377 Moody's Corp. 38,966 1,391 Morgan Stanley 195,948 10,407 National City Corp. 115,554 1,902 Northern Trust Corp. 34,306 2,627 NYSE Euronext 48,600 4,266 Plum Creek Timber Co., Inc. 30,811 1,419 PNC Financial Services Group, Inc. 63,251 4,152 Principal Financial Group, Inc. 49,491 3,407 Progressive Corp. 135,501 2,596 ProLogis 47,891 3,035 Prudential Financial, Inc. 83,039 7,726 Public Storage, Inc. 23,087 1,695 Regions Financial Corp. 128,789 3,046 SAFECO Corp. 16,950 944 Simon Property Group, Inc. 41,100 3,570 SLM Corp. 73,899 1,488 Sovereign Bancorp, Inc. 65,974 752 State Street Corp. (b) 70,325 5,710 SunTrust Banks, Inc. 64,818 4,050 Synovus Financial Corp. 57,585 1,387 T. Rowe Price Group, Inc. 48,675 2,963 Torchmark Corp. 17,921 1,085 Travelers Cos, Inc. 118,604 6,381 U.S. Bancorp 317,331 10,072 Unum Group 63,629 1,514 Vornado Realty Trust 25,134 2,211 Wachovia Corp. 364,322 13,855 Washington Mutual, Inc. 159,441 2,170 Wells Fargo Co. 621,744 18,770 Western Union Co. 143,985 3,496 XL Capital, Ltd. Class A 33,044 1,662 Zions Bancorp 20,553 960 --------- 421,659 --------- HEALTH CARE -- 11.6% Abbott Laboratories 285,708 16,043 Aetna, Inc. 94,397 5,450 Allergan, Inc. 56,592 3,635 AmerisourceBergen Corp. 29,493 1,323 Amgen, Inc. (a) 199,895 9,283 MARKET VALUE SHARES (000) --------- --------- Applera Corp. - Applied Biosystems Group 33,273 $ 1,129 Barr Pharmaceuticals, Inc. (a) 18,923 1,005 Baxter International, Inc. 116,561 6,766 Becton, Dickinson & Co. 45,297 3,786 Biogen Idec, Inc. (a) 52,931 3,013 Boston Scientific Corp. (a) 244,634 2,845 Bristol-Myers Squibb Co. 363,616 9,643 C.R. Bard, Inc. 19,097 1,810 Cardinal Health, Inc. 66,957 3,867 Celgene Corp. (a) 70,418 3,254 CIGNA Corp. 51,496 2,767 Coventry Health Care, Inc. (a) 27,603 1,635 Covidien Ltd. 92,404 4,093 Eli Lilly & Co. 181,443 9,687 Express Scripts, Inc. (a) 47,299 3,453 Forest Laboratories, Inc. (a) 58,602 2,136 Genzyme Corp. (a) 48,492 3,610 Gilead Sciences, Inc. (a) 172,094 7,918 Hospira, Inc. (a) 28,503 1,215 Humana, Inc. (a) 30,047 2,263 IMS Health, Inc. 34,732 800 Johnson & Johnson 529,940 35,347 King Pharmaceuticals, Inc. (a) 49,292 505 Laboratory Corp. of America Holdings (a) 21,122 1,595 McKesson Corp. 54,455 3,567 Medco Health Solutions, Inc. (a) 48,834 4,952 Medtronic, Inc. 208,511 10,482 Merck & Co., Inc. 402,238 23,374 Millipore Corp. (a) 9,535 698 Mylan Laboratories Inc. 58,709 825 Patterson Cos., Inc. (a) 25,094 852 Pfizer, Inc. 1,257,294 28,578 Quest Diagnostics, Inc. 28,100 1,486 Schering-Plough Corp. 299,884 7,989 St. Jude Medical, Inc. (a) 60,894 2,475 Stryker Corp. 43,489 3,250 Tenet Healthcare Corp. (a) 95,470 485 Thermo Fisher Scientific, Inc. (a) 76,824 4,431 UnitedHealth Group, Inc. 238,346 13,872 Varian Medical Systems, Inc. (a) 22,860 1,192 Watson Pharmaceuticals, Inc. (a) 17,346 471 Wellpoint, Inc. (a) 105,770 9,279 Wyeth 247,016 10,916 Zimmer Holdings, Inc. (a) 44,052 2,914 --------- 281,964 --------- INDUSTRIALS -- 11.4% 3M Co. 131,560 11,093 Allied Waste Industries, Inc. (a) 51,430 567 Avery Dennison Corp. 20,488 1,089 Boeing Co. 143,954 12,590 Burlington Northern Santa Fe Corp. 55,082 4,584 Caterpillar, Inc. 117,740 8,543 CH Robinson Worldwide, Inc. 30,461 1,649 See Notes to Financial Statements 8 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 MARKET VALUE SHARES (000) --------- --------- INDUSTRIALS -- (CONTINUED) Cintas Corp. 25,088 $ 843 Cooper Industries, Ltd. 34,434 1,821 CSX Corp. 80,738 3,551 Cummins, Inc. 18,529 2,360 Danaher Corp. 46,986 4,123 Deere & Co. 82,162 7,651 Domtar Corp. (a) (c) 11 0 Dover Corp. 36,195 1,668 Eaton Corp. 26,595 2,578 Emerson Electric Co. 145,740 8,258 Equifax, Inc. 23,683 861 Expeditors International Washington, Inc. 37,820 1,690 FedEx Corp. 57,339 5,113 Fluor Corp. 16,530 2,409 General Dynamics Corp. 74,748 6,652 General Electric Co. 1,866,192 69,180 Goodrich Co. 22,145 1,564 Honeywell International, Inc. 138,282 8,514 Illinois Tool Works, Inc. 75,471 4,041 Ingersoll-Rand Co. Class A 51,321 2,385 ITT Industries, Inc. 33,792 2,232 Jacobs Engineering Group, Inc. (a) 22,600 2,161 L-3 Communications Holdings, Inc. 22,503 2,384 Lockheed Martin Corp. 64,312 6,769 Manitowoc Co., Inc. 24,000 1,172 Masco Corp. 67,523 1,459 Monster Worldwide, Inc. (a) 22,609 733 Norfolk Southern Corp. 71,955 3,629 Northrop Grumman Corp. 63,511 4,995 PACCAR, Inc. 68,474 3,730 Pall Corp. 22,209 895 Parker-Hannifin Corp. 32,403 2,440 Pitney Bowes, Inc. 40,827 1,553 Precision Castparts Corp. 25,307 3,510 R.R. Donnelley & Sons Co. 40,209 1,517 Raytheon Co. 80,756 4,902 Robert Half International, Inc. 31,140 842 Rockwell Automation, Inc. 27,505 1,897 Rockwell Collins, Inc. 30,231 2,176 Ryder Systems, Inc. 9,821 462 Southwest Airlines Co. 138,886 1,694 Terex Corp. (a) 19,035 1,248 Textron, Inc. 45,639 3,254 Tyco Electronics Ltd. 91,104 3,383 Tyco International Ltd. 90,861 3,603 Union Pacific Corp. 48,084 6,040 United Parcel Service, Inc. Class B 192,650 13,624 United Technologies Corp. 182,024 13,932 W.W. Grainger, Inc. 12,169 1,065 Waste Management, Inc. 96,739 3,160 --------- 275,838 --------- INFORMATION TECHNOLOGY -- 15.9% Adobe Systems, Inc. (a) 108,757 4,647 MARKET VALUE SHARES (000) --------- --------- Advanced Micro Devices, Inc. (a) 114,986 $ 862 Affiliated Computer Services, Inc. Class A (a) 19,337 872 Agilent Technologies, Inc. (a) 69,168 2,541 Akamai Technologies, Inc. (a) 29,424 1,018 Altera Corp. 59,454 1,149 Analog Devices, Inc. 57,869 1,835 Apple Computer, Inc. (a) 161,217 31,934 Applied Materials, Inc. 254,707 4,524 Autodesk, Inc. (a) 41,876 2,084 Automatic Data Processing, Inc. 97,217 4,329 BMC Software, Inc. (a) 35,721 1,273 Broadcom Corp. Class A (a) 85,359 2,231 CA, Inc. 68,899 1,719 CIENA Corp. (a) 14,529 496 Cisco Systems, Inc. (a) 1,120,801 30,340 Citrix Systems, Inc. (a) 33,467 1,272 Cognizant Technology Solutions Corp. Class A (a) 54,284 1,842 Computer Sciences Corp. (a) 30,744 1,521 Compuware Corp. (a) 54,650 485 Convergys Corp. (a) 27,935 460 Corning, Inc. 291,844 7,001 Dell, Inc. (a) 417,763 10,239 Electronic Arts, Inc. (a) 57,100 3,335 Electronic Data Systems Corp. 91,816 1,903 EMC Corp. (a) 388,642 7,202 Fiserv, Inc. (a) 29,952 1,662 Google, Inc. Class A (a) 42,771 29,575 Hewlett-Packard Co. 476,394 24,048 IAC (a) 34,889 939 Intel Corp. 1,080,236 28,799 International Business Machines Corp. 253,729 27,428 Intuit, Inc. (a) 61,163 1,933 Jabil Circuit, Inc. 39,951 610 Juniper Networks, Inc. (a) 94,093 3,124 KLA-Tencor Corp. 33,505 1,614 Lexmark International Group, Inc. Class A (a) 15,842 552 Linear Technology Corp. 40,863 1,301 LSI Logic Corp. (a) 138,462 735 MEMC Electronic Materials, Inc. (a) 42,578 3,768 Microchip Technology, Inc. 37,989 1,194 Micron Technology, Inc. (a) 142,362 1,032 Microsoft Corp. 1,485,833 52,896 Molex, Inc. 24,805 677 Motorola, Inc. 418,265 6,709 National Semiconductor Corp. 41,596 942 Network Appliance, Inc. (a) 66,057 1,649 Novell, Inc. (a) 68,720 472 Novellus Systems, Inc. (a) 20,030 552 NVIDIA Corp. (a) 100,756 3,428 Oracle Corp. (a) 728,972 16,460 Paychex, Inc. 61,738 2,236 PerkinElmer, Inc. 21,118 550 See Notes to Financial Statements 9 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 MARKET VALUE SHARES (000) --------- --------- INFORMATION TECHNOLOGY -- (CONTINUED) QLogic Corp. (a) 24,322 $ 345 QUALCOMM, Inc. 307,534 12,102 SanDisk Corp. (a) 40,167 1,332 Sun Microsystems, Inc. (a) 148,641 2,695 Symantec Corp. (a) 164,763 2,659 Tellabs, Inc. (a) 85,030 556 Teradata Corp. (a) 33,520 919 Teradyne, Inc. (a) 27,649 286 Texas Instruments, Inc. 258,656 8,639 Unisys Corp. (a) 69,807 330 VeriSign, Inc. (a) 40,321 1,517 Waters Corp. (a) 18,865 1,492 Xerox Corp. 171,534 2,777 Xilinx, Inc. 52,602 1,151 Yahoo!, Inc. (a) 243,219 5,657 --------- 384,456 --------- MATERIALS -- 3.5% Air Products & Chemicals, Inc. 39,609 3,907 Alcoa, Inc. 159,562 5,832 Allegheny Technologies, Inc. 18,128 1,566 Ashland, Inc. 10,700 507 Ball Corp. 17,562 790 Bemis Co., Inc. 17,262 473 Consol Energy, Inc. 33,573 2,401 Dow Chemical Co. 174,930 6,896 E.I. Du Pont de Nemours & Co. 166,474 7,340 Eastman Chemical Co. 15,004 917 Ecolab, Inc. 30,766 1,575 Freeport-McMoRan Copper & Gold, Inc. Class B 70,723 7,245 Hercules, Inc. 23,050 446 International Flavors & Fragrances, Inc. 14,331 690 International Paper Co. 78,611 2,545 MeadWestvaco Corp. 32,320 1,012 Monsanto Co. 100,225 11,194 Newmont Mining Corp. 83,206 4,063 Nucor Corp. 52,454 3,106 Pactiv Corp. (a) 23,915 637 Peabody Energy Corp. 48,324 2,979 PPG Industries, Inc. 29,871 2,098 Praxair, Inc. 59,114 5,244 Rohm & Haas Co. 23,906 1,269 Sealed Air Corp. 28,492 659 Sigma-Aldrich Corp. 24,234 1,323 Titanium Metals Corp. 16,600 439 United States Steel Corp. 21,578 2,609 Vulcan Materials Co. 20,361 1,610 Weyerhaeuser Co. 39,537 2,915 --------- 84,287 --------- TELECOMMUNICATION SERVICES -- 3.6% American Tower Corp. (a) 75,200 3,204 AT&T, Inc. 1,120,152 46,553 CenturyTel, Inc. 20,441 847 MARKET VALUE SHARES (000) --------- --------- Citizens Communications Co. 60,384 $ 769 Embarq Corp. 27,597 1,367 JDS Uniphase Corp. (a) 42,723 568 Qwest Communications International, Inc. (a) 283,890 1,990 Sprint Nextel Corp. 523,943 6,879 Verizon Communications, Inc. 531,829 23,236 Windstream Corp. 89,913 1,171 --------- 86,584 --------- UTILITIES -- 3.7% AES Corp. (a) 124,995 2,674 Allegheny Energy, Inc. 30,759 1,957 Ameren Corp. 36,960 2,004 American Electric Power Co., Inc. 73,152 3,406 CenterPoint Energy, Inc. 57,611 987 CMS Energy Corp. 38,856 675 Consolidated Edison, Inc. 50,752 2,479 Constellation Energy Group, Inc. 33,014 3,385 Dominion Resources, Inc. 108,424 5,145 DTE Energy Co. 30,584 1,344 Duke Energy Corp. 233,920 4,718 Dynegy, Inc. (a) 95,490 682 Edison International 59,819 3,193 Entergy Corp. 35,998 4,302 Exelon Corp. 123,974 10,121 FirstEnergy Corp. 56,007 4,052 FPL Group, Inc. 75,121 5,092 Integrys Energy Group, Inc. 12,916 668 Nicor, Inc. 9,100 385 NiSource, Inc. 49,982 944 Pepco Holdings, Inc. 36,900 1,082 PG&E Corp. 64,726 2,789 Pinnacle West Capital Corp. 17,760 753 PPL Corp. 71,275 3,713 Progress Energy, Inc. 46,981 2,275 Public Service Enterprise Group, Inc. 47,212 4,638 Questar Corp. 32,468 1,756 Sempra Energy 49,286 3,050 Southern Co. 140,787 5,455 Spectra Energy Corp. 113,198 2,923 TECO Energy, Inc. 35,651 614 Trane, Inc. 31,030 1,449 Xcel Energy, Inc. 77,251 1,744 --------- 90,454 --------- TOTAL COMMON STOCKS (Cost $1,442,132,115) 2,375,113 --------- See Notes to Financial Statements 10 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS - (CONTINUED) DECEMBER 31, 2007 PAR MARKET AMOUNT VALUE (000) (000) ------ ------ U.S. GOVERNMENT SECURITIES -- 0.2% United States Treasury Bill 3.0% due 03/06/08 (d) (e) $4,299 $4,276 ------ TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,275,869) 4,276 ------ MARKET SHARES VALUE (000) (000) ------ ---------- MONEY MARKET FUNDS -- 2.0% AIM Short Term Investment Prime Portfolio 48,722 $48,722 Federated Money Market Obligations Trust 554 554 ---------- TOTAL MONEY MARKET FUNDS (Cost $49,275,442) 49,276 ---------- TOTAL INVESTMENTS -- 100.3% (identified cost $1,495,683,426) 2,428,665 LIABILITIES IN EXCESS OF ASSETS --(0.3)% (6,288) ---------- NET ASSETS -- 100.0% $2,422,377 ========== (a) Non-income producing security. (b) Affiliated issuer. See table that follows for more information. (c) Amount is less than $ 1,000. (d) Rate represents annualized yield at date of purchase. (e) Security held as collateral in relation to initial margin requirements on futures contracts. See Notes to Financial Statements 11 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 NUMBER UNREALIZED OF APPRECIATION CONTRACTS (000) --------- ------------ Schedule of Futures Contracts S&P 500 Financial Futures Contracts (long) Expiration Date 03/2008 677 $675 ---- Total unrealized depreciation on open futures contracts purchased $675 ---- AFFILIATE TABLE Shares Shares Income Earned for Realized Number of purchased for sold for Number of Value at the year ended Gain Security shares held at the year ended the year ended shares held at 12/31/07 12/31/07 on shares Description 12/31/2006 12/31/07 12/31/07 12/31/07 (000) (000) sold (000) - ------------------ -------------- -------------- -------------- -------------- -------- ----------------- ---------- State Street Corp. 69,744 18,900 18,319 70,325 5,710 $62 $573 See Notes to Financial Statements 12 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (Amounts in thousands) ASSETS Investments in unaffiliated issuers at market (identified cost $1,492,789) $2,422,955 Investments in non-controlled affiliates at market (identified cost $2,894) (Note 4) 5,710 ---------- 2,428,665 Cash 143 Receivables: Investment securities sold 548 Dividends and interest 3,648 ---------- Total assets 2,433,004 LIABILITIES Payables: Investment securities purchased 10,140 Daily variation margin on futures contracts 291 Management fees (Note 4) 196 ---------- Total liabilities 10,627 ---------- NET ASSETS $2,422,377 ========== See Notes to Financial Statements. 13 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 (Amounts in thousands) INVESTMENT INCOME Dividend income - unaffiliated issuers $ 51,567 Dividend income - non-controlled affiliated issuer 62 Interest 2,709 -------- Total Investment Income 54,338 -------- EXPENSES Management fees (Note 4) $ 1,221 -------- Total Expenses 1,221 -------- NET INVESTMENT INCOME 53,117 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments - unaffiliated issuers 169,491 Investments - non-controlled affiliated issuer 573 Futures contracts (853) 169,211 -------- Net change in net unrealized appreciation (depreciation) on: Investments (67,144) Futures contracts 663 (66,481) -------- -------- Net realized and unrealized gain 102,730 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $155,847 ======== See Notes to Financial Statements. 14 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS (Amounts in thousands) For the For the Year Ended Year Ended December December 31, 2007 31, 2006 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income $ 53,117 $ 49,532 Net realized gain on investments and futures contracts 169,211 9,894 Net change in net unrealized appreciation (depreciation) (66,481) 318,596 ---------- ---------- Net increase in net assets resulting from operations 155,847 378,022 ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions 328,812 310,574 Contributions in-kind -- 8,054 Fair value of withdrawals (765,322) (383,063) Withdrawals in-kind (63,656) -- ---------- ---------- Net decrease in net assets from capital transactions (500,166) (64,435) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS (344,319) 313,587 NET ASSETS Beginning of period 2,766,696 2,453,109 ---------- ---------- End of period $2,422,377 $2,766,696 ========== ========== See Notes to Financial Statements. 15 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets: Year Year Year Year Year Ended Ended Ended Ended Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $2,422,377 $2,766,696 $2,453,109 $2,767,467 $2,714,672 Ratios to average net assets: Operating expenses 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income 1.96% 1.94% 1.84% 1.97% 1.74% Portfolio turnover rate* 12% 10% 8% 9% 12% Total return (a) 5.49% 15.75% 4.87% 10.86% 28.62% - ---------- * 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. 16 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 1. ORGANIZATION 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 eleven 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, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus 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, 2007, only the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government 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. 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. 17 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 The Portfolio adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Portfolio did not have a liability for any unrecognized tax expenses. The Portfolio recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years 2004 through 2007 remain subject to examination by the portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. 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, 2007, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $312,810,297 and $728,958,796, respectively. The aggregate value of withdrawals in-kind was $63,655,791. The realized gain associated with the withdrawal in-kind was $19,063,455. At December 31, 2007, the book cost of investments was $1,495,683,426 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $1,001,447,866 and $68,465,885, respectively, resulting in net appreciation of $932,981,981 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 Bank and Trust Company ("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, 2007 is listed in the Portfolio of Investments. 5. TRUSTEES' FEES Pursuant to certain agreements with State Street and its affiliates, each Independent Trustee receives for his or her services a $30,000 retainer in addition to $2,500 for each in-person meeting and $500 for each telephonic meeting from State Street or its affiliates. 18 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 6. INDEMNIFICATIONS 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. Management does not expect anything significant. 7. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Portfolio and believes the impact will be limited to expanded disclosures in the Portfolio's Financial Statements resulting from adoption of this pronouncement. 19 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 of the State Street Equity 500 Index Portfolio (one of the portfolios constituting State Street Master Funds) (the Portfolio), including the portfolio of investments, as of December 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the 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, 2007, by correspondence with the custodian and brokers or by other appropriate auditing where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Equity 500 Index Portfolio of State Street Master Funds at December 31, 2007, 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 25, 2008 20 STATE STREET EQUITY 500 INDEX PORTFOLIO DECEMBER 31, 2007 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 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 29, 2007 (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 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 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 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 $1.99 trillion in assets under management as of September 30, 2007, including over $140 billion managed by the Adviser. 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 they were satisfied with the experience, resources and strength of the Adviser in the management of index products. 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. 21 STATE STREET EQUITY 500 INDEX PORTFOLIO DECEMBER 31, 2007 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. 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 June 30, 2007. 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 during the period for which information had been provided, 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 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' relationship with State Street as fund administrator, custodian and transfer agent and the Portfolios' use of State Street Global Markets to perform certain brokerage services. 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. 22 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. NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE COMPLEX OTHER AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY DIRECTORSHIPS ("DOB") TRUST TIME SERVED DURINGS PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - -------------------- ------------- ---------------- ------------------------------ ------------ ---------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & Company 22 Trustee, State Street Holland & Company, Chairman of L.L.C. (investment adviser) Institutional LLC the Board Elected: 7/99 (1995 - present). Investment Trust; 375 Park Avenue Director, the Holland New York, NY 10152 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 22 Trustee, State Street State Street Africa Master Trust Institutional Master Funds Elected: 7/99 (investments) (1995 - Investment Trust; and P.O. Box 5049 present); Chairman emeritus, Trustee, Old Mutual Boston, MA 02206 Children's Hospital (1984 - South Africa Master present); Director, Boston Trust DOB: January 20, Plan For Excellence 1937 (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 22 Trustee, State Street State Street Master International LLC (1998 - Institutional Funds Elected: 7/99 present); Member of the Investment Trust; P.O. Box 5049 Advisory Board, Ingenium Corp. Director, Berkshire Boston, MA 02206 (technology company) (2001 - Life Insurance Company present); Chief Executive of America; and DOB: October 24, Officer, IEmily.com (internet Director, IEmily.com 1948 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 22 Trustee, State Street State Street Chase Manhattan Bank (1987 Institutional Master Funds Elected: 7/99 - 1999). Mr. Williams retired Investment Trust P.O. Box 5049 in 1999. Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. 23 STATE STREET EQUITY 500 INDEX PORTFOLIO Trustees and Executive Officers (Unaudited). NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE COMPLEX OTHER AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY DIRECTORSHIPS ("DOB") TRUST TIME SERVED DURINGS PAST FIVE YEARS* TRUSTEE HELD BY TRUSTEE - -------------------- ------------- ---------------- ------------------------------ ------------ ---------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: Indefinite President, SSgA Funds 22 Trustee, State Street SSgA Funds President Management, Inc. (2005 - Institutional Management, Inc. Elected Trustee: present); Principal, SSgA Investment Trust; State Street 2/07 Funds Management, Inc. (2001 Trustee, SPDR(R) Financial Center - 2005); Senior Managing Series Trust; Trustee, One Lincoln Elected Director, State Street Global SPDR(R) Index Shares Street Boston, MA President: 4/05 Advisors (March 2006 Trust and Trustee, 02111-2900 - present); Principal, State Select Sector SPDR(R) Street Global Advisers Trust DOB: June 24, 1965 (2000-2006). OFFICERS: Gary L. French Treasurer Term: Indefinite Senior Vice President of State -- -- State Street Bank Street Bank and Trust Company and Trust Company Elected: 5/05 (2002 -present); Managing 2 Avenue de Director, Deutsche Bank Lafayette Boston, (including its predecessor, MA 02111 Scudder Investments), Fund Operations Unit (2001 - 2002); DOB: July 4, 1951 President, UAM Fund Services (1995-2001). Julie Piatelli Interim Chief Term: Indefinite Principal and Senior -- -- SSgA Funds Compliance Compliance and Risk Management Management, Inc. Officer Elected: 7/07 Officer, SSgA Funds State Street Management, Inc. Financial (2004-present), Vice President Center State Street Global Advisors One Lincoln Street (2004-present); Manager, Boston, MA 02111 PricewaterhouseCoopers LLP (1999-2004). DOB: August 5, 1967 Nancy L. Conlin Secretary Term: Indefinite Vice President and Managing -- -- State Street Bank Counsel, State Street Bank and and Trust Company Elected: 9/07 Trust Company (2007 - 2 Avenue de present); General Counsel to Lafayette Boston, Plymouth Rock Companies MA 02111 (2004-2007); and U.S. Chief Counsel to Sun Life Financial DOB: December 11, 1953 (2002 - 2004). (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 24 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross 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 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 02110 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 INSTITUTIONAL INVESTMENT TRUST ANNUAL REPORT DECEMBER 31, 2007 STATE STREET INSTITUTIONAL LIQUID RESERVES FUND STATE STREET INSTITUTIONAL TAX FREE MONEY MARKET FUND STATE STREET INSTITUTIONAL U.S. GOVERNMENT MONEY MARKET FUND STATE STREET INSTITUTIONAL TREASURY MONEY MARKET FUND STATE STREET INSTITUTIONAL TREASURY PLUS MONEY MARKET FUND STATE STREET INSTITUTIONAL INVESTMENT TRUST EXPENSE EXAMPLE As a shareholder of the below listed Funds, you incur ongoing costs, which include costs for administrative services and to the extent applicable, distribution (12b-1) fees, among others, in addition to the Fund's proportionate share of expenses of the series of the State Street Master Funds, in which each Fund invests substantially all of its assets (their respective "Portfolio".) This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund 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, 2007* to December 31, 2007. The table below illustrates your Fund'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 Fund'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 Fund. 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 Fund under the heading "Expenses Paid During Period". - BASED ON HYPOTHETICAL 5% RETURN. This section is intended to help you compare your Fund's costs with those of other mutual funds. It assumes that the Fund 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 Fund'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 Fund's costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. Six Months Ended December 31, 2007 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING INSTITUTIONAL CLASS SHARES JULY 1, 2007 DECEMBER 31, 2007 PERIOD* - --------------------------------- ------------- ----------------- ------------- BASED ON ACTUAL PORTFOLIO RETURN Liquid Reserves Fund $1,000.00 $1,025.90 $0.56 Tax Free Money Market Fund $1,000.00 $1,017.10 $0.86 U.S. Government Money Market Fund $1,000.00 $1,008.20 $0.34 Treasury Money Market Fund $1,000.00 $1,005.90 $0.52 Treasury Plus Money Market Fund $1,000.00 $1,007.40 $0.47 2 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING INSTITUTIONAL CLASS SHARES JULY 1, 2007 DECEMBER 31, 2007 PERIOD* - --------------------------------------- ------------- ----------------- ------------- BASED ON HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Liquid Reserves Fund $1,000.00 $1,024.65 $0.56 Tax Free Money Market Fund $1,000.00 $1,024.35 $0.87 U.S. Government Money Market Fund $1,000.00 $1,024.30 $0.92 Treasury Money Market Fund $1,000.00 $1,023.79 $1.43 Treasury Plus Money Market Fund $1,000.00 $1,023.95 $1.28 * The calculations are based on expenses incurred in the most recent fiscal period of the Fund. The Fund's Institutional Class Shares annualized average weighted expense ratio as of December 31, 2007 was as follows, which includes the Fund's proportionate share of the expenses of their respective Portfolio: Liquid Reserves Fund 0.11% Tax Free Money Market Fund 0.17% U.S. Government Money Market Fund 0.18% Treasury Money Market Fund 0.28% Treasury Plus Money Market Fund 0.25% "Actual" expense information for the Fund's Institutional Class Shares is for the period from date of initial public investment to December 31, 2007. Actual expenses are equal to the annualized expense ratio of the respective Share Class, multiplied by actual days in the period/365 (to reflect the period from initial public investment to December 31, 2007). DATE OF INITIAL PUBLIC INVESTMENT ACTUAL DAYS ----------------- ----------- U.S. Government Money Market Fund October 25, 2007 68 Treasury Money Market Fund October 25, 2007 68 Treasury Plus Money Market Fund October 24, 2007 69 "Hypothetical" expense information for Institutional Class Shares is presented on the basis of the full one-half year period to enable comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but is multiplied by 184/365 (to reflect the full half-year period). 3 Six Months ended December 31, 2007 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING INVESTMENT CLASS SHARES JULY 1, 2007 DECEMBER 31, 2007 PERIOD* ----------------------- ------------- ----------------- ------------- BASED ON ACTUAL PORTFOLIO RETURN Liquid Reserves Fund $1,000.00 $1,009.70 $0.97 Tax Free Money Market Fund $1,000.00 $1,006.50 $1.09 U.S. Government Money Market Fund $1,000.00 $ 1008.40 $1.11 Treasury Money Market Fund $1,000.00 $1,005.30 $1.18 Treasury Plus Money Market Fund $1,000.00 $1,006.80 $1.14 BASED ON HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Liquid Reserves Fund $1,000.00 $ 1022.94 $2.29 Tax Free Money Market Fund $1,000.00 $1,022.74 $2.50 U.S. Government Money Market Fund $1,000.00 $1,022.53 $2.70 Treasury Money Market Fund $1,000.00 $1,022.03 $3.21 Treasury Plus Money Market Fund $1,000.00 $1,022.18 $3.06 The calculations are based on expenses incurred in the most recent fiscal period of the Fund. The Fund's Investment Class Shares annualized average weighted expense ratio as of December 31, 2007 was as follows, respectively, which includes the Fund's proportionate share of the expenses of their respective Portfolio: Liquid Reserves Fund 0.45% Tax Free Money Market Fund 0.49% U.S. Government Money Market Fund 0.53% Treasury Money Market Fund 0.63% Treasury Plus Money Market Fund 0.60% "Actual" expense information for the Fund's Investment Class Shares is for the period from date of initial public investment to December 31, 2007. Actual expenses are equal to the annualized expense ratio of the respective Share Class, multiplied by actual days in the period/365 (to reflect the period from initial public investment to December 31, 2007). DATE OF INITIAL PUBLIC INVESTMENT ACTUAL DAYS ----------------- ----------- Liquid Reserves Fund October 15, 2007 78 Tax Free Money Market Fund October 12, 2007 81 U.S. Government Money Market Fund October 17, 2007 76 Treasury Money Market Fund October 25, 2007 68 Treasury Plus Money Market Fund October 24, 2007 69 "Hypothetical" expense information for Institutional Class Shares and Investment Class Shares is presented on the basis of the full one-half year period to enable comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but is multiplied by 184/365 (to reflect the full half-year period). 4 STATE STREET INSTITUTIONAL INVESTMENT TRUST STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2007 U.S. TREASURY LIQUID TAX FREE GOVERNMENT TREASURY PLUS RESERVES MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND FUND FUND -------------- ------------ -------------- ------------ ------------ ASSETS Investment in corresponding Portfolio at value (Note 1) $6,865,580,622 $447,677,494 $1,076,793,308 $530,102,928 $463,189,039 -------------- ------------ -------------- ------------ ------------ Total assets 6,865,580,622 447,677,494 1,076,793,308 530,102,928 463,189,039 -------------- ------------ -------------- ------------ ------------ LIABILITIES Payables: Administration, custody and transfer agent fees (Note 3) 14,995 14,861 14,961 16,433 16,432 Distributions fees (Note 3) 103,400 54,700 197,266 63,568 48,371 Dividends payable 3,298,527 738,482 4,137,070 912,085 1,383,522 Registration and filing fees 35,319 14,550 40,837 10,474 15,453 Shareholder services fee 134,849 65,138 249,700 91,512 50,786 Professional fees 12,784 10,001 19,395 19,642 19,643 Accrued expenses and other liabilities 2,157 633 8,617 8,773 8,773 -------------- ------------ -------------- ------------ ------------ Total liabilities 3,602,031 898,365 4,667,846 1,122,487 1,542,980 -------------- ------------ -------------- ------------ ------------ NET ASSETS $6,861,978,591 $446,779,129 $1,072,125,462 $528,980,441 $461,646,059 ============== ============ ============== ============ ============ NET ASSETS CONSIST OF: Paid in capital $6,861,982,883 $446,762,675 $1,071,894,398 $528,902,639 $461,592,103 Accumulated net realized gain (loss) (6,948) 12,161 -- 8,735 -- Undistributed net investment income 2,656 4,293 231,064 69,067 53,956 -------------- ------------ -------------- ------------ ------------ NET ASSETS $6,861,978,591 $446,779,129 $1,072,125,462 $528,980,441 $461,646,059 ============== ============ ============== ============ ============ TOTAL NET ASSETS Institutional Class $6,203,162,292 $146,569,407 $ 63,189,604 $ 36,999,101 $207,900,760 ============== ============ ============== ============ ============ Investment Class $ 658,816,299 $300,209,722 $1,008,935,858 $491,981,340 $253,745,299 ============== ============ ============== ============ ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING Institutional Class 6,203,166,584 146,565,370 63,189,603 36,998,369 207,900,756 ============== ============ ============== ============ ============ Investment Class 658,816,299 300,201,598 1,008,935,858 491,973,337 253,745,304 ============== ============ ============== ============ ============ OFFERING, NET ASSET VALUE AND REDEMPTION PRICE PER SHARE Institutional Class $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============== ============ ============== ============ ============ Investment Class $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============== ============ ============== ============ ============ See Notes to Financial Statements 5 STATE STREET INSTITUTIONAL INVESTMENT TRUST STATEMENTS OF OPERATIONS PERIOD ENDED DECEMBER 31, 2007 TAX FREE U.S. TREASURY LIQUID MONEY GOVERNMENT TREASURY PLUS RESERVES MARKET MONEY MARKET MONEY MONEY MARKET FUND* FUND* FUND* MARKET FUND* FUND* ------------ ---------- ------------ ------------ ------------ INCOME Interest income allocated from Portfolio (Note 2) $298,714,099 $4,669,177 $11,153,380 $2,511,898 $3,950,262 Expenses allocated from Portfolio (Note 3) (5,688,595) (134,346) (345,267) (141,121) (165,981) ------------ ---------- ----------- ---------- ---------- 293,025,504 4,534,831 10,808,113 2,370,777 3,784,281 ------------ ---------- ----------- ---------- ---------- EXPENSES Administration and accounting fees (Note 3) 37,775 34,641 9,287 9,400 9,400 Transfer agent fees (Note 3) 37,614 30,250 9,007 9,116 9,115 Professional fees 28,459 24,679 20,444 20,691 20,691 Registration and filing fees 92,332 14,550 40,837 10,474 15,453 Distribution fees - Institutional Class (Note 3) 1,973,196 19,164 -- -- -- Distribution fees - Investment Class (Note 3) 125,202 61,708 231,064 69,067 53,956 Other expenses 45,654 162,066 592,216 187,379 149,605 ------------ ---------- ----------- ---------- ---------- Total Expenses 2,340,232 347,058 902,855 306,127 258,220 Less: Fee reimbursements by investment adviser (Note 3) (1,139,263) (60,824) -- -- -- ------------ ---------- ----------- ---------- ---------- Total Net Expenses 1,200,969 286,234 902,855 306,127 258,220 ------------ ---------- ----------- ---------- ---------- NET INVESTMENT INCOME $291,824,535 $4,248,597 $ 9,905,258 $2,064,650 $3,526,061 ============ ========== =========== ========== ========== Net realized gain (loss) allocated from Portfolio on investments (6,948) 12,161 -- 8,735 -- ------------ ---------- ----------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $291,817,587 $4,260,758 $ 9,905,258 $2,073,385 $3,526,061 ============ ========== =========== ========== ========== * The Fund's Institutional Class commenced operations on August 12, 2004, February 7, 2007, October 25, 2007, October 25, 2007 and October 24, 2007, respectively. The Fund's Investment Class commenced operations on October 15, 2007, October 12, 2007, October 17, 2007, October 25, 2007 and October 24, 2007, respectively. See Notes to Financial Statements 6 STATE STREET INSTITUTIONAL INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS TAX FREE U.S. GOVERNMENT LIQUID RESERVES FUND MONEY MARKET MONEY MARKET ----------------------------------- FUND FUND YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2007* 2006 2007* 2007* ---------------- ---------------- ------------- --------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM: OPERATIONS Net investment income $ 291,824,535 $ 225,775,863 $ 4,248,597 $ 9,905,258 Net realized gain (loss) on investments (6,948) -- 12,161 -- ---------------- ---------------- ------------- -------------- Net increase in net assets from operations 291,817,587 225,775,863 4,260,758 9,905,258 ---------------- ---------------- ------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class (286,163,911) (225,775,863) (2,461,004) (597,001) Investment Class (5,660,624) -- (1,787,593) (9,308,257) ---------------- ---------------- ------------- -------------- Total dividends declared (291,824,535) (225,775,863) (4,248,597) (9,905,258) ---------------- ---------------- ------------- -------------- NET INCREASE (DECREASE) FROM CAPITAL SHARES TRANSACTIONS INSTITUTIONAL CLASS Shares sold 13,393,848,853 16,772,257,102 237,226,991 123,692,944 Reinvestment of distributions 283,724,523 225,775,863 2,437,309 24,263 Shares redeemed (13,669,123,906) (12,443,060,197) (93,098,930) (60,527,604) ---------------- ---------------- ------------- -------------- Net increase (decrease) from Institutional Class capital share transactions 8,449,470 4,554,972,768 146,565,370 63,189,603 ---------------- ---------------- ------------- -------------- INVESTMENT CLASS Shares sold 912,175,069 -- 536,422,012 1,832,535,690 Reinvestment of distributions -- -- -- 30,706 Shares redeemed (253,358,770) -- (236,220,414) (823,630,537) ---------------- ---------------- ------------- -------------- Net increase (decrease) from Investment Class capital share transactions 658,816,299 -- 300,201,598 1,008,935,859 ---------------- ---------------- ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS 667,258,821 4,554,972,768 446,779,129 1,072,125,462 NET ASSETS Beginning of period 6,194,719,770 1,639,747,002 -- -- ---------------- ---------------- ------------- -------------- End of period $ 6,861,978,591 $ 6,194,719,770 $ 446,779,129 $1,072,125,462 ================ ================ ============= ============== Undistributed net investment income $ 2,656 $ 2,656 $ 4,293 $ 231,064 ================ ================ ============= ============== CHANGE IN SHARES INSTITUTIONAL CLASS Shares sold 13,393,848,853 16,772,257,102 237,226,991 123,692,944 Reinvestment of distributions 283,724,523 225,775,863 2,437,309 24,263 Shares redeemed (13,669,123,906) (12,443,060,197) (93,098,930) (60,527,604) ---------------- ---------------- ------------- -------------- Net increase (decrease) in Institutional Class shares 8,449,470 4,554,972,768 146,565,370 63,189,603 ================ ================ ============= ============== INVESTMENT CLASS Shares sold 912,175,069 -- 536,422,012 1,832,535,690 Reinvestment of distributions -- -- -- 30,706 Shares redeemed (253,358,770) -- (236,220,414) (823,630,537) ---------------- ---------------- ------------- -------------- Net increase (decrease) in Investment Class shares 658,816,299 -- 300,201,598 1,008,935,859 ================ ================ ============= ============== * The Fund's Institutional Class commenced operations on August 12, 2004, February 7, 2007 and October 25, 2007, respectively. The Fund's Investment Class commenced operations on October 15, 2007, October 12, 2007 and October 17, 2007, respectively. See Notes to Financial Statements 7 STATE STREET INSTITUTIONAL INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) TREASURY TREASURY PLUS MONEY MARKET FUND MONEY MARKET FUND PERIOD ENDED PERIOD ENDED DECEMBER 31, 2007* DECEMBER 31, 2007* ------------------ ------------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM: OPERATIONS Net investment income $ 2,064,650 $ 3,526,061 Net realized gain (loss) on investments 8,735 -- ------------- ------------- Net increase in net assets from operations 2,073,385 3,526,061 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class (183,308) (1,620,933) Investment Class (1,881,342) (1,905,128) ------------- ------------- Total dividends declared (2,064,650) (3,526,061) ------------- ------------- NET INCREASE (DECREASE) FROM CAPITAL SHARES TRANSACTIONS INSTITUTIONAL CLASS Shares sold 58,349,221 366,231,461 Reinvestment of distributions 114,707 101,773 Shares redeemed (21,465,559) (158,432,478) ------------- ------------- Net increase (decrease) from Institutional Class capital share transactions 36,998,369 207,900,756 ------------- ------------- INVESTMENT CLASS Shares sold 604,292,386 687,161,668 Reinvestment of distributions -- -- Shares redeemed (112,319,049) (433,416,365) ------------- ------------- Net increase (decrease) from Investment Class capital share transactions 491,973,337 253,745,303 ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS 528,980,441 461,646,059 NET ASSETS Beginning of period -- -- ------------- ------------- End of period $ 528,980,441 $ 461,646,059 ============= ============= Undistributed net investment income $ 69,067 $ 53,956 ============= ============= CHANGE IN SHARES INSTITUTIONAL CLASS Shares sold 58,349,221 366,231,461 Reinvestment of distributions 114,707 101,773 Shares redeemed (21,465,559) (158,432,478) ------------- ------------- Net increase (decrease) in Institutional Class shares 36,998,369 207,900,756 ============= ============= INVESTMENT CLASS Shares sold 604,292,386 687,161,668 Reinvestment of distributions -- -- Shares redeemed (112,319,049) (433,416,365) ------------- ------------- Net increase (decrease) in Investment Class shares 491,973,337 253,745,303 ============= ============= * The Fund's Institutional Class commenced operations on October 25, 2007 and October 24, 2007, respectively. The Fund's Investment Class commenced operations on October 25, 2007 and October 24, 2007, respectively. See Notes to Financial Statements 8 STATE STREET INSTITUTIONAL INVESTMENT TRUST FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout the period is presented below (A): NET ASSET DISTRIBUTIONS NET ASSET VALUE NET GAIN (LOSS) TOTAL FROM FROM NET VALUE BEGINNING INVESTMENT ON INVESTMENT INVESTMENT END PERIOD ENDED DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME OF PERIOD - ------------------------- --------- ---------- ----------- ---------- ------------- --------- LIQUID RESERVES INSTITUTIONAL CLASS 2007 1.0000 0.0516 0.0000* 0.0516 (0.0516) 1.0000 2006 1.0000 0.0496 -- 0.0496 (0.0496) 1.0000 2005 1.0000 0.0315 0.0000* 0.0315 (0.0315) 1.0000 2004** 1.0000 0.0066 -- 0.0066 (0.0066) 1.0000 INVESTMENT CLASS 2007** 1.0000 0.0097 -- 0.0097 (0.0097) 1.0000 TAX FREE MONEY MARKET INSTITUTIONAL CLASS 2007** 1.0000 0.0309 0.0000* 0.0309 (0.0309) 1.0000 INVESTMENT CLASS 2007** 1.0000 0.0065 0.0000* 0.0065 (0.0065) 1.0000 U.S. GOVERNMENT MONEY MARKET INSTITUTIONAL CLASS 2007** 1.0000 0.0081 -- 0.0081 (0.0081) 1.0000 INVESTMENT CLASS 2007** 1.0000 0.0084 -- 0.0084 (0.0084) 1.0000 TREASURY INSTITUTIONAL CLASS 2007** 1.0000 0.0058 0.0000* 0.0058 (0.0058) 1.0000 INVESTMENT CLASS 2007** 1.0000 0.0053 0.0000* 0.0053 (0.0053) 1.0000 TREASURY PLUS INSTITUTIONAL CLASS 2007** 1.0000 0.0074 -- 0.0074 (0.0074) 1.0000 INVESTMENT CLASS 2007** 1.0000 0.0068 -- 0.0068 (0.0068) 1.0000 ANNUALIZED RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA ------------------------------ NET ASSETS NET VOLUNTARY END OF TOTAL GROSS NET INVESTMENT EXPENSE PERIOD PERIOD ENDED DECEMBER 31, RETURN(B) EXPENSES EXPENSES INCOME REIMBURSEMENT(C) (000S OMITTED) - ------------------------- --------- -------- -------- ---------- ---------------- -------------- LIQUID RESERVES INSTITUTIONAL CLASS 2007 5.28% 0.13% 0.11% 5.14% 0.02% 6,203,162 2006 5.07% 0.17% 0.12% 5.07% 0.03% 6,194,720 2005 3.19% 0.17% 0.14% 3.30% 0.01% 1,639,747 2004** 0.66% 0.23%*** 0.15%*** 1.67%*** -- 381,638 INVESTMENT CLASS 2007** 0.97% 0.45%*** 0.45%*** 4.52%*** -- 658,816 TAX FREE MONEY MARKET INSTITUTIONAL CLASS 2007** 3.14% 0.25%*** 0.16%*** 3.39%*** 0.03% 146,569 INVESTMENT CLASS 2007** 0.65% 0.49%*** 0.49%*** 2.90%*** -- 300,210 U.S. GOVERNMENT MONEY MARKET INSTITUTIONAL CLASS 2007** 0.82% 0.18%*** 0.18%*** 4.43%*** -- 63,190 INVESTMENT CLASS 2007** 0.84% 0.53%*** 0.53%*** 4.01%*** -- 1,008,936 TREASURY INSTITUTIONAL CLASS 2007** 0.59% 0.28%*** 0.28%*** 3.16%*** -- 36,999 INVESTMENT CLASS 2007** 0.53% 0.63%*** 0.63%*** 2.77%*** -- 491,981 TREASURY PLUS INSTITUTIONAL CLASS 2007** 0.74% 0.25%*** 0.25%*** 3.87%*** -- 207,901 INVESTMENT CLASS 2007** 0.68% 0.60%*** 0.60%*** 3.55%*** -- 253,745 (A) The per share amounts and percentages include the Fund's proportionate share of income and expenses of their corresponding Portfolio. (B) Total return is calculated assuming a purchase of shares at the net asset value on the first day and a sale at the net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at the net asset value per share on the respective payment dates. Total returns for periods of less than one year are not annualized. Results represent past performance and are not indicative of future results. (C) This voluntary expense reimbursement is reflected in both the net expense and the net income ratios shown above. * Amount is less than $0.0001. ** The Fund's Institutional Class commenced operations on August 12, 2004, February 7, 2007, October 25, 2007, October 25, 2007 and October 24, 2007, respectively. The Fund's Investment Class commenced operations on October 15, 2007, October 12, 2007, October 17, 2007, October 25, 2007 and October 24, 2007, respectively. *** Annualized. See Notes to Financial Statements 9 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. ORGANIZATION State Street Institutional Investment Trust (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 February 16, 2000. The Trust consists of the following series: the State Street Equity 500 Index Fund, the State Street Equity 400 Index Fund, the State Street Equity 2000 Index Fund, the State Street Aggregate Bond Index Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Limited Duration Bond Fund, the State Street Institutional Tax Free Limited Duration Bond Fund, the State Street Institutional U.S. Government Money Market Fund, the State Street Institutional Treasury Money Market Fund and the State Street Institutional Treasury Plus Money Market Fund, each of which is a separate diversified series of the Trust. Information presented in these financial statements pertains only to the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional U.S. Government Money Market Fund, the State Street Institutional Treasury Money Market Fund and the State Street Institutional Treasury Plus Money Market (the "Funds"). The Funds offer two classes of shares: Institutional Class and Investment Class. The Funds are authorized to issue an unlimited number of shares, with no par value. The Funds' Institutional Class commenced operations as follows: State Street Institutional Liquid Reserves Fund August 12, 2004 State Street Institutional Tax Free Money Market Fund February 7, 2007 State Street Institutional U.S. Government Money Market Fund October 25, 2007 State Street Institutional Treasury Money Market Fund October 25, 2007 State Street Institutional Treasury Plus Money Market Fund October 24, 2007 The Funds' Investment Class commenced operations as follows: State Street Institutional Liquid Reserves Fund October 15, 2007 State Street Institutional Tax Free Money Market Fund October 12, 2007 State Street Institutional U.S. Government Money Market Fund October 17, 2007 State Street Institutional Treasury Money Market Fund October 25, 2007 State Street Institutional Treasury Plus Money Market Fund October 24, 2007 As of December 31, 2007, the State Street Equity 500 Index Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Tax Free Limited Duration Bond Fund, the State Street Institutional U.S. Government Money Market Fund, the State Street Institutional Treasury Money Market Fund, the State Street Institutional Treasury Plus Money Market Fund and were the only series of the Trust that had commenced operations. 10 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 It is the policy of each Fund to maintain a stable net asset value per share of $1.00. However, there is no assurance the Funds will be able to maintain stable net asset values per share. The Funds invest all of their investable assets in interests in their respective Portfolios, each of which is a series of a separately registered investment company called State Street Master Funds. The investment objective and policies of each Portfolio are substantially similar to those of its respective Fund. The value of the Funds' investment in their respective Portfolios reflects the Funds' proportionate interest in the net assets of their Portfolio (99.23% for State Street Institutional Liquid Reserves Fund, 100.00% for State Street Institutional Tax Free Money Market Fund, State Street Institutional U.S. Government Money Market Fund, State Street Institutional Treasury Money Market Fund and State Street Institutional Treasury Plus Money Market Fund, at December 31, 2007). The performance of a Fund is directly affected by the performance of its respective Portfolios. The financial statements of the Portfolios, including their portfolios of investments, are included elsewhere in this report and should be read in conjunction with each Fund's financial statements. FUND RESPECTIVE PORTFOLIOS - ---- --------------------- State Street Institutional Liquid Reserves Fund State Street Money Market Portfolio State Street Institutional Tax Free Money Market Fund State Street Tax Free Money Market Portfolio State Street Institutional U.S. Government Money Market Fund State Street U.S. Government Money Market Portfolio State Street Institutional Treasury Money Market Fund State Street Treasury Money Market Portfolio State Street Institutional Treasury Plus Money Market Fund State Street Treasury Plus Money Market Portfolio An investment in the funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of shareholders' investment at $1.00 per share, it is possible to lose money by investing in the funds. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Funds in the preparation of their financial statements. SECURITY VALUATION - The Funds record their investment in their respective Portfolios at value. The valuation policies of the Portfolios are discussed in Note 2 of the Portfolios' Notes to Financial Statements, which are included elsewhere within this report. SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES - Securities transactions are recorded on a trade date basis for financial statement purposes. Net investment income consists of a Fund's pro-rata share of the net investment income of its respective Portfolio, less all expenses of the Fund. Realized gains and losses from security transactions consist of a Fund's pro-rata share of its respective Portfolio's realized gains and losses. Realized gains and losses from security transactions are recorded on the basis 11 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 of identified cost. Class specific distribution fees are borne by each class. Income, non-class specific expenses, and realized gains and losses are allocated to the respective classes daily on the basis of relative net assets. DIVIDENDS AND DISTRIBUTIONS - Dividends from net investment income are declared daily and are payable as of the last business day of each month. Net realized capital gains, if any, are distributed annually, unless additional distributions are required for compliance with applicable tax regulations. The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are due in part to differing treatments for 12b-1 fees. For the year ended December 31, 2007, permanent differences identified and reclassified among the components of net assets were as follows: INCREASE (DECREASE) UNDISTRIBUTED NET INVESTMENT FUND PAID-IN CAPITAL INCOME (LOSS) - ---- --------------- -------------- State Street Institutional Tax Free Money Market Fund $ (4,293) $ 4,293 State Street Institutional U.S. Government Money Market Fund $(231,064) $231,064 State Street Institutional Treasury Money Market Fund $ (69,067) $ 69,067 State Street Institutional Treasury Plus Money Market Fund $ (53,956) $ 53,956 Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification. The tax character of distributions paid to shareholders from ordinary and tax exempt income during the years ended December 31, 2007 and December 31, 2006 was as follows: DECEMBER 31, 2007 DECEMBER 31, 2006 ------------------------- ------------------------- TAX ORDINARY EXEMPT ORDINARY TAX EXEMPT INCOME INCOME INCOME INCOME ------------ ---------- ------------ ---------- State Street Institutional Liquid Reserves Fund $291,824,535 -- $225,775,863 -- State Street Institutional Tax Free Money Market Fund -- $4,248,597 -- -- State Street Institutional U.S. Government Money Market Fund $ 9,905,258 -- -- -- State Street Institutional Treasury Money Market Fund $ 2,064,650 -- -- -- State Street Institutional Treasury Plus Money Market Fund $ 3,526,061 -- -- -- 12 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 At December 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY TAX EXEMPT CAPITAL LOSS INCOME INCOME CARRY FORWARD TOTAL ------------- ------------- ------------- -------- State Street Institutional Liquid Reserves Fund $ 2,656 -- $(6,948) $ (4,292) State Street Institutional Tax Free Money Market Fund $ 12,161 $4,293 -- $ 16,454 State Street Institutional U.S. Government Money Market Fund $231,064 -- -- $231,064 State Street Institutional Treasury Money Market Fund $ 77,802 -- -- $ 77,802 State Street Institutional Treasury Plus Money Market Fund $ 53,956 $ 53,956 FEDERAL INCOME TAXES - Each Fund intends to continue to qualify for and elect treatment as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, the Funds will not be subject to federal income taxes to the extent they distribute their taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year substantially all of their net taxable income and capital gains, if any, the Funds will not be subject to federal excise tax. At December 31, 2007, the State Street Institutional Liquid Reserves Fund had a capital loss carry forward in the amount of $6,948, all of which may be utilized to offset future net realized capital gains until expiration date of December 31, 2015. The Funds adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Funds did not have a liability for any unrecognized tax expenses. The Funds recognize interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years 2004 (or since inception, for Funds formed subsequent to 2004) through 2007 remain subject to examination by the fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. EXPENSE ALLOCATION: Certain expenses are applicable to multiple Funds. Expenses directly attributable to a Fund are charged to that Fund. Expenses of the Trust that are not directly attributed to a Fund are allocated among the Funds, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the Funds can otherwise be made fairly. USE OF ESTIMATES: The Funds' 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. 13 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 3. RELATED PARTY FEES The Portfolios retain 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"), as their investment adviser. For such investment advisory services, the Portfolios pay SSgA FM a fee at the annual rate of 0.10% of their average daily net assets. The Funds have also retained SSgA FM to serve as their investment adviser, but pay no advisory fee to SSgA FM as long as the Funds invest substantially all of their assets in the Portfolios or another investment company. SSgA FM has contractually agreed to cap the total operating expenses of the State Street Institutional Liquid Reserves Fund (not including the pass-through expenses of its respective Portfolio) on an annual basis at 0.05% of the Fund's average daily net assets until November 1, 2008. In addition, effective August 1, 2005, SSgA FM voluntarily agreed to cap the total operating expenses of the Fund (not including the pass-through expenses of its respective Portfolio) at 0.02% of the Fund's average daily net assets. This voluntary expense limitation may be revised or canceled at any time without notice. For the year ended December 31, 2007, SSgA FM reimbursed the Fund $1,139,263 under these agreements. SSgA FM has contractually agreed to cap the total operating expenses of the Institutional Tax Free Money Market Fund (not including the pass-through expenses of its respective Portfolio) on an annual basis at 0.10% of the Fund's average daily net assets until November 1, 2008. For the year ended December 31, 2007, SSgA FM reimbursed the Fund $60,824 under this agreement. State Street serves as the Funds' administrator and custodian. The Funds each pay State Street annual fees of $25,000 for administration services and $12,000 for custody and accounting services. The Funds' Investment Class has adopted a plan of distribution pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the Funds compensate financial intermediaries in connection with the distribution of Fund shares and for services provided to the Funds' shareholders. The Funds' Investment Class Shares, first offered in October 2007, made payments under the Rule 12b-1 Plan at an annual rate of 0.10% of average daily net assets. Prior to October 2, 2007, the State Street Institutional Liquid Reserve Fund's and the State Street Institutional Tax Free Money Market Fund's Institutional Class Shares made payments under the Rule 12b-1 Plan at an annual rate of 0.05% of average daily net assets. These Funds discontinued their Rule 12b-1 plan an October 2, 2007. The Wealth Management Services department of State Street is among the financial intermediaries who may receive fees from the Funds under the Rule 12b-1 Plan. Until October 2, 2007, State Street Global Markets LLC, an affiliate company of State Street, was among the financial intermediaries which received fees from the State Street Institutional Liquid Reserve Fund and the State Street Institutional Tax Free Money Market Fund. For the year ended December 31, 2007, the table below shows 12b-1 fees received by Wealth Management Services and State Street Global Markets LLC: 14 STATE STREET INSTITUTIONAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 STATE STREET GLOBAL WEALTH MANAGEMENT MARKETS LLC SERVICES ------------------- ----------------- State Street Institutional Liquid Reserves Fund $1,973,196 $125,202 State Street Institutional Tax Free Money Market Fund $ 19,164 $ 61,708 State Street Institutional U.S. Government Money Market Fund -- $231,064 State Street Institutional Treasury Money Market Fund -- $ 69,067 State Street Institutional Treasury Plus Money Market Fund -- $ 53,956 4. INDEMNIFICATIONS 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. Management does not expect anything significant. 5. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Funds and believes the impact will be limited to expanded disclosures in the Funds' Financial Statements resulting from adoption of this pronouncement. 6. TAX INFORMATION (UNAUDITED) For federal income tax purposes, the following information is furnished with respect to the Funds' distributions for its fiscal year ended December 31, 2007: For the State Street Institutional Tax Free Money Market Fund for the year ended December 31, 2007, 100.0% of the distributions from net investment income is exempt from federal income tax, other than the federal AMT. 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Institutional Investment Trust: We have audited the accompanying statements of assets and liabilities of the State Street Institutional Liquid Reserves Fund, State Street Institutional Tax Free Money Market Fund, State Street Institutional U.S. Government Money Market Fund, State Street Institutional Treasury Money Market Fund and State Street Institutional Treasury Money Market Plus Fund (five of the funds constituting State Street Institutional Investment Trust) (the Funds) as of December 31, 2007, and the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund'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 Fund'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 Funds' 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, 2007, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Institutional Liquid Reserves Fund, State Street Institutional Tax Free Money Market Fund, State Street Institutional U.S. Government Money Market Fund, State Street Institutional Treasury Money Market Fund and State Street Institutional Treasury Plus Money Market Fund of State Street Institutional Investment Trust at December 31, 2007, the results of their operations, the changes in their net assets and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 16 STATE STREET INSTITUTIONAL INVESTMENT TRUST DECEMBER 31, 2007 GENERAL INFORMATION PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Fund. 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 Exchange Commission (the "SEC") at www.sec.gov. Information on how the Fund 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 September 17, 2007 (the "September Meeting") to consider the approval of the investment advisory agreement (the "Advisory Agreement") for the State Street Institutional Treasury Money Market Fund and the State Street Institutional Treasury Plus Money Market Fund (together, the "Treasury Funds"). The Board of Trustees of the Trust also met on November 29, 2007 (the "November Meeting") to consider the renewal of the Advisory Agreement for the State Street Institutional Liquid Reserves Fund and the State Street Institutional U.S. Government Money Market Fund (the "ILR Fund" and the "U.S. Government Fund", respectively, together, the "Money Market Funds" and collectively with the Treasury Funds, the "Funds"). In preparation for considering the Advisory Agreement, the Trustees had reviewed the initial approval materials provided at the September Meeting with respect to the Treasury Funds and the renewal materials provided at the November Meeting with respect to the Money Market Funds. The materials had been provided by the Adviser, which the Board had requested through independent counsel. The Trustees who are not "interested persons" of the Trust within the meaning of the Investment Company Act of 1940, as amended (the "Independent Trustees") also met separately with their counsel to consider the Advisory Agreement. In deciding whether to approve the Advisory Agreement, the Trustees considered various factors, including (i) the nature, extent and quality of the services to be provided by SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreements, (ii) the investment performance of the ILR Fund, (iii) the costs to the Adviser of its services and 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 Agreements 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 to be provided by the Adviser with respect to the Treasury Funds and the nature, extent and quality of the services currently provided with respect to the Money Market Funds, the Trustees relied on their prior direct experience as Trustees of the Trust as well as on the materials provided at the September and November Meetings. The Board reviewed the 17 STATE STREET INSTITUTIONAL INVESTMENT TRUST(CONTINUED) DECEMBER 31, 2007 Adviser's responsibilities under the Advisory Agreement and noted the experience and expertise that would be appropriate to expect of an adviser to the Funds, which are feeder money market funds in a master-feeder structure. 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 Funds, and the responsibilities of the latter with respect to the Funds. They also considered the resources, operational structures and practices of the Adviser in managing the Funds' investments, in monitoring and securing the Funds' compliance with their investment objectives and policies with respect to their 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 further noting the assets under management of the Adviser. 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 they were satisfied with the experience, resources and strength of the Adviser in the management of money market products. As discussed more fully below, they also determined that the advisory fees for the Funds were fair and reasonable and the projected expenses with respect to the Treasury Funds were satisfactory and that, while the U.S. Government Fund had only recently commenced operations, the performance of the ILR Fund and its expense ratio were satisfactory. Noting the similarity of the Treasury Funds to an existing series of the Trust, the ILR Fund, the Trustees concluded that the nature and extent of the Adviser's services with respect to the Treasury Funds could be expected to be comparable to those provided for the ILR Fund and therefore appropriate, satisfactory and of high quality. On the basis of this review, the Trustees determined that the nature and extent of the services to be provided by the Adviser to the Treasury Funds was appropriate. The Trustees also determined that the nature and extent of the services provided by the Adviser indirectly to the ILR Fund 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 ILR Fund, the investment performance was satisfactory. The Trustees noted that materials provided by Lipper Inc. at the November Meeting indicated that the ILR Fund's performance had been above average for its Lipper peer group for the three-year, one-year and year-to-date periods ending September 30, 2007. They concluded that the performance of the ILR Fund was satisfactory. The Trustees noted that, while profitability of the investment adviser is typically a factor considered in evaluating an advisory agreement, because the Treasury Funds had not commenced operations, profitability could not be analyzed during the September Meeting with respect to the Treasury Funds. The Trustees considered the profitability to the Adviser and its affiliate, State Street, of the advisory relationships with the Trust as a result of the Adviser's services provided to the Money Market Funds. The Trustees had been provided with data regarding the profitability to the Adviser and its affiliated service providers with respect to the Money Market Funds individually, and on an aggregate basis, for the year ended June 30, 2007. 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 Money Market Funds had been profitable during the period for which information had been provided, the profitability was in no case such as to render the advisory fees excessive. 18 STATE STREET INSTITUTIONAL INVESTMENT TRUST(CONTINUED) DECEMBER 31, 2007 In order better to evaluate the Funds' advisory fees, 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 each of the Funds' advisory fee was low compared to those of comparable funds. The Trustees also reviewed the estimated expense ratios of the Treasury Funds. The Board determined that the estimated expense ratios were reasonable in light of their peers. The Trustees found that the Money Market Funds' advisory fees were lower than the average for the peer group, while total expense ratios were lower than average for certain of the Money Market Funds' share classes and higher for others. The Trustees noted that the Adviser does not receive any advisory fees from the Funds so long as they invest substantially all of their assets in a master portfolio or in another investment company. The Trustees also considered that to help limit expenses of the ILR Fund, the Adviser had reduced its advisory fee or otherwise reimbursed expenses for the ILR Fund during the past year. The Trustees concluded that the data available provided confirmation of the reasonableness of the Adviser's fees. 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 and custodian and the ILR Fund's use of State Street Global Markets to perform certain brokerage services. They noted that the Adviser utilizes no soft-dollar arrangements in connection with the Funds' 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. At the September Meeting, the Trustees noted that, because the Treasury Funds had not yet commenced operations, there was no record of performance to review for each, no profitability to evaluate, and no occasion to consider economies of scale. At the November Meeting, the Board considered the extent to which economies of scale may be realized by the Money Market Funds as assets grow and whether the Money Market Funds' 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 Money Market Funds 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. On the basis of these considerations of the factors noted above, the Trustees and the Independent Trustees acting separately, unanimously concluded that the Advisory Agreements are fair and reasonable and that it should be approved. 19 TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED). The table below includes information about the Trustees and Executive Officers of the State Street Institutional Investment Trust, including their: - business addresses and ages; - principal occupations during the past five years; and - other directorships of publicly traded companies or funds. 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 ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - ----------------------- ----------- -------------- ------------------------- ------------- ---------------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Chairman, Holland & 22 Trustee, State Street Master Holland & Company, Chairman of Indefinite Company L.L.C. Funds; Director, the Holland LLC the Board Elected: 7/99 (investment adviser) Series Fund, Inc.; Director, 375 Park Avenue (1995 - present). The China Fund, Inc.; New York, NY 10152 Chairman and Trustee, DOB: July 7, 1944 Scottish Widows Investment Partnership Trust; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Trustee of Old Mutual 22 Trustee, State Street Master State Street Indefinite South Africa Master Trust Funds; and Trustee, Old Institutional Elected: 7/99 (investments) (1995 - Mutual South Africa Master Investment Trust present); Chairman Trust P.O. Box 5049 emeritus, Children's Boston, MA 02206 Hospital (1984 - DOB: January 20, 1937 present); Director, Boston 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: President of SpenceCare 22 Trustee, State Street Master State Street Indefinite International LLC (1998 - Funds; Director, Berkshire Institutional Elected: 7/99 present); Member of the Life Insurance Company of Investment Trust Advisory Board, Ingenium America; and Director, P.O. Box 5049 Corp. (technology IEmily.com Boston, MA 02206 company) (2001 - DOB: October 24, 1948 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. Williams Trustee Term: Executive Vice President 22 Trustee, State Street Master State Street Inefinite of Chase Manhattan Bank Funds Institutional Elected: 7/99 (1987 - 1999). Mr. Investment Trust Williams retired in 1999. P.O. Box 5049 Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Master Funds. 20 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 ('DOB') TRUST TIME SERVED DURING PAST FIVE YEARS* TRUSTEE HELD BY TRUSTEE - ----------------------- ----------- -------------- ------------------------- ------------- ----------------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: President, SSgA Funds 22 Trustee, State Street SSgA Funds President Indefinite Management, Inc. (2005 - Master Funds; Trustee, Management, Inc. Elected present); Principal, SsgA SPDR(R) Series Trust; State Street Financial Trustee: 2/07 Funds Management, Inc. Trustee, SPDR(R) Index Shares Center (2001 - 2005); Senior Trust and Trustee, Select One Lincoln Street Elected Managing Director, State Sector SPDR(R) Trust Boston, MA 02111- President: Street Global Advisors 2900 4/05 (March 2006 - present); DOB: June 24, 1965 Principal, State Street Global Advisers (2000 - 2006). OFFICERS: Gary L. French Treasurer Term: Senior Vice President of -- -- State Street Bank and Indefinite State Street Bank and Trust Company Elected: 5/05 Trust Company (2002 - 2 Avenue de present); Managing Lafayette Director, Deutsche Bank Boston, MA 02111 (including its DOB: July 4, 1951 predecessor, Scudder Investments), Fund Operations Unit (2001 - 2002); President, UAM Fund Services (1995 - 2001). Julie Piatelli Interim Term: Principal and Senior -- -- SSgA Funds Chief Indefinite Compliance and Risk Management, Inc. Compliance Elected: 7/07 Management Officer, SsgA State Street Financial Officer Funds Management, Inc. Center (2004 - present), Vice One Lincoln Street President State Street Boston, MA 02111 Global Advisors (2004 - DOB: August 5, 1967 present); Manager, PricewaterhouseCoopers LLP (1999-2004). Nancy L. Conlin Secretary Term: Vice President and -- -- State Street Bank and Indefinite Managing Counsel, State Trust Company Elected: 9/07 Street Bank and Trust 2 Avenue de Company (2007 - present); Lafayette General Counsel to Boston, MA 02111 Plymouth Rock Companies DOB: December 11, 1953 (2004 - 2007); and U.S. Chief Counsel to Sun Life Financial (2002 - 2004). (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 21 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross INVESTMENT ADVISER SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 ADMINISTRATOR AND CUSTODIAN 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 02110 TRANSFER AGENT ALPS Fund Services, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 DISTRIBUTOR ALPS Distributors, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. A PROSPECTUS WHICH CONTAINS THIS and OTHER INFORMATION ABOUT THE FUND CAN BE OBTAINED BY CALLING 1-877-521-4083, OR BY TALKING TO YOUR FINANCIAL ADVISOR. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 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 Institutional Investment Trust State Street Bank and Trust Company P.O. Box 5049 Boston, MA 02206 STATE STREET MASTER FUNDS ANNUAL REPORT DECEMBER 31, 2007 STATE STREET MONEY MARKET PORTFOLIO STATE STREET TAX FREE MONEY MARKET PORTFOLIO STATE STREET U.S. GOVERNMENT MONEY MARKET PORTFOLIO STATE STREET TREASURY MONEY MARKET PORTFOLIO STATE STREET TREASURY PLUS MONEY MARKET PORTFOLIO STATE STREET MASTER FUNDS EXPENSE EXAMPLE As a shareholder of the below listed Portfolios, 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, 2007* to December 31, 2007. 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, 2007 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING JULY 1, 2007 DECEMBER 31, 2007 PERIOD* ------------- ----------------- ------------- BASED ON ACTUAL PORTFOLIO RETURN Money Market Portfolio $1,000.00 $1,025.90 $0.51 Tax Free Money Market Portfolio $1,000.00 $1,017.50 $0.51 U.S. Government Money Market Portfolio $1,000.00 $1,009.20 $0.29 Treasury Money Market Portfolio $1,000.00 $1,006.10 $0.36 Treasury Plus Money Market Portfolio $1,000.00 $1,007.50 $0.32 1 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING JULY 1, 2007 DECEMBER 31, 2007 PERIOD* ------------- ----------------- ------------- BASED ON HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Money Market Portfolio $1,000.00 $1,024.70 $0.51 Tax Free Money Market Portfolio $1,000.00 $1,024.70 $0.51 U.S. Government Money Market Portfolio $1,000.00 $1,024.50 $0.71 Treasury Money Market Portfolio $1,000.00 $1,024.25 $0.97 Treasury Plus Money Market Portfolio $1,000.00 $1,024.35 $0.87 * 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, 2007 was as follows: Money Market Portfolio 0.10% Tax Free Money Market Portfolio 0.10% U.S. Government Money Market Portfolio 0.14% Treasury Money Market Portfolio 0.19% Treasury Plus Money Market Portfolio 0.17% "Actual" expense information for the Portfolio is for the period from date of initial public investment to December 31, 2007. Actual expenses are equal to the annualized expense ratio of the Portfolio, multiplied by actual days in the period/365 (to reflect the period from initial public investment to December 31, 2007). DATE OF INITIAL PUBLIC INVESTMENT ACTUAL DAYS --------------------------------- ----------- U.S. Government Money Market Portfolio October 17, 2007 76 Treasury Money Market Portfolio October 25, 2007 68 Treasury Plus Money Market Portfolio October 24, 2007 69 "Hypothetical" expense information for the Portfolio is presented on the basis of the full one-half year period to enable comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but is multiplied by 184/365 (to reflect the full half-year period). 2 STATE STREET MONEY MARKET PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- Yankee Certificate of Deposit 36.2% Repurchase Agreements 20.2 Commercial Paper 20.1 Certificate of Deposit 8.7 Medium Term Note 5.6 Bank Notes 4.7 U.S. Government Agency Obligations 2.0 Promissory Note 1.2 Euro Certificate of Deposit 0.7 Time Deposits 0.0 Other assets less liabilities 0.6 ------ Total 100.00% ====== MATURITY LADDER* DECEMBER 31, 2007 - ---------------- ----------------- 0-3 Days 20.3% 4-90 Days 55.8 90+ Days 23.9 ----- Total 100.0% ===== Average maturity 38 Days * As a percentage of net assets as of the date indicated. The Portfolio's composition will vary over time. 3 STATE STREET MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST+ - --------------------------------- -------- ---------- ------------ -------------- COMMERCIAL PAPER - 20.1% BANK DOMESTIC - 3.5% Bank of America Corp. 5.400% 01/15/2008 $125,000,000 $ 124,737,500 Bank of America Corp. 4.705% 03/24/2008 60,000,000 59,349,141 Bank of America Corp. 4.665% 04/24/2008 60,000,000 59,113,650 -------------- 243,200,291 -------------- BANK FOREIGN - 12.3% Bank of Ireland(a) 4.820% 02/01/2008 234,500,000 233,526,695 CBA (Delaware) Finance 4.990% 02/29/2008 223,000,000 221,176,294 Dexia Delaware LLC 5.040% 01/16/2008 150,000,000 149,685,000 Societe Generale NY 4.860% 04/24/2008 50,000,000 49,230,500 Westpac Banking Corp. NY 4.970% 02/28/2008 200,000,000 198,398,555 -------------- 852,017,044 -------------- FINANCE CAPTIVE CONSUMER - 4.3% General Electric Capital Corp. 5.170% 01/25/2008 50,000,000 49,827,667 General Electric Capital Corp. 5.150% 04/04/2008 175,000,000 172,646,736 General Electric Capital Corp. 4.620% 04/21/2008 75,000,000 73,931,625 -------------- 296,406,028 -------------- TOTAL COMMERCIAL PAPER 1,391,623,363 -------------- CERTIFICATES OF DEPOSIT - 8.7% BANK DOMESTIC - 8.7% Chase Bank USA NA 4.700% 05/06/2008 100,000,000 100,000,000 Chase Bank USA NA 5.150% 02/12/2008 200,000,000 200,000,000 Citibank 4.760% 01/29/2008 200,000,000 200,000,000 Citibank 4.900% 02/15/2008 100,000,000 100,000,000 -------------- TOTAL CERTIFICATES OF DEPOSIT 600,000,000 -------------- YANKEE CERTIFICATES OF DEPOSIT - 36.2% BANK FOREIGN - 36.2% Bank of Nova Scotia NY 4.750% 02/08/2008 100,000,000 100,000,000 Bank Scotland NY 4.720% 04/30/2008 50,000,000 50,000,000 Bank Scotland NY 4.810% 04/28/2008 100,000,000 100,000,000 Barclays Bank PLC 4.950% 06/13/2008 100,000,000 100,000,000 Barclays Bank PLC 5.160% 02/19/2008 140,000,000 140,000,000 Barclays Bank PLC 5.355% 01/22/2008 60,000,000 60,000,000 Calyon NY 4.750% 03/26/2008 100,000,000 100,001,157 Deutsche Bank NY 4.680% 04/01/2008 75,000,000 75,000,000 Deutsche Bank NY(b) 5.025% 04/29/2008 200,000,000 200,000,000 Dexia Bank NY 4.850% 01/08/2008 150,000,000 150,000,000 HBOS Treasury Services NY(b) 5.340% 01/18/2008 150,000,000 150,000,000 ING Bank Amsterdam 5.170% 01/18/2008 100,000,000 100,000,000 See Notes to Financial Statements 4 STATE STREET MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST+ - --------------------------------- -------- ---------- ------------ -------------- YANKEE CERTIFICATES OF DEPOSIT (CONTINUED) BANK FOREIGN (CONTINUED) Landesbank Baden-Wurtt NY 5.020% 01/25/2008 $150,000,000 $ 150,000,494 Rabobank Nederland NY 4.750% 02/08/2008 250,000,000 250,001,304 Societe Generale NY(b) 4.815% 03/26/2008 95,000,000 94,994,527 Societe Generale NY 5.150% 02/29/2008 100,000,000 100,000,000 Svenska Handelsbanken AB(a)(b) 5.110% 01/17/2008 160,000,000 160,000,000 UBS AG Stamford CT 5.095% 01/16/2008 125,000,000 125,000,000 UBS AG Stamford CT 5.095% 02/19/2008 125,000,000 125,000,000 Unicredito Italiano Spa NY 5.355% 01/14/2008 175,000,000 175,000,307 -------------- TOTAL YANKEE CERTIFICATES OF DEPOSIT 2,504,997,789 -------------- EURO CERTIFICATES OF DEPOSIT - 0.7% BANK FOREIGN - 0.7% Societe Generale 5.375% 04/14/2008 50,000,000 50,000,694 -------------- TOTAL EURO CERTIFICATES OF DEPOSIT 50,000,694 -------------- BANK NOTES - 4.7% BANK DOMESTIC - 1.4% Bank of America NA(a) 5.090% 01/17/2008 100,000,000 100,000,000 -------------- 100,000,000 -------------- BANK FOREIGN - 3.3% BNP Paribas(a)(b) 4.895% 08/19/2008 25,000,000 25,000,000 Lloyds TSB Group PLC(a)(b) 5.222% 09/06/2008 100,000,000 100,000,000 Svenska Handelsbanken(a)(b) 4.922% 09/19/2008 100,000,000 100,000,000 -------------- 225,000,000 -------------- TOTAL BANK NOTES 325,000,000 -------------- MEDIUM TERM NOTES - 5.6% BANK DOMESTIC - 2.1% American Express Credit Corp.(b) 4.949% 08/19/2008 20,000,000 20,000,000 JPMorgan Chase & Co.(b) 5.215% 09/02/2008 50,000,000 50,000,000 Wells Fargo Company(b) 4.596% 08/15/2008 50,000,000 50,000,000 Wells Fargo Company(b) 5.076% 09/17/2008 30,000,000 30,000,000 -------------- 150,000,000 -------------- BANK FOREIGN - 3.5% Alliance & Leicester PLC(a)(b) 4.845% 08/29/2008 35,000,000 35,000,000 Bank of Scotland PLC(a)(b) 5.233% 09/08/2008 25,000,000 25,000,000 Caja de Ahorros y Monte de Piedad de Madrid(a)(b) 5.349% 08/12/2008 30,000,000 30,000,000 National Australia Bank Ltd.(a)(b) 5.240% 09/05/2008 20,000,000 20,000,000 UniCredito Italiano Bank Ireland PLC(b) 5.048% 09/12/2008 15,000,000 15,000,000 See Notes to Financial Statements 5 STATE STREET MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST+ - --------------------------------- -------- ---------- ------------ -------------- MEDIUM TERM NOTES (CONTINUED) BANK FOREIGN (CONTINUED) Westpac Banking Corp.(a)(b) 5.242% 09/05/2008 $100,000,000 $ 100,000,000 Westpac Banking Corp.(a)(b) 5.018% 09/15/2008 15,000,000 15,000,000 -------------- 240,000,000 -------------- TOTAL MEDIUM TERM NOTES 390,000,000 -------------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.0% Federal Home Loan Bank Discount Notes(c) 4.360% 01/24/2008 41,500,000 41,384,400 Federal Home Loan Bank Discount Notes(c) 4.350% 01/30/2008 100,000,000 99,649,583 -------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 141,033,983 -------------- PROMISSORY NOTES - 1.2% Goldman Sachs Group, Inc.(b)(d) 5.280% 01/15/2008 50,000,000 50,000,000 Goldman Sachs Group, Inc.(b)(d) 5.140% 01/25/2008 30,000,000 30,000,000 -------------- TOTAL PROMISSORY NOTES 80,000,000 -------------- REPURCHASE AGREEMENTS - 20.2% ABN AMRO Inc. Tri Party Repo, dated 12/31/07 (collateralized by Corporate Notes, 4.800% - 7.875% due 07/15/09 - 12/15/25 valued at $78,750,000); proceeds $75,019,167 4.600% 01/02/2008 75,000,000 75,000,000 ABN AMRO Inc. Tri Party Repo, dated 12/31/07 (collateralized by Federal National Mortgage Association, 5.000% - 6.000% due 08/01/33 - 02/01/37 and Federal Home Loan Mortgage Corporation 5.000% - 5.500% due 12/01/19 - 12/01/35 valued at $612,000,000); proceeds $600,158,333 4.750% 01/02/2008 600,000,000 600,000,000 Bank of America Tri Party Repo, dated 12/31/07 (collateralized by a Federal National Mortgage Association, 5.000% due 03/01/35 valued at $47,482,021); proceeds $46,563,026 4.650% 01/02/2008 46,551,000 46,551,000 Credit Suisse First Boston Tri Party Repo, dated 12/31/07 (collateralized by Corporate Notes, 6.850% - 10.250% due 04/01/09 - 05/15/31 valued at $78,752,792); proceeds $75,019,167 4.600% 01/02/2008 75,000,000 75,000,000 Deutsche Bank Tri Party Repo, dated 12/31/07 (collateralized by Federal National Mortgage Association, 4.500% - 7.000% due 03/01/19 - 12/01/37 valued at $612,000,000); proceeds $600,158,333 4.750% 01/02/2008 600,000,000 600,000,000 -------------- TOTAL REPURCHASE AGREEMENTS 1,396,551,000 -------------- TOTAL INVESTMENTS - 99.4% 6,879,206,829 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.6% 39,056,199 -------------- NET ASSETS - 100.0% $6,918,263,028 -------------- See Notes to Financial Statements 6 STATE STREET MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 (a) 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. (b) Floating Rate Note - Interest rate shown is rate in effect at December 31, 2007. (c) Discount rate at time of purchase. (d) 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, 2007, these securities represented 1.2% of net assets. + See Note 2 to the Notes to Financial Statements. See Notes to Financial Statements 7 STATE STREET TAX FREE MONEY MARKET PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- Health 28.4% Education 17.4 General Obligations 8.3 Housing Revenue 7.9 Electric Power 7.6 Municipals 7.0 Public Agency 5.0 Utility 3.3 Other Revenue 3.1 Transportation 3.0 Water Revenue 2.6 Tax Revenue 2.2 Water & Sewer 1.6 Parking 1.3 Industrial Revenue/Pollution Control Revenue 0.7 Portfolio Revenue 0.4 Pre Refunded/Escrow to Maturity 0.2 ----- Total 100.0% ===== MATURITY LADDER DECEMBER 31, 2007 - --------------- ----------------- 0-3 Days 92.3% 4-90 Days 7.7% 90+ Days 0.0 ----- Total 100.0% ===== Average maturity 15 * As a percentage of net assets as of the date indicated. The Portfolio's composition will vary over time. 8 STATE STREET TAX FREE MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ---------- SHORT-TERM TAX-EXEMPT OBLIGATIONS - 111.0% ALABAMA - 3.1% County of Jefferson Alabama Limited Obligation Revenue Bonds, Series 1757 T, INS: FSA-CR, LIQ: JP Morgan Chase Bank(a) 5,000,000 3.50 07/01/2012 5,000,000 Jefferson County Alabama Sewer Revenue Bonds, Capital Improvement Waters, Series A, INS: FGIC, SPA: JP Morgan Chase Bank(a) 3,500,000 3.43 02/01/2042 3,500,000 Montgomery Alabama Waterworks & Sanitary Sewer Board Revenue Bonds, Series 881, INS: FSA, LIQ: JP Morgan Chase Bank(a) 5,245,000 3.51 03/01/2013 5,245,000 ---------- 13,745,000 ---------- ALASKA - 4.1% Alaska State Housing Finance Corp Revenue Bonds, Series B, INS: MBIA GO of Corp(a) 18,525,000 3.44 12/01/2030 18,525,000 ---------- CALIFORNIA - 2.7% Bay Area Toll Authority California Revenue Bonds, San Francisco Bay Area, Class C, INS: AMBAC(a) 4,800,000 3.22 04/01/2045 4,800,000 Metropolitan Water District of Southern California Waterworks Revenue Bonds, Series A, SPA: Landesbank Baden-Wuerttemberg(a) 2,165,000 3.30 07/01/2025 2,165,000 Northern California Gas Authority No 1 Gas Project Revenue Bonds, ROCs RR II Series R-11124, LIQ: FAC-Citibank N.A.(a) 5,000,000 3.48 07/01/2017 5,000,000 ---------- 11,965,000 ---------- COLORADO - 14.5% City of Colorado Springs Colorado Utilities Revenue Bonds, Sub Lien Improvement, Series A, SPA: Dexia Credit Local(a) 15,000,000 3.42 11/01/2025 15,000,000 Colorado State Education Loan Program, Tax & Revenue Anticipation Notes, Series B 15,000,000 3.25 08/05/2008 15,030,427 Denver City & County Colorado Certificate Participation, Wellington, Series E WEB-C1, INS: AMBAC, SPA: JP Morgan Chase Bank(a) 10,600,000 3.40 12/01/2029 10,600,000 Southern Ute Indian Tribe of Southern Ute Indian Reservation Revenue Bonds(a) 8,200,000 3.43 11/01/2031 8,200,000 See Notes to Financial Statements 9 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ---------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) COLORADO (CONTINUED) University of Colorado Hospital Authority Revenue Bonds, Series A, INS: AMBAC, SPA: JP Morgan Chase Bank(a) 16,085,000 3.47 11/15/2031 16,085,000 ---------- 64,915,427 ---------- CONNECTICUT - 2.4% Connecticut State Health & Educational Facility Authority Revenue Bonds, Yale University, Series U2(a) 10,500,000 3.30 07/01/2033 10,500,000 ---------- DELAWARE - 2.1% Delaware State EDA Revenue Bonds, Hospital Billing & Collection, Series B, LOC: JP Morgan Chase Bank(a) 8,000,000 3.40 12/01/2015 8,000,000 Delaware State EDA, Hospital Billing, Series A, LOC: JP Morgan Chase Bank(a) 1,500,000 3.40 12/01/2015 1,500,000 ---------- 9,500,000 ---------- FLORIDA - 6.0% County of Santa Rosa Florida Health Facility Authority Revenue Bonds, Baptist Hospital, Inc., LOC: Bank of American N.A.(a) 10,000,000 3.48 10/01/2021 10,000,000 Florida State Board of Education, Capital Outlay, Series A, GO 1,075,000 5.25 01/01/2009 1,085,750 JEA Florida Water & Sewer Systems Revenue Bonds, Series B, INS: XLCA, SPA: Fortis Bank SA/NV(a) 1,500,000 3.40 10/01/2041 1,500,000 Orange County Florida Industrial Development Authority Revenue Bonds, Lake Highland School, Inc., LOC: Bank of America N.A.(a) 9,000,000 3.48 08/01/2032 9,000,000 Orlando Florida Utilities Commission Water & Electric Revenue Bonds, Series B, SPA: Suntrust Bank(a) 5,400,000 3.47 10/01/2022 5,400,000 ---------- 26,985,750 ---------- See Notes to Financial Statements 10 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ---------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) GEORGIA - 7.0% Dalton Georgia Development Authority Revenue Bonds, Hamilton Health Systems Project, Class B, LOC: Bank of America N.A.(a) 7,350,000 3.48 08/15/2033 7,350,000 Fulton DeKalb Georgia Hospital Authority Revenue Bonds, INS: FSA 2,900,000 5.00 01/01/2008 2,900,000 Municipal Electric Authority Georgia, Gen C Rmkt, INS: GO of Participants, LOC: Bayerische Landesbank(a) 1,500,000 3.40 03/01/2020 1,500,000 Municipal Electric Authority of Georgia Revenue Bonds, PJ One SUB D RMKT, INS: FSA, SPA: Dexia Credit Local(a) 7,800,000 3.40 01/01/2022 7,800,000 Roswell Georgia Housing Authority Multifamily Revenue Bonds, Chambrel Roswell, INS: Fannie Mae, LIQ: Fannie Mae(a) 11,980,000 3.46 11/15/2032 11,980,000 ---------- 31,530,000 ---------- ILLINOIS - 11.7% Bloomington Illinois Normal Airport Authority, GO, SPA: Bank One N.A.(a) 3,815,000 3.46 01/01/2023 3,815,000 Chicago Illinois Board of Education, Series C, GO, INS: FSA, SPA: Dexia Public Finance(a) 1,950,000 3.48 03/01/2032 1,950,000 City of Chicago Illinois, Neighborhoods Alive 21, Class B, INS: MBIA, SPA: Depfa Bank PLC(a) 5,000,000 3.42 01/01/2037 5,000,000 Illinois Development Finance Authority Revenue Bonds, Chicago Educational TV Assignment, Series A, LOC: Lasalle Bank N.A.(a) 1,900,000 3.40 11/01/2014 1,900,000 Illinois Development Finance Authority Revenue Bonds, Chicago Symphony PJ, INS: GO of Corp, LOC: Bank One N.A.(a) 8,500,000 3.43 12/01/2033 8,500,000 Illinois Development Finance Authority Revenue Bonds, Evanston Northwestern, Class C, SPA: Bank One N.A.(a) 975,000 3.43 05/01/2008 975,000 Illinois Development Finance Authority Revenue Bonds, World Communications, Inc., LOC: Lasalle Bank N.A.(a) 1,500,000 3.40 08/01/2015 1,500,000 Illinois Finance Authority Revenue Bonds, Northwestern Member Hospital, Series B-1, SPA: Bank of Nova Scotia(a) 6,000,000 3.75 08/15/2038 6,000,000 See Notes to Financial Statements 11 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) ILLINOIS (CONTINUED) Lake County Illinois Warren Township High School District No 121-Gurnee, ROCS RR II R 2157, GO, INS: FGIC, LIQ: Citigroup Financial(a) 9,500,000 3.55 03/01/2024 9,500,000 University of Illinois Revenue Bonds, UIC South Campus PJ, Class A, INS: FGIC, SPA: Dexia Credit Local(a) 13,400,000 3.40 01/15/2022 13,400,000 ------------ 52,540,000 ------------ INDIANA - 1.9% Delaware County Hospital Authority Revenue Bonds, Cardinal Health Systems Obligation, INS: AMBAC, LIQ: FAC-Bank One Indiana(a) 4,200,000 3.43 08/01/2018 4,200,000 Indiana State Development Finance Authority Revenue Bonds, Educational Facilities, Indiana Historical Society, LOC: Bank One Indiana N.A.(a) 4,200,000 3.43 08/01/2031 4,200,000 ------------ 8,400,000 ------------ LOUISIANA - 2.9% Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Bonds, Shreveport Utilities Systems Project, INS: FSA Municipal Government GTD, SPA: JP Morgan Chase Bank(a) 11,500,000 3.43 10/01/2026 11,500,000 Louisiana State Offshore Terminal Authority Deep Water Port Revenue Bond, Series B, LOC: Bank One N.A.(a) 1,500,000 3.40 09/01/2014 1,500,000 ------------ 13,000,000 ------------ MARYLAND - 4.8% Anne Arundel County Medical, GO 1,270,000 6.00 02/01/2008 1,272,434 Maryland State Health & Higher Educational Facilities Authority Revenue Bonds, University of Maryland Medical System, Class A, LOC: Wachovia Bank N.A.(a) 20,000,000 3.42 07/01/2034 20,000,000 ------------ 21,272,434 ------------ See Notes to Financial Statements 12 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) MASSACHUSETTS - 4.2% Massachusetts State Health & Educational Facilities Authority Revenue Bonds, Partner Healthcare System, Series D-3, INS: GO of Institution, SPA: JP Morgan Chase Bank(a) 18,545,000 3.40 07/01/2038 18,545,000 Massachusetts State HEFA Revenue Bonds, Wellesley College, Series G, LIQ: Wellesley College(a) 400,000 3.50 07/01/2039 400,000 ------------ 18,945,000 ------------ MICHIGAN - 0.6% Michigan Municipal Bond Authority Revenue Bonds, PUTTERS, Series 286, LIQ: FAC- JP Morgan Chase(a) 2,600,000 3.51 10/01/2021 2,600,000 ------------ MINNESOTA - 1.6% Southern Minnesota Municipal Power Agency Power Supply Systems Revenue Bonds, ROCS RR II, Series R-10021Z, INS: MBIA, LIQ: FAC- Citigroup Financial(a) 4,800,000 3.51 01/01/2027 4,800,000 State of Minnesota, GO 2,490,000 5.00 08/01/2008 2,512,422 ------------ 7,312,422 ------------ MISSOURI - 0.5% Missouri State HEFA Revenue Bonds, BJC Health System, Series B(a) 2,000,000 3.75 05/15/2034 2,000,000 ------------ NEW JERSEY - 0.4% Essex County New Jersey Improvement Authority Revenue Bonds, Pooled Governmental Loan Program, LOC: First Union National Bank(a) 1,700,000 3.43 07/01/2026 1,700,000 ------------ NEW YORK - 6.0% City of New York NY, Subseries J2-RMKT, LOC: Westdeutsche Landesbank(a) 9,300,000 3.31 02/15/2016 9,300,000 Metropolitan Transportation Authority Revenue Bonds, Series 2389, INS: AMBAC, LIQ: JP Morgan Chase(a) 6,000,000 3.47 05/15/2013 6,000,000 Nassau County New York Industrial Development Agency Revenue Bonds, Cold Spring Harbor, SPA: Morgan Guaranty Trust(a) 600,000 3.73 01/01/2034 600,000 See Notes to Financial Statements 13 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) NEW YORK (CONTINUED) New York State Local Government Assistant Corp., Sub Lien, Series 3V, INS: FGIC GO of Corp., SPA: Bandesbank Baden-Wuerttemberg(a) 1,000,000 3.33 04/01/2022 1,000,000 Suffolk County New York Industrial Development Agency Revenue Bonds, Touro College Project, LOC: JP Morgan Chase Bank(a) 10,000,000 3.35 06/01/2037 10,000,000 ------------ 26,900,000 ------------ NORTH CAROLINA - 5.6% Charlotte North Carolina COPS, Governmental Facilities, Series F, SPA: Bank of America N.A.(a) 2,000,000 3.48 06/01/2033 2,000,000 Charlotte-Mecklenburg Hospital Authority North Carolina Health Care System Revenue Bonds, Carolinas, Series L, INS: AMBAC, SPA: Bayerische Landesbank(a) 11,065,000 3.45 01/15/2036 11,065,000 City of Winston-Salem North Carolina Water and Sewer Systems Revenue Bonds, Series C, SPA: Dexia Credit Local(a) 2,000,000 3.48 06/01/2028 2,000,000 North Carolina Eastern Municipal Power Agency Revenue Bonds, Series A, INS: MBIA, SPA: Wachovia Bank(a) 9,900,000 3.46 01/01/2024 9,900,000 ------------ 24,965,000 ------------ OHIO - 6.8% Butler County Ohio Healthcare Facilities Revenue Bonds, IMPT-Lifesphere Project, LOC: U.S. Bank NA(a) 1,400,000 3.42 05/01/2027 1,400,000 City of Columbus Ohio, SAN Sewer, Series 1, GO Unlimited(a) 500,000 3.33 12/01/2026 500,000 Cleveland Cuyahoga County Ohio Port Authority Revenue Bonds, Carnegie/89TH Garage Project, LOC: JPMorgan Chase Bank(a) 6,000,000 3.43 01/01/2037 6,000,000 Cleveland Cuyahoga County Ohio Port Authority Revenue Bonds, Euclid/93rd Garage Office, LOC: Fifth Third Bank(a) 1,030,000 3.43 01/01/2034 1,030,000 Cuyahoga County Ohio Revenue Bonds, Cleveland Clinic, Subseries B1, SPA: JP Morgan Chase Bank(a) 2,700,000 3.75 01/01/2039 2,700,000 See Notes to Financial Statements 14 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) OHIO (CONTINUED) Franklin County Ohio Hospital Revenue Bonds, Childrens Hospital, Series A, INS: FGIC, SPA: National City Bank(a) 4,225,000 3.43 05/01/2031 4,225,000 Montgomery County Ohio Revenue Bonds, Catholic Health Initiatives, Series B-2(a) 11,200,000 3.40 04/01/2037 11,200,000 Ohio State University General Receipts, Series B(a) 3,500,000 3.37 06/01/2035 3,500,000 ------------ 30,555,000 ------------ OKLAHOMA - 0.5% Oklahoma State Industries Authority Revenue Bonds, Integris Baptist, Series B, INS: MBIA, SPA: JP Morgan Chase Bank(a) 2,130,000 3.75 08/15/2029 2,130,000 ------------ OREGON - 0.3% Oregon State, Series 73 G, SPA: JP Morgan Chase Bank(a) 1,500,000 3.40 12/01/2018 1,500,000 ------------ PENNSYLVANIA - 3.3% City of Philadelphia Pennsylvania Gas Works Revenue Bonds, Series B, INS: FSA 1,000,000 5.00 07/01/2028 1,011,472 City of Philadelphia Pennsylvania Gas Works Revenue Bonds, Sixth Series, INS: FSA(a) 2,000,000 3.42 08/01/2031 2,000,000 Commonwealth of Pennsylvania, Second Series, GO 3,320,000 5.50 06/01/2008 3,348,008 Erie Pennsylvania Water Authority Revenue Bonds, Series A, INS: FSA, SPA: JP Morgan Chase Bank(a) 1,000,000 3.42 12/01/2010 1,000,000 Pennsylvania State Turnpike Commission Turnpike Revenue Bonds, Series A-2, SPA: Landesbank Baden-Wuerttemberg(a) 1,400,000 3.40 12/01/2030 1,400,000 Philadelphia Pennsylvania Authority for IDR, Fox Chase Cancer Center, Series A, LOC: Citizens Bank of PA(a) 1,900,000 3.75 07/01/2031 1,900,000 Washington County Pennsylvania Authority Revenue Bonds, University of Pennsylvania(a) 4,000,000 3.33 07/01/2034 4,000,000 ------------ 14,659,480 ------------ See Notes to Financial Statements 15 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) PUERTO RICO - 3.0% Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue Bonds, ROCS RR II R-11248, INS: AMBAC, LIQ: Citibank N.A.(a) 9,000,000 3.47 07/01/2024 9,000,000 Puerto Rico Electric Power Authority Power Revenue Bonds, PUTTERS, Series 268, INS: FSA, LIQ: JP Morgan Chase Bank(a) 4,595,000 3.44 07/01/2029 4,595,000 ------------ 13,595,000 ------------ SOUTH CAROLINA - 3.7% Greenville County South Carolina School District Installment Revenue Bonds, Stars 2007-048, LIQ: BNP Paribas(a) 7,395,000 3.48 12/01/2024 7,395,000 South Carolina Transportation Infrastructure Bank Revenue Bonds, Series 1283, INS: AMBAC, LIQ: JP Morgan Chase Bank(a) 9,050,000 3.54 04/01/2012 9,050,000 ------------ 16,445,000 ------------ TEXAS - 6.5% Austin County Texas Industrial Development Corp Revenue Bonds, Justin Industries, Inc. Project, LOC: Bank One N.A.(a) 3,500,000 3.48 12/01/2014 3,500,000 City of Arlington Texas Special Obligations Revenue Bonds, Tax-Dallas Cowboys, Class B, INS: MBIA, SPA: Depfa Bank PLC(a) 1,400,000 3.43 08/15/2035 1,400,000 City of San Antonio Texas Water Revenue Bonds, Securities Trust Receipts-SGB 66, INS: FGIC, LIQ: Societe Generale(a) 7,100,000 3.54 05/15/2037 7,100,000 Denton Texas Independent School District, School Building, Series B, INS: PSF-GTD, SPA: Bank of America N.A.(a) 1,000,000 3.43 08/01/2023 1,000,000 Harris County Texas, GO 2,215,000 5.00 10/01/2008 2,240,176 Splendora Texas Higher Education Facilities Corporate Revenue Bonds, Fellowship Christian Project, LOC: Bank America N.A.(a) 7,500,000 3.48 01/01/2017 7,500,000 State of Texas, Public Finance Authority, Series B, GO 1,040,000 4.00 10/01/2008 1,046,060 State of Texas, Tax & Revenue Anticipation Notes, GO Limited Notes 3,000,000 4.50 08/28/2008 3,015,563 See Notes to Financial Statements 16 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ ---------- ---- ---------- ----------- SHORT-TERM TAX-EXEMPT OBLIGATIONS (CONTINUED) TEXAS (CONTINUED) Texas State Transportation Commission Revenue Bonds, First Tier 1,500,000 5.00 04/01/2008 1,505,865 University of Texas, University Revenue Bonds, Financing Systems, Series A(a) 700,000 3.40 08/15/2013 700,000 ------------ 29,007,664 ------------ UTAH - 1.0% Murray City Utah Hospital Revenue Bonds, IHC Health Services, Inc., Series A, INS: J.P. Morgan Securities(a) 1,500,000 3.42 05/15/2036 1,500,000 Nebo Utah School District, School Building, GO, INS: School Building Guaranty 3,125,000 4.50 07/01/2008 3,137,797 ------------ 4,637,797 ------------ WASHINGTON - 3.8% Energy Northwest Washington Electric Revenue Bonds, Project Number 3, Series E, LOC: JP Morgan Chase Bank(a) 3,600,000 3.40 07/01/2017 3,600,000 King County Washington, Series 1184, GO Limited, INS: FGIC, LIQ: JP Morgan Chase Bank(a) 3,100,000 3.54 01/01/2013 3,100,000 Port Vancouver Washington Revenue Bonds, United Grain Corporation, Series 84A, LOC: Bank of America N.A.(a) 2,000,000 3.48 12/01/2009 2,000,000 Seattle Washington Water Systems Revenue Bonds, Series A, LOC: Bayerische Landesbank(a) 400,000 3.40 03/01/2032 400,000 Washington State Higher Education Facilities Authority Revenue Bonds, Whitman College Project, SPA: JP Morgan Chase Bank(a) 8,000,000 3.43 10/01/2029 8,000,000 ------------ 17,100,000 ------------ Total Short-Term Tax-Exempt Obligations 496,930,974 ------------ TOTAL INVESTMENTS - 111.0% 496,930,974 LIABILITIES IN EXCESS OF ASSETS - (11.0)% (49,252,469) ------------ NET ASSETS - 100.0% $447,678,505 ============ (a) Floating Rate Note- Interest rate shown is rate in effect at December 31, 2007. See Notes to Financial Statements 17 STATE STREET TAX FREE MONEY MARKET PORTFOLIO (CONTINUED) SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 ACRONYM NAME - ------- ---- AMBAC American Municipal Bond Assurance Corporation COPs Certificates of Participation EDA Economic Development Authority FGIC Financial Guaranty Insurance Company FSA Financial Security Assurance GO General Obligation GTD Guaranteed HEFA Health and Education Facilities Authority INS Insured LOC Letter of Credit MBIA Municipal Bond Investors Assurance PSF Permanent School Fund PUTTERs Puttable Tax Exempt Receipts ROCs Reset Option Certificates SPA Standby Purchase Agreement See Notes to Financial Statements 18 STATE STREET U.S. GOVERNMENT MONEY MARKET PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- U.S. Government Securities 72.3% Repurchase Agreements 27.7 Liabilities less cash and other assets 0.0 ----- Total 100.0% ===== MATURITY LADDER DECEMBER 31, 2007 - --------------- ----------------- 0-3 Days 0% 4-90 Days 100.0 90+ Days 0.0 ----- Total 100.0% ===== Average maturity 34 * As a percentage of net assets as of the date indicated. The Portfolio's composition may vary over time. See Notes to Financial Statements 19 STATE STREET U.S. GOVERNMENT MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED AND TITLE OF ISSUE RATE DATE AMOUNT COST - ------------------ -------- ---------- ----------- ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 72.3% Fannie Mae Discount Notes(a) 4.655% 01/16/2008 $25,000,000 $ 24,954,743 Fannie Mae Discount Notes(a) 4.340% 02/13/2008 10,000,000 9,949,367 Fannie Mae Discount Notes(a) 4.220% 02/15/2008 65,000,000 64,664,745 Fannie Mae Discount Notes(a) 4.210% 02/29/2008 80,000,000 79,457,378 Fannie Mae Discount Notes(a) 4.185% 03/05/2008 60,000,000 59,560,575 Fannie Mae Discount Notes(a) 4.270% 03/19/2008 20,000,000 19,817,339 Federal Home Loan Bank Discount Notes(a) 4.375% 01/18/2008 45,000,000 44,912,500 Federal Home Loan Bank Discount Notes(a) 4.350% 02/01/2008 75,000,000 74,728,125 Federal Home Loan Bank Discount Notes(a) 4.185% 03/05/2008 60,000,000 59,560,575 Federal Home Loan Bank Discount Notes(a) 4.265% 03/19/2008 35,000,000 34,680,717 Federal Home Loan Bank Discount Notes(a) 4.270% 03/19/2008 5,000,000 4,954,335 Federal Home Loan Bank System + 4.680% 11/07/2008 65,000,000 65,000,000 Freddie Mac + 4.715% 03/26/2008 25,000,000 25,001,162 Freddie Mac Discount Notes(a) 4.270% 01/29/2008 60,000,000 59,807,850 Freddie Mac Discount Notes(a) 4.340% 02/04/2008 50,000,000 49,801,083 Freddie Mac Discount Notes(a) 4.210% 02/19/2008 60,000,000 59,663,200 Freddie Mac Discount Notes(a) 4.170% 03/10/2008 42,000,000 41,669,180 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 778,182,874 ------------ REPURCHASE AGREEMENTS - 27.7% ABN AMRO Inc. Tri Party Repo, dated 12/31/07 (collateralized by Federal National Mortgage Association, 0.000% - 5.125% due 02/12/08 - 2/28/08 valued at $30,600,960); proceeds $30,007,083 4.250% 01/02/2008 30,000,000 30,000,000 Bank of America Tri Party Repo, dated 12/31/07 (collateralized by a Federal Home Loan Mortgage Corporation, 5.870% due 08/21/17 valued at $30,600,401); proceeds $30,007,167 4.300% 01/02/2008 30,000,000 30,000,000 Citigroup Tri Party Repo, dated 12/31/07 (collateralized by a Federal National Mortgage Association, 5.600% due 02/01/17 valued at $30,600,441); proceeds $30,006,833 4.100% 01/02/2008 30,000,000 30,000,000 Credit Suisse First Boston Tri Party Repo, dated 12/31/07 (collateralized by a Federal Home Loan Mortgage Corporation, 6.000% due 03/02/22 valued at $30,602,057); proceeds $30,007,083 4.250% 01/02/2008 30,000,000 30,000,000 Deutsche Tri Party Repo, dated 12/31/07 (collateralized by a Federal Home Loan Mortgage Corporation, 5.375% due 01/09/14 and a Federal National Mortgage Association, 6.000% due 02/28/17 valued at $59,525,402); proceeds $58,371,455 4.150% 01/02/2008 58,358,000 58,358,000 HSBC Tri Party Repo, dated 12/31/07 (collateralized by U.S. Treasury Notes, 4.625% - 4.875% due 08/15/16 - 11/15/16 valued at $30,604,953); proceeds $30,007,083 4.250% 01/02/2008 30,000,000 30,000,000 Merrill Lynch Tri Party Repo, dated 12/31/07 (collateralized by Agency Bonds, 0.000% due 10/15/08 - 04/15/30 valued at $30,600,348); proceeds $30,005,833 3.500% 01/02/2008 30,000,000 30,000,000 See Notes to Financial Statements 20 STATE STREET U.S. GOVERNMENT MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST - --------------------------------- -------- ---------- ------------ -------------- REPURCHASE AGREEMENTS (CONTINUED) Morgan Stanley Tri Party Repo, dated 12/31/07 (collateralized by a Federal National Mortgage Association, 0.000% due 06/01/17 valued at $30,602,772); proceeds $30,007,250 4.350% 01/02/2008 30,000,000 30,000,000 UBS Warburg Tri Party Repo, dated 12/31/07 (collateralized by a Agency Bond, 0.000% due 01/15/18 valued at $30,603,167); proceeds $30,007,167 4.300% 01/02/2008 30,000,000 30,000,000 -------------- TOTAL REPURCHASE AGREEMENTS 298,358,000 -------------- TOTAL INVESTMENTS - 100.0% 1,076,540,874 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.00% 253,443 -------------- NET ASSETS - 100.0% $1,076,794,317 ============== (a) Discount rate at time of purchase. + Variable Rate Security - Interest Rate is in effect as of December 31, 2007. See Notes to Financial Statements 21 STATE STREET TREASURY MONEY MARKET PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- U.S. Treasury Obligations 100.0% Liabilities less cash and other assets 0.0 ----- Total 100.0% ===== MATURITY LADDER DECEMBER 31, 2007 - --------------- ----------------- 0-3 Days 19.8% 4-90 Days 80.2 90+ Days 0.0 ----- Total 100.0% ===== Average maturity 21 * As a percentage of net assets as of the date indicated. The Portfolio's composition may vary over time. 22 STATE STREET TREASURY MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST - --------------------------------- -------- ---------- ------------ ------------ U.S. TREASURY OBLIGATIONS - 100.0% United States Treasury Bill 2.590% 01/03/2008 $32,148,000 $ 32,143,374 United States Treasury Bill 2.510% 01/03/2008 19,624,000 19,621,264 United States Treasury Bill 2.650% 01/03/2008 24,178,000 24,174,440 United States Treasury Bill 2.845% 01/03/2008 3,559,000 3,558,437 United States Treasury Bill 2.960% 01/03/2008 5,453,000 5,452,103 United States Treasury Bill 3.110% 01/03/2008 20,000,000 19,996,544 United States Treasury Bill 2.250% 01/10/2008 5,616,000 5,612,841 United States Treasury Bill 2.400% 01/10/2008 23,148,000 23,134,111 United States Treasury Bill 2.550% 01/10/2008 16,342,000 16,331,562 United States Treasury Bill 2.750% 01/10/2008 25,000,000 24,982,813 United States Treasury Bill 3.000% 01/10/2008 40,160,000 40,129,880 United States Treasury Bill 2.500% 01/17/2008 12,352,000 12,338,276 United States Treasury Bill 2.790% 01/17/2008 17,752,000 17,729,988 United States Treasury Bill 2.820% 01/17/2008 5,524,000 5,517,077 United States Treasury Bill 2.850% 01/17/2008 25,000,000 24,968,333 United States Treasury Bill 2.865% 01/17/2008 10,000,000 9,987,267 United States Treasury Bill 2.905% 01/17/2008 4,610,000 4,604,048 United States Treasury Bill 3.032% 01/17/2008 30,000,000 29,959,573 United States Treasury Bill 2.580% 01/24/2008 20,000,000 19,967,033 United States Treasury Bill 2.795% 01/24/2008 20,000,000 19,964,286 United States Treasury Bill 2.350% 01/31/2008 10,000,000 9,979,260 United States Treasury Bill 2.581% 01/31/2008 15,000,000 14,968,900 United States Treasury Bill 2.750% 01/31/2008 20,000,000 19,954,167 United States Treasury Bill 2.500% 02/07/2008 15,000,000 14,961,458 United States Treasury Bill 2.800% 02/07/2008 25,000,000 24,928,043 United States Treasury Bill 2.720% 02/14/2008 12,317,000 12,276,053 United States Treasury Bill 2.800% 02/14/2008 25,000,000 24,914,444 United States Treasury Bill 2.695% 02/21/2008 45,000,000 44,828,194 United States Treasury Bill 2.800% 02/21/2008 3,221,000 3,208,223 ------------ TOTAL U.S. TREASURY OBLIGATIONS 530,191,992 ------------ TOTAL INVESTMENTS - 100.0% 530,191,992 LIABILITIES IN EXCESS OF ASSETS - 0.00% (88,058) ------------ NET ASSETS - 100.0% $530,103,934 ============ See Notes to Financial Statements 23 STATE STREET TREASURY PLUS MONEY MARKET PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- U.S. Treasury Obligations 17.3% U.S. Government Securities 12.6 Repurchase Agreements 70.1 Liabilities less cash and other assets 0.0 ----- Total 100.0% ===== MATURITY LADDER DECEMBER 31, 2007 - --------------- ----------------- 0-3 Days 78.7% 4-90 Days 21.3 90+ Days 0.0 ----- Total 100.0% ===== Average maturity 9 * As a percentage of net assets as of the date indicated. The Portfolio's composition may vary over time. 24 STATE STREET TREASURY PLUS MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST - --------------------------------- -------- ---------- ------------ ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 12.6% Fannie Mae Discount Notes(a) 4.340% 02/13/2008 $ 10,000,000 $ 9,948,161 Fannie Mae Discount Notes(a) 4.220% 02/15/2008 5,000,000 4,973,625 Fannie Mae Discount Notes(a) 4.210% 02/29/2008 5,000,000 4,965,501 Federal Home Loan Bank Discount Notes(a) 4.375% 01/18/2008 5,000,000 4,989,670 Federal Home Loan Bank Discount Notes(a) 4.280% 03/26/2008 3,887,000 3,847,720 Federal Home Loan Bank Discount Notes(a) 4.280% 03/28/2008 10,000,000 9,896,567 Freddie Mac Discount Notes(a) 4.340% 02/04/2008 5,000,000 4,979,506 Freddie Mac Discount Notes(a) 4.330% 02/21/2008 5,000,000 4,969,329 Freddie Mac Discount Notes(a) 4.170% 03/10/2008 10,000,000 9,920,075 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 58,490,154 ------------ U.S. TREASURY OBLIGATIONS - 17.3% United States Treasury Bill 2.500% 01/03/2008 40,000,000 39,994,444 United States Treasury Bill 2.700% 01/10/2008 40,000,000 39,973,000 ------------ TOTAL U.S. TREASURY OBLIGATIONS 79,967,444 ------------ REPURCHASE AGREEMENTS - 70.1% ABN AMRO Inc. Tri Party Repo, dated 12/31/07 (collateralized by Federal National Mortgage Association, 6.005% due 05/08/17 valued at $15,300,290); proceeds $15,001,042 1.250% 01/02/2008 15,000,000 15,000,000 Bank of America Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Note, 4.875% due 10/31/08 valued at $15,300,384); proceeds $15,000,625 0.750% 01/02/2008 15,000,000 15,000,000 Bear Stearns Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Bond, 5.250% due 02/15/29 and U.S. Treasury Notes, 4.125% - 4.250% due 11/15/14 - 05/15/15 valued at $16,115,625); proceeds $15,001,167 1.400% 01/02/2008 15,000,000 15,000,000 Citigroup Tri Party Repo, dated 12/31/07 (collateralized by U.S. Treasury Notes, 3.875% - 4.250% due 07/15/10 - 08/15/14 valued at $15,300,964); proceeds $15,000,417 0.500% 01/02/2008 15,000,000 15,000,000 Deutsche Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Bond, 7.250% due 05/15/16 and a U.S. Treasury Note, 3.625% due 10/31/09 valued at $45,707,912); proceeds $44,814,734 1.500% 01/02/2008 44,811,000 44,811,000 Fortis Tri Party Repo, dated 12/31/07 (collateralized by Federal National Mortgage Association, 0.000% due 01/02/08 valued at $15,300,939); proceeds $15,001,250 1.500% 01/02/2008 15,000,000 15,000,000 Goldman Sacs Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Note, 4.000% due 09/30/09 valued at $15,300,025); proceeds $15,000,917 1.100% 01/02/2008 15,000,000 15,000,000 Greenwich Tri Party Repo, dated 12/31/07 (collateralized by Agency Bonds, 0.000% due 01/15/08 - 04/15/30 valued at $15,300,102); proceeds 15,001,125 1.350% 01/02/2008 15,000,000 15,000,000 HSBC Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Note, 4.000% due 06/15/09 valued at $15,303,804); proceeds $15,001,250 1.500% 01/02/2008 15,000,000 15,000,000 See Notes to Financial Statements 25 STATE STREET TREASURY PLUS MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 INTEREST MATURITY PRINCIPAL AMORTIZED NAME OF ISSUER AND TITLE OF ISSUE RATE DATE AMOUNT COST - --------------------------------- -------- ---------- ------------ ------------ REPURCHASE AGREEMENTS (CONTINUED) ING Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Note, 5.000% due 08/15/11 valued at $15,301,485); proceeds $15,001,250 1.500% 01/02/2008 15,000,000 15,000,000 Lehman Brothers Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Note, 4.125% due 08/31/12 valued at $$15,304,604); proceeds 15,001,042 1.250% 01/02/2008 15,000,000 15,000,000 Merrill Lynch Tri Party Repo, dated 12/31/07 (collateralized by Agency Bonds, 0.000% due 04/15/08 - 07/15/27 valued at $15,303,107); proceeds $15,000,833 1.000% 01/02/2008 15,000,000 15,000,000 Morgan Stanley Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Bond, 8.000% due 11/15/21 valued at $102,758,818); proceeds $100,007,222 1.300% 01/02/2008 $100,000,000 $100,000,000 UBS Warburg Tri Party Repo, dated 12/31/07 (collateralized by a U.S. Treasury Bill, 3.175% due 02/28/08 valued at $15,301,969); proceeds $15,001,083 1.300% 01/02/2008 15,000,000 15,000,000 ------------ TOTAL REPURCHASE AGREEMENTS 324,811,000 ------------ TOTAL INVESTMENTS - 100.0% 463,268,598 LIABILITIES IN EXCESS OF ASSETS - 0.00% (78,555) ------------ NET ASSETS - 100.0% $463,190,043 ============ (a) Discount rate at time of purchase. See Notes to Financial Statements 26 STATE STREET MASTER FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2007 TAX FREE U.S. GOVERNMENT TREASURY TREASURY PLUS MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO -------------- ------------ --------------- ------------ ------------- ASSETS Investments in unaffiliated issuers, at amortized cost (Note 2) $5,482,655,829 $496,930,974 $ 778,182,874 $530,191,992 $138,457,598 Repurchase Agreements (cost $1,396,551,000, $0, $298,358,000, $0 and $324,811,000, respectively) (Note 2) 1,396,551,000 -- 298,358,000 -- 324,811,000 -------------- ------------ -------------- ------------ ------------ 6,879,206,829 496,930,974 1,076,540,874 530,191,992 463,268,598 Cash 579 -- 698 939 846 Receivables: Interest receivable 39,784,833 2,307,789 555,050 -- 11,478 Receivable from adviser (Note 3) 138,111 12,687 -- -- -- Prepaid expense 7 209 471 459 459 -------------- ------------ -------------- ------------ ------------ Total assets 6,919,130,359 499,251,659 1,077,097,093 530,193,390 463,281,381 -------------- ------------ -------------- ------------ ------------ LIABILITIES Payables: Management fee (Note 3) 606,497 38,905 105,816 39,764 40,681 Due to custodian -- 51,499,965 -- -- -- Administration, custody and transfer agent fees (Note 3) 240,657 11,688 28,709 9,352 10,287 Professional fees 14,934 18,112 35,449 35,907 35,907 Trustee's fees (Note 4) -- -- 1,029 669 693 Accrued expenses 5,243 4,484 131,773 3,764 3,770 -------------- ------------ -------------- ------------ ------------ Total liabilities 867,331 51,573,154 302,776 89,456 91,338 -------------- ------------ -------------- ------------ ------------ NET ASSETS $6,918,263,028 $447,678,505 $1,076,794,317 $530,103,934 $463,190,043 ============== ============ ============== ============ ============ See Notes to Financial Statements 27 STATE STREET MASTER FUNDS STATEMENTS OF OPERATIONS PERIOD ENDED DECEMBER 31, 2007 TAX FREE U.S. GOVERNMENT TREASURY TREASURY PLUS MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET PORTFOLIO PORTFOLIO* PORTFOLIO* PORTFOLIO* PORTFOLIO* -------------- ------------ --------------- ------------ ------------- INVESTMENT INCOME Interest $300,172,406 $4,669,187 $11,153,388 $2,511,904 $3,950,271 ------------ ---------- ----------- ---------- ---------- EXPENSES Management fees (Note 3) 5,716,641 134,345 244,717 75,025 95,654 Administration, custody and transfer agent fees (Note 3) 1,183,036 27,607 49,922 15,305 19,513 Professional fees 47,471 48,194 37,895 38,353 38,353 Trustee's fees (Note 4) 79,354 15,748 1,029 669 694 Printing fees -- 4,255 4,175 4,226 4,226 Other expenses 48,622 845 7,529 7,543 7,541 ------------ ---------- ----------- ---------- ---------- Total Expenses 7,075,124 230,994 345,267 141,121 165,981 Less: Fee waivers/reimbursements by investment adivser (Note 3) (1,358,482) (96,648) -- -- -- ------------ ---------- ----------- ---------- ---------- Total Net Expenses 5,716,642 134,346 345,267 141,121 165,981 ------------ ---------- ----------- ---------- ---------- NET INVESTMENT INCOME $294,455,764 $4,534,841 $10,808,121 $2,370,783 $3,784,290 ============ ========== =========== ========== ========== REALIZED GAIN (LOSS) Net realized gain (loss) on investments (6,953) 12,161 -- 8,735 -- ------------ ---------- ----------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $294,448,811 $4,547,002 $10,808,121 $2,379,518 $3,784,290 ============ ========== =========== ========== ========== * The portfolios commenced operations on February 7, 2007, October 17, 2007, October 25, 2007 and October 24, 2007, respectively. See Notes to Financial Statements 28 STATE STREET MASTER FUNDS STATEMENTS OF CHANGES IN NET ASSETS MONEY MARKET TAX FREE U.S. GOVERNMENT PORTFOLIO MONEY MARKET MONEY MARKET ------------------------------------- PORTFOLIO PORTFOLIO YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED DECEMBER 31, 2007 DECEMBER 31, 2006 DECEMBER 31, 2007* DECEMBER 31, 2007* ----------------- ----------------- ------------------ ------------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income $ 294,455,764 $ 226,696,506 $ 4,534,841 $ 10,808,121 Net realized gain (loss) on investments (6,953) -- 12,161 -- ---------------- ---------------- ------------- -------------- Net increase in net assets from operations 294,448,811 226,696,506 4,547,002 10,808,121 ---------------- ---------------- ------------- -------------- CAPITAL TRANSACTIONS Proceeds from contributions 14,082,546,440 16,774,127,323 743,338,878 1,801,532,181 Fair value of withdrawals (13,655,849,339) (12,443,577,980) (300,207,375) (735,545,985) ---------------- ---------------- ------------- -------------- Net increase in net assets from capital transactions 426,697,101 4,330,549,343 443,131,503 1,065,986,196 ---------------- ---------------- ------------- -------------- NET INCREASE IN NET ASSETS 721,145,912 4,557,245,849 447,678,505 1,076,794,317 NET ASSETS Beginning of period 6,197,117,116 1,639,871,267 -- -- ---------------- ---------------- ------------- -------------- End of period $ 6,918,263,028 $ 6,197,117,116 $ 447,678,505 $1,076,794,317 ================ ================ ============= ============== * The portfolios commenced operations on February 7, 2007 and October 17, 2007, respectively. See Notes to Financial Statements. 29 STATE STREET MASTER FUNDS STATEMENTS OF CHANGES IN NET ASSETS TREASURY TREASURY PLUS MONEY MARKET MONEY MARKET PORTFOLIO PORTFOLIO PERIOD ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, 2007* 2007* ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income $ 2,370,783 $ 3,784,290 Net realized loss on investments 8,735 -- ------------- ------------- Net increase in net assets from operations 2,379,518 3,784,290 ------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions 652,230,533 934,443,802 Fair value of withdrawals (124,506,117) (475,038,049) ------------- ------------- Net increase in net assets from capital transactions 527,724,416 459,405,753 ------------- ------------- NET INCREASE IN NET ASSETS 530,103,934 463,190,043 NET ASSETS Beginning of period -- -- ------------- ------------- End of period $ 530,103,934 $ 463,190,043 ============= ============= * The portfolio commenced operations on October 25, 2007 and October 24, 2007, respectively. See Notes to Financial Statements 30 STATE STREET MASTER FUNDS FINANCIAL HIGHLIGHTS RATIOS TO AVERAGE NET ASSETS ---------------------------------- NET ASSETS GROSS NET NET END OF TOTAL OPERATING OPERATING INVESTMENT PERIOD PERIOD ENDED DECEMBER 31, RETURN (A) EXPENSES EXPENSES INCOME (000S OMITTED) - ------------------------- ---------- --------- --------- ---------- -------------- MONEY MARKET PORTFOLIO 2007 5.30% 0.12% 0.10% 5.14% $6,918,263 2006 5.09% 0.13% 0.10% 5.08% 6,197,117 2005 3.31% 0.14% 0.10% 3.33% 1,639,871 2004* 0.68% 0.18%** 0.10%** 1.71%** 381,716 TAX FREE MONEY MARKET PORTFOLIO 2007* 3.19% 0.17%** 0.10%** 3.42%** 447,679 U.S. GOVERNMENT MONEY MARKET PORTFOLIO 2007* 0.92% 0.14%** 0.14%** 4.39%** 1,076,794 TREASURY PORTFOLIO 2007* 0.61% 0.19%** 0.19%** 3.21%** 530,104 TREASURY PLUS PORTFOLIO 2007* 0.75% 0.17%** 0.17%** 3.95%** 463,190 (a) Results represent past performance and are not indicative of future results. Total return for periods of less than one year are not annualized. * The portfolios commenced operations on August 12, 2004, February 7, 2007, October 17, 2007, October 25, 2007 and October 24, 2007, respectively. ** Annualized. See Notes to Financial Statements. 31 STATE STREET MASTER FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 eleven 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, the State Street Tax Free Money Market Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street U.S. Government Money Market Portfolio, the State Street Treasury Money Market Portfolio and the State Street Treasury Plus Money Market Portfolio. At December 31, 2007, only the State Street Equity 500 Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street U.S. Government Money Market Portfolio, the State Street Treasury Money Market Portfolio and the State Street Treasury Plus Money Market Portfolio were in operation. Information presented in these financial statements pertains only to the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street U.S. Government Money Market Portfolio, the State Street Treasury Money Market Portfolio and the State Street Treasury Plus Money Market Portfolio (the "Portfolios"). The Portfolios commenced operations as follows: PORTFOLIO NAME COMMENCEMENT DATE - -------------- ----------------- State Street Money Market Portfolio August 12, 2004 State Street Tax Free Money Market Portfolio February 7, 2007 State Street U.S. Government Money Market Portfolio October 17, 2007 State Street Treasury Money Market Portfolio October 25, 2007 State Street Treasury Plus Money Market Portfolio October 24, 2007 The Portfolios are authorized to issue an unlimited number of non-transferable beneficial interests. 32 STATE STREET MASTER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 The Portfolios' investment objectives are as follows: PORTFOLIO NAME INVESTMENT OBJECTIVE - -------------- ---------------------------------------- State Street Money Market Portfolio To seek to maximize current income, to the extent consistent with the preservation of capital and liquidity by investing in dollar denominated securities. State Street Tax Free Money Market To seek to maximize current income, Portfolio exempt from federal income taxes, to the extent consistent with the preservation of capital and liquidity. State Street U.S. Government Money To seek to maximize current income, to Market Portfolio the extent consistent with the preservation of capital and liquidity by investing in U.S. government securities with remaining maturities of one year or less than in repurchase agreements collateralized by U.S. government securities. State Street Treasury Money Market To seek a high level of current income Portfolio consistent with preserving principal and liquidity. State Street Treasury Plus Money Market To seek a high level of current income Portfolio consistent with preserving principal and liquidity by investing in a portfolio made up principally of U.S. Treasury securities and repurchase agreements collateralized by such securities. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Portfolios in the preparation of their financial statements. SECURITY VALUATION: As permitted under Rule 2a-7 of the 1940 Act and certain conditions therein, securities of the Portfolios 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 Portfolios are allocated pro rata among the partners in the Portfolios based on each partner's daily ownership percentage. FEDERAL INCOME TAXES: The Portfolios are not required to pay federal income taxes on their net investment income and net capital gains because they are treated as partnerships for federal income tax purposes. All interest, gains and losses of the Portfolios are deemed to have been "passed through" to the Portfolios' partners in proportion to their holdings in the Portfolios, regardless of whether such items 33 STATE STREET MASTER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 have been distributed by the Portfolios. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes. The Portfolios adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Portfolios did not have a liability for any unrecognized tax expenses. The Portfolios recognize interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years 2004 (or since inception, for Portfolios formed subsequent to 2004) through 2007 remain subject to examination by the portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. At December 31, 2007, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. REPURCHASE AGREEMENTS: A repurchase agreement customarily obligates the seller at the time it sells securities to a Portfolio to repurchase the securities at a mutually agreed upon price and time which, in the case of the Portfolios' transactions, is within seven days. The total amount received by a 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 a 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. In addition, the proceeds of any such disposition may be less than the amount the Portfolio is owed under the repurchase agreement. A 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 Portfolios' 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 Portfolios have entered into investment advisory agreements with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"). The Adviser directs the investments of each Portfolio in accordance with its investment objective, policies, and limitations. In compensation for the Adviser's services as investment adviser, each Portfolio pays the Adviser an annual fee of 0.10% of the respective Portfolio's average daily net assets. The Adviser has contractually agreed to cap the total operating expenses of the State Street Money Market Portfolio and the State Street Tax Free Money Market 34 STATE STREET MASTER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 Portfolio at 0.10% of the respective Portfolio's average daily net assets until November 1, 2008. For the year ended December 31, 2007, SSgA FM reimbursed the Portfolios under this agreement as follows: State Street Money Market Portfolio $1,358,482 State Street Tax Free Money Market Portfolio $ 96,648 State Street is the administrator, custodian and transfer agent for the Portfolios. In compensation for State Street's services as administrator, custodian and transfer agent beginning February 1, 2007, the Trust pays State Street an annual fee, which is accrued daily and payable monthly at the applicable fee rate described below, of the following annual percentages of the Trust's average aggregate daily net assets during the month as follows: Annual percentage of average aggregate Asset Levels daily net assets - ------------ -------------------- First $400 Million 0.03% Thereafter 0.02 Minimum annual fee per trust: $150,000 The State Street Money Market Portfolio paid State Street, through January 31, 2007, an annual fee, which is accrued daily at 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: 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 contractually agreed to waive 0.01% of its fees on an annual basis when the Portfolio's assets were between $500 million and $2 billion. For the year ended December 31, 2007, State Street did not waive any fees under this agreement. 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 $30,000. Each trustee is reimbursed for out-of-pocket and travel expenses. 5. INDEMNIFICATIONS 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 35 STATE STREET MASTER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 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. Management does not expect anything significant. 6. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Portfolios and believes the impact will be limited to expanded disclosures in the Portfolios' Financial Statements resulting from adoption of this pronouncement. 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Master Funds: We have audited the accompanying statement of assets and liabilities of the State Street Money Market Portfolio, State Street Tax Free Money Market Portfolio, State Street U.S. Government Money Market Portfolio, State Street Treasury Money Market Portfolio and, State Street Treasury Plus Money Market Portfolio (five of the portfolios constituting State Street Master Funds) (the Portfolios), including the portfolios of investments, as of December 31, 2007, and the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolios' 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 Portfolios' 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, 2007, 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 State Street Money Market Portfolio, State Street Tax Free Money Market Portfolio, State Street U.S. Government Money Market Portfolio, State Street Treasury Money Market Portfolio and State Street Treasury Plus Money Market Portfolio of State Street Master Funds at December 31, 2007, the results of their operations, the changes in their net assets and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 37 STATE STREET MASTER FUNDS DECEMBER 31, 2007 GENERAL INFORMATION 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 Exchange Commission (the "SEC") at www.sec.gov. Information on how the Fund 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 September 17, 2007 (the "September Meeting") to consider the approval of the investment advisory agreement (the "Advisory Agreement") for the State Street Treasury Money Market Portfolio and the State Street Treasury Plus Money Market Portfolio (together, the "Treasury Portfolios"). The Board of Trustees of the Trust also met on November 29, 2007 (the "November Meeting") to consider the renewal of the Advisory Agreement for the State Street Money Market Portfolio and the State Street U.S. Government Money Market Portfolio (the "Money Market Portfolio" and the "U.S. Government Portfolio", respectively, together, the "Money Market Portfolios" and collectively with the Treasury Portfolios, the "Portfolios"). In preparation for considering the Advisory Agreement, the Trustees had reviewed the initial approval materials provided at the September Meeting with respect to the Treasury Portfolios and the renewal materials provided at the November Meeting with respect to the Money Market Portfolios. The materials had been provided by the Adviser, which the Board had requested through independent counsel. The Trustees who are not "interested persons" of the Trust within the meaning of the Investment Company Act of 1940, as amended (the "Independent Trustees") also met separately with their counsel to consider the Advisory Agreement. In deciding whether to approve the Advisory Agreement, the Trustees considered various factors, including (i) the nature, extent and quality of the services to be provided by SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreements, (ii) the investment performance of the Money Market Portfolio, (iii) the costs to the Adviser of its services, and 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 Agreements 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 to be provided by the Adviser with respect to the Treasury Portfolios and the nature, extent and quality of the services currently provided with respect to the Money Market Portfolios, the Trustees relied on their prior direct experience as Trustees of the Trust as well as on the materials provided at the September and November Meetings. The Board reviewed the Adviser's responsibilities under the Advisory Agreements and noted the experience and expertise 38 STATE STREET MASTER FUNDS (CONTINUED) DECEMBER 31, 2007 that would be appropriate to expect of an adviser to the Portfolios, which are money market funds. 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 Portfolios, and the responsibilities of the latter with respect to the Portfolios. They also considered the resources, operational structures and practices of the Adviser in managing the Portfolios' investments, in monitoring and securing the Portfolios' compliance with their investment objectives and policies with respect to their 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 further noting the assets under management of the Adviser. 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 they were satisfied with the experience, resources and strength of the Adviser in the management of money market products. As discussed more fully below, they also determined that the advisory fees for the Portfolios were fair and that projected expenses of the Treasury Portfolios were satisfactory and that, while the U.S. Government Portfolio had only recently commenced operations, the performance of the Money Market Portfolio and its expense ratio were satisfactory. Noting the similarity of the Treasury Portfolios to an existing series of the Trust, the Money Market Portfolio, the Trustees concluded that the nature and extent of the Adviser's services with respect to the Treasury Portfolios could be expected to be comparable to those provided for the Money Market Portfolio and therefore appropriate, satisfactory and of high quality. On the basis of this review, the Trustees determined that the nature and extent of the services to be provided by the Adviser to the Treasury Portfolios were appropriate. The Trustees also determined that the nature and extent of the services provided by the Adviser indirectly to the Money Market 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 Money Market Portfolio, the investment performance was satisfactory. The Trustees noted that materials provided by Lipper Inc. at the November Meeting indicated that the Money Market Portfolio's performance had been above average for its Lipper peer group for the three- year, one-year and year-to-date periods ending September 30, 2007. They concluded that the performance of the Money Market Portfolio was satisfactory. The Trustees noted that, while profitability of the investment adviser is typically a factor considered in evaluating an advisory agreement, because the Treasury Portfolios had not commenced operations, profitability could not be analyzed during the September Meeting with respect to the Treasury Portfolios. The Trustees considered the profitability to the Adviser and its affiliate, State Street, of the advisory relationships with the Trust as a result of the Adviser's services provided to the Money Market Portfolios. The Trustees had been provided with data regarding the profitability to the Adviser and its affiliated service providers with respect to the Money Market Portfolios individually, and on an aggregate basis, for the year ended June 30, 2007. 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 Money Market Portfolios had been profitable during the period for which information had been provided, the profitability was in no case such as to render the advisory fees excessive. 39 STATE STREET MASTER FUNDS (CONTINUED) DECEMBER 31, 2007 In order better to evaluate the Portfolios' advisory fees, 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 the each of Portfolios' advisory fees was low compared to those of comparable portfolios. The Trustees also reviewed the estimated expense ratios of the Treasury Portfolios. The Board determined that the estimated expense ratios were reasonable in light of their peers. The Trustees found that the Money Market Portfolios' advisory fees and total expense ratios 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 fees. 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, transfer agent and custodian and the Money Market's use of State Street Global Markets to perform certain brokerage services. They noted that the Adviser utilizes no soft-dollar arrangements in connection with the Portfolios' 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. At the September Meeting, the Trustees noted that, because the Treasury Portfolios had not yet commenced operations, there was no record of performance to review for each, no profitability to evaluate, and no occasion to consider economies of scale. At the November Meeting, the Board considered the extent to which economies of scale may be realized by the Money Market Portfolios as assets grow and whether the Money Market Portfolios' 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 Money Market Portfolios 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. On the basis of these considerations of the factors noted above, the Trustees and the Independent Trustees acting separately, unanimously concluded that the Advisory Agreement is fair and reasonable and that it should be approved. 40 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. NUMBER OF FUNDS IN POSITION(S) TERM OF OFFICE FUND COMPLEX NAME, ADDRESS, AND HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY OTHER DIRECTORSHIPS DATE OF BIRTH ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - --------------------- ------------- ---------------- ---------------------------------- ------------ ------------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & Company L.L.C. 22 Trustee, State Street Holland & Company, LLC Chairman of Elected: 7/99 (investment adviser) (1995 - Institutional Investment 375 Park Avenue the Board present). Trust; Director, the New York, NY 10152 Holland Series Fund, DOB: July 7, 1944 Inc.; Director, The China 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 Africa 22 Trustee, State Street State Street Master Elected: 7/99 Master Trust (investments) (1995 - Institutional Investment Funds present); Chairman emeritus, Trust; and Trustee, Old P.O. Box 5049 Children's Hospital (1984 - Mutual South Africa Boston, MA 02206 present); Director, Boston Plan Master Trust DOB: January 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. Rina K. Spence Trustee Term: Indefinite President of SpenceCare 22 Trustee, State Street State Street Master Elected: 7/99 International LLC (1998 - Institutional Investment Funds present); Member of the Advisory Trust; Director, P.O. Box 5049 Board, Ingenium Corp. (technology Berkshire Life Insurance Boston, MA 02206 company) (2001 - present); Chief Company of America; and DOB: October 24, 1948 Executive Officer, IEmily.com Director, 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 Chase 22 Trustee, State Street State Street Master Elected: 7/99 Manhattan Bank (1987 - 1999). Institutional Investment Funds Mr. Williams retired in 1999. Trust P.O. Box 5049 Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. 41 NUMBER OF FUNDS IN POSITION(S) TERM OF OFFICE FUND COMPLEX NAME, ADDRESS, AND HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY OTHER DIRECTORSHIPS DATE OF BIRTH ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - --------------------- ------------- ---------------- ---------------------------------- ------------ ------------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: Indefinite President, SSgA Funds Management, 22 Trustee, State Street SSgA Funds Management, President Elected Trustee: Inc. (2005 - present); Principal, Institutional Investment Inc. 2/07 SSgA Funds Management, Inc. (2001 Trust; Trustee, SPDR(R) State Street Financial - 2005); Senior Managing Director, Series Trust; Trustee, Center Elected State Street Global Advisors SPDR(R) Index Shares One Lincoln Street president: 4/05 (March 2006 - present); Principal, Trust and Trustee, Select Boston, MA 02111-2900 State Street Global Advisers (2000 Sector SPDR(R) Trust DOB: June 24, 1965 - 2006). OFFICERS: Gary L. French Treasurer Term: Indefinite Senior Vice President of State -- -- State Street Bank and Elected: 5/05 Street Bank and Trust Company Trust Company (2002 - present); Managing 2 Avenue de Director, Deutsche Bank (including Lafayette its predecessor, Scudder Boston, MA 02111 Investments), Fund Operations Unit DOB: July 4, 1951 (2001 - 2002); President, UAM Fund Services (1995 - 2001). Julie Piatelli Interim Chief Term: Indefinite Principal and Senior Compliance -- -- SSgA Funds Compliance Elected: 7/07 and Risk Management Officer, SSgA Management, Inc. Officer Funds Management, Inc. (2004 - State Street Financial present), Vice President State Center Street Global Advisors (2004 - One Lincoln Street present); Manager, Boston, MA 02111 PricewaterhouseCoopers LLP (1999 - DOB: August 5, 1967 2004). Nancy L. Conlin Secretary Term: Indefinite Vice President and Managing -- -- State Street Bank and Elected: 9/07 Counsel, State Street Bank and Trust Company Trust Company (2007 - present); 2 Avenue de General Counsel to Plymouth Rock Lafayette Companies (2004 - 2007); and U.S. Boston, MA 02111 Chief Counsel to Sun Life DOB: December 11, 1953 Financial (2002 - 2004). * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 42 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross 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 02110 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 Master Funds State Street Bank and Trust Company P.O. Box 5049 Boston, MA 02206 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND ANNUAL REPORT December 31, 2007 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND GROWTH OF A $10,000 INVESTMENT (A) (PERFORMANCE GRAPH) iMoney Net State Street Tax-Free Institutional National Tax Free Limited Institutional Duration Bond Fund* Average** (b) ------------------- ------------- 2/7/07 10,000 10,000 3/31/07 10,051 10,027 4/30/07 10,081 10,055 5/31/07 10,113 10,085 6/30/07 10,142 10,112 7/31/07 10,172 10,140 8/31/07 10,202 10,168 9/30/07 10,232 10,196 10/31/07 10,262 10,224 11/30/07 10,290 10,251 12/31/07 10,319 10,278 INVESTMENT PERFORMANCE (A) For the Fiscal Year Ended December 31, 2007 Total Return For the period Total Return from February Average Annualized 7, 2007 to Since Commencement December 31, of Operations 2007 (February 7, 2007) -------------- ------------------ State Street Institutional Tax Free Limited Duration Bond Fund 3.29% 3.29% iMoney Net tax-Free National Institutional Average (b) 3.05% 3.05% (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 AN INVESTOR'S SHARE, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. INVESTMENT PERFORMANCE REFLECTS FEE WAIVERS IN EFFECT. IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURN WOULD BE LOWER. (b) The iMoney Net Tax-Free National Institutional Average is an average that consists of all national tax-free and municipal institutional funds. Portfolio Holdings of tax-free funds include rated and unrated demand notes, rated and unrated general market notes, commercial paper, put bonds - 6 months & less, put bonds - over 6 months, AMT paper, and other tax-free holdings. It is not possible to invest directly in an average. 1 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND EXPENSE EXAMPLE As a shareholder of the State Street Institutional Tax Free Limited Duration Bond Fund (the "Fund"), you incur ongoing costs, which include costs for administrative services and distribution (12b-l) fees, among others, in addition to the Fund's proportionate share of expenses of the State Street Tax Free Limited Duration Bond Portfolio. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund 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, 2007 to December 31, 2007. The table below illustrates your Fund'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 Fund'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 Fund. 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 Fund under the heading "Expenses Paid During Period". - BASED ON HYPOTHETICAL 5% RETURN. This section is intended to help you compare your Fund's costs with those of other mutual funds. It assumes that the Fund 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 Fund'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 Fund's costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. Six Months Ended December 31, 2007 Beginning Ending Expenses Paid Account Value Account Value During July 1,2007 December 31, 2007 Period * ------------- ----------------- ------------- Based on Actual Fund Return $1,000.00 $1,017.40 $1.02 Based on Hypothetical (5% return before expenses) $1,000.00 $1,024.20 $1.02 * The calculations are based on expenses incurred in the most recent fiscal period of the Fund. The Fund's annualized average weighted expense ratio as of December 31,2007 was 0.20%, which includes the Fund's proportionate share of the expenses of the State Street Tax Free Limited Duration Bond Portfolio. 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. 2 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 ASSETS Investment in State Street Tax-Free Limited Duration Bond $40,466,364 Portfolio, at value (identified cost $40,441,046) (Note 1) Receivable from adviser (Note 3) 5,734 ----------- Total assets 40,472,098 LIABILITIES Payables: Administration, custody and transfer agent fees (Note 3) 14,860 Distribution fees (Note 3) 1,712 Registration and filing fees 1,230 Professional fees 12,049 Dividends payable 24 Accrued expenses and other liabilities 4,669 ----------- Total liabilities 34,544 ----------- NET ASSETS $40,437,554 =========== NET ASSETS CONSIST OF: Paid-in capital 40,408,798 Undistributed net investment income 3,438 Net unrealized appreciation on investments 25,318 ----------- NET ASSETS $40,437,554 =========== Shares of beneficial interest outstanding 4,041,212 Offering, net asset value, and redemption price per share $ 10.01 =========== See Notes to Financial Statements. 3 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND STATEMENT OF OPERATIONS FOR THE PERIOD FROM FEBRUARY 7, 2007 TO DECEMBER 31, 2007* INCOME Interest income allocated from Portfolio (Note 2) $1,181,605 Expenses allocated from Portfolio (Note 3) (32,093) ---------- 1,149,512 ---------- EXPENSES Distribution fees (Note 3) 16,015 Administration and accounting fees (Note 3) 34,642 Transfer agent fees (Note 3) 30,250 Professional fees 26,679 Registration and filing fees 1,230 Other expenses 7,794 ---------- Total Expenses 116,610 Less: Fee reimbursements by investment adviser (Note 3) (90,214) ---------- Total Net Expenses 26,396 ---------- NET INVESTMENT INCOME $1,123,116 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Change in net unrealized appreciation (depreciation) allocated from Portfolio 25,318 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,148,434 ========== * The fund commenced operations on February 7, 2007. See Notes to Financial Statements. 4 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND STATEMENTS OF CHANGES IN NET ASSETS For the Period Ended December 31, 2007* ------------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income $ 1,123,116 Change in net unrealized appreciation (depreciation) 25,318 ----------- Net increase in net assets resulting from operations 1,148,434 ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (1,123,116) ----------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS Shares sold 39,366,348 Reinvestment of distributions 1,123,092 Shares redeemed (77,204) ----------- Net increase from capital share transactions 40,412,236 ----------- Net increase in net assets 40,437,554 NET ASSETS, BEGINNING OF PERIOD -- ----------- NET ASSETS, END OF PERIOD $40,437,554 =========== Accumulated undistributed net investment income $ 3,438 =========== CHANGES IN SHARES: Shares sold 3,936,634 Reinvestment of distributions 112,298 Shares redeemed (7,720) ----------- Net increase in shares 4,041,212 =========== * The fund commenced operations on February 7, 2007. See Notes to Financial Statements. 5 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout the period: PERIOD ENDED 12/31/2007* ----------- PER SHARE OPERATING PERFORMANCE (A): NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 ------- INVESTMENT OPERATIONS: Net investment income 0.31** Net realized and unrealized gain (loss) on investments 0.01 ------- Total from investment operations 0.32 ------- LESS DISTRIBUTIONS FROM: Net investment income (0.31) ------- NET ASSET VALUE, END OF PERIOD $ 10.01 ------- TOTAL RETURN (B) 3.29% RATIOS AND SUPPLEMENTAL DATA: Net Assets, End of Period (000s) $40,438 Ratios to average net assets: Gross operating expenses 0.46%*** Net operating expenses 0.18%*** Net investment income 3.51%*** Voluntary expense reimbursement (c) 0.02%*** Portfolio turnover rate(d) 31.18%**** - ---------- * The Fund commenced operations on February 7, 2007. ** Net investment income per share calculated using the average shares method. *** Annualized. **** Not annualized (a) The per share amounts and percentages include the Fund's proportionate share of income and expenses of the State Street Tax Free Limited Duration Bond Portfolio. (b) Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates. Total returns for periods of less than one year are not annualized. Results represent past performance and are not indicative of future results. (c) This voluntary expense reimbursement is reflected in both the net operating expense and the net investment income ratios shown above. (d) Portfolio turnover rate is from the State Street Tax Free Limited Duration Bond Portfolio. See Notes to Financial Statements. 6 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. ORGANIZATION State Street Institutional Investment Trust (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 February 16, 2000. The Trust consists of the following series: the State Street Equity 500 Index Fund, the State Street Equity 400 Index Fund, the State Street Equity 2000 Index Fund, the State Street Aggregate Bond Index Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Tax Free Limited Duration Bond Fund, the State Street Institutional Limited Duration Bond Fund, the State Street Institutional Treasury Money Market Fund, the State Street Institutional Treasury Plus Money Market Fund and the State Street Institutional U.S. Government Money Market Fund, each of which is a separate diversified series of the Trust. Information presented in these financial statements pertains only to the State Street Institutional Tax Free Limited Duration Bond Fund (the "Fund"). The Fund commenced operations on February 7, 2007. The Fund is authorized to issue an unlimited number of shares, with no par value. As of December 31, 2007, the Fund, the State Street Equity 500 Index Fund, the State Street Institutional Liquid Reserves Fund, the State Street Institutional Tax Free Money Market Fund, the State Street Institutional Treasury Money Market Fund, the State Street Institutional Treasury Plus Money Market Fund and the State Street Institutional U.S. Government Money Market Fund were the only series of the Trust that had commenced operations. The Fund invests all of its investable assets in interests in the State Street Tax Free Limited Duration Bond Portfolio (the "Portfolio"), a series of a separately registered investment company called State Street Master Funds. The investment objective and policies of the Portfolio are substantially similar to those of the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (100% at December 31, 2007). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION - The Fund records its investment in the Portfolio at value. The valuation policies of the Portfolio are discussed in Note 2 of the Portfolio's Notes to Financial Statements, which are included elsewhere within this report. SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES - Securities transactions are recorded on a trade date basis for financial statement purposes. Net investment income 7 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 consists of the Fund's pro-rata share of the net investment income of the Portfolio, less all expenses of the Fund. Realized gains and losses from security transactions consist of the Fund's pro-rata share of the Portfolio's realized gains and losses. Realized gains and losses from security transactions are recorded on the basis of identified cost. DIVIDENDS AND DISTRIBUTIONS - Dividends from net investment income are declared daily and are payable as of the last business day of each month. Net realized capital gains, if any, are distributed annually, unless additional distributions are required for compliance with applicable tax regulations. The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for 12b-l fees. For the year ended December 31, 2007, permanent differences identified and reclassified among the components of net assets were as follows: Increase (Decrease) - ------------------------------- Undistributed Net Investment Paid-In Capital Income (Loss) - --------------- ------------- $(3,438) $3,438 Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification. The tax character of distributions paid to shareholders during the year ended December 31, 2007 was as follows: 2007 ---------- Tax exempt income $1,123,116 At December 31, 2007 the components of distributable earnings on a tax basis were as follows: Undistributed tax exempt income $ 3,438 Unrealized appreciation $25,318 ------- Total $28,756 FEDERAL INCOME TAXES -The Fund intends to qualify for and elect treatment as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, the Fund will not be subject to federal income taxes to the extent it distributes its taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year 8 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 substantially all of its net taxable income and capital gains, if any, the Fund will not be subject to federal excise tax. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. At December 31, 2007, the cost of investments computed on a federal income tax basis was $40,441,046, resulting in $25,318 of unrealized appreciation. The Fund adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Fund did not have a liability for any unrecognized tax expenses. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years since inception through 2007 remain subject to examination by the fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. EXPENSE ALLOCATION: Certain expenses are applicable to multiple Funds. Expenses directly attributable to a Fund are charged to that Fund. Expenses of the Trust that are not directly attributed to a Fund are allocated among the Funds, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the Funds can otherwise be made fairly. USE OF ESTIMATES: The Fund'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 retains 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"), as its investment adviser. For such investment advisory services, the Portfolio pays SSgA FM a fee at the annual rate of 0.10% of its average daily net assets. The Fund has also retained SSgA FM to serve as its investment adviser, but pays no advisory fee to SSgA FM as long as the Fund invests substantially all of its assets in the Portfolio or another investment company. SSgA FM has contractually agreed to cap the total operating expenses of the Fund (not including the pass-through expenses of the Portfolio) on an annual basis at 0.10% of the Fund's average daily net assets until November 1, 2008. For the year ended December 31, 2007, SSgA FM reimbursed the Fund $90,214 under this agreement. State Street serves as the Fund's administrator and custodian. The Fund pays State Street annual fees of $25,000 for administration services and $12,000 for custody and accounting services. 9 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 The Trust has adopted a plan of distribution pursuant to Rule 12b-l under the 1940 Act (the "Rule 12b-l Plan"). Under the Rule 12b-l Plan, the Fund compensates financial intermediaries in connection with the distribution of Fund shares and for services provided to the Fund's shareholders. The Fund accrued fees under the Rule 12b-l Plan at an annual rate of 0.05% of average daily net assets. State Street Global Markets LLC, an affiliated company of State Street, is among the financial intermediaries who may receive fees from the Fund under the Rule 12b-l Plan. For the year ended December 31, 2007, the Fund accrued $16,015, which is payable to State Street Global Markets LLC, for services provided to the Fund's shareholders. 4. INDEMNIFICATIONS 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. Management does not expect anything significant. 5. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Fund and believes the impact will be limited to expanded disclosures in the Fund's Financial Statements resulting from adoption of this pronouncement. 6. TAX INFORMATION (UNAUDITED) For federal income tax purposes, the following information is furnished with respect to the Funds' distributions for its fiscal year ended December 31, 2007: For the year ended December 31, 2007, 100.0% of the distributions from net investment income is exempt from federal income tax, other than the federal AMT. 10 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Institutional Investment Trust and Shareholders of State Street Institutional Tax Free Limited Duration Bond Fund: We have audited the accompanying statement of assets and liabilities of the State Street Institutional Tax Free Limited Duration Bond Fund (one of the funds constituting State Street Institutional Investment Trust) (the Fund) as of December 31, 2007, and the related statement of operations, the statement of changes in net assets and the financial highlights for the period from February 7, 2007 (commencement of operations) through December 31, 2007. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit 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 Fund's internal control over financial reporting. Our audit 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 Fund'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, 2007, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Institutional Tax Free Limited Duration Bond Fund of the State Street Institutional Investment Trust at December 31, 2007, the results of its operations, the changes in its net assets and the financial highlights for the period from February 7, 2007 (commencement of operations) through December 31, 2007, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 11 STATE STREET INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND DECEMBER 31, 2007 GENERAL INFORMATION PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Fund. 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 Exchange Commission (the "SEC") at www.sec.gov. Information on how the Fund 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. 12 TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED). The table below includes information about the Trustees and Executive Officers of the State Street Institutional Investment Trust, including their: - business addresses and ages; - principal occupations during the past five years; and - other directorships of publicly traded companies or funds. 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 22 Trustee, State Street Holland & Company, Chairman of L.L.C. (investment adviser) Master Funds; Director, LLC the Board Elected: 7/99 (1995 - the Holland Series Fund, 375 Park Avenue present). Inc.; Director, The China New York, NY 10152 Fund, Inc.; Chairman and Trustee, Scottish Widows DOB: July 7, 1944 Investment Partnership Trust; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual South 22 Trustee, State Street State Street Africa Master Trust Master Funds; and Institutional Elected: 7/99 (investments) (1995 Trustee, Old Mutual Investment Trust -present); Chairman South Africa Master P.O. Box 5049 emeritus, Children's Trust Boston, MA 02206 Hospital (1984 - present); Director, Boston Plan For DOB: January 20, 1937 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 22 Trustee, State Street State Street International LLC (1998 - Master Funds; Director, Institutional Elected: 7/99 present); Member of the Berkshire Life Insurance Investment Trust Advisory Board, Ingenium Company of America; and P.O. Box 5049 Corp. (technology company) Director, Boston, MA 02206 (2001 -present); Chief IEmily.com Executive Officer, DOB: October 24, 1948 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 22 Trustee, State Street State Street Chase Manhattan Bank Master Funds Institutional Elected: 7/99 (1987-1999). Mr. Williams Investment retired in 1999. Trust P.O. Box 5049 Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Master Funds. 13 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 - ----------------- ----------- ---------------- --------------------------- ----------- ------------------------------ INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: Indefinite President, SSgA Funds 22 Trustee, State Street Master SSgA Funds President Management, Inc. (2005 - Funds; Trustee, SPDR(R) SerieS Management, Inc. Elected Trustee: present); Principal, SSgA Trust; Trustee, SPDR(R) Index State Street 2/07 Funds Management, Inc. Shares Trust and Trustee, Financial Center (2001 -2005); Senior Select Sector SPDR(R) Trust One Lincoln Elected Managing Director, State Street Boston, President: 4/05 Street Global Advisors MA 02111-2900 (March 2006 -present); Principal, State Street DOB: June 24, 1965 Global Advisers (2000-2006). OFFICERS: Gary L. French Treasurer Term: Indefinite Senior Vice President of -- -- State Street State Street Bank and Bank and Trust Elected: 5/05 Trust Company (2002 Company 2 Avenue -present); Managing de Lafayette Director, Deutsche Bank Boston, MA 02111 (including its predecessor, Scudder DOB: July 4, 1951 Investments), Fund Operations Unit (2001 - 2002); President, UAM Fund Services (1995 -2001). Julie Piatelli Interim Term: Indefinite Principal and Senior -- -- SSgA Funds Chief Compliance and Risk Management, Inc. Compliance Elected: 7/07 Management Officer, SSgA State Street Officer Funds Management, Inc. Financial (2004-present), Vice Center President State Street One Lincoln Street Global Advisors Boston, MA 02111 (2004-present); Manager, PricewaterhouseCoopers DOB: August 5, 1967 LLP (1999-2004). Nancy L. Conlin Secretary Term: Indefinite Vice President and -- -- State Street Managing Counsel, State Bank and Trust Elected: 9/07 Street Bank and Trust Company 2 Avenue Company (2007 - present); de Lafayette General Counsel to Boston, MA 02111 Plymouth Rock Companies (2004-2007); and U.S. DOB: December 11, 1953 Chief Counsel to Sun Life Financial (2002 - 2004). (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 14 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross INVESTMENT ADVISER SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 ADMINISTRATOR AND CUSTODIAN 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 02110 TRANSFER AGENT ALPS Fund Services, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 DISTRIBUTOR ALPS Distributors, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. A PROSPECTUS WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUND CAN BE OBTAINED BY CALLING 1-877-521-4083, OR BY TALKING TO YOUR FINANCIAL ADVISOR. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 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 INSTITUTIONAL TAX FREE LIMITED DURATION BOND FUND State Street Bank and Trust Company P.O. Box 5049 Boston, MA 02206 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO ANNUAL REPORT DECEMBER 31, 2007 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO Management Discussion of Fund Performance and Analysis, year ending 12/31/2007 HOW DID THE FUNDS PERFORMANCE SINCE ITS INCEPTION (02/07/07) COMPARE TO ITS BENCHMARK? Since inception through December 31, 2007 the State Street Tax Free Limited Duration Bond Portfolio (the "Portfolio") returned 3.33% net of fees and expenses versus the 3.05% return of the IMoneyNet MFR Tax-Free (the "Index"). PLEASE EXPLAIN WHAT CONTRIBUTED MOST AND LEAST TO THE FUNDS PERFORMANCE SINCE INCEPTION? The reshaping of the short end of the municipal yield curve during 2007 was the biggest contributor to the Portfolio's out-performance of the Index since inception. For much of the year, market participants were mixed as to whether the economy was tilting toward inflation or falling into recession. At the outset of the year, we believed the yield curve tended to favor the recession argument. The yield curve is the term structure of interest rates or the relationship between interest rates and time to maturity. Indeed, for many weeks, the curve exhibited a yield inversion between zero and three years, meaning that longer term yields were below interest rates, which usually indicates expectation of a worsening economic situation in the future. Specifically, our outlook early in the year was for the Federal Reserve to be in a holding pattern. This outlook led us to favor the excess yield offered in very short maturities. As the year progressed, and economic statistics deteriorated, we moved to expect a lowering of the Federal Funds target rate by 75 basis points by year end (a basis point is 1/100th of 1% or .01%). In fact, by year end the Federal Reserve cut the Federal Funds target rate by 100 basis points. Our changed outlook led us to extend the portfolio slightly in anticipation of a steeper curve and capture some of the price performance of longer maturities. While credit spreads widened in this environment, neither the Portfolio nor the Index were negatively impacted because both the Portfolio and the Index contain the highest quality investment grade holdings. . How did the market conditions and the investment strategies and techniques employed since inception impact the portfolio's performance? The fixed income markets were very turbulent and volatile during 2007. Most notable, securities in the housing sector, specifically those associated with sub-prime mortgage debt experienced extreme negative absolute and relative return. The municipal market to a certain degree benefited from its normally safe haven status. However, as the effects of sub-prime exposure spread, dealers, banks and insurance companies felt the effects. Fortunately the Portfolio invests in those portions of the yield curve (3 years and less) and credit spectrum (high quality) that has been minimally affected. The views expressed in this statement reflect those of the portfolio manager only through the end of the period of this report and do not necessarily represent the views of the Adviser as a whole. Any such views are subject to change at any time based upon market or other conditions and the Adviser disclaims any responsibility to update such views. 1 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO GROWTH OF a $10,000 INVESTMENT (a) (PERFORMANCE GRAPH) iMoney Net State Street Tax Tax-Free Free Limited National Duration Bond Institutional Portfolio* Average** (b) ---------------- ------------- 2/7/07 10,000 10,000 3/31/07 10,053 10,027 4/30/07 10,081 10,055 5/31/07 10,113 10,085 6/30/07 10,143 10,112 7/31/07 10,174 10,140 8/31/07 10,205 10,168 9/30/07 10,240 10,196 10/31/07 10,271 10,224 11/30/07 10,301 10,251 12/31/07 10,333 10,278 INVESTMENT PERFORMANCE (a) For the Fiscal Year Ended December 31, 2007 Total Return Total Return for the Period Average Annualized from February Since Commencement 7, 2007 to of Operations December 31, 2007 (February 7, 2007) ----------------- ------------------ State Street Institutional Tax Free Limited Duration Bond Fund 3.33% 3.33% iMoney Net tax-Free National Institutional Average (b) 3.05% 3.05% (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 AN INVESTOR'S SHARE, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. INVESTMENT PERFORMANCE REFLECTS FEE WAIVERS IN EFFECT. IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURN WOULD BE LOWER. (b) The iMoney Net Tax-Free National Institutional Average is an average that consists of all national tax-free and municipal institutional funds. Portfolio Holdings of tax-free funds include rated and unrated demand notes, rated and unrated general market notes, commercial paper, put bonds - 6 months & less, put bonds - over 6 months, AMT paper, and other tax-free holdings. It is not possible to invest directly in an average. 2 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO EXPENSE EXAMPLE As a shareholder of the State Street Tax Free Limited Duration Bond 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, 2007 to December 31, 2007. 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, 2007 BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING JULY 1, 2007 DECEMBER 31, 2007 PERIOD * ------------- ----------------- ------------- BASED ON ACTUAL PORTFOLIO RETURN $1,000.00 $1,018.80 $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, 2007 was 0.10%. 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. 3 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO PORTFOLIO STATISTICS (UNAUDITED) PORTFOLIO COMPOSITION* DECEMBER 31, 2007 - ---------------------- ----------------- Miscellaneous Revenue 21.5% Hospital Revenue 19.6 General Obligation State 12.0 Higher Education 9.2 Industrial Revenue/Pollution Control Revenue 9.0 General Obligations 5.9 Pre Refunded/Escrow to Maturity 4.8 Cash 4.0 Municipals 3.9 Electricity and Power Revenue 3.8 Water & Sewer 3.7 TRANS Revenue 2.6 ----- Total 100.0% ===== MATURITY LADDER DECEMBER 31, 2007 - --------------- ----------------- 0-3 Days 82.8% 4-90 Days 3.0% 90+ Days 14.2 ----- Total 100.0% ===== * The Portfolio's composition will vary over time. 4 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL OF AMOUNT RATE % MATURITY VALUE $ --------- ------ ---------- --------- TAX-EXEMPT OBLIGATIONS -- 93.5% ARIZONA -- 4.7% Arizona Health Facilities Authority Revenue Bonds, Banner Health, Series B, INS: FGIC, SPA: Bank of Nova Scotia (a) 1,000,000 3.47 01/01/2035 1,000,000 Arizona School District, TAN, Financing Program COPs 900,000 4.50 07/30/2008 908,037 --------- 1,908,037 --------- COLORADO -- 7.4% City of Colorado Springs Utilities Revenue Bonds, Sub Lien Improvement, Series B, SPA: Bayerische Landesbank (a) 1,500,000 3.42 11/01/2036 1,500,000 City of Colorado Springs Utilities Revenue Bonds, Sub Lien, Series A, SPA: Dexia Credit Local (a) 1,500,000 5.20 11/01/2023 1,500,000 --------- 3,000,000 --------- DELAWARE -- 3.7% Delaware State Economic Development Authority Revenue Bonds, Hospital Billing & Collection, Series B, LOC: JP Morgan Chase Bank (a) 1,500,000 3.40 12/01/2015 1,500,000 --------- DISTRICT OF COLUMBIA -- 8.1% District of Columbia Revenue Bonds, George Washington University, Series B, INS: MBIA, SPA: Bank of America N.A. (a) 1,500,000 3.40 09/15/2029 1,500,000 Washington DC Convention Center Authority Dedicated Tax Revenue Bonds, Sr. Lien, INS: AMBAC 1,750,000 5.25 10/01/2011 1,796,620 --------- 3,296,620 --------- GEORGIA -- 2.5% Burke County Georgia Development Authority PCRBs, Oglethorpe Power Corporation, Series A, INS: FGIC, SPA: Credit Local De France (a) 1,000,000 3.43 01/01/2019 1,000,000 --------- ILLINOIS -- 9.3% City of Chicago Illinois, Neighborhoods Alive 21, Class B, INS: MBIA, SPA: Depfa Bank PLC (a) 1,300,000 3.42 01/01/2037 1,300,000 Illinois Development Finance Authority Revenue Bonds, Evanston Northwestern, Class C, SPA: Bank One N.A. (a) 1,460,000 3.43 05/01/2031 1,460,000 Illinois Finance Authority Revenue Bonds, Loyola University Health, Series C, LOC: Charter One Bank FSB (a) 1,000,000 3.40 04/01/2041 1,000,000 --------- 3,760,000 --------- See Notes to Financial Statements 5 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL OF AMOUNT RATE % MATURITY VALUE $ --------- ------ ---------- --------- INDIANA -- 6.2% Indiana State Development Finance Authority Revenue Bonds, Educational Facilities, Indiana Historical Society, 1,500,000 3.43 08/01/2031 1,500,000 LOC: Bank One Indiana N.A. (a) Petersburg Indiana PCRBs, Indiania Power & Light Co., Series B, SPA: Lasalle National Bank (a) 1,000,000 3.53 01/01/2023 1,000,000 --------- 2,500,000 --------- MARYLAND -- 3.7% Maryland State Health & Higher Educational Facilities Authority Revenue Bonds, Universal Medical System, Series E, INS: FGIC, SPA: Dexia Credit Local (a) 1,500,000 3.42 07/01/2041 1,500,000 --------- MASSACHUSETTS -- 2.9% Massachusetts State Health & Educational Facilities Authority Revenue Bonds, New England Medical Center Hospital, Series H, INS: FGIC 1,160,000 5.00 05/15/2009 1,189,011 --------- MISSOURI -- 3.1% Missouri Development Finance Board Cultural Facilities Revenue Bonds, Nelson Gallery Funding, Series B, INS: MBIA, SPA: JP Morgan Chase Bank (a) 1,250,000 3.75 12/01/2031 1,250,000 --------- MONTANA -- 3.5% Billings Montana IDRBs, CFS Continental, Inc. LOC: Toronto Dominion Bank (a) 1,400,000 3.48 12/01/2014 1,400,000 --------- NEW MEXICO -- 2.5% New Mexico Finance Authority Revenue Bonds, Cigarette Tax-UNM Health, Class B, INS: MBIA, SPA: Bank of America N.A. (a) 1,000,000 3.43 04/01/2019 1,000,000 --------- NEW YORK -- 2.5% New York State Local Government Assistant Corp., Sub Lien, Series 3V, INS: FGIC GO of Corp., SPA: Bandesbank Baden-Wuerttemberg (a) 1,000,000 3.33 04/01/2024 1,000,000 --------- OHIO -- 5.9% City of Columbus Ohio, SAN Sewer, Series 1, GO Unlimited (a) Ohio State Higher Education Facility Community Revenue 1,400,000 3.33 12/01/2026 1,400,000 Bonds. Kenyon College Project, LIQ: Harris Bank (a) 1,000,000 3.43 04/01/2022 1,000,000 --------- 2,400,000 --------- OKLAHOMA -- 3.2% Oklahoma State Industries Authority Revenue Bonds, Integris Baptist, Series B, INS: MBIA, SPA: JP Morgan Chase Bank (a) 1,285,000 3.75 08/15/2029 1,285,000 --------- See Notes to Financial Statements 6 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 DATE PRINCIPAL RATE OF VALUE AMOUNT % MATURITY $ --------- ---- ---------- ----------- OREGON -- 3.7% State of Oregon, TAN, GO Unlimited Notes, Series A 1,500,000 4.50 06/30/2008 1,511,340 ----------- PENNSYLVANIA -- 6.2% Pennsylvania State Turnpike Community Revenue Bonds, Series A 1, SPA: Westdeutsche Lanesbank (a) 1,000,000 3.40 12/01/2030 1,000,000 Washington County Pennsylvania Authority Revenue Bonds, University of Pennsylvania (a) 1,500,000 3.33 07/01/2034 1,500,000 ----------- 2,500,000 ----------- PUERTO RICO -- 3.5% Puerto Rico Electric Power Authority Revenue Bonds, Series 815, INS: FSA/FGIC, LIQ: JP Morgan Chase Bank (a) 1,440,000 3.44 01/01/2013 1,440,000 ----------- TEXAS -- 7.2% City of Arlington Texas Special Obligations Revenue Bonds, Tax-Dallas Cowboys, Class B, INS: MBIA, SPA: Depfa Bank PLC (a) 1,400,000 3.43 08/15/2035 1,400,000 State of Texas, Tax & Revenue Anticipation Notes, GO Limited Notes 1,500,000 4.50 08/28/2008 1,515,030 ----------- 2,915,030 ----------- WASHINGTON -- 3.7% Washington State, PUTTERs, Series 1422, INS: FSA, LIQ: JP Morgan Chase Bank (a) 1,495,000 3.50 07/01/2014 1,495,000 ----------- Total Tax-Exempt Obligations (Cost $37,824,720) 37,850,038 ----------- MONEY MARKET FUND -- 6.0% State Street Institutional Investment Trust Tax Free Money Market Fund (b) (at net asset value) 2,410,373 3.29 01/01/2050 2,410,373 ----------- TOTAL INVESTMENTS(c) -- 99.5% (Cost $40,235,093) 40,260,411 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 206,965 ----------- NET ASSETS -- 100.0% $40,467,376 =========== (a) Floating Rate Note- Interest rate shown is rate in effect at December 31, 2007. (b) Affiliated issuer. See table that follows for more information. (c) Cost of investments shown approximates cost for federal income tax purposes. Acronym Name - ------- ---- AMBAC American Municipal Bond Assurance Corporation COPs Certificates of Participation FGIC Financial Guaranty Insurance Company See Notes to Financial Statements 7 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 FSA Financial Security Assurance GO General Obligation IDRBs Industrial Development Revenue Bonds INS Insured LIQ Liquidity Agreement LOC Letter of Credit MBIA Municipal Bond Investors Assurance PCRBs Pollution Control Revenue Bonds PUTTERs Puttable Tax Exempt Receipts SPA Standby Purchase Agreement TAN Tax Anticipation Note AFFILIATE TABLE Certain investments made by the Portfolio were made in mutual funds affiliated with State Street and SSgA FM. The market value of this investment at December 31, 2007 is listed in the Portfolio of Investments. Number of shares Shares purchased Shares sold for Number of shares Income Earned for held at for the year ended the year ended held at Value at the year ended Security Description 12/31/2006 12/31/07 12/31/07 12/31/07 12/31/07 12/31/07 - -------------------- ---------------- ------------------ --------------- ---------------- ---------- ----------------- State Street Institutional Trust Tax Free Money Market Fund -- 7,017,967 4,607,594 2,410,373 $2,410,373 $52,247 See Notes to Financial Statements 8 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 ASSETS Investments in unaffiliated issuers at market (identified cost $37,824,720) $37,850,038 Investments in non-controlled affiliates at market (net asset value $2,410,373) (Note 4) 2,410,373 ----------- 40,260,411 Receivables: Interest receivable 227,601 Receivable from adviser (Note 4) 6,032 Prepaid expenses 224 ----------- Total assets 40,494,268 LIABILITIES Payables: Management fee (Note 4) 3,432 Administration, custody and transfer agent fees (Note 4) 1,406 Professional fees 20,113 Accrued expenses and other liabilities 1,941 ----------- Total Liabilities 26,892 ----------- NET ASSETS $40,467,376 =========== See Notes to Financial Statements. 9 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO STATEMENT OF OPERATIONS FOR THE PERIOD FROM FEBRUARY 7, 2007 TO DECEMBER 31, 2007* INVESTMENT INCOME Interest income - unaffiliated issuers $1,129,371 Interest income - non-controlled affiliated issuer 52,247 ---------- Total Investment Income 1,181,618 EXPENSES Professional fees 52,194 Management fees (Note 4) 32,094 Trustees' fees (Note 5) 15,493 Printing fees 4,255 Administration, custody and transfer agent fees (Note 4) 6,636 Other expenses 730 ---------- Total Expenses 111,402 Less: Fee waivers/reimbursements by investment adviser (Note 4) (79,309) ---------- Total Net Expenses 32,093 ---------- NET INVESTMENT INCOME $1,149,525 REALIZED AND UNREALIZED GAIN (LOSS) Net change in net unrealized appreciation (depreciation) on Investments 25,318 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,174,843 ========== * The portfolio commenced operations on February 7, 2007. See Notes to Financial Statements. 10 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS For the Period Ended December 31, 2007* ------------------ INCREASE IN NET ASSETS FROM: OPERATIONS Net investment income $ 1,149,525 Change in net unrealized appreciation (depreciation) of investments 25,318 ----------- Net increase in net assets resulting from operations 1,174,843 ----------- CAPITAL TRANSACTIONS Proceeds from contributions 39,422,181 Fair value of withdrawals (129,648) ----------- Net increase in net assets from capital transactions 39,292,533 ----------- TOTAL NET INCREASE IN NET ASSETS 40,467,376 NET ASSETS Beginning of period -- ----------- End of period $40,467,376 =========== * The portfolio commenced operations on February 7, 2007. See Notes to Financial Statements. 11 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets: PERIOD ENDED 12/31/2007* ----------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s) $40,467 Ratios to average net assets: Gross operating expenses 0.35%** Net operating expenses 0.10%** Net investment income 3.58%** Portfolio turnover rate 31.18%*** Total return (a) 3.33% - ---------- * The Portfolio commenced operations on February 7, 2007. ** Annualized. *** Not 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. 12 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 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 eleven 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, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus 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 Tax Free Limited Duration Bond Portfolio (the "Portfolio"). The Portfolio commenced operations on February 7, 2007. At December 31, 2007, only the Portfolio, the State Street Equity 500 Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Portfolio and the State Street U.S. Government Money Market Portfolio were in operation. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests. 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. Fixed-income securities are valued on the basis of the closing bid price. Investments in other mutual funds are valued at the net asset value per share. 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. 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. The Portfolio adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Portfolio did not have a liability for any unrecognized tax expenses. The Portfolio recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years since inception through 2007 remain subject to examination by the portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. USE OF ESTIMATES: The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles which require the use of management estimates. Actual results could differ from those estimates. 13 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2007 3. SECURITIES TRANSACTIONS For the year ended December 31, 2007, purchases and sales of investment securities, excluding short-term investments, futures contracts, and in-kind contributions and withdrawals, aggregated to $48,600,836 and $10,745,000, respectively. At December 31, 2007, the book cost of investments was $40,235,093 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $26,350 and $1,032, respectively, resulting in net depreciation of $25,318 for all securities as computed on a federal income tax basis. 4. 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, 2008. For the year ended December 31, 2007, SSgA FM reimbursed the Portfolio $79,309 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 Trust pays State Street an annual fee, which is accrued daily at 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 trust: $150,000 5. 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 $30,000. Each trustee is reimbursed for out-of-pocket and travel expenses. 6. INDEMNIFICATIONS 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. Management does not expect anything significant. 7. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Portfolio and believes the impact will be limited to expanded disclosures in the Portfolio's Financial Statements resulting from adoption of this pronouncement. 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 Tax Free Limited Duration Bond Portfolio: We have audited the accompanying statement of assets and liabilities of the State Street Tax Free Limited Duration Bond Portfolio (one of the portfolios constituting State Street Master Funds) (the Portfolio), including the portfolio of investments, as of December 31, 2007, and the related statement of operations, the statement of changes in net assets and the financial highlights for the period from February 7, 2007 (commencement of operations) through December 31, 2007. 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 audit. We conducted our audit 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 audit 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, 2007, by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Tax Free Limited Duration Bond Portfolio of State Street Master Funds at December 31, 2007, the results of its operations, the changes in its net assets and the financial highlights for the period from February 7, 2007 (commencement of operations) through December 31, 2007, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 15 STATE STREET TAX FREE LIMITED DURATION BOND PORTFOLIO DECEMBER 31, 2007 GENERAL INFORMATION 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 Exchange Commission (the "SEC") at www.sec.gov. Information on how the Fund 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. 16 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. 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 ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE - ----------------- ----------------- -------------- ----------------------------------------- ----------- ------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Chairman, Holland & Company L.L.C. 22 Trustee, State Holland & Company, Chairman of Indefinite (investment adviser) (1995 - present). Street LLC the Board Institutional 375 Park Avenue Elected: 7/99 Investment New York, NY 10152 Trust; Director, the Holland Series DOB: July 7, 1944 Fund, Inc.; Director, The China Fund, Inc.; Chairman and Trustee, Scottish Widows Investment Partnership Trust; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Trustee of Old Mutual South Africa Master 22 Trustee, State State Street Master Indefinite Trust (investments) (1995 - present); Street Funds Chairman emeritus, Children's Hospital Institutional P.O. Box 5049 Elected: 7/99 (1984 - present); Director, Boston Plan Investment Trust; Boston, MA 02206 For Excellence (non-profit) (1994 - and Trustee, Old present); President and Chief Operations Mutual South DOB: January 20, Officer, John Hancock Mutual Life Africa Master Trust 1937 Insurance Company (1959 - 1999). Mr. Boyan retired in 1999. Rina K. Spence Trustee Term: President of SpenceCare International LLC 22 Trustee, State State Street Master Indefinite (1998 - present); Member of the Advisory Street Funds Board, Ingenium Corp. (technology Institutional P.O. Box 5049 Elected: 7/99 company) (2001 - present); Chief Investment Boston, MA 02206 Executive Officer, IEmily.com (internet Trust; Director, company) (2000 - 2001); Chief Executive Berkshire Life DOB: October 24, Officer of Consensus Pharmaceutical, Inc. Insurance Company 1948 (1998 - 1999); Founder, President and of America; and Chief Executive Officer of Spence Center Director, for Women's Health (1994 -1998); Trustee, IEmily.com Eastern Enterprise (utilities) (1988-2000). Douglas T. Williams Trustee Term: Executive Vice President of Chase 22 Trustee, State State Street Master Indefinite Manhattan Bank (1987 -1999). Mr. Williams Street Funds retired in 1999. Institutional P.O. Box 5049 Elected: 7/99 Investment Trust Boston, MA 02206 DOB: December 23, 1940 * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. 17 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 ("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS* TRUSTEE HELD BY TRUSTEE - ----------------- ----------------- -------------- ----------------------------------------- ----------- ------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/President Term: President, SSgA Funds Management, Inc. 22 Trustee, State SSgA Funds Indefinite (2005 - present); Principal, SSgA Funds Street Management, Inc. Elected Management, Inc. (2001 -2005); Senior Institutional State Street Trustee: Managing Director, State Street Global Investment Trust; Financial Center 2/07 Advisors (March 2006 -present); Trustee, SPDR(R) One Lincoln Principal, State Street Global Advisers Series Trust; Street Boston, MA Elected (2000-2006). Trustee, SPDR(R) 02111-2900 President: Index Shares 4/05 Trust and Trustee, DOB: June 24, 1965 Select Sector SPDR(R) Trust OFFICERS: Gary L. French Treasurer Term: Senior Vice President of State Street -- -- State Street Bank Indefinite Bank and Trust Company (2002 -present); and Trust Company Managing Director, Deutsche Bank 2 Avenue de Elected: 5/05 (including its predecessor, Scudder Lafayette Boston, Investments), Fund Operations Unit (2001 MA 02111 - 2002); President, UAM Fund Services (1995 -2001). DOB: July 4, 1951 Julie Piatelli Interim Chief Term: Principal and Senior Compliance and Risk -- -- SSgA Funds Compliance Indefinite Management Officer, SSgA Funds Management, Inc. Officer Management, Inc. (2004-present), Vice State Street Elected: 7/07 President State Street Global Advisors Financial (2004-present); Manager, Center PricewaterhouseCoopers LLP (1999-2004). One Lincoln Street Boston, MA 02111 DOB: August 5, 1967 Nancy L. Conlin Secretary Term: Vice President and Managing Counsel, -- -- State Street Bank Indefinite State Street Bank and Trust Company (2007 and Trust Company - present); General Counsel to Plymouth 2 Avenue de Elected: 9/07 Rock Companies (2004-2007); and U.S. Lafayette Boston, Chief Counsel to Sun Life Financial (2002 MA 02111 - 2004). DOB: December 11, 1953 (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 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. 18 TRUSTEES Michael F. Holland William L. Boyan Rina K. Spence Douglas T. Williams James E. Ross INVESTMENT ADVISER SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 ADMINISTRATOR AND CUSTODIAN 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 02110 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 TAX FREE LIMITED DURATION BOND 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, 2007, State Street Institutional Investment Trust (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, 2007 and December 31, 2006, 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 $105,000 and $28,500, respectively. (b) Audit-Related Fees For the fiscal years ended December 31, 2007 and December 31, 2006, 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, 2007 and December 31, 2006, the aggregate tax fees billed for professional services rendered by E&Y for tax compliance, tax advice, and tax planning were $35,500 and $11,000, 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, 2007 and December 31, 2006, 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, 2007 and December 31, 2006, 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, 2007 and December 31, 2006, 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 $16,600,000, and $4,500,000, 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 this report, 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 referred to in Item 2. (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. (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. 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. STATE STREET INSTITUTIONAL INVESTMENT TRUST By: /s/ James E. Ross ------------------------------------------- James E. Ross President (Principal Executive Officer) Date: February 28, 2008 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 28, 2008 By: Gary L. French ------------------------------------------- Gary L. French Treasurer (Principal Executive Officer) Date: February 28, 2008