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  <p align="center" style="border:none;margin:0in 0in .0001pt;padding:0in;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
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  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">UNITED STATES</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">SECURITIES AND EXCHANGE COMMISSION</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Washington, D.C.&#160;
  20549</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">FORM&nbsp;8-K</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">CURRENT REPORT</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">Pursuant to Section&nbsp;13 or 15(d)&nbsp;of the
  Securities Exchange Act of 1934</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date of Report
  (Date of earliest event reported):&#160; <b>June&nbsp;2, 2008</b></font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">State Street Corporation</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Exact name of registrant as specified in its charter)</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
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    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Massachusetts</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">001-07511</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">04-2456637</font></b></p>
    </td>
   </tr>
   <tr>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(State of
    Incorporation)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Commission File
    Number)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(IRS Employer
    Identification Number)</font></p>
    </td>
   </tr>
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  </div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div align="center">
  
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   <tr>
    <td width="65%" valign="top" style="padding:0in 0in 0in 0in;width:65.84%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">One
    Lincoln Street, Boston, Massachusetts</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.08%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">02111</font></b></p>
    </td>
   </tr>
   <tr>
    <td width="65%" valign="top" style="padding:0in 0in 0in 0in;width:65.84%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Address of principal
    executive offices)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in 0in 0in 0in;width:32.08%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Zip code)</font></p>
    </td>
   </tr>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Registrant&#146;s
  telephone number, including area code:&#160;&#160; <b>(617) 786-3000</b></font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Check the appropriate box
  below if the Form&nbsp;8-K filing is intended to simultaneously satisfy the
  filing obligation of the registrant under any of the following provisions:</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Written communications pursuant to Rule&nbsp;425
  under the Securities Act</p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Soliciting material pursuant to Rule&nbsp;14a-12
  under the Exchange Act</p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Pre-commencement communications pursuant to
  Rule&nbsp;14d-2(b)&nbsp;under the Exchange Act</p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Pre-commencement communications pursuant to
  Rule&nbsp;13e-4(c)&nbsp;under the Exchange Act</p>
  
  <div style="border:none;border-bottom:double windowtext 6.0pt;padding:0in 0in 0in 0in;">
  
  <p style="border:none;margin:0in 0in .0001pt;padding:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  </div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 8.01.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Other
  Events</b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We are filing this
  current report on Form 8-K for the purposes of (1) updating our risk factor
  disclosures, in particular the disclosures (a) under the heading &#147;Liquidity
  Risk,&#148; concerning accounts managed by State Street Global Advisors, or SSgA,
  that have the benefit of contractual arrangements with third-party financial
  institutions known as &#147;wrap providers,&#148; (b) under the heading &#147;Operational Risk,&#148;
  concerning the maintenance of confidential information; and (c) under the
  heading &#147;Regulatory/Legal/Accounting/Tax Risk&#148; concerning legal actions,
  regulatory matters and tax matters, (2) filing certain capital ratio
  information and (3) filing certain information concerning State Street&#146;s
  investment portfolio and asset-backed commercial paper conduits.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Unless otherwise
  indicated or unless the context requires otherwise, all references in this
  Current Report on Form 8-K to &#147;State Street,&#148; &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; or similar
  terms means State Street Corporation and its subsidiaries on a consolidated
  basis.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Risk
  Factors</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Form&nbsp;8-K and other reports filed by us under the Securities
  Exchange Act of 1934 or registration statements under the Securities Act of 1933
  contains statements that are considered &#147;forward-looking statements&#148; within the
  meaning of United States securities laws. In addition, State Street and its
  management may make other written or oral communications from time to time that
  contain forward-looking statements. Forward-looking statements, including
  statements about industry trends, management&#146;s future expectations and other
  matters that do not relate strictly to historical facts, are based on
  assumptions by management, and are often identified by such forward-looking
  terminology as &#147;expect,&#148; &#147;look,&#148; &#147;believe,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;seek,&#148; &#147;may,&#148;
  &#147;will,&#148; &#147;trend,&#148; &#147;target&#148; and &#147;goal,&#148; or similar statements or variations of
  such terms. Forward-looking statements may include, among other things,
  statements about State Street&#146;s confidence in its strategies and its
  expectations about financial performance, market growth, acquisitions and
  divestitures, new technologies, services and opportunities and earnings.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Forward-looking statements are subject to various risks and
  uncertainties, which change over time, are based on management&#146;s expectations
  and assumptions at the time the statements are made, and are not guarantees of
  future results. Management&#146;s expectations and assumptions, and the continued validity
  of the forward-looking statements, are subject to change due to a broad range
  of factors affecting the national and global economies, the equity, debt,
  currency and other financial markets, as well as factors specific to State
  Street and its subsidiaries, including State Street Bank. Factors that could
  cause changes in the expectations or assumptions on which forward-looking
  statements are based include, but are not limited to:</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to integrate acquisitions into
  our business, including the acquisition of Investors Financial Services Corp. (&#147;Investors
  Financial&#148;);</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the level and volatility of interest rates,
  particularly in the U.S., Europe and the Asia/Pacific region; the performance
  and volatility of securities, currency and other markets in the U.S. and
  internationally; and economic conditions and monetary and other governmental
  actions designed to address those conditions;</p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='2',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the liquidity of the U.S. and international
  securities markets, particularly the markets for fixed-income securities,
  including asset-backed commercial paper, and the liquidity requirements of our
  customers;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to measure the fair value of securities
  in our investment securities portfolio, particularly given current market
  conditions for many of these securities;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the credit quality and credit agency ratings
  of the securities in our investment securities portfolio, a deterioration or
  downgrade of which could lead to other-than-temporary impairment of the
  respective securities and the recognition of an impairment loss;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to attract non-interest bearing
  deposits and other low-cost funds;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the possibility that changes in market conditions
  or asset performance may require any off-balance sheet activities, including
  our asset-backed commercial paper conduits, to be consolidated into our
  financial statements, requiring the recognition of associated losses, if any;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the results of litigation and similar
  disputes and, in particular, the effect that current or potential litigation
  may have on our reputation and SSgA&#146;s reputation, and our ability to attract
  and retain customers; and the possibility that the ultimate costs of the
  legal exposure associated with certain of SSgA&#146;s actively managed fixed-income
  strategies may exceed or be below the level of the related reserve, in view of the uncertainties of the timing and
  outcome of litigation, and the amounts involved;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the possibility of further developments of
  the nature that previously gave rise to the legal exposure associated with
  certain of SSgA&#146;s actively managed fixed-income and other investment
  strategies;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the performance and demand for the products
  and services we offer;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the competitive environment in which we
  operate;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the enactment of legislation and changes in
  regulation and enforcement that impact us and our customers, as well as the
  effects of legal and regulatory proceedings, including litigation;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to continue to grow revenue,
  control expenses and attract the capital necessary to achieve our business
  goals and comply with regulatory requirements;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to manage systemic risks and
  control operating risks;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>our ability to obtain quality and timely
  services from third parties with which we contract;</p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='3',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>trends in the globalization of investment
  activity and the growth on a worldwide basis in financial assets;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>trends in governmental and corporate pension
  plans and savings rates;</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>changes in accounting standards and
  practices, including changes in the interpretation of existing standards, that
  impact our consolidated financial statements; and</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>changes in tax legislation and in the
  interpretation of existing tax laws by U.S. and non-U.S. tax authorities that
  impact the amount of taxes due.</p>
  
  <p style="margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Therefore, actual outcomes and results may differ materially from what
  is expressed in our forward-looking statements and from our historical
  financial results due to the factors discussed above, below and elsewhere in
  this Form&nbsp;8-K or disclosed in our other Securities and Exchange
  Commission, or &#147;SEC,&#148; filings.&#160;
  Forward-looking statements should not be relied upon as representing our
  expectations or beliefs as of any date subsequent to the date this Form&nbsp;8-K
  is filed with the SEC. State Street undertakes no obligation to revise the
  forward-looking statements contained in this Form&nbsp;8-K to reflect events
  after the date it is filed with the SEC. The factors discussed above are not
  intended to be a complete summary of all risks and uncertainties that may
  affect our businesses. Though we strive to monitor and mitigate risk, we cannot
  anticipate all potential economic, operational and financial developments that
  may adversely impact our operations and our financial results.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Forward-looking statements should not be viewed as predictions, and
  should not be the primary basis upon which investors evaluate State Street. Any
  investor in State Street should consider all risks and uncertainties disclosed
  in our SEC filings, including our filings under the Securities Exchange Act of
  1934, including our reports on Form&nbsp;10-K, Form&nbsp;10-Q and Form&nbsp;8-K,
  or registration statements under the Securities Act of 1933, all of which are
  accessible on the SEC&#146;s website at <i>www.sec.gov</i>
  or on our website at <i>www.statestreet.com</i>.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Business Conditions/Economic Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our businesses are affected by global economic conditions, political
  uncertainties and volatility and other developments in the financial markets.
  Factors such as interest rates and commodities prices, regional and
  international rates of economic growth, inflation, political instability, the
  liquidity and volatility of fixed-income, equity, credit, currency, derivative
  and other financial markets, and investor confidence can significantly affect
  the financial markets in which we and our customers are engaged. Such factors
  have affected, and may further unfavorably affect, both regional and worldwide
  economic growth, creating adverse effects on many companies, including us, in
  ways that are not predictable or that we may fail to anticipate.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A significant market downturn may lead to a decline in the value of
  assets under management and custody, which could reduce our asset-based fee
  revenue and may adversely impact other transaction-based revenue, such as
  securities finance revenue, and the volume of transactions that we execute for
  our customers. This market downturn could be accompanied by a widening of
  credit spreads or credit deterioration, which could reduce the value of
  securities we hold in our investment portfolio. The assets held by our
  asset-backed commercial paper conduits</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='4',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">can be
  similarly affected. In addition, lower market volatility, even in a generally
  rising market environment, may reduce trading volumes of our customers, and our
  ability to achieve attractive spreads, which could lead to lower trading
  revenues. Our revenues, particularly our trading revenues, may increase or
  decrease depending upon the extent of increases or decreases in cross-border
  investments made by our customers. The level of cross-border activity can be
  influenced by a number of factors, including geopolitical instabilities and
  customer mix. General market downturns would also likely lead to a decline in
  the volume of transactions we execute on behalf of our customers, decreasing
  our fee and revenue opportunities and reducing the level of assets under
  management and custody. Market performance and volatility may also influence
  the revenue that we receive from off-balance sheet activities.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In addition, revenues during a calendar year, driven by the products
  and services we provide, can fluctuate commensurate with the normal course of
  business activity of our customers and market conditions, and may provide
  volatility to our earnings from quarter to quarter.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In recent years, investment manager and hedge fund manager operations
  outsourcing and non-U.S. asset servicing have been areas of rapid growth in our
  business. If the demand for these types of services were to decline, we could
  see a slowdown in the growth rate of our revenue.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Strategic/Competition Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We expect the markets in which we operate to remain both highly
  competitive and global across all facets of our business, resulting in
  increases in both regional and global competitive risks. We have experienced,
  and anticipate that we will continue to experience, pricing pressure in many of
  our core businesses. Many of our businesses compete with other domestic and
  international banks and financial services companies, such as custody banks,
  investment advisors, broker/dealers, outsourcing companies and data processing
  companies. Many of our competitors, including our competitors in core services,
  have substantially greater capital resources. In some of our businesses, we are
  service providers to significant competitors. These competitors are in some
  instances significant customers, and the retention of these customers involves
  additional risks, such as the avoidance of actual or perceived conflicts of
  interest and the maintenance of high levels of service quality. The ability of
  a competitor to offer comparable or improved products or services at a lower
  price would likely negatively affect our ability to maintain or increase our
  profitability. Many of our core services are subject to contracts that have
  relatively short terms or may be terminated by our customer after a short
  notice period. In addition, pricing pressures as a result of the activities of
  competitors, customer pricing reviews, and rebids, as well as the introduction
  of new products, may result in a reduction in the prices we can charge for our
  products and services.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our strategy for growth depends upon both attracting new customers and
  cross-selling additional products and services to our existing customer base.
  To the extent that we are not able to achieve these goals, we may not be able
  to attain our financial goals. Substantial risks and uncertainties are
  associated with the introduction of new products and services, including
  technical and control requirements that may need to be developed and
  implemented to offer such products while also managing associated risks. The
  introduction of new products and services can also entail significant time and
  resources. Regulatory and internal control requirements,</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='5',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">capital
  requirements, competitive alternatives and shifting market preferences may also
  determine if such initiatives can be brought to market in a manner that is
  timely and attractive to our customers. Failure to successfully manage these
  risks in the development and implementation of new products or services could
  have a material adverse effect on our business, as well as our results of
  operations and financial condition.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our financial performance depends, in part, on our ability to develop
  and market new and innovative services and to adopt or develop new technologies
  that differentiate our products or provide cost efficiencies, while avoiding
  increased related expenses. The risks we face include rapid technological
  change in the industry, our ability to access technical and other information
  from our customers, and the significant and ongoing investments required to bring
  new products and services to market in a timely manner at competitive prices.
  Our proactive cross-selling of multiple products and services to our customers
  can exacerbate the negative financial effects associated with the risk of loss
  of any one customer. Developments in the securities processing industry,
  including shortened settlement cycles and straight-through processing, have
  required continued internal procedural enhancements and further technology
  investment.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Acquisitions of complementary businesses and technologies, development
  of strategic alliances and divestitures of portions of our business, in
  addition to fostering organic growth opportunities, are an active part of our
  overall business strategy to remain competitive. We may not be able to effectively
  assimilate services, technologies, key personnel or businesses of acquired
  companies into our business or service offerings, alliances may not be
  successful, and we may not achieve related revenue growth or cost savings. In
  addition, we may not be able to successfully manage the divestiture of
  identified businesses on satisfactory terms, if at all, and this would reduce
  anticipated benefits to earnings. Ongoing consolidation within the financial
  services industry could pose challenges in the markets we serve.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Acquisitions present risks that differ from the risks associated with
  our ongoing operations. Our financial results for 2008 and for the next few
  years may be significantly impacted by our ability to achieve the cost savings
  and other benefits that we anticipate as a result of the acquisition of
  Investors Financial in 2007, as well as our ability to retain its customer base
  and to successfully cross-sell our products and services to its customers.
  These cost savings and customer retention goals will be significantly
  influenced by our ability to convert former Investors Financial customers onto
  State Street systems in a timely manner and to maintain the level of customer
  service such customers received from Investors Financial. Future acquisitions
  may present similar integration, cost savings and customer retention
  challenges.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Intellectual property of an acquired business, such as Currenex,&nbsp;Inc.,
  acquired in 2007, may be an important component of the value that we agree to
  pay for such a business; however, these types of acquisitions entail the risk
  that the acquired business does not own the intellectual property that we
  believe we are acquiring, that the intellectual property is dependent upon
  licenses from third parties, that the acquired business infringes upon the
  intellectual property rights of others, or that the technology does not have
  the acceptance in the marketplace that we anticipated. Acquisitions of
  investment servicing businesses such as Investors Financial normally entail
  information technology systems conversions, which involve operational risks and
  may result in customer dissatisfaction and defection. Customers of businesses
  that we acquire, including, in the case of Investors Financial, its largest
  customer, are competitors of our non-</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='6',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">custody
  businesses. The loss of some of these customers or a significant reduction in
  revenues generated from them, for competitive or other reasons, would adversely
  affect the benefits that we expect to achieve from the acquisition.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our ability to acquire other entities that provide our core services to
  achieve greater economies of scale or to expand our product offering is
  dependent upon our financial resources and our ability to access the capital
  markets. Due to company-specific issues or lack of liquidity in the capital
  markets, our ability to continue to expand through acquisitions or to dispose
  of businesses that no longer are strategic to us may be adversely affected.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In connection with most acquisitions, before the acquisition can be
  completed, we must obtain various regulatory approvals or consents, which may
  include approvals of the Federal Reserve Board, the Massachusetts Commissioner
  of Banks and other domestic and foreign regulatory authorities. These
  regulatory authorities may impose conditions on the completion of the acquisition
  or require changes to its terms. Any such conditions, or any associated
  regulatory delays, could limit the benefits of the transaction.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">With any acquisition, the integration of the operations and resources
  of the businesses could result in the loss of key employees, the disruption of
  our and the acquired company&#146;s ongoing businesses, or inconsistencies in
  standards, controls, procedures and policies that could adversely affect our
  ability to maintain relationships with customers and employees or to achieve
  the anticipated benefits of the acquisition. Integration efforts may also
  divert management attention and resources. The acquisition and combination of a
  business with our operations may also expose us to risks from unknown or
  contingent liabilities with respect to which we may have no recourse against
  the seller. While we normally seek to mitigate that risk through
  pre-acquisition due diligence, increasingly acquisition transactions are
  competitive auctions in which we have limited time and access to information to
  evaluate the risks inherent in the business being acquired, and no or limited
  recourse against the seller if undisclosed liabilities are discovered after we
  enter into a definitive agreement.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We may not achieve the benefits we sought in an acquisition, or, if
  achieved, those benefits may be achieved later than we anticipated. Failure to
  achieve anticipated benefits from an acquisition could result in increased
  costs and lower revenues than expected of the combined company. In addition, if
  the financial performance associated with an acquisition falls short of
  expectations, it may result in impairment charges associated with the goodwill
  or other intangible assets recorded as part of the acquisition.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Liquidity Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The management of liquidity risk is critical to the management of our
  consolidated balance sheet and to our ability to service our customer base. In
  managing our consolidated balance sheet, our primary source of funding is
  customer deposits. These deposits are predominantly short-term,
  transaction-based deposits by institutional investors. Our ability to continue
  to attract these deposits, and other funding sources such as certificates of
  deposit and commercial paper, is subject to variability based upon a number of
  factors, including volume and volatility in the global securities markets, our
  credit rating and the relative interest rates that we are prepared to pay for
  these liabilities.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='7',FILE='C:\JMS\c900132\08-15737-1\task2970327\15737-1-ba-01.htm',USER='c900132',CD='Jun  3 02:00 2008' -->
  
  
  
  <br clear="all" style="page-break-before:always;">
  <div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In managing our consolidated balance sheet,
  we also depend on access to global capital markets to provide us with
  sufficient capital resources and liquidity to meet our commitments and business
  needs, and to accommodate the transaction and cash management needs of our
  customers. Other sources of funding available to us, and upon which we rely as
  regular components of our liquidity risk management strategy, include
  inter-bank borrowings, repurchase agreements and borrowings from the Federal
  Reserve discount window, or comparable non-U.S. central banking sources. Any
  occurrence that may limit our access to the capital markets, such as a decline
  in the confidence of our corporate debt or equity purchasers, or a downgrade of
  any of our credit ratings, may adversely affect our capital costs and our
  ability to raise capital and, in turn, our liquidity. Similarly, the failure to
  maintain acceptable credit ratings may preclude us from being competitive in
  certain products. General market disruptions, natural disasters or operational
  problems may affect either third parties or us, and can also have an adverse
  affect on our liquidity. &nbsp;We generally use our sources of funds to invest
  in a portfolio of investment securities and to maintain the liquidity necessary
  to extend credit to our customers. These funds are invested in a variety of
  assets ranging from short-term interest-bearing deposits with banks to
  longer-maturity investment securities. While we have historically maintained
  our investment portfolio at a relatively short duration with respect to
  interest-rate risk, the average maturity of the investment portfolio is
  significantly longer than the contractual maturity of our deposit base. In
  addition, as part of our custody business, we provide overdraft financing to
  our customers, and liquidity lines to third-party commercial paper conduits and
  mutual funds, as well as more traditional extensions of credit. The demand for
  credit is difficult to forecast and control, and may be at its peak at times of
  dislocation in the securities markets, potentially compounding liquidity
  issues.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In a period of financial disruption, or if
  negative developments occurred with respect to State Street, the availability
  and cost of our funding sources could be adversely affected. In that event, our
  cost of funds may increase, thereby reducing our net interest revenue, or we
  may need to dispose of a portion of our investment portfolio, which, depending
  upon market conditions, could result in our realizing a loss or experiencing
  other adverse accounting consequences upon those dispositions. Our efforts to
  monitor and manage liquidity risk may not be successful or sufficient to deal
  with dramatic or unanticipated changes in the global securities markets or
  other State Street or market event-driven reductions in liquidity.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">At March&nbsp;31, 2008, including the effect
  of master netting agreements, approximately $78.28&nbsp;billion of our
  consolidated total assets and approximately $9.10&nbsp;billion of our
  consolidated total liabilities were carried at fair value. Of the total assets
  carried at fair value, approximately $68.01&nbsp;billion consisted of
  investment securities available for sale, with the remainder primarily composed
  of derivative instruments. More than 90% of the available-for-sale securities and
  substantially all of the derivative instruments were categorized in
  level&nbsp;2 of the valuation hierarchy (meaning that their fair value was
  determined by reference to quoted prices for similar assets or liabilities or
  other observable inputs), with the remaining amounts categorized in
  level&nbsp;3 (meaning that their fair value was determined by reference to
  inputs that are unobservable in the market and therefore require a greater
  degree of management judgment). Excluding the effect of master netting
  agreements, the fair value of level&nbsp;3 assets at March&nbsp;31, 2008 was
  $6.97&nbsp;billion, or 8.5% of total assets carried at fair value, and the fair
  value of level&nbsp;3 liabilities was $656&nbsp;million, or 5% of total
  liabilities carried at fair value. The determination of </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='8',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">fair value for securities categorized in level&nbsp;2 or&nbsp;3
  involves significant judgment due to the complexity of factors contributing to
  the valuation, many of which are not readily observable in the market. In addition,
  we have historically placed a high level of reliance on information obtained
  from third-party sources to measure fair values. Third-party sources also use
  assumptions, judgments and estimates in determining securities values, and
  different third parties may provide different prices for securities. Moreover,
  depending upon, among other things, the measurement date of the security, the
  subsequent sale price of the security may be different from its recorded fair
  value. These differences may be significant especially if the security is sold
  during a period of illiquidity or market disruption or as part of a large block
  of securities under a forced transaction. See note&nbsp;9, &#147;Fair Value
  Measurements,&#148; to the consolidated financial statements included in our Quarterly
  Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2008 for a more
  detailed discussion of the criteria used to categorize securities in
  level&nbsp;1, 2 or&nbsp;3 of the valuation hierarchy.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As of March&nbsp;31, 2008, in connection with
  management&#146;s measurements of fair value referenced above, there were
  $3.16&nbsp;billion of pre-tax net unrealized losses associated with our
  investment securities portfolio. When the fair value of a security declines,
  management must assess whether that decline is &#147;other-than-temporary.&#148; When the
  decline in fair value is deemed an &#147;other-than-temporary&#148; impairment, the
  amortized cost basis of the investment security is reduced to its then current
  fair value through a charge to earnings. The review of whether a decline in
  fair value is other-than-temporary considers numerous factors such as: adverse
  situations that might affect the ability to fully collect interest and
  principal; the credit quality and performance of any underlying collateral and
  guarantees; the length of time the amortized cost has exceeded the fair value
  and the severity of this impairment relative to the security&#146;s amortized cost
  basis; external credit ratings and current developments with respect to the
  security; management&#146;s intent and ability to hold the security until recovery
  in market value; management&#146;s assessment of current market conditions and
  future expectations; and current and expected future interest rates. Many of
  these factors involve significant judgment. If all or a significant portion of
  this unrealized loss were determined to be other-than-temporary impairment, we
  would recognize a material charge to earnings in the quarter during which such
  determination was made, our capital ratios would be adversely impacted and a
  rating agency might downgrade our credit rating or put us on credit watch. A
  downgrade or a significant reduction in our capital ratios might adversely
  impact our ability to access the capital markets or might increase our cost of
  capital.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In our business activities, we assume
  liquidity and interest-rate risk in managing longer-term assets or asset pools
  for third parties that are funded on a short-term basis, or where the customers
  participating in these products may have a right to the return of cash or
  assets on limited notice. These business activities include, among others, the
  unconsolidated asset-backed commercial paper conduits administered by our
  Structured Products group, securities finance collateral pools and money market
  and other short-term investment funds.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the asset-backed commercial paper
  conduits, for example, pools of medium- and long-term financial instruments,
  principally mortgage- and other asset-backed securities, are financed through
  the issuance of short-term commercial paper. The conduits strive to maintain a positive
  margin between the rate of return on their longer-term assets and the
  short-term cost of funding. This mismatch in the maturity of the investment
  pools and funding creates risk if disruptions </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
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  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">occur in the liquidity of the short-term debt or asset-backed
  securities markets, or if the cost of short-term borrowings exceeds the
  conduits&#146; rate of return on their investment pools or purchased assets.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In connection with the administration of the
  activities of the asset-backed commercial paper conduits, we provide
  contractual back-up liquidity to the conduits if they cannot meet their
  liquidity needs through the issuance of commercial paper. In the event that
  maturing commercial paper cannot be placed by the conduits, we are required by
  contract to, among other things, provide liquidity to the conduits by
  purchasing portfolio assets from them. During the first quarter of 2008,
  pursuant to these contractual obligations, we were required to purchase $850&nbsp;million
  of conduit assets. The securities were purchased at prices determined in
  accordance with existing contractual terms of the liquidity asset purchase
  agreement, and which exceeded their fair value. Accordingly, the securities
  were written down to fair value through a $12&nbsp;million reduction of
  processing fees and other revenue in our consolidated statement of income.
  These purchases were funded from our general liquidity, and the assets were
  recorded on our consolidated balance sheet. We also provide liquidity by
  purchasing commercial paper or providing other extensions of credit to the
  conduits. As of April&nbsp;30, 2008, we held on our consolidated balance sheet
  an aggregate of approximately $1.18&nbsp;billion of commercial paper issued by
  the conduits, compared to $292&nbsp;million as of March&nbsp;31, 2008 and
  $2&nbsp;million as of December&nbsp;31, 2007. Our contractual arrangements with
  the conduits also require that we purchase conduit portfolio assets under other
  circumstances, such as a downgrade of our credit rating.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If circumstances change we may be required,
  under existing accounting standards, to consolidate some or all of the
  otherwise unconsolidated conduits onto our consolidated balance sheet. In the
  event State Street were to consolidate the conduits, there may be a significant
  charge reflecting the difference between the book value and the market value of
  each of the conduit&#146;s portfolios. For example, if changes in market conditions
  require us to update the assumptions in our expected loss model, we may be
  required to increase the amount of first-loss notes in order for the investors
  in the first-loss notes to continue to be considered the primary beneficiaries
  of the conduits. During the first quarter of 2008, some of the conduits issued
  additional first-loss notes totaling $20&nbsp;million to third parties,
  increasing the total first-loss notes outstanding at March&nbsp;31, 2008 to
  $52&nbsp;million. In various circumstances, including if the conduits are not
  able to issue additional first-loss notes or take other actions, we may be determined
  to be the primary beneficiary of the conduits, and we would be required to
  consolidate the conduits&#146; assets and liabilities onto our consolidated balance
  sheet. In addition, existing accounting standards may be changed or interpreted
  differently in the future in a manner that increases the risk of consolidation
  of the conduits.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Consolidation, or the purchase of the assets
  of the conduits pursuant to the contractual agreements described above, could
  affect the size of our consolidated balance sheet and related funding
  requirements, our financial and regulatory capital ratios and, if the conduit
  assets include unrealized losses, could require us to recognize those losses.
  As of March&nbsp;31, 2008, these unrealized losses amount to $1.49&nbsp;billion
  after-tax. Because of our contractual agreements to purchase assets from the
  conduits under specified conditions, we are also exposed to the credit risks in
  the conduits&#146; portfolios subject to first-loss coverage. Conditions in the
  financial markets that might warrant consolidation of the conduits or the
  purchase of assets may also require us to </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
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  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">recognize other-than-temporary impairment in our investment portfolio.
  The Financial Accounting Standard Board is considering changes to accounting
  standards related to off-balance sheet vehicles such as the conduits, and
  industry-wide revisions are under discussion that could require us to
  consolidate all of the conduits we administer into our financial statements in
  the future, possibly as early as January&nbsp;1, 2009.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If consolidation of the conduits, purchase of
  the conduit assets pursuant to contractual arrangements or recognition of
  unrealized loss as other-than-temporary impairment were to occur, our capital
  ratios would be adversely affected. The degree of the adverse impact would
  depend upon many factors including our capital ratios at the time of such
  occurrence, the amount of loss realized and management actions, such as raising
  capital, that might mitigate the impact of a loss.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We also manage other assets that are funded
  in the short-term markets and invested in longer-term markets, including
  securities finance collateral pools and money market and other short-term
  investment funds. These businesses involve risks inherent in an arbitrage of
  funding and investment; however, in these businesses, we primarily act as agent
  and do not have the direct principal risk. For example, if a collateral pool or
  a money market fund that we manage were to have unexpected liquidity demands
  from investors in the pool that exceeded available liquidity, the investment
  pool could be required to sell assets to meet those redemption requirements.
  During periods of disruption in the credit markets, it may be difficult to sell
  the assets held by these pools at a reasonable price. In those circumstances,
  the financial loss accrues to the pools&#146; investors and not to us.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The credit risks inherent in these portfolios
  are attributable to the investors in the investment pools and not to State
  Street. These investment pools may have significant exposure to individual
  credits. The incurrence of substantial losses in these pools, particularly in
  money market funds, could result in significant harm to our reputation and
  significantly and adversely affect the prospects of our associated business
  units. In some circumstances, we may seek to mitigate that risk by compensating
  the investment pools for all or a portion of such losses even though we are not
  contractually obligated to do so; however, that would potentially result in the
  recognition of significant losses or a greater use of capital than we have
  available and could in certain extreme situations require us to consolidate the
  investment pools onto our consolidated balance sheet.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SSgA manages certain accounts that have the benefit of contractual
  arrangements with third party financial institutions, which allow the accounts
  to issue and redeem units based upon the book value of the account&#146;s assets
  rather than their market value. The third-party financial institutions, know as
  &#147;wrap providers&#148;, generally have an obligation to fund any shortfall in the
  account after all qualified participant withdrawals have been redeemed at a
  price based upon the assets&#146; book value. As of April&nbsp;30, 2008, these
  accounts had a total book value of $14.6&nbsp;billion, of which
  $10.3&nbsp;billion is subject to contractual wrap arrangements and
  $4.3&nbsp;billion consists of cash and guaranteed investment contracts. Several
  financial institutions currently provide such contractual wrap arrangements.
  Securities representing 92.5% of the book value of the $10.3 billion wrapped
  portion of these accounts are rated &#147;AA&#148; or better as of April 30, 2008, and
  the average duration of the securities in the accounts was generally
  three&nbsp;years or less. Many of these accounts were significantly impacted by
  the volatility and lack of liquidity in the fixed-income securities markets
  beginning in the second half of 2007 and experienced a variance between market
  and book values greater than that </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
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  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">experienced in
  more liquid markets. As contemplated when we established the reserve in
  connection with SSgA&#146;s active fixed-income strategies, we used $160 million of
  the reserve to decrease the difference between the market and book values of
  the wrapped portion of these accounts, and in part as a result of this action,
  the average market-to-book-value ratio of the wrapped portion of these accounts
  on January&nbsp;31, 2008 increased to 96.77% from 93.43% on December&nbsp;26,
  2007.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The volatility and illiquidity in the fixed-income securities markets
  during 2008 continue to impact the assets held by these accounts and have
  further reduced their market values. As of April&nbsp;30, 2008, the average
  market-to-book-value ratio on the wrapped portion of these accounts was
  approximately 94.1%. This deficiency, or a further deterioration in the
  market-to-book-value ratio, could lead one or more wrap providers to
  discontinue their relationship with us. Factors that could lead to further
  deterioration in the market-to-book-value ratio, or the crediting rate earned
  by the accounts, include a decline in market value of securities held or of
  fixed-income securities generally due to illiquidity, interest-rate or credit
  risk or net cash outflows due to redemptions by participants in the accounts. A
  wrap provider could attempt to minimize its exposure to further deterioration
  in market value of the portfolio under its contract.&#160; It could do so by exercising its contractual
  right to require the account to be managed within more restrictive investment
  guidelines.&#160; This election is known as &#147;immunization.&#148;&#160; Following such an election, investments made
  with additional cash contributions from participants are excluded from the wrap
  provider&#146;s contractual obligations.&#160; We
  also have the contractual right to elect to immunize all or a portion of these
  accounts at any time, including following receipt of notice of a wrap provider&#146;s
  election to terminate its agreement that benefit the accounts.&#160; The right of the participating investors to
  redeem their units at a price based on book value would not be affected by
  termination by a wrap provider or immunization. However, immunization of all or
  part of an account may adversely impact cash flows with respect to the account,
  potentially resulting in significant account redemptions.&#160; Moreover, our ability to continue to offer an
  attractive crediting rate on these accounts, our reputation as a manager of
  these types of products in the defined contribution market and the amount of
  fees that we recognize from this portion of our business, would be adversely
  impacted.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">One of our wrap providers has notified us of its election to terminate
  its relationship with us during the third quarter of 2008 as a result of its
  decision to exit the business of providing wrap contracts.&#160; We are seeking to replace this wrap provider,
  but there can be no assurance that we will be able to do so.&#160; There are a limited number of third-party
  financial institutions that currently offer these products, limiting the
  potential to find alternative wrap providers, and most accounts have investment
  guidelines requiring multiple wrap contracts.&#160;
  Moreover, one or more of our other wrap providers may seek to condition
  continuing to wrap our products on our taking action to further support the
  market value of the accounts&#146; assets, although we are not contractually
  obligated to take such an action.&#160; If we
  support the market value of these accounts under any circumstances to mitigate
  the risks to our business, the cost to us could be material. Moreover, any
  action by us to support these accounts could result, depending on the nature
  and extent of such support, in the accounts being consolidated on our balance
  sheet for financial reporting purposes.&#160;
  If we were unable to replace one or more wrap providers that elect to
  terminate their arrangements with us, we may elect to immunize the portion of
  the accounts wrapped by the terminating wrap providers.&#160; Any action resulting in immunization of a
  part of an account could cause either the other wrap providers or us to elect
  immunization of the remainder </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
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  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of such
  account.&#160; In addition, a wrap provider
  may seek to eliminate or reduce its contractual obligations. Such an action
  could result in litigation with the defaulting wrap provider and the plans
  investing in the accounts. Any discontinuation of the contracts with our
  existing wrap providers, any inability to enter into new contracts with other
  wrap providers, any failure by a wrap provider to fund account shortfalls under
  its contract or any action by us or by a wrap provider to immunize all or a
  portion of the wrapped accounts would adversely affect our business.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Investment, operational and other decisions
  and actions, often made to achieve scale and other benefits, are implemented
  over multiple investment pools as applicable, increasing the opportunity for
  losses, even small losses, to have a significant effect. To mitigate these
  risks to the investment pools, we seek to prudently manage the duration and
  credit exposure of the pools, to satisfy large liquidity demands by the in-kind
  delivery of securities held by the pools and to closely monitor liquidity
  demand from investors; however, market conditions or increased defaults could
  result in our inability to effectively manage those risks. To some degree, all
  of our investment management pools hold potential risks to our reputation and
  business prospects if the asset pools that we manage have higher than
  anticipated redemption or other liquidity requirements and the pools incur
  losses to meet such demands.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other parts of our business where we
  primarily act as agent, such as other investment management activities of SSgA
  and certain of our broker/dealer-related businesses, do not currently have
  significant liquidity requirements; however, as we develop new products in
  response to customer demand and to remain competitive in a dynamic marketplace,
  we could take on more principal risk in these businesses. Any increase in the extent
  to which these or other businesses assume principal positions would increase
  the risks associated with our liquidity management strategy.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The disruption in the global fixed-income
  securities markets beginning in the third quarter of 2007 has had a substantially
  greater impact upon liquidity and valuations in those markets than has
  historically been experienced. Because demand from investors for fixed-income
  products has markedly decreased and dealers have been less prepared to take
  principal exposures, funding sources, such as the commercial paper markets for
  conduits, have been less reliable and more expensive. At the same time, the
  ability of the markets to absorb the sale of certain types of fixed-income
  securities has been substantially impaired. These market conditions have made
  the management of our own and our customers&#146; liquidity significantly more
  challenging. As discussed above, the risks to State Street inherent in its
  management of liquidity are significant, and a further deterioration in the
  credit markets could adversely affect our consolidated financial position,
  including our regulatory capital ratios, and could adversely affect our results
  of operations and our business prospects in the future.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Reputational Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our relationship with many of our customers
  is predicated upon our reputation as a fiduciary and a service provider that
  adheres to the highest standards of ethics, service quality and regulatory
  compliance. Adverse publicity, regulatory actions, litigation, operational
  failures, the failure to meet client expectations and other issues could
  materially and adversely affect our reputation and our ability to retain and
  attract customers. Preserving and enhancing our </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='13',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">reputation depends not only on maintaining systems and procedures that
  address known risks and regulatory requirements, but also our ability to
  identify and mitigate additional risks that arise due to changes in our
  businesses and the marketplaces in which we operate, the regulatory
  environment, and customer expectations. If any of these developments, including
  our recently announced customer concerns related to certain SSgA active
  fixed-income strategies, has a material effect on our reputation, our business
  will suffer.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Credit Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our focus on large institutional investors
  and their businesses requires that we assume credit and counterparty risk, both
  on- and off-balance sheet, in a variety of forms. We may experience significant
  intra- and inter-day credit exposure through settlement-related extensions of
  credit. From time to time, we may assume concentrated credit risk at the
  individual obligor, counterparty, guarantor, industry and/or country level,
  thereby potentially exposing us to a single market or political event or a
  correlated set of events. The credit quality of our on- and off-balance sheet
  exposures may be affected by many factors, such as economic and business
  conditions or deterioration in the financial condition of an individual
  counterparty, group of counterparties or asset classes. If a significant
  economic downturn occurs in either a country or a region, or we experience the
  failure of a significant individual counterparty, we could incur financial
  losses that could adversely affect our earnings.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Financial Markets Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As asset values in worldwide financial
  markets increase or decrease, our opportunities to invest in and service
  financial assets change. Given that a portion of our fee revenue is based on
  the value of assets under custody and management, fluctuations in the valuation
  of worldwide securities markets will affect revenue. Many of the costs of
  providing our services are relatively fixed; therefore, a decline in revenue
  could have a disproportionate effect on our earnings. In addition, if
  investment performance in our asset management business fails to meet either
  benchmarks or the performance of our competitors, we could experience a decline
  in assets under management and a reduction in the fees that we earn,
  irrespective of economic or market conditions.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We have increased the portion of our
  management fee revenue that is generated from enhanced index and actively
  managed products, with respect to which we generally receive higher fees
  compared to passive products. We may not be able to continue to increase this
  segment of our business at the same rate that we have achieved in the past few
  years. The amount of assets in active fixed-income strategies, for example, has
  been adversely impacted since 2007. In addition, with respect to certain of our
  enhanced index and actively managed products, we have entered into performance
  fee arrangements, where the management fee revenue we earn is based on the
  performance of managed funds against specified benchmarks. The reliance on
  performance fees increases the potential volatility of our management fee
  revenue.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Financial markets trading businesses, as well
  as our asset and liability management activities, are also subject to market
  risks. Adverse movements in levels and volatilities of financial markets could
  cause losses that may affect our consolidated results of operations and </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='14',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">financial condition. In addition, changes in investor and rating agency
  perceptions regarding certain asset classes or structures can also affect
  volatility, liquidity and market prices, which, in turn, can lead to losses.
  The degree of volatility in foreign exchange rates can affect our foreign
  exchange trading revenue. In general, we benefit from currency volatility, although
  it can increase risk. Foreign exchange revenue, all other things being equal,
  is likely to decrease during times of decreased currency volatility. In
  addition, as our business grows globally, our exposure to changes in foreign
  currency exchange rates could affect our levels of revenue, expense and
  earnings, as well as the value of our investment in our non-U.S. operations.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Interest-Rate Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">State Street&#146;s financial performance could be
  unfavorably affected by changes in interest rates as they impact our asset and
  liability management activities. The levels of global market interest rates,
  the shape of these yield curves (changes in the relationship between short- and
  long-term interest rates), the direction and speed of interest rate changes,
  and the asset and liability spreads relative to the currency and geographic mix
  of our interest-earning assets and interest-bearing liabilities, affect our net
  interest revenue. Our ability to anticipate these changes and/or to hedge the
  related exposures on and off our consolidated balance sheet can significantly
  influence the success of our asset and liability management activities and the
  resulting level of our net interest revenue. The impact of changes in interest
  rates will depend on the relative durations of assets and liabilities in
  accordance with their relevant currencies. In general, sustained lower interest
  rates, a flat or inverted yield curve and narrow interest-rate spreads have a
  constraining effect on our net interest revenue.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Operational Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operational risk is inherent in all of State
  Street&#146;s activities. Our customers have a broad array of complex and
  specialized servicing, confidentiality and fiduciary requirements. We have
  established policies, procedures and systems designed to comply with these
  regulatory and operational risk requirements. We also face the potential for
  loss resulting from inadequate or failed internal processes, employee
  supervisory or monitoring mechanisms, or other systems or controls, and from
  external events, which could materially affect our future results of
  operations. We may also be subject to disruptions from events that are wholly
  or partially beyond our control, which could cause delays or disruptions to
  operational functions, including information processing and financial market
  settlement functions. In addition, our customers, vendors and counterparties
  could suffer from such events. Should these events affect us, or the customers,
  vendors or counterparties with which we conduct business, our results of operations
  could be negatively affected.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our success depends, in large part, on our
  ability to attract and retain key people. Competition for the best people in
  most activities in which we engage can be intense, and we may not be able to
  hire people or retain them. The unexpected loss of services of one or more of
  our key personnel could have a material adverse impact on our business because
  of their skills, their knowledge of our markets, their years of industry
  experience, and, in some cases, the difficulty of promptly finding qualified
  replacement personnel. Similarly, the loss of key staff, either individually or
  as a group, can adversely impact customer perception of our ability to continue
  to manage certain types of investment management mandates. In some of our </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='15',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">businesses, we have experienced significant employee turnover, which
  increases costs, requires additional training and increases the potential for
  operational risks.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We enter into long-term fixed-price contracts
  to provide middle office or investment manager and hedge fund manager
  operations outsourcing services to customers, services related but not limited
  to certain trading activities, cash reporting, settlement and reconciliation
  activities, collateral management and information technology development. These
  long-term contracts require considerable up-front investment by us, including
  technology and conversion costs, and carry the risk that pricing for the
  products and services we provide might not prove adequate to generate expected
  operating margins over the term of the contracts. Profitability of these
  contracts is largely a function of our ability to accurately calculate pricing
  for our services and our ability to control our costs and maintain the
  relationship with the customer for an adequate period of time to recover our
  up-front investment. Performance risk exists in each contract, given our
  dependence on successful conversion and implementation onto our own operating
  platforms of the service activities provided. In addition, our failure to meet
  specified service levels may adversely affect our revenue from such
  arrangements, or permit early termination of the contracts by the customer.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We actively strive to achieve significant
  cost savings by shifting certain business processes to lower-cost geographic
  locations, while continuing to maintain service quality, control and effective
  management of risks within these business operations. This transition to a true
  &#147;shared services&#148; operational model focuses on certain core service offerings,
  including middle- and back-office reconciliations, securities processing and
  transfer agency activities. We have employed various structural arrangements to
  achieve these goals, including forming joint ventures and wholly-owned
  subsidiaries and establishing operations in lower cost areas, such as Eastern
  Europe, India and China, and outsourcing to vendors in various jurisdictions.
  The increased elements of risk that arise from conducting certain operating processes
  in some jurisdictions could lead to an increase in reputational risk. During
  periods of transition, greater operational risk and client concern exists
  regarding the continuity of a high level of service delivery. The extent and
  pace at which we are able to move functions to lower-cost locations may also be
  impacted by regulatory and customer acceptance issues. Such relocation of
  functions also entails costs, such as technology and real estate expenses, that
  partially offset the financial benefits of the lower-cost locations.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our businesses depend on an information
  technology infrastructure to record and process a large volume of increasingly
  complex transactions, in many currencies, on a daily basis, across numerous and
  diverse markets. Any interruptions, delays and/or breakdowns of this
  infrastructure can result in significant costs and reputational damage. As a
  result, we continue to invest significantly in this infrastructure.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our businesses and our relationship with
  customers are also dependent upon our ability to maintain the confidentiality
  of our and our customers&#146; trade secrets and confidential information (including
  personal data about our employees, our customers and our customers&#146; customers).
  While we undertake significant efforts to maintain and protect confidential
  information from theft, loss or other misappropriation, unauthorized access to
  such information can occur. In this regard, on May&nbsp;29, 2008, we announced
  that we are sending precautionary notifications to employees and certain customers
  of the former Investors Financial that computer equipment </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='16',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">containing certain personal data was stolen from the facility of an
  Investors Financial vendor.&#160; Any theft,
  loss or other misappropriation of confidential information could have a
  material adverse impact on our competitive positions, our relationships with
  our customers and our reputation and could subject us to regulatory inquiries
  and enforcement, civil litigation and possible financial liability or costs.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To the extent that we are not able to protect
  our intellectual property through patents or other means, we are also exposed
  to the risk that employees with knowledge of such intellectual property may
  leave and seek to exploit our intellectual property for their own or others&#146;
  advantage.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Litigation Risks</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">From time to time, our customers may make
  claims and take legal action relating to our performance of fiduciary or
  contractual responsibilities. If such claims and legal actions are not resolved
  in a manner favorable to us, such claims may result in financial liability to
  State Street and/or adversely affect the market perception of us and our
  products and services, and could impact customer demand for our products and
  services. We record balance sheet reserves for probable loss contingencies,
  including litigation and operational losses. However, we cannot always
  accurately estimate our ultimate exposure. As a result, any reserves we
  establish to cover any settlements, judgments or operational losses may not be
  sufficient to cover our actual financial exposure. Any underestimation or
  overestimation could have a material impact on our consolidated financial
  condition or results of operations.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In connection with certain of SSgA&#146;s active
  fixed-income strategies, we established a reserve to cover legal exposure and
  related costs in connection with such strategies as of December&nbsp;31, 2007.
  Among other things, the portfolio managers for certain actively managed
  fixed-income strategies materially increased the exposure of these strategies
  to securities collateralized by sub-prime mortgages and shifted the weighting
  of these portfolios to more highly rated sub-prime instruments. During the
  third quarter of 2007, as the liquidity and valuations of these securities,
  including the more highly rated instruments, came under increased pressure, the
  performance of these strategies was adversely affected, in some cases
  significantly. The underperformance, which was greater than that typically
  associated with fixed-income funds, also caused a number of our customers to
  question whether the execution of these strategies was consistent with their
  investment intent. This has resulted in several civil suits, including putative
  class action claims. These lawsuits allege, among other things, that we failed
  to comply with our standard of care in managing these active funds as a
  fiduciary under ERISA. We have also received and are in the process of
  responding to inquiries or subpoenas from federal and state regulatory
  authorities regarding SSgA&#146;s active fixed-income strategies. Given our desire
  to fully respond to customer concerns, following the end of the third quarter
  of 2007, State Street undertook a further review of all the actively managed
  fixed-income strategies at SSgA that were exposed to sub-prime investments.
  Based on our review and ongoing discussions with customers who were invested in
  these strategies, we established the reserve to address our estimated legal
  exposure.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The reserve was established based upon our
  best judgment as to legal exposures and related costs associated with certain
  actively managed fixed-income investment strategies. As of </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='17',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">March&nbsp;31, 2008, we had made settlement and related payments
  totaling approximately $275&nbsp;million, including amounts expended to support
  certain accounts managed by SSgA that benefit from contractual arrangements
  with &#147;wrap providers&#148;. The amount of the reserve is based on certain
  assumptions. While we believe the reserve represents a reasonable estimate of
  our legal exposure and other costs associated with these issues, we do not
  believe that it is feasible to predict or determine the amount of such exposure
  with certainty. As such, it is possible that we have overestimated or
  underestimated our exposure. If the amount of our actual exposure is materially
  different from our reserve, there would be a material impact on our
  consolidated financial condition and results of operations.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To determine whether the issues that arose
  within the active fixed-income area are limited to SSgA&#146;s active fixed-income
  strategies, we are conducting, with the assistance of third-party consultants,
  a systematic review of the operational, risk and compliance infrastructure,
  procedures and resources across SSgA&#146;s entire product line. While this review
  is ongoing, the conclusions or recommendations that have been made to date have
  not identified any material legal or regulatory exposures; however, there can
  be no assurance at this time as to the ultimate conclusions of such review.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Regulatory/Legal/Accounting/Tax
  Risk</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Most of our businesses are subject to
  extensive regulation, and many of the customers to which we provide services
  are themselves subject to a broad range of regulatory requirements. These
  regulations may affect the manner and terms of delivery of our services. As a
  financial institution with substantial international operations, we are subject
  to extensive regulatory and supervisory oversight, both in the U.S. and
  overseas in connection with our global operations. Our businesses are subject
  to stringent regulation and examination by U.S. federal and state governmental
  and regulatory agencies, including the Federal Reserve, the SEC and the
  Massachusetts Commissioner of Banks, and self-regulatory organizations
  (including securities exchanges), and by non-U.S. governmental and regulatory
  agencies and self-regulatory organizations. The regulations affect, among other
  things, the scope of our activities and customer services, our capital
  structure and our ability to fund the operations of our subsidiaries, our
  lending practices, our dividend policy and the manner in which we market our
  services. Evolving regulations, such as the new Basel II regulatory capital
  framework and anti-money laundering regulations, can require significant effort
  on our part to ensure compliance. New or modified regulations and related
  regulatory guidance may have unforeseen or unintended adverse effects on the
  financial services industry.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If we do not comply with governmental
  regulations, we may be subject to fines, penalties or material restrictions on
  our businesses in the jurisdiction where the violation occurred, which may
  adversely affect our business operations and, in turn, our financial results.
  Similarly, many of our customers are subject to significant regulatory
  requirements, and retain our services in order for us to assist them in
  complying with those legal requirements. Changes in these regulations can
  significantly affect the services that we are asked to provide, as well as our
  costs. If we cause customers to fail to comply with these regulatory
  requirements, we may be liable to them for losses and expenses that they incur.
  In addition, adverse publicity and damage to our reputation arising from the
  failure or perceived failure to comply with legal, regulatory or contractual
  requirements could affect our ability to attract and retain customers or to
  maintain </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='18',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">access to capital markets, or could result in enforcement actions,
  fines, penalties and lawsuits. In recent years, regulatory oversight and
  enforcement have increased substantially, imposing additional costs and
  increasing the potential risks associated with our operations. If this regulatory
  trend continues, it could adversely affect our operations and, in turn, our
  financial results.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the ordinary course of our business, we are
  involved from time to time in civil litigation or arbitration, including
  actions arising out of our contractual, fiduciary or employment
  relationships.&#160; In certain of these
  actions, claims for substantial monetary damages may be asserted against
  us.&#160; In the ordinary course of our business,
  we are also subject to various regulatory, governmental and law enforcement
  inquiries, investigations and subpoenas.&#160;
  These may be directed generally to participants in the businesses in
  which we are involved or may be specifically directed at us.&#160; In regulatory enforcement matters, claims for
  disgorgement, the imposition of penalties and the imposition of other remedial
  sanctions are possible.&#160; Among other
  inquiries, investigations and subpoenas, we have received federal and state
  regulatory inquiries or subpoenas relating to SSgA&#146;s active fixed-income
  strategies as to which we established a reserve in the fourth quarter of
  2007.&#160; There can be no assurance as to
  the outcome of the inquiries with regard to the SSgA&#146;s fixed-income strategies
  or any other matter. Additional legal actions or regulatory matters may be
  initiated from time to time in the future.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In view of the inherent difficulty of
  predicting the outcome of such legal actions and regulatory matters, we can not
  provide assurance as to the outcome of any pending matter or, if determined
  adversely to us, the costs associated with any such matter, particularly where
  the claimant seeks very large or indeterminate damages or where the matter
  presents novel legal theories, involves a large number of parties or is at a
  preliminary stage.&#160; Based upon the
  information currently available to us, we do not believe that any pending legal
  actions or regulatory matters will have a material adverse effect on our
  consolidated financial condition or results of operations.&#160; However, the resolution of certain pending
  legal actions or regulatory matters, if unfavorable, could have a material
  adverse effect on our consolidated results of operations for any particular
  quarter, depending on the magnitude of the loss or liability relative to our
  results for that quarter.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">New accounting standards, or changes in the
  interpretation of existing accounting standards, by the Financial Accounting
  Standards Board or the SEC, can potentially affect our consolidated financial
  condition and results of operations. These changes are very difficult to
  predict, and can materially impact how we record and report our consolidated
  financial condition and results of operations and other financial information.
  In some cases, we could be required to apply a new or revised standard
  retroactively, resulting in the revised treatment of certain transactions or
  activities, and, in some cases, the restatement of prior period financial
  statements.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our businesses can be affected by new tax
  legislation or the interpretation of existing tax laws worldwide. Changes in
  tax laws may affect our business directly or indirectly through their impact on
  the financial markets. In the normal course of business, we are subject to
  reviews by U.S. and non-U.S. tax authorities. These reviews may result in
  adjustments to the timing or amount of taxes due and the allocation of taxable
  income among tax jurisdictions. These adjustments could affect the attainment
  of our financial goals.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='19',FILE='C:\JMS\jkarthi\08-15737-1\task2970378\15737-1-ba-03.htm',USER='105429',CD='Jun  3 02:15 2008' -->
  
  
  
  <br clear="all" style="page-break-before:always;">
  <div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Prior
  to 2004, we entered into certain leveraged leases, known as sale-in, lease-out,
  or SILO, transactions.&nbsp; In accordance with Statement of Financial
  Accounting Standards, or SFAS, No.&nbsp;13, <i>Accounting for Leases</i>,
  we recorded income and deferred tax liabilities with respect to the SILO
  transactions based on projected pre-tax and tax cash flows. The Internal
  Revenue Service, or IRS, has proposed disallowing tax deductions arising from
  those transactions, and we have been engaged in settlement discussions.&nbsp; In
  connection with these discussions we have revised our projections of the timing
  of tax cash flows and we have reflected those revisions in our leveraged lease
  accounting under SFAS No.&nbsp;13.&nbsp; We have also substantially reserved
  for tax-related interest expense that may be incurred upon resolution of this
  matter. On May&nbsp;28, 2008, in a case involving a SILO transaction of another
  taxpayer, a federal district court upheld the IRS&#146; tax position. We do not yet
  know what effect, if any, such decision may have on our settlement discussions
  with the IRS or on our evaluation of the potential exposure with respect to the
  SILO transactions.&nbsp; If we were to further revise our projection of the
  timing of tax cash flows from the leases, SFAS No.&nbsp;13 would require us to
  again recalculate the rate of return and the timing of the recognition of
  income from the leases from inception.&nbsp; The effect of the SFAS No.&nbsp;13
  recalculation would be to reschedule the recognition of previously-recognized
  income to future periods; that is, the charge we would record to income during
  the period of revision would be recovered over the remaining lives of the
  leases.&nbsp; In addition to the SFAS No.&nbsp;13 recalculation, we would
  increase our reserve for tax-related interest expense, which would be recorded
  as an increase to income tax expense.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Risk
  Management</font></i></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A
  comprehensive and well-integrated risk management function linked to our
  strategy and capital is essential to the financial and operational success of
  our global business activities. We seek to monitor and manage risk on a
  corporate basis and within specific business units. The types of risk that we
  monitor and seek to manage include, but are not limited to, operational risk,
  interest-rate risk, trading risk, fiduciary risk, legal and compliance risk,
  liquidity risk and credit risk. We have adopted various policies, procedures
  and systems to monitor and manage risk. There can be no assurance that those
  policies, procedures or systems are adequate to identify and mitigate all risks
  inherent in our various business. In addition, our businesses and the markets
  in which we operate are continuously evolving. We may fail to fully understand
  the implications of changes in our business or the financial markets and fail
  to adequately or timely enhance our risk framework to address those changes. If
  our risk framework is ineffective, either because it fails to keep pace with
  changes in the financial markets or our business or for other reasons, we could
  incur losses.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We
  also measure our material risks. Our measurement methodologies rely upon many
  assumptions and historical analyses and correlations. There can be no assurance
  that those assumptions will be correct or that the historical correlations will
  continue to be relevant. Consequently the measurements that we make for
  regulatory and economic capital may not adequately capture or express the true
  risk profiles of our businesses. Additionally, as businesses and markets
  evolve, our measurements may not accurately reflect those changes. While our
  risk measures may indicate sufficient capitalization, we may in fact have
  inadequate capital to conduct our businesses.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20</font></p>
  
  <div><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='20',FILE='C:\JMS\105576\08-15737-1\task2969807\15737-1-ba-05.htm',USER='105576',CD='Jun  2 22:05 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Capital Ratios</font></b></p>
  
  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">The following are certain of our capital ratios as of March&nbsp;31,
  2008:</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">&nbsp;</font></p>
  
  <table border="0" cellspacing="0" cellpadding="0" width="60%" style="border-collapse:collapse;width:60.0%;">
   <tr>
    <td width="74%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:74.72%;">
    <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">Tier 1 leverage ratio</font></p>
    </td>
    <td width="4%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:4.88%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
    <td width="17%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:17.62%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">6.1</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.78%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">%</font></p>
    </td>
   </tr>
   <tr>
    <td width="74%" valign="top" style="padding:0in 0in 0in 0in;width:74.72%;">
    <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">Tier 1 risk-based capital ratio</font></p>
    </td>
    <td width="4%" valign="bottom" style="padding:0in 0in 0in 0in;width:4.88%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
    <td width="17%" valign="bottom" style="padding:0in 0in 0in 0in;width:17.62%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">12.4</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.78%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="74%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:74.72%;">
    <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">Total risk-based capital ratio</font></p>
    </td>
    <td width="4%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:4.88%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
    <td width="17%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:17.62%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">13.8</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.78%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="74%" valign="top" style="padding:0in 0in 0in 0in;width:74.72%;">
    <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">Tangible common equity to tangible assets (TCE/TA)</font></p>
    </td>
    <td width="4%" valign="bottom" style="padding:0in 0in 0in 0in;width:4.88%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
    <td width="17%" valign="bottom" style="padding:0in 0in 0in 0in;width:17.62%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;layout-grid-mode:both;">2.9</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.78%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;layout-grid-mode:both;">&nbsp;</font></p>
    </td>
   </tr>
  </table>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Investment
  Portfolio and Asset-Backed Commercial Paper Conduits</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Information concerning State Street&#146;s investment portfolio and
  asset-backed<b>  </b>commercial paper conduit program
  is filed with this Form&nbsp;8-K as Exhibit&nbsp;99.1.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item
  9.01.&#160;&#160;&#160;&#160;&#160;&#160;&#160; Financial Statements and
  Exhibits.</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&nbsp;<i>Exhibits.</i></font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">99.1</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Information
  concerning State Street&#146;s investment portfolio and asset-backed<b>  </b>commercial paper conduit program.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21</font></p>
  
  <div><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='21',FILE='C:\JMS\105576\08-15737-1\task2969807\15737-1-ba-05.htm',USER='105576',CD='Jun  2 22:05 2008' -->
  
  
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  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SIGNATURES</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly
  caused this report to be signed on its behalf by the undersigned hereunto duly
  authorized.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
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    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="51%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:51.5%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">STATE STREET
    CORPORATION</font></p>
    </td>
   </tr>
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    <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.5%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="51%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:51.5%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
   </tr>
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    <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.5%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
    </td>
    <td width="45%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:45.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ David C. Phelan</font></p>
    </td>
   </tr>
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    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:&nbsp;</font></p>
    </td>
    <td width="45%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:45.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">David C. Phelan</font></p>
    </td>
   </tr>
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    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
    </td>
    <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executive Vice
    President and General<br>
    Counsel</font></p>
    </td>
   </tr>
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    <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.5%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
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    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date June&nbsp;2, 2008</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
  </table>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22</font></p>
  
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  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT INDEX</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>
  
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    <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Exhibit&nbsp;No.</font></b></p>
    </td>
    <td width="3%" valign="bottom" style="padding:0in 0in 0in 0in;width:3.4%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="86%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:86.16%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Description</font></b></p>
    </td>
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    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="3%" valign="bottom" style="padding:0in 0in 0in 0in;width:3.4%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="86%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:86.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
   </tr>
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    <td width="10%" valign="top" style="padding:0in 0in 0in 0in;width:10.44%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">99.1</font></p>
    </td>
    <td width="3%" valign="bottom" style="padding:0in 0in 0in 0in;width:3.4%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="86%" valign="top" style="padding:0in 0in 0in 0in;width:86.16%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Information concerning
    State Street&#146;s investment portfolio and asset-backed<b>  </b>commercial
    paper conduit program.</font></p>
    </td>
   </tr>
  </table>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">23</font></p>
  
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metadata_documents: [{"type": "8-K", "sequence": "1", "filename": "a08-15737_18k.htm", "description": "8-K", "secsgml_size_bytes": 140303}]
metadata_filer: {"company-data": {"conformed-name": "STATE STREET CORP", "cik": "0000093751", "assigned-sic": "6022", "irs-number": "042456637", "state-of-incorporation": "MA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-07511", "film-number": "08874692"}, "business-address": {"street1": "STATE STREET FINANCIAL CENTER", "street2": "ONE LINCOLN STREET", "city": "BOSTON", "state": "MA", "zip": "02111", "phone": "6177863000"}, "mail-address": {"street1": "STATE STREET FINANCIAL CENTER", "street2": "ONE LINCOLN STREET", "city": "BOSTON", "state": "MA", "zip": "02111"}, "former-company": {"former-conformed-name": "STATE STREET BOSTON FINANCIAL CORP", "date-changed": "19780525"}}
text: UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 
  20549
  FORM 8-K
  CURRENT REPORT
  Pursuant to Section 13 or 15(d) of the
  Securities Exchange Act of 1934
  Date of Report
  (Date of earliest event reported):
  June 2, 2008
  State Street Corporation
  (Exact name of registrant as specified in its charter)
  Massachusetts
  001-07511
  04-2456637
  (State of
    Incorporation)
  (Commission File
    Number)
  (IRS Employer
    Identification Number)
  One
    Lincoln Street, Boston, Massachusetts
  02111
  (Address of principal
    executive offices)
  (Zip code)
  Registrant's
  telephone number, including area code:
  (617) 786-3000
  Check the appropriate box
  below if the Form 8-K filing is intended to simultaneously satisfy the
  filing obligation of the registrant under any of the following provisions:
  o
  Written communications pursuant to Rule 425
  under the Securities Act
  o
  Soliciting material pursuant to Rule 14a-12
  under the Exchange Act
  o
  Pre-commencement communications pursuant to
  Rule 14d-2(b) under the Exchange Act
  o
  Pre-commencement communications pursuant to
  Rule 13e-4(c) under the Exchange Act
  Item 8.01.
  Other
  Events
  We are filing this
  current report on Form 8-K for the purposes of (1) updating our risk factor
  disclosures, in particular the disclosures (a) under the heading "Liquidity
  Risk," concerning accounts managed by State Street Global Advisors, or SSgA,
  that have the benefit of contractual arrangements with third-party financial
  institutions known as "wrap providers," (b) under the heading "Operational Risk,"
  concerning the maintenance of confidential information; and (c) under the
  heading "Regulatory/Legal/Accounting/Tax Risk" concerning legal actions,
  regulatory matters and tax matters, (2) filing certain capital ratio
  information and (3) filing certain information concerning State Street's
  investment portfolio and asset-backed commercial paper conduits.
  Unless otherwise
  indicated or unless the context requires otherwise, all references in this
  Current Report on Form 8-K to "State Street," "we," "us," "our," or similar
  terms means State Street Corporation and its subsidiaries on a consolidated
  basis.
  Risk
  Factors
  This Form 8-K and other reports filed by us under the Securities
  Exchange Act of 1934 or registration statements under the Securities Act of 1933
  contains statements that are considered "forward-looking statements" within the
  meaning of United States securities laws. In addition, State Street and its
  management may make other written or oral communications from time to time that
  contain forward-looking statements. Forward-looking statements, including
  statements about industry trends, management's future expectations and other
  matters that do not relate strictly to historical facts, are based on
  assumptions by management, and are often identified by such forward-looking
  terminology as "expect," "look," "believe," "anticipate," "estimate," "seek," "may,"
  "will," "trend," "target" and "goal," or similar statements or variations of
  such terms. Forward-looking statements may include, among other things,
  statements about State Street's confidence in its strategies and its
  expectations about financial performance, market growth, acquisitions and
  divestitures, new technologies, services and opportunities and earnings.
  Forward-looking statements are subject to various risks and
  uncertainties, which change over time, are based on management's expectations
  and assumptions at the time the statements are made, and are not guarantees of
  future results. Management's expectations and assumptions, and the continued validity
  of the forward-looking statements, are subject to change due to a broad range
  of factors affecting the national and global economies, the equity, debt,
  currency and other financial markets, as well as factors specific to State
  Street and its subsidiaries, including State Street Bank. Factors that could
  cause changes in the expectations or assumptions on which forward-looking
  statements are based include, but are not limited to:
  ·
  our ability to integrate acquisitions into
  our business, including the acquisition of Investors Financial Services Corp. ("Investors
  Financial");
  ·
  the level and volatility of interest rates,
  particularly in the U.S., Europe and the Asia/Pacific region; the performance
  and volatility of securities, currency and other markets in the U.S. and
  internationally; and economic conditions and monetary and other governmental
  actions designed to address those conditions;
  2
  ·
  the liquidity of the U.S. and international
  securities markets, particularly the markets for fixed-income securities,
  including asset-backed commercial paper, and the liquidity requirements of our
  customers;
  ·
  our ability to measure the fair value of securities
  in our investment securities portfolio, particularly given current market
  conditions for many of these securities;
  ·
  the credit quality and credit agency ratings
  of the securities in our investment securities portfolio, a deterioration or
  downgrade of which could lead to other-than-temporary impairment of the
  respective securities and the recognition of an impairment loss;
  ·
  our ability to attract non-interest bearing
  deposits and other low-cost funds;
  ·
  the possibility that changes in market conditions
  or asset performance may require any off-balance sheet activities, including
  our asset-backed commercial paper conduits, to be consolidated into our
  financial statements, requiring the recognition of associated losses, if any;
  ·
  the results of litigation and similar
  disputes and, in particular, the effect that current or potential litigation
  may have on our reputation and SSgA's reputation, and our ability to attract
  and retain customers; and the possibility that the ultimate costs of the
  legal exposure associated with certain of SSgA's actively managed fixed-income
  strategies may exceed or be below the level of the related reserve, in view of the uncertainties of the timing and
  outcome of litigation, and the amounts involved;
  ·
  the possibility of further developments of
  the nature that previously gave rise to the legal exposure associated with
  certain of SSgA's actively managed fixed-income and other investment
  strategies;
  ·
  the performance and demand for the products
  and services we offer;
  ·
  the competitive environment in which we
  operate;
  ·
  the enactment of legislation and changes in
  regulation and enforcement that impact us and our customers, as well as the
  effects of legal and regulatory proceedings, including litigation;
  ·
  our ability to continue to grow revenue,
  control expenses and attract the capital necessary to achieve our business
  goals and comply with regulatory requirements;
  ·
  our ability to manage systemic risks and
  control operating risks;
  ·
  our ability to obtain quality and timely
  services from third parties with which we contract;
  3
  ·
  trends in the globalization of investment
  activity and the growth on a worldwide basis in financial assets;
  ·
  trends in governmental and corporate pension
  plans and savings rates;
  ·
  changes in accounting standards and
  practices, including changes in the interpretation of existing standards, that
  impact our consolidated financial statements; and
  ·
  changes in tax legislation and in the
  interpretation of existing tax laws by U.S. and non-U.S. tax authorities that
  impact the amount of taxes due.
  Therefore, actual outcomes and results may differ materially from what
  is expressed in our forward-looking statements and from our historical
  financial results due to the factors discussed above, below and elsewhere in
  this Form 8-K or disclosed in our other Securities and Exchange
  Commission, or "SEC," filings. 
  Forward-looking statements should not be relied upon as representing our
  expectations or beliefs as of any date subsequent to the date this Form 8-K
  is filed with the SEC. State Street undertakes no obligation to revise the
  forward-looking statements contained in this Form 8-K to reflect events
  after the date it is filed with the SEC. The factors discussed above are not
  intended to be a complete summary of all risks and uncertainties that may
  affect our businesses. Though we strive to monitor and mitigate risk, we cannot
  anticipate all potential economic, operational and financial developments that
  may adversely impact our operations and our financial results.
  Forward-looking statements should not be viewed as predictions, and
  should not be the primary basis upon which investors evaluate State Street. Any
  investor in State Street should consider all risks and uncertainties disclosed
  in our SEC filings, including our filings under the Securities Exchange Act of
  1934, including our reports on Form 10-K, Form 10-Q and Form 8-K,
  or registration statements under the Securities Act of 1933, all of which are
  accessible on the SEC's website at
  www.sec.gov
  or on our website at
  www.statestreet.com
  .
  Business Conditions/Economic Risk
  Our businesses are affected by global economic conditions, political
  uncertainties and volatility and other developments in the financial markets.
  Factors such as interest rates and commodities prices, regional and
  international rates of economic growth, inflation, political instability, the
  liquidity and volatility of fixed-income, equity, credit, currency, derivative
  and other financial markets, and investor confidence can significantly affect
  the financial markets in which we and our customers are engaged. Such factors
  have affected, and may further unfavorably affect, both regional and worldwide
  economic growth, creating adverse effects on many companies, including us, in
  ways that are not predictable or that we may fail to anticipate.
  A significant market downturn may lead to a decline in the value of
  assets under management and custody, which could reduce our asset-based fee
  revenue and may adversely impact other transaction-based revenue, such as
  securities finance revenue, and the volume of transactions that we execute for
  our customers. This market downturn could be accompanied by a widening of
  credit spreads or credit deterioration, which could reduce the value of
  securities we hold in our investment portfolio. The assets held by our
  asset-backed commercial paper conduits
  4
  can be
  similarly affected. In addition, lower market volatility, even in a generally
  rising market environment, may reduce trading volumes of our customers, and our
  ability to achieve attractive spreads, which could lead to lower trading
  revenues. Our revenues, particularly our trading revenues, may increase or
  decrease depending upon the extent of increases or decreases in cross-border
  investments made by our customers. The level of cross-border activity can be
  influenced by a number of factors, including geopolitical instabilities and
  customer mix. General market downturns would also likely lead to a decline in
  the volume of transactions we execute on behalf of our customers, decreasing
  our fee and revenue opportunities and reducing the level of assets under
  management and custody. Market performance and volatility may also influence
  the revenue that we receive from off-balance sheet activities.
  In addition, revenues during a calendar year, driven by the products
  and services we provide, can fluctuate commensurate with the normal course of
  business activity of our customers and market conditions, and may provide
  volatility to our earnings from quarter to quarter.
  In recent years, investment manager and hedge fund manager operations
  outsourcing and non-U.S. asset servicing have been areas of rapid growth in our
  business. If the demand for these types of services were to decline, we could
  see a slowdown in the growth rate of our revenue.
  Strategic/Competition Risk
  We expect the markets in which we operate to remain both highly
  competitive and global across all facets of our business, resulting in
  increases in both regional and global competitive risks. We have experienced,
  and anticipate that we will continue to experience, pricing pressure in many of
  our core businesses. Many of our businesses compete with other domestic and
  international banks and financial services companies, such as custody banks,
  investment advisors, broker/dealers, outsourcing companies and data processing
  companies. Many of our competitors, including our competitors in core services,
  have substantially greater capital resources. In some of our businesses, we are
  service providers to significant competitors. These competitors are in some
  instances significant customers, and the retention of these customers involves
  additional risks, such as the avoidance of actual or perceived conflicts of
  interest and the maintenance of high levels of service quality. The ability of
  a competitor to offer comparable or improved products or services at a lower
  price would likely negatively affect our ability to maintain or increase our
  profitability. Many of our core services are subject to contracts that have
  relatively short terms or may be terminated by our customer after a short
  notice period. In addition, pricing pressures as a result of the activities of
  competitors, customer pricing reviews, and rebids, as well as the introduction
  of new products, may result in a reduction in the prices we can charge for our
  products and services.
  Our strategy for growth depends upon both attracting new customers and
  cross-selling additional products and services to our existing customer base.
  To the extent that we are not able to achieve these goals, we may not be able
  to attain our financial goals. Substantial risks and uncertainties are
  associated with the introduction of new products and services, including
  technical and control requirements that may need to be developed and
  implemented to offer such products while also managing associated risks. The
  introduction of new products and services can also entail significant time and
  resources. Regulatory and internal control requirements,
  5
  capital
  requirements, competitive alternatives and shifting market preferences may also
  determine if such initiatives can be brought to market in a manner that is
  timely and attractive to our customers. Failure to successfully manage these
  risks in the development and implementation of new products or services could
  have a material adverse effect on our business, as well as our results of
  operations and financial condition.
  Our financial performance depends, in part, on our ability to develop
  and market new and innovative services and to adopt or develop new technologies
  that differentiate our products or provide cost efficiencies, while avoiding
  increased related expenses. The risks we face include rapid technological
  change in the industry, our ability to access technical and other information
  from our customers, and the significant and ongoing investments required to bring
  new products and services to market in a timely manner at competitive prices.
  Our proactive cross-selling of multiple products and services to our customers
  can exacerbate the negative financial effects associated with the risk of loss
  of any one customer. Developments in the securities processing industry,
  including shortened settlement cycles and straight-through processing, have
  required continued internal procedural enhancements and further technology
  investment.
  Acquisitions of complementary businesses and technologies, development
  of strategic alliances and divestitures of portions of our business, in
  addition to fostering organic growth opportunities, are an active part of our
  overall business strategy to remain competitive. We may not be able to effectively
  assimilate services, technologies, key personnel or businesses of acquired
  companies into our business or service offerings, alliances may not be
  successful, and we may not achieve related revenue growth or cost savings. In
  addition, we may not be able to successfully manage the divestiture of
  identified businesses on satisfactory terms, if at all, and this would reduce
  anticipated benefits to earnings. Ongoing consolidation within the financial
  services industry could pose challenges in the markets we serve.
  Acquisitions present risks that differ from the risks associated with
  our ongoing operations. Our financial results for 2008 and for the next few
  years may be significantly impacted by our ability to achieve the cost savings
  and other benefits that we anticipate as a result of the acquisition of
  Investors Financial in 2007, as well as our ability to retain its customer base
  and to successfully cross-sell our products and services to its customers.
  These cost savings and customer retention goals will be significantly
  influenced by our ability to convert former Investors Financial customers onto
  State Street systems in a timely manner and to maintain the level of customer
  service such customers received from Investors Financial. Future acquisitions
  may present similar integration, cost savings and customer retention
  challenges.
  Intellectual property of an acquired business, such as Currenex, Inc.,
  acquired in 2007, may be an important component of the value that we agree to
  pay for such a business; however, these types of acquisitions entail the risk
  that the acquired business does not own the intellectual property that we
  believe we are acquiring, that the intellectual property is dependent upon
  licenses from third parties, that the acquired business infringes upon the
  intellectual property rights of others, or that the technology does not have
  the acceptance in the marketplace that we anticipated. Acquisitions of
  investment servicing businesses such as Investors Financial normally entail
  information technology systems conversions, which involve operational risks and
  may result in customer dissatisfaction and defection. Customers of businesses
  that we acquire, including, in the case of Investors Financial, its largest
  customer, are competitors of our non-
  6
  custody
  businesses. The loss of some of these customers or a significant reduction in
  revenues generated from them, for competitive or other reasons, would adversely
  affect the benefits that we expect to achieve from the acquisition.
  Our ability to acquire other entities that provide our core services to
  achieve greater economies of scale or to expand our product offering is
  dependent upon our financial resources and our ability to access the capital
  markets. Due to company-specific issues or lack of liquidity in the capital
  markets, our ability to continue to expand through acquisitions or to dispose
  of businesses that no longer are strategic to us may be adversely affected.
  In connection with most acquisitions, before the acquisition can be
  completed, we must obtain various regulatory approvals or consents, which may
  include approvals of the Federal Reserve Board, the Massachusetts Commissioner
  of Banks and other domestic and foreign regulatory authorities. These
  regulatory authorities may impose conditions on the completion of the acquisition
  or require changes to its terms. Any such conditions, or any associated
  regulatory delays, could limit the benefits of the transaction.
  With any acquisition, the integration of the operations and resources
  of the businesses could result in the loss of key employees, the disruption of
  our and the acquired company's ongoing businesses, or inconsistencies in
  standards, controls, procedures and policies that could adversely affect our
  ability to maintain relationships with customers and employees or to achieve
  the anticipated benefits of the acquisition. Integration efforts may also
  divert management attention and resources. The acquisition and combination of a
  business with our operations may also expose us to risks from unknown or
  contingent liabilities with respect to which we may have no recourse against
  the seller. While we normally seek to mitigate that risk through
  pre-acquisition due diligence, increasingly acquisition transactions are
  competitive auctions in which we have limited time and access to information to
  evaluate the risks inherent in the business being acquired, and no or limited
  recourse against the seller if undisclosed liabilities are discovered after we
  enter into a definitive agreement.
  We may not achieve the benefits we sought in an acquisition, or, if
  achieved, those benefits may be achieved later than we anticipated. Failure to
  achieve anticipated benefits from an acquisition could result in increased
  costs and lower revenues than expected of the combined company. In addition, if
  the financial performance associated with an acquisition falls short of
  expectations, it may result in impairment charges associated with the goodwill
  or other intangible assets recorded as part of the acquisition.
  Liquidity Risk
  The management of liquidity risk is critical to the management of our
  consolidated balance sheet and to our ability to service our customer base. In
  managing our consolidated balance sheet, our primary source of funding is
  customer deposits. These deposits are predominantly short-term,
  transaction-based deposits by institutional investors. Our ability to continue
  to attract these deposits, and other funding sources such as certificates of
  deposit and commercial paper, is subject to variability based upon a number of
  factors, including volume and volatility in the global securities markets, our
  credit rating and the relative interest rates that we are prepared to pay for
  these liabilities.
  7
  In managing our consolidated balance sheet,
  we also depend on access to global capital markets to provide us with
  sufficient capital resources and liquidity to meet our commitments and business
  needs, and to accommodate the transaction and cash management needs of our
  customers. Other sources of funding available to us, and upon which we rely as
  regular components of our liquidity risk management strategy, include
  inter-bank borrowings, repurchase agreements and borrowings from the Federal
  Reserve discount window, or comparable non-U.S. central banking sources. Any
  occurrence that may limit our access to the capital markets, such as a decline
  in the confidence of our corporate debt or equity purchasers, or a downgrade of
  any of our credit ratings, may adversely affect our capital costs and our
  ability to raise capital and, in turn, our liquidity. Similarly, the failure to
  maintain acceptable credit ratings may preclude us from being competitive in
  certain products. General market disruptions, natural disasters or operational
  problems may affect either third parties or us, and can also have an adverse
  affect on our liquidity.  We generally use our sources of funds to invest
  in a portfolio of investment securities and to maintain the liquidity necessary
  to extend credit to our customers. These funds are invested in a variety of
  assets ranging from short-term interest-bearing deposits with banks to
  longer-maturity investment securities. While we have historically maintained
  our investment portfolio at a relatively short duration with respect to
  interest-rate risk, the average maturity of the investment portfolio is
  significantly longer than the contractual maturity of our deposit base. In
  addition, as part of our custody business, we provide overdraft financing to
  our customers, and liquidity lines to third-party commercial paper conduits and
  mutual funds, as well as more traditional extensions of credit. The demand for
  credit is difficult to forecast and control, and may be at its peak at times of
  dislocation in the securities markets, potentially compounding liquidity
  issues.
  In a period of financial disruption, or if
  negative developments occurred with respect to State Street, the availability
  and cost of our funding sources could be adversely affected. In that event, our
  cost of funds may increase, thereby reducing our net interest revenue, or we
  may need to dispose of a portion of our investment portfolio, which, depending
  upon market conditions, could result in our realizing a loss or experiencing
  other adverse accounting consequences upon those dispositions. Our efforts to
  monitor and manage liquidity risk may not be successful or sufficient to deal
  with dramatic or unanticipated changes in the global securities markets or
  other State Street or market event-driven reductions in liquidity.
  At March 31, 2008, including the effect
  of master netting agreements, approximately $78.28 billion of our
  consolidated total assets and approximately $9.10 billion of our
  consolidated total liabilities were carried at fair value. Of the total assets
  carried at fair value, approximately $68.01 billion consisted of
  investment securities available for sale, with the remainder primarily composed
  of derivative instruments. More than 90% of the available-for-sale securities and
  substantially all of the derivative instruments were categorized in
  level 2 of the valuation hierarchy (meaning that their fair value was
  determined by reference to quoted prices for similar assets or liabilities or
  other observable inputs), with the remaining amounts categorized in
  level 3 (meaning that their fair value was determined by reference to
  inputs that are unobservable in the market and therefore require a greater
  degree of management judgment). Excluding the effect of master netting
  agreements, the fair value of level 3 assets at March 31, 2008 was
  $6.97 billion, or 8.5% of total assets carried at fair value, and the fair
  value of level 3 liabilities was $656 million, or 5% of total
  liabilities carried at fair value. The determination of
  8
  fair value for securities categorized in level 2 or 3
  involves significant judgment due to the complexity of factors contributing to
  the valuation, many of which are not readily observable in the market. In addition,
  we have historically placed a high level of reliance on information obtained
  from third-party sources to measure fair values. Third-party sources also use
  assumptions, judgments and estimates in determining securities values, and
  different third parties may provide different prices for securities. Moreover,
  depending upon, among other things, the measurement date of the security, the
  subsequent sale price of the security may be different from its recorded fair
  value. These differences may be significant especially if the security is sold
  during a period of illiquidity or market disruption or as part of a large block
  of securities under a forced transaction. See note 9, "Fair Value
  Measurements," to the consolidated financial statements included in our Quarterly
  Report on Form 10-Q for the quarter ended March 31, 2008 for a more
  detailed discussion of the criteria used to categorize securities in
  level 1, 2 or 3 of the valuation hierarchy.
  As of March 31, 2008, in connection with
  management's measurements of fair value referenced above, there were
  $3.16 billion of pre-tax net unrealized losses associated with our
  investment securities portfolio. When the fair value of a security declines,
  management must assess whether that decline is "other-than-temporary." When the
  decline in fair value is deemed an "other-than-temporary" impairment, the
  amortized cost basis of the investment security is reduced to its then current
  fair value through a charge to earnings. The review of whether a decline in
  fair value is other-than-temporary considers numerous factors such as: adverse
  situations that might affect the ability to fully collect interest and
  principal; the credit quality and performance of any underlying collateral and
  guarantees; the length of time the amortized cost has exceeded the fair value
  and the severity of this impairment relative to the security's amortized cost
  basis; external credit ratings and current developments with respect to the
  security; management's intent and ability to hold the security until recovery
  in market value; management's assessment of current market conditions and
  future expectations; and current and expected future interest rates. Many of
  these factors involve significant judgment. If all or a significant portion of
  this unrealized loss were determined to be other-than-temporary impairment, we
  would recognize a material charge to earnings in the quarter during which such
  determination was made, our capital ratios would be adversely impacted and a
  rating agency might downgrade our credit rating or put us on credit watch. A
  downgrade or a significant reduction in our capital ratios might adversely
  impact our ability to access the capital markets or might increase our cost of
  capital.
  In our business activities, we assume
  liquidity and interest-rate risk in managing longer-term assets or asset pools
  for third parties that are funded on a short-term basis, or where the customers
  participating in these products may have a right to the return of cash or
  assets on limited notice. These business activities include, among others, the
  unconsolidated asset-backed commercial paper conduits administered by our
  Structured Products group, securities finance collateral pools and money market
  and other short-term investment funds.
  In the asset-backed commercial paper
  conduits, for example, pools of medium- and long-term financial instruments,
  principally mortgage- and other asset-backed securities, are financed through
  the issuance of short-term commercial paper. The conduits strive to maintain a positive
  margin between the rate of return on their longer-term assets and the
  short-term cost of funding. This mismatch in the maturity of the investment
  pools and funding creates risk if disruptions
  9
  occur in the liquidity of the short-term debt or asset-backed
  securities markets, or if the cost of short-term borrowings exceeds the
  conduits' rate of return on their investment pools or purchased assets.
  In connection with the administration of the
  activities of the asset-backed commercial paper conduits, we provide
  contractual back-up liquidity to the conduits if they cannot meet their
  liquidity needs through the issuance of commercial paper. In the event that
  maturing commercial paper cannot be placed by the conduits, we are required by
  contract to, among other things, provide liquidity to the conduits by
  purchasing portfolio assets from them. During the first quarter of 2008,
  pursuant to these contractual obligations, we were required to purchase $850 million
  of conduit assets. The securities were purchased at prices determined in
  accordance with existing contractual terms of the liquidity asset purchase
  agreement, and which exceeded their fair value. Accordingly, the securities
  were written down to fair value through a $12 million reduction of
  processing fees and other revenue in our consolidated statement of income.
  These purchases were funded from our general liquidity, and the assets were
  recorded on our consolidated balance sheet. We also provide liquidity by
  purchasing commercial paper or providing other extensions of credit to the
  conduits. As of April 30, 2008, we held on our consolidated balance sheet
  an aggregate of approximately $1.18 billion of commercial paper issued by
  the conduits, compared to $292 million as of March 31, 2008 and
  $2 million as of December 31, 2007. Our contractual arrangements with
  the conduits also require that we purchase conduit portfolio assets under other
  circumstances, such as a downgrade of our credit rating.
  If circumstances change we may be required,
  under existing accounting standards, to consolidate some or all of the
  otherwise unconsolidated conduits onto our consolidated balance sheet. In the
  event State Street were to consolidate the conduits, there may be a significant
  charge reflecting the difference between the book value and the market value of
  each of the conduit's portfolios. For example, if changes in market conditions
  require us to update the assumptions in our expected loss model, we may be
  required to increase the amount of first-loss notes in order for the investors
  in the first-loss notes to continue to be considered the primary beneficiaries
  of the conduits. During the first quarter of 2008, some of the conduits issued
  additional first-loss notes totaling $20 million to third parties,
  increasing the total first-loss notes outstanding at March 31, 2008 to
  $52 million. In various circumstances, including if the conduits are not
  able to issue additional first-loss notes or take other actions, we may be determined
  to be the primary beneficiary of the conduits, and we would be required to
  consolidate the conduits' assets and liabilities onto our consolidated balance
  sheet. In addition, existing accounting standards may be changed or interpreted
  differently in the future in a manner that increases the risk of consolidation
  of the conduits.
  Consolidation, or the purchase of the assets
  of the conduits pursuant to the contractual agreements described above, could
  affect the size of our consolidated balance sheet and related funding
  requirements, our financial and regulatory capital ratios and, if the conduit
  assets include unrealized losses, could require us to recognize those losses.
  As of March 31, 2008, these unrealized losses amount to $1.49 billion
  after-tax. Because of our contractual agreements to purchase assets from the
  conduits under specified conditions, we are also exposed to the credit risks in
  the conduits' portfolios subject to first-loss coverage. Conditions in the
  financial markets that might warrant consolidation of the conduits or the
  purchase of assets may also require us to
  10
  recognize other-than-temporary impairment in our investment portfolio.
  The Financial Accounting Standard Board is considering changes to accounting
  standards related to off-balance sheet vehicles such as the conduits, and
  industry-wide revisions are under discussion that could require us to
  consolidate all of the conduits we administer into our financial statements in
  the future, possibly as early as January 1, 2009.
  If consolidation of the conduits, purchase of
  the conduit assets pursuant to contractual arrangements or recognition of
  unrealized loss as other-than-temporary impairment were to occur, our capital
  ratios would be adversely affected. The degree of the adverse impact would
  depend upon many factors including our capital ratios at the time of such
  occurrence, the amount of loss realized and management actions, such as raising
  capital, that might mitigate the impact of a loss.
  We also manage other assets that are funded
  in the short-term markets and invested in longer-term markets, including
  securities finance collateral pools and money market and other short-term
  investment funds. These businesses involve risks inherent in an arbitrage of
  funding and investment; however, in these businesses, we primarily act as agent
  and do not have the direct principal risk. For example, if a collateral pool or
  a money market fund that we manage were to have unexpected liquidity demands
  from investors in the pool that exceeded available liquidity, the investment
  pool could be required to sell assets to meet those redemption requirements.
  During periods of disruption in the credit markets, it may be difficult to sell
  the assets held by these pools at a reasonable price. In those circumstances,
  the financial loss accrues to the pools' investors and not to us.
  The credit risks inherent in these portfolios
  are attributable to the investors in the investment pools and not to State
  Street. These investment pools may have significant exposure to individual
  credits. The incurrence of substantial losses in these pools, particularly in
  money market funds, could result in significant harm to our reputation and
  significantly and adversely affect the prospects of our associated business
  units. In some circumstances, we may seek to mitigate that risk by compensating
  the investment pools for all or a portion of such losses even though we are not
  contractually obligated to do so; however, that would potentially result in the
  recognition of significant losses or a greater use of capital than we have
  available and could in certain extreme situations require us to consolidate the
  investment pools onto our consolidated balance sheet.
  SSgA manages certain accounts that have the benefit of contractual
  arrangements with third party financial institutions, which allow the accounts
  to issue and redeem units based upon the book value of the account's assets
  rather than their market value. The third-party financial institutions, know as
  "wrap providers", generally have an obligation to fund any shortfall in the
  account after all qualified participant withdrawals have been redeemed at a
  price based upon the assets' book value. As of April 30, 2008, these
  accounts had a total book value of $14.6 billion, of which
  $10.3 billion is subject to contractual wrap arrangements and
  $4.3 billion consists of cash and guaranteed investment contracts. Several
  financial institutions currently provide such contractual wrap arrangements.
  Securities representing 92.5% of the book value of the $10.3 billion wrapped
  portion of these accounts are rated "AA" or better as of April 30, 2008, and
  the average duration of the securities in the accounts was generally
  three years or less. Many of these accounts were significantly impacted by
  the volatility and lack of liquidity in the fixed-income securities markets
  beginning in the second half of 2007 and experienced a variance between market
  and book values greater than that
  11
  experienced in
  more liquid markets. As contemplated when we established the reserve in
  connection with SSgA's active fixed-income strategies, we used $160 million of
  the reserve to decrease the difference between the market and book values of
  the wrapped portion of these accounts, and in part as a result of this action,
  the average market-to-book-value ratio of the wrapped portion of these accounts
  on January 31, 2008 increased to 96.77% from 93.43% on December 26,
  2007.
  The volatility and illiquidity in the fixed-income securities markets
  during 2008 continue to impact the assets held by these accounts and have
  further reduced their market values. As of April 30, 2008, the average
  market-to-book-value ratio on the wrapped portion of these accounts was
  approximately 94.1%. This deficiency, or a further deterioration in the
  market-to-book-value ratio, could lead one or more wrap providers to
  discontinue their relationship with us. Factors that could lead to further
  deterioration in the market-to-book-value ratio, or the crediting rate earned
  by the accounts, include a decline in market value of securities held or of
  fixed-income securities generally due to illiquidity, interest-rate or credit
  risk or net cash outflows due to redemptions by participants in the accounts. A
  wrap provider could attempt to minimize its exposure to further deterioration
  in market value of the portfolio under its contract.  It could do so by exercising its contractual
  right to require the account to be managed within more restrictive investment
  guidelines.  This election is known as "immunization."  Following such an election, investments made
  with additional cash contributions from participants are excluded from the wrap
  provider's contractual obligations.  We
  also have the contractual right to elect to immunize all or a portion of these
  accounts at any time, including following receipt of notice of a wrap provider's
  election to terminate its agreement that benefit the accounts.  The right of the participating investors to
  redeem their units at a price based on book value would not be affected by
  termination by a wrap provider or immunization. However, immunization of all or
  part of an account may adversely impact cash flows with respect to the account,
  potentially resulting in significant account redemptions.  Moreover, our ability to continue to offer an
  attractive crediting rate on these accounts, our reputation as a manager of
  these types of products in the defined contribution market and the amount of
  fees that we recognize from this portion of our business, would be adversely
  impacted.
  One of our wrap providers has notified us of its election to terminate
  its relationship with us during the third quarter of 2008 as a result of its
  decision to exit the business of providing wrap contracts.  We are seeking to replace this wrap provider,
  but there can be no assurance that we will be able to do so.  There are a limited number of third-party
  financial institutions that currently offer these products, limiting the
  potential to find alternative wrap providers, and most accounts have investment
  guidelines requiring multiple wrap contracts. 
  Moreover, one or more of our other wrap providers may seek to condition
  continuing to wrap our products on our taking action to further support the
  market value of the accounts' assets, although we are not contractually
  obligated to take such an action.  If we
  support the market value of these accounts under any circumstances to mitigate
  the risks to our business, the cost to us could be material. Moreover, any
  action by us to support these accounts could result, depending on the nature
  and extent of such support, in the accounts being consolidated on our balance
  sheet for financial reporting purposes. 
  If we were unable to replace one or more wrap providers that elect to
  terminate their arrangements with us, we may elect to immunize the portion of
  the accounts wrapped by the terminating wrap providers.  Any action resulting in immunization of a
  part of an account could cause either the other wrap providers or us to elect
  immunization of the remainder
  12
  of such
  account.  In addition, a wrap provider
  may seek to eliminate or reduce its contractual obligations. Such an action
  could result in litigation with the defaulting wrap provider and the plans
  investing in the accounts. Any discontinuation of the contracts with our
  existing wrap providers, any inability to enter into new contracts with other
  wrap providers, any failure by a wrap provider to fund account shortfalls under
  its contract or any action by us or by a wrap provider to immunize all or a
  portion of the wrapped accounts would adversely affect our business.
  Investment, operational and other decisions
  and actions, often made to achieve scale and other benefits, are implemented
  over multiple investment pools as applicable, increasing the opportunity for
  losses, even small losses, to have a significant effect. To mitigate these
  risks to the investment pools, we seek to prudently manage the duration and
  credit exposure of the pools, to satisfy large liquidity demands by the in-kind
  delivery of securities held by the pools and to closely monitor liquidity
  demand from investors; however, market conditions or increased defaults could
  result in our inability to effectively manage those risks. To some degree, all
  of our investment management pools hold potential risks to our reputation and
  business prospects if the asset pools that we manage have higher than
  anticipated redemption or other liquidity requirements and the pools incur
  losses to meet such demands.
  Other parts of our business where we
  primarily act as agent, such as other investment management activities of SSgA
  and certain of our broker/dealer-related businesses, do not currently have
  significant liquidity requirements; however, as we develop new products in
  response to customer demand and to remain competitive in a dynamic marketplace,
  we could take on more principal risk in these businesses. Any increase in the extent
  to which these or other businesses assume principal positions would increase
  the risks associated with our liquidity management strategy.
  The disruption in the global fixed-income
  securities markets beginning in the third quarter of 2007 has had a substantially
  greater impact upon liquidity and valuations in those markets than has
  historically been experienced. Because demand from investors for fixed-income
  products has markedly decreased and dealers have been less prepared to take
  principal exposures, funding sources, such as the commercial paper markets for
  conduits, have been less reliable and more expensive. At the same time, the
  ability of the markets to absorb the sale of certain types of fixed-income
  securities has been substantially impaired. These market conditions have made
  the management of our own and our customers' liquidity significantly more
  challenging. As discussed above, the risks to State Street inherent in its
  management of liquidity are significant, and a further deterioration in the
  credit markets could adversely affect our consolidated financial position,
  including our regulatory capital ratios, and could adversely affect our results
  of operations and our business prospects in the future.
  Reputational Risk
  Our relationship with many of our customers
  is predicated upon our reputation as a fiduciary and a service provider that
  adheres to the highest standards of ethics, service quality and regulatory
  compliance. Adverse publicity, regulatory actions, litigation, operational
  failures, the failure to meet client expectations and other issues could
  materially and adversely affect our reputation and our ability to retain and
  attract customers. Preserving and enhancing our
  13
  reputation depends not only on maintaining systems and procedures that
  address known risks and regulatory requirements, but also our ability to
  identify and mitigate additional risks that arise due to changes in our
  businesses and the marketplaces in which we operate, the regulatory
  environment, and customer expectations. If any of these developments, including
  our recently announced customer concerns related to certain SSgA active
  fixed-income strategies, has a material effect on our reputation, our business
  will suffer.
  Credit Risk
  Our focus on large institutional investors
  and their businesses requires that we assume credit and counterparty risk, both
  on- and off-balance sheet, in a variety of forms. We may experience significant
  intra- and inter-day credit exposure through settlement-related extensions of
  credit. From time to time, we may assume concentrated credit risk at the
  individual obligor, counterparty, guarantor, industry and/or country level,
  thereby potentially exposing us to a single market or political event or a
  correlated set of events. The credit quality of our on- and off-balance sheet
  exposures may be affected by many factors, such as economic and business
  conditions or deterioration in the financial condition of an individual
  counterparty, group of counterparties or asset classes. If a significant
  economic downturn occurs in either a country or a region, or we experience the
  failure of a significant individual counterparty, we could incur financial
  losses that could adversely affect our earnings.
  Financial Markets Risk
  As asset values in worldwide financial
  markets increase or decrease, our opportunities to invest in and service
  financial assets change. Given that a portion of our fee revenue is based on
  the value of assets under custody and management, fluctuations in the valuation
  of worldwide securities markets will affect revenue. Many of the costs of
  providing our services are relatively fixed; therefore, a decline in revenue
  could have a disproportionate effect on our earnings. In addition, if
  investment performance in our asset management business fails to meet either
  benchmarks or the performance of our competitors, we could experience a decline
  in assets under management and a reduction in the fees that we earn,
  irrespective of economic or market conditions.
  We have increased the portion of our
  management fee revenue that is generated from enhanced index and actively
  managed products, with respect to which we generally receive higher fees
  compared to passive products. We may not be able to continue to increase this
  segment of our business at the same rate that we have achieved in the past few
  years. The amount of assets in active fixed-income strategies, for example, has
  been adversely impacted since 2007. In addition, with respect to certain of our
  enhanced index and actively managed products, we have entered into performance
  fee arrangements, where the management fee revenue we earn is based on the
  performance of managed funds against specified benchmarks. The reliance on
  performance fees increases the potential volatility of our management fee
  revenue.
  Financial markets trading businesses, as well
  as our asset and liability management activities, are also subject to market
  risks. Adverse movements in levels and volatilities of financial markets could
  cause losses that may affect our consolidated results of operations and
  14
  financial condition. In addition, changes in investor and rating agency
  perceptions regarding certain asset classes or structures can also affect
  volatility, liquidity and market prices, which, in turn, can lead to losses.
  The degree of volatility in foreign exchange rates can affect our foreign
  exchange trading revenue. In general, we benefit from currency volatility, although
  it can increase risk. Foreign exchange revenue, all other things being equal,
  is likely to decrease during times of decreased currency volatility. In
  addition, as our business grows globally, our exposure to changes in foreign
  currency exchange rates could affect our levels of revenue, expense and
  earnings, as well as the value of our investment in our non-U.S. operations.
  Interest-Rate Risk
  State Street's financial performance could be
  unfavorably affected by changes in interest rates as they impact our asset and
  liability management activities. The levels of global market interest rates,
  the shape of these yield curves (changes in the relationship between short- and
  long-term interest rates), the direction and speed of interest rate changes,
  and the asset and liability spreads relative to the currency and geographic mix
  of our interest-earning assets and interest-bearing liabilities, affect our net
  interest revenue. Our ability to anticipate these changes and/or to hedge the
  related exposures on and off our consolidated balance sheet can significantly
  influence the success of our asset and liability management activities and the
  resulting level of our net interest revenue. The impact of changes in interest
  rates will depend on the relative durations of assets and liabilities in
  accordance with their relevant currencies. In general, sustained lower interest
  rates, a flat or inverted yield curve and narrow interest-rate spreads have a
  constraining effect on our net interest revenue.
  Operational Risk
  Operational risk is inherent in all of State
  Street's activities. Our customers have a broad array of complex and
  specialized servicing, confidentiality and fiduciary requirements. We have
  established policies, procedures and systems designed to comply with these
  regulatory and operational risk requirements. We also face the potential for
  loss resulting from inadequate or failed internal processes, employee
  supervisory or monitoring mechanisms, or other systems or controls, and from
  external events, which could materially affect our future results of
  operations. We may also be subject to disruptions from events that are wholly
  or partially beyond our control, which could cause delays or disruptions to
  operational functions, including information processing and financial market
  settlement functions. In addition, our customers, vendors and counterparties
  could suffer from such events. Should these events affect us, or the customers,
  vendors or counterparties with which we conduct business, our results of operations
  could be negatively affected.
  Our success depends, in large part, on our
  ability to attract and retain key people. Competition for the best people in
  most activities in which we engage can be intense, and we may not be able to
  hire people or retain them. The unexpected loss of services of one or more of
  our key personnel could have a material adverse impact on our business because
  of their skills, their knowledge of our markets, their years of industry
  experience, and, in some cases, the difficulty of promptly finding qualified
  replacement personnel. Similarly, the loss of key staff, either individually or
  as a group, can adversely impact customer perception of our ability to continue
  to manage certain types of investment management mandates. In some of our
  15
  businesses, we have experienced significant employee turnover, which
  increases costs, requires additional training and increases the potential for
  operational risks.
  We enter into long-term fixed-price contracts
  to provide middle office or investment manager and hedge fund manager
  operations outsourcing services to customers, services related but not limited
  to certain trading activities, cash reporting, settlement and reconciliation
  activities, collateral management and information technology development. These
  long-term contracts require considerable up-front investment by us, including
  technology and conversion costs, and carry the risk that pricing for the
  products and services we provide might not prove adequate to generate expected
  operating margins over the term of the contracts. Profitability of these
  contracts is largely a function of our ability to accurately calculate pricing
  for our services and our ability to control our costs and maintain the
  relationship with the customer for an adequate period of time to recover our
  up-front investment. Performance risk exists in each contract, given our
  dependence on successful conversion and implementation onto our own operating
  platforms of the service activities provided. In addition, our failure to meet
  specified service levels may adversely affect our revenue from such
  arrangements, or permit early termination of the contracts by the customer.
  We actively strive to achieve significant
  cost savings by shifting certain business processes to lower-cost geographic
  locations, while continuing to maintain service quality, control and effective
  management of risks within these business operations. This transition to a true
  "shared services" operational model focuses on certain core service offerings,
  including middle- and back-office reconciliations, securities processing and
  transfer agency activities. We have employed various structural arrangements to
  achieve these goals, including forming joint ventures and wholly-owned
  subsidiaries and establishing operations in lower cost areas, such as Eastern
  Europe, India and China, and outsourcing to vendors in various jurisdictions.
  The increased elements of risk that arise from conducting certain operating processes
  in some jurisdictions could lead to an increase in reputational risk. During
  periods of transition, greater operational risk and client concern exists
  regarding the continuity of a high level of service delivery. The extent and
  pace at which we are able to move functions to lower-cost locations may also be
  impacted by regulatory and customer acceptance issues. Such relocation of
  functions also entails costs, such as technology and real estate expenses, that
  partially offset the financial benefits of the lower-cost locations.
  Our businesses depend on an information
  technology infrastructure to record and process a large volume of increasingly
  complex transactions, in many currencies, on a daily basis, across numerous and
  diverse markets. Any interruptions, delays and/or breakdowns of this
  infrastructure can result in significant costs and reputational damage. As a
  result, we continue to invest significantly in this infrastructure.
  Our businesses and our relationship with
  customers are also dependent upon our ability to maintain the confidentiality
  of our and our customers' trade secrets and confidential information (including
  personal data about our employees, our customers and our customers' customers).
  While we undertake significant efforts to maintain and protect confidential
  information from theft, loss or other misappropriation, unauthorized access to
  such information can occur. In this regard, on May 29, 2008, we announced
  that we are sending precautionary notifications to employees and certain customers
  of the former Investors Financial that computer equipment
  16
  containing certain personal data was stolen from the facility of an
  Investors Financial vendor.  Any theft,
  loss or other misappropriation of confidential information could have a
  material adverse impact on our competitive positions, our relationships with
  our customers and our reputation and could subject us to regulatory inquiries
  and enforcement, civil litigation and possible financial liability or costs.
  To the extent that we are not able to protect
  our intellectual property through patents or other means, we are also exposed
  to the risk that employees with knowledge of such intellectual property may
  leave and seek to exploit our intellectual property for their own or others'
  advantage.
  Litigation Risks
  From time to time, our customers may make
  claims and take legal action relating to our performance of fiduciary or
  contractual responsibilities. If such claims and legal actions are not resolved
  in a manner favorable to us, such claims may result in financial liability to
  State Street and/or adversely affect the market perception of us and our
  products and services, and could impact customer demand for our products and
  services. We record balance sheet reserves for probable loss contingencies,
  including litigation and operational losses. However, we cannot always
  accurately estimate our ultimate exposure. As a result, any reserves we
  establish to cover any settlements, judgments or operational losses may not be
  sufficient to cover our actual financial exposure. Any underestimation or
  overestimation could have a material impact on our consolidated financial
  condition or results of operations.
  In connection with certain of SSgA's active
  fixed-income strategies, we established a reserve to cover legal exposure and
  related costs in connection with such strategies as of December 31, 2007.
  Among other things, the portfolio managers for certain actively managed
  fixed-income strategies materially increased the exposure of these strategies
  to securities collateralized by sub-prime mortgages and shifted the weighting
  of these portfolios to more highly rated sub-prime instruments. During the
  third quarter of 2007, as the liquidity and valuations of these securities,
  including the more highly rated instruments, came under increased pressure, the
  performance of these strategies was adversely affected, in some cases
  significantly. The underperformance, which was greater than that typically
  associated with fixed-income funds, also caused a number of our customers to
  question whether the execution of these strategies was consistent with their
  investment intent. This has resulted in several civil suits, including putative
  class action claims. These lawsuits allege, among other things, that we failed
  to comply with our standard of care in managing these active funds as a
  fiduciary under ERISA. We have also received and are in the process of
  responding to inquiries or subpoenas from federal and state regulatory
  authorities regarding SSgA's active fixed-income strategies. Given our desire
  to fully respond to customer concerns, following the end of the third quarter
  of 2007, State Street undertook a further review of all the actively managed
  fixed-income strategies at SSgA that were exposed to sub-prime investments.
  Based on our review and ongoing discussions with customers who were invested in
  these strategies, we established the reserve to address our estimated legal
  exposure.
  The reserve was established based upon our
  best judgment as to legal exposures and related costs associated with certain
  actively managed fixed-income investment strategies. As of
  17
  March 31, 2008, we had made settlement and related payments
  totaling approximately $275 million, including amounts expended to support
  certain accounts managed by SSgA that benefit from contractual arrangements
  with "wrap providers". The amount of the reserve is based on certain
  assumptions. While we believe the reserve represents a reasonable estimate of
  our legal exposure and other costs associated with these issues, we do not
  believe that it is feasible to predict or determine the amount of such exposure
  with certainty. As such, it is possible that we have overestimated or
  underestimated our exposure. If the amount of our actual exposure is materially
  different from our reserve, there would be a material impact on our
  consolidated financial condition and results of operations.
  To determine whether the issues that arose
  within the active fixed-income area are limited to SSgA's active fixed-income
  strategies, we are conducting, with the assistance of third-party consultants,
  a systematic review of the operational, risk and compliance infrastructure,
  procedures and resources across SSgA's entire product line. While this review
  is ongoing, the conclusions or recommendations that have been made to date have
  not identified any material legal or regulatory exposures; however, there can
  be no assurance at this time as to the ultimate conclusions of such review.
  Regulatory/Legal/Accounting/Tax
  Risk
  Most of our businesses are subject to
  extensive regulation, and many of the customers to which we provide services
  are themselves subject to a broad range of regulatory requirements. These
  regulations may affect the manner and terms of delivery of our services. As a
  financial institution with substantial international operations, we are subject
  to extensive regulatory and supervisory oversight, both in the U.S. and
  overseas in connection with our global operations. Our businesses are subject
  to stringent regulation and examination by U.S. federal and state governmental
  and regulatory agencies, including the Federal Reserve, the SEC and the
  Massachusetts Commissioner of Banks, and self-regulatory organizations
  (including securities exchanges), and by non-U.S. governmental and regulatory
  agencies and self-regulatory organizations. The regulations affect, among other
  things, the scope of our activities and customer services, our capital
  structure and our ability to fund the operations of our subsidiaries, our
  lending practices, our dividend policy and the manner in which we market our
  services. Evolving regulations, such as the new Basel II regulatory capital
  framework and anti-money laundering regulations, can require significant effort
  on our part to ensure compliance. New or modified regulations and related
  regulatory guidance may have unforeseen or unintended adverse effects on the
  financial services industry.
  If we do not comply with governmental
  regulations, we may be subject to fines, penalties or material restrictions on
  our businesses in the jurisdiction where the violation occurred, which may
  adversely affect our business operations and, in turn, our financial results.
  Similarly, many of our customers are subject to significant regulatory
  requirements, and retain our services in order for us to assist them in
  complying with those legal requirements. Changes in these regulations can
  significantly affect the services that we are asked to provide, as well as our
  costs. If we cause customers to fail to comply with these regulatory
  requirements, we may be liable to them for losses and expenses that they incur.
  In addition, adverse publicity and damage to our reputation arising from the
  failure or perceived failure to comply with legal, regulatory or contractual
  requirements could affect our ability to attract and retain customers or to
  maintain
  18
  access to capital markets, or could result in enforcement actions,
  fines, penalties and lawsuits. In recent years, regulatory oversight and
  enforcement have increased substantially, imposing additional costs and
  increasing the potential risks associated with our operations. If this regulatory
  trend continues, it could adversely affect our operations and, in turn, our
  financial results.
  In the ordinary course of our business, we are
  involved from time to time in civil litigation or arbitration, including
  actions arising out of our contractual, fiduciary or employment
  relationships.  In certain of these
  actions, claims for substantial monetary damages may be asserted against
  us.  In the ordinary course of our business,
  we are also subject to various regulatory, governmental and law enforcement
  inquiries, investigations and subpoenas. 
  These may be directed generally to participants in the businesses in
  which we are involved or may be specifically directed at us.  In regulatory enforcement matters, claims for
  disgorgement, the imposition of penalties and the imposition of other remedial
  sanctions are possible.  Among other
  inquiries, investigations and subpoenas, we have received federal and state
  regulatory inquiries or subpoenas relating to SSgA's active fixed-income
  strategies as to which we established a reserve in the fourth quarter of
  2007.  There can be no assurance as to
  the outcome of the inquiries with regard to the SSgA's fixed-income strategies
  or any other matter. Additional legal actions or regulatory matters may be
  initiated from time to time in the future.
  In view of the inherent difficulty of
  predicting the outcome of such legal actions and regulatory matters, we can not
  provide assurance as to the outcome of any pending matter or, if determined
  adversely to us, the costs associated with any such matter, particularly where
  the claimant seeks very large or indeterminate damages or where the matter
  presents novel legal theories, involves a large number of parties or is at a
  preliminary stage.  Based upon the
  information currently available to us, we do not believe that any pending legal
  actions or regulatory matters will have a material adverse effect on our
  consolidated financial condition or results of operations.  However, the resolution of certain pending
  legal actions or regulatory matters, if unfavorable, could have a material
  adverse effect on our consolidated results of operations for any particular
  quarter, depending on the magnitude of the loss or liability relative to our
  results for that quarter.
  New accounting standards, or changes in the
  interpretation of existing accounting standards, by the Financial Accounting
  Standards Board or the SEC, can potentially affect our consolidated financial
  condition and results of operations. These changes are very difficult to
  predict, and can materially impact how we record and report our consolidated
  financial condition and results of operations and other financial information.
  In some cases, we could be required to apply a new or revised standard
  retroactively, resulting in the revised treatment of certain transactions or
  activities, and, in some cases, the restatement of prior period financial
  statements.
  Our businesses can be affected by new tax
  legislation or the interpretation of existing tax laws worldwide. Changes in
  tax laws may affect our business directly or indirectly through their impact on
  the financial markets. In the normal course of business, we are subject to
  reviews by U.S. and non-U.S. tax authorities. These reviews may result in
  adjustments to the timing or amount of taxes due and the allocation of taxable
  income among tax jurisdictions. These adjustments could affect the attainment
  of our financial goals.
  19
  Prior
  to 2004, we entered into certain leveraged leases, known as sale-in, lease-out,
  or SILO, transactions.  In accordance with Statement of Financial
  Accounting Standards, or SFAS, No. 13,
  Accounting for Leases
  ,
  we recorded income and deferred tax liabilities with respect to the SILO
  transactions based on projected pre-tax and tax cash flows. The Internal
  Revenue Service, or IRS, has proposed disallowing tax deductions arising from
  those transactions, and we have been engaged in settlement discussions.  In
  connection with these discussions we have revised our projections of the timing
  of tax cash flows and we have reflected those revisions in our leveraged lease
  accounting under SFAS No. 13.  We have also substantially reserved
  for tax-related interest expense that may be incurred upon resolution of this
  matter. On May 28, 2008, in a case involving a SILO transaction of another
  taxpayer, a federal district court upheld the IRS' tax position. We do not yet
  know what effect, if any, such decision may have on our settlement discussions
  with the IRS or on our evaluation of the potential exposure with respect to the
  SILO transactions.  If we were to further revise our projection of the
  timing of tax cash flows from the leases, SFAS No. 13 would require us to
  again recalculate the rate of return and the timing of the recognition of
  income from the leases from inception.  The effect of the SFAS No. 13
  recalculation would be to reschedule the recognition of previously-recognized
  income to future periods; that is, the charge we would record to income during
  the period of revision would be recovered over the remaining lives of the
  leases.  In addition to the SFAS No. 13 recalculation, we would
  increase our reserve for tax-related interest expense, which would be recorded
  as an increase to income tax expense.
  Risk
  Management
  A
  comprehensive and well-integrated risk management function linked to our
  strategy and capital is essential to the financial and operational success of
  our global business activities. We seek to monitor and manage risk on a
  corporate basis and within specific business units. The types of risk that we
  monitor and seek to manage include, but are not limited to, operational risk,
  interest-rate risk, trading risk, fiduciary risk, legal and compliance risk,
  liquidity risk and credit risk. We have adopted various policies, procedures
  and systems to monitor and manage risk. There can be no assurance that those
  policies, procedures or systems are adequate to identify and mitigate all risks
  inherent in our various business. In addition, our businesses and the markets
  in which we operate are continuously evolving. We may fail to fully understand
  the implications of changes in our business or the financial markets and fail
  to adequately or timely enhance our risk framework to address those changes. If
  our risk framework is ineffective, either because it fails to keep pace with
  changes in the financial markets or our business or for other reasons, we could
  incur losses.
  We
  also measure our material risks. Our measurement methodologies rely upon many
  assumptions and historical analyses and correlations. There can be no assurance
  that those assumptions will be correct or that the historical correlations will
  continue to be relevant. Consequently the measurements that we make for
  regulatory and economic capital may not adequately capture or express the true
  risk profiles of our businesses. Additionally, as businesses and markets
  evolve, our measurements may not accurately reflect those changes. While our
  risk measures may indicate sufficient capitalization, we may in fact have
  inadequate capital to conduct our businesses.
  20
  Capital Ratios
  The following are certain of our capital ratios as of March 31,
  2008:
  Tier 1 leverage ratio
  6.1
  %
  Tier 1 risk-based capital ratio
  12.4
  Total risk-based capital ratio
  13.8
  Tangible common equity to tangible assets (TCE/TA)
  2.9
  Investment
  Portfolio and Asset-Backed Commercial Paper Conduits
  Information concerning State Street's investment portfolio and
  asset-backed
  commercial paper conduit program
  is filed with this Form 8-K as Exhibit 99.1.
  Item
  9.01.        Financial Statements and
  Exhibits.
  (d)
  Exhibits.
  99.1
  Information
  concerning State Street's investment portfolio and asset-backed
  commercial paper conduit program.
  21
  SIGNATURES
  Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly
  caused this report to be signed on its behalf by the undersigned hereunto duly
  authorized.
  STATE STREET
    CORPORATION
  By:
  /s/ David C. Phelan
  Name:
  David C. Phelan
  Title:
  Executive Vice
    President and General
  Counsel
  Date June 2, 2008
  22
  EXHIBIT INDEX
  Exhibit No.
  Description
  99.1
  Information concerning
    State Street's investment portfolio and asset-backed
  commercial
    paper conduit program.
  23