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# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2007

# TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF

# THE	SECURITIES	EXCHANGE	ACT	OF	1934

# STATE	STREET	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

Massachusetts

(State	or	other	jurisdiction	of	incorporation)

One	Lincoln	Street

Boston,	Massachusetts

(Address	of	principal	executive	office)

(I.R.S.	Employer	Identification	No.)

(Zip	Code)

(Registrant's	telephone	number,	including	area	code)

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# (Title	of	Each	Class)

Common	Stock,	$1	par	value

# (Name	of	each	exchange	on	which	registered)

New	York	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

									Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes	ý	No	o

									Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes	o	No	ý

									Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports)	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past 90	days.	Yes	ý	No	o

									Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.	ý

									Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer	or	a	smaller	reporting	company.	See	the definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	one):

									Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Securities	Exchange	Act	of	1934).	Yes	o	No	ý

									The	aggregate	market	value	of	the	voting	and	non-voting	common	equity	held	by	non-affiliates	computed	by	reference	to	the	per	share	price	($68.40)	at	which	the common	equity	was	last	sold	as	of	the	last	business	day	of	the	registrant's	most	recently	completed	second	fiscal	quarter	(June	29,	2007)	was	approximately	$23.00 billion.

									Portions	of	the	following	documents	are	incorporated	by	reference	into	Parts	of	this	Report	on	Form	10-K,	to	the	extent	noted	in	such	Parts,	as	indicated	below:

									(1)	The	registrant's	definitive	Proxy	Statement	for	the	2008	Annual	Meeting	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2008	(Part	III).

# Table	of	Contents

# PART	I

								State	Street	Corporation	is	a	financial	holding	company,	organized	in	1970	under	the	laws	of	the	Commonwealth	of	Massachusetts.	Through	its	subsidiaries, including	its	principal	banking	subsidiary,	State	Street	Bank	and	Trust	Company,	State	Street	Corporation	provides	a	full	range	of	products	and	services	for	institutional investors	worldwide.	All	references	in	this	Form	10-K	to	"the	parent	company"	are	to	State	Street	Corporation.	Unless	otherwise	indicated	or	unless	the	context	requires otherwise,	all	references	in	this	Form	10-K	to	"State	Street,"	"we,"	"us,"	"our"	or	similar	terms	mean	State	Street	Corporation	and	its	subsidiaries	on	a	consolidated	basis. State	Street	Bank	and	Trust	Company	is	referred	to	as	"State	Street	Bank."	The	parent	company	is	a	legal	entity	separate	and	distinct	from	its	subsidiaries,	assisting those	subsidiaries	by	providing	financial	resources	and	management.	At	December	31,	2007,	we	had	consolidated	total	assets	of	$142.54	billion,	consolidated	total deposits	of	$95.79	billion,	consolidated	total	shareholders'	equity	of	$11.30	billion	and	employed	27,110.	Our	executive	offices	are	located	at	One	Lincoln	Street, Boston,	Massachusetts	02111	(telephone	(617)	786-3000).

								We	make	available,	without	charge,	on	or	through	our	Internet	website	at	www.statestreet.com	all	reports	we	electronically	file	with,	or	furnish	to,	the	Securities and	Exchange	Commission,	including	our	Annual	Reports	on	Form	10-K,	Quarterly	Reports	on	Form	10-Q	and	Current	Reports	on	Form	8-K,	as	well	as	any amendments	to	those	reports,	as	soon	as	reasonably	practicable	after	those	documents	have	been	filed	with,	or	furnished	to,	the	SEC.	These	documents	are	also accessible	on	the	SEC's	website	at	www.sec.gov.	We	have	included	the	website	addresses	of	State	Street	and	the	SEC	as	inactive	textual	references	only.	Except	as	may be	specifically	incorporated	by	reference	into	this	Form	10-K,	information	on	those	websites	is	not	part	of	this	Form	10-K.

								We	have	adopted	Corporate	Governance	Guidelines,	as	well	as	written	charters	for	the	Executive	Committee,	the	Examining	and	Audit	Committee,	the	Executive Compensation	Committee,	and	the	Nominating	and	Corporate	Governance	Committee	of	our	Board	of	Directors,	and	a	Code	of	Ethics	for	Senior	Financial	Officers,	a Standard	of	Conduct	for	Directors,	and	a	Standard	of	Conduct	for	our	employees.	Each	of	these	documents	is	posted	on	our	website,	and	each	is	available	in	print	to	any shareholder	who	requests	it	by	writing	to	the	Office	of	the	Secretary,	State	Street	Corporation,	One	Lincoln	Street,	Boston,	Massachusetts	02111.

# GENERAL

								We	conduct	our	business	primarily	through	our	principal	banking	subsidiary,	State	Street	Bank,	which	traces	its	beginnings	to	the	founding	of	the	Union	Bank	in 1792.	State	Street	Bank's	current	charter	was	authorized	by	a	special	act	of	the	Massachusetts	Legislature	in	1891,	and	its	present	name	was	adopted	in	1960.	With $15.30	trillion	of	assets	under	custody	and	$1.98	trillion	of	assets	under	management	at	year-end	2007,	we	are	a	leading	specialist	in	meeting	the	needs	of	institutional investors	worldwide.	Our	customers	include	mutual	funds	and	other	collective	investment	funds,	corporate	and	public	retirement	plans,	insurance	companies, foundations,	endowments	and	other	investment	pools,	and	investment	managers.	Including	the	United	States,	we	operate	in	26	countries	and	more	than	100	geographic markets	worldwide.

								For	a	discussion	of	our	business	activities,	refer	to	the	"Lines	of	Business"	section	that	follows.	For	information	about	our	management	of	capital,	liquidity,	market risk,	including	interest-rate	risk,	and	other	risks	inherent	in	our	businesses,	refer	to	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	included	under	Item	7,	and	Risk	Factors,	under	Item	1A,	of	this	Form	10-K.	Financial	information	with	respect	to	our	non-U.S.	activities	is	included	in note	23	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								In	July	2007,	we	completed	our	acquisition	of	Investors	Financial	Services	Corp.,	a	bank	holding	company	based	in	Boston,	Massachusetts,	with	approximately $17	billion	in	total	assets	and	approximately	$1.9	trillion	in	assets	under	custody.	We	acquired	Investors	Financial	in	order	to	enhance	our	position	as	a	worldwide service	provider	to	institutional	investors.	Additional	information	about	this	acquisition	is	included	in	note	2	of	the	Notes	to	Consolidated	Financial	Statements	included in	this	Form	10-K	under	Item	8.

# LINES	OF	BUSINESS

								We	report	two	lines	of	business:	Investment	Servicing	and	Investment	Management.	These	two	lines	of	business	provide	services	to	support	institutional	investors, including	custody,	recordkeeping,	daily	pricing	and	administration,	shareholder	services,	foreign	exchange,	brokerage	and	other	trading	services,	securities	finance, deposit	and	short-term	investment	facilities,	loan	and	lease	financing,	investment	manager	and	hedge	fund	manager	operations	outsourcing,	performance,	risk	and compliance	analytics,	investment	research	and	investment	management,	including	passive	and	active	U.S.	and	non-U.S.	equity	and	fixed	income	strategies.	For additional	information	about	our	lines	of	business,	see	the	"Line	of	Business	Information"	section	of	Management's	Discussion	and	Analysis	included	under	Item	7,	and note	22	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8,	of	this	Form	10-K.

# COMPETITION

								We	operate	in	a	highly	competitive	environment	in	all	areas	of	our	business	worldwide.	We	face	competition	from	other	financial	services	institutions,	deposit- taking	institutions,	investment	management	firms,	insurance	companies,	mutual	funds,	broker/dealers,	investment	banking	firms,	benefits	consultants,	leasing	companies, and	business	service	and	software	companies.	As	we	expand	globally,	we	encounter	additional	sources	of	competition.

								We	believe	that	there	are	certain	key	competitive	considerations	in	these	markets.	These	considerations	include,	for	investment	servicing,	quality	of	service, economies	of	scale,	technological	expertise,	quality	and	scope	of	sales	and	marketing,	and	price;	and	for	investment	management,	expertise,	experience,	the	availability of	related	service	offerings,	and	price.

								Our	competitive	success	will	depend	upon	our	ability	to	develop	and	market	new	and	innovative	services,	to	adopt	or	develop	new	technologies,	to	bring	new services	to	market	in	a	timely	fashion	at	competitive	prices,	to	continue	and	expand	our	relationships	with	existing	customers	and	to	attract	new	customers.

# SUPERVISION	AND	REGULATION

								We	are	registered	with	the	Board	of	Governors	of	the	Federal	Reserve	System,	which	we	refer	to	as	the	Federal	Reserve	Board,	as	a	bank	holding	company	pursuant to	the	Bank	Holding	Company	Act	of	1956,	as	amended.	The	Bank	Holding	Company	Act,	with	certain	exceptions,	limits	the	activities	in	which	we	and	our	non-bank subsidiaries	may	engage,	to	those	that	the	Federal	Reserve	Board	considers	to	be	closely	related	to	banking	or	managing	or	controlling	banks.	These	limits	also	apply	to non-bank	companies	of	which	we	own	or	control	more	than	5%	of	a	class	of	voting	shares.	The	Federal	Reserve	Board	may	order	a	bank	holding	company	to	terminate any	activity	or	its	ownership	or	control	of	a	non-bank	subsidiary	if	the	Federal	Reserve	Board	finds	that	such	activity,	ownership	or	control	constitutes	a	serious	risk	to the	financial	safety,	soundness	or	stability	of	a	bank	subsidiary	or	is	inconsistent	with	sound	banking	principles	or	statutory	purposes.	In	the	opinion	of	management,	all of	our	present	subsidiaries	operate	within	the	statutory	standard	or	are	otherwise	permissible.	The	Bank	Holding	Company	Act	also	requires	a	bank	holding	company	to obtain	prior	approval	of	the	Federal

Reserve	Board	before	it	may	acquire	substantially	all	the	assets	of	any	bank	or	ownership	or	control	of	more	than	5%	of	the	voting	shares	of	any	bank.

								The	parent	company	operates	as	a	financial	holding	company,	which	reduces	to	some	extent	the	Federal	Reserve	Board's	restrictions	on	our	activities.	A	financial holding	company	and	the	companies	under	its	control	are	permitted	to	engage	in	activities	considered	"financial	in	nature"	as	defined	by	the	Gramm-Leach-Bliley	Act and	Federal	Reserve	Board	interpretations,	and	therefore	may	engage	in	a	broader	range	of	activities	than	permitted	for	bank	holding	companies	and	their	subsidiaries. Financial	holding	companies	may	engage	directly	or	indirectly	in	activities	considered	financial	in	nature,	either	de	novo	or	by	acquisition,	provided	the	financial holding	company	gives	the	Federal	Reserve	Board	after-the-fact	notice	of	the	new	activities.	Activities	defined	to	be	financial	in	nature	include,	but	are	not	limited	to, the	following:	providing	financial	or	investment	advice;	underwriting;	dealing	in	or	making	markets	in	securities;	merchant	banking,	subject	to	significant	limitations; and	any	activities	previously	found	by	the	Federal	Reserve	Board	to	be	closely	related	to	banking.	In	order	to	maintain	status	as	a	financial	holding	company,	each	of	a bank	holding	company's	depository	subsidiaries	must	be	well	capitalized	and	well	managed,	as	judged	by	regulators,	and	must	comply	with	Community	Reinvestment Act	obligations.	Failure	to	maintain	such	standards	may	ultimately	permit	the	Federal	Reserve	Board	to	take	certain	enforcement	actions	against	such	company.

								Many	aspects	of	our	business	are	subject	to	regulation	by	other	U.S.	federal	and	state	governmental	and	regulatory	agencies	and	self-regulatory	organizations (including	securities	exchanges),	and	by	non-U.S.	governmental	and	regulatory	agencies	and	self-regulatory	organizations.	Aspects	of	our	public	disclosure,	corporate governance	principles	and	internal	control	systems	are	subject	to	the	Sarbanes-Oxley	Act	of	2002	and	regulations	and	rules	of	the	SEC	and	the	New	York	Stock Exchange.

# Capital	Adequacy

								Like	other	bank	holding	companies,	we	are	subject	to	Federal	Reserve	Board	minimum	risk-based	capital	and	leverage	ratio	guidelines.	As	noted	above,	our	status as	a	financial	holding	company	also	requires	that	we	maintain	certain	capital	ratio	levels.	State	Street	Bank	is	subject	to	similar	risk-based	capital	and	leverage	ratio guidelines.	As	of	December	31,	2007,	our	capital	levels	on	a	consolidated	basis,	and	the	capital	levels	of	State	Street	Bank,	exceeded	the	applicable	minimum	capital requirements	and	the	requirements	to	qualify	as	a	financial	holding	company.	Failure	to	meet	capital	requirements	could	subject	us	to	a	variety	of	enforcement	actions, including	the	termination	of	deposit	insurance	of	State	Street	Bank	by	the	Federal	Deposit	Insurance	Corporation,	and	to	certain	restrictions	on	our	business	that	are described	further	in	this	"Supervision	and	Regulation"	section.

								For	additional	information	about	our	capital	position	and	capital	adequacy,	refer	to	the	"Capital"	section	of	Management's	Discussion	and	Analysis	included	under Item	7,	and	note	14	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8,	of	this	Form	10-K.

# Subsidiaries

								The	Federal	Reserve	Board	is	the	primary	federal	banking	agency	responsible	for	regulating	us	and	our	subsidiaries,	including	State	Street	Bank,	for	both	our	U.S. and	non-U.S.	operations.

								Our	bank	subsidiaries	are	subject	to	supervision	and	examination	by	various	regulatory	authorities.	State	Street	Bank	is	a	member	of	the	Federal	Reserve	System and	the	FDIC	and	is	subject	to	applicable	federal	and	state	banking	laws	and	to	supervision	and	examination	by	the	Federal	Reserve	Bank	of	Boston,	as	well	as	by	the Massachusetts	Commissioner	of	Banks,	the	FDIC,	and	the	regulatory	authorities	of	those	countries	in	which	a	branch	of	State	Street	Bank	is	located.	Other	subsidiary trust	companies	are	subject	to	supervision	and	examination	by	the	Office	of	the	Comptroller	of	the	Currency,	other	offices	of	the	Federal	Reserve	System	or	by	the appropriate	state	banking	regulatory	authorities	of	the	states	in	which	they	are	located.	Our	non-U.S.	bank	subsidiaries	are	subject	to

regulation	by	the	regulatory	authorities	of	the	countries	in	which	they	are	located.	As	of	December	31,	2007,	the	capital	of	each	of	these	banking	subsidiaries	was	in excess	of	the	minimum	legal	capital	requirements	as	set	by	those	authorities.

								The	parent	company	and	its	non-bank	subsidiaries	are	affiliates	of	State	Street	Bank	under	federal	banking	laws,	which	impose	certain	restrictions	on	transfers	of funds	in	the	form	of	loans,	extensions	of	credit,	investments	or	asset	purchases	from	State	Street	Bank	to	the	parent	and	its	non-bank	subsidiaries.	Transfers	of	this	kind to	affiliates	by	State	Street	Bank	are	limited	with	respect	to	each	affiliate	to	10%	of	State	Street	Bank's	capital	and	surplus,	as	defined,	and	to	20%	in	the	aggregate	for	all affiliates,	and	are	subject	to	certain	collateral	requirements.	As	a	bank	holding	company,	the	parent	company	and	its	subsidiaries	are	prohibited	from	engaging	in	certain tie-in	arrangements	in	connection	with	any	extension	of	credit	or	lease	or	sale	of	property	or	furnishing	of	services.	Federal	law	also	provides	that	certain	transactions with	affiliates	must	be	on	terms	and	under	circumstances,	including	credit	standards,	that	are	substantially	the	same	or	at	least	as	favorable	to	the	institution	as	those prevailing	at	the	time	for	comparable	transactions	involving	other	non-affiliated	companies	or,	in	the	absence	of	comparable	transactions,	on	terms	and	under circumstances,	including	credit	standards,	that	in	good	faith	would	be	offered	to,	or	would	apply	to,	non-affiliated	companies.	The	Federal	Reserve	Board	has jurisdiction	to	regulate	the	terms	of	certain	debt	issues	of	bank	holding	companies.	Federal	law	provides	as	well	for	a	depositor	preference	on	amounts	realized	from	the liquidation	or	other	resolution	of	any	depository	institution	insured	by	the	FDIC.

								Our	investment	management	division,	State	Street	Global	Advisors,	or	"SSgA,"	which	acts	as	an	investment	advisor	to	investment	companies	registered	under	the Investment	Company	Act	of	1940,	is	registered	as	an	investment	adviser	with	the	SEC.	However,	a	major	portion	of	our	investment	management	activities	are conducted	by	State	Street	Bank,	which	is	subject	to	supervision	primarily	by	the	Federal	Reserve	Board	and	the	SEC	with	respect	to	these	activities.	Our	U.S. broker/dealer	subsidiary	is	registered	as	a	broker/dealer	with	the	SEC,	is	subject	to	regulation	by	the	SEC	(including	the	SEC's	net	capital	rule)	and	is	a	member	of	the Financial	Industry	Regulatory	Authority,	a	self-regulatory	organization.	Many	aspects	of	our	investment	management	activities	are	subject	to	federal	and	state	laws	and regulations	primarily	intended	to	benefit	the	investment	holder.	These	laws	and	regulations	generally	grant	supervisory	agencies	and	bodies	broad	administrative powers,	including	the	power	to	limit	or	restrict	us	from	carrying	on	our	investment	management	activities	in	the	event	that	we	fail	to	comply	with	such	laws	and regulations,	and	examination	authority.	Our	business	relating	to	investment	management	and	trusteeship	of	collective	trust	funds	and	separate	accounts	offered	to employee	benefit	plans	is	subject	to	ERISA	and	is	regulated	by	the	U.S.	Department	of	Labor.

								Our	businesses,	including	our	investment	management	and	securities	and	futures	businesses,	are	also	regulated	extensively	by	non-U.S.	governments,	securities exchanges,	self-regulatory	organizations,	central	banks	and	regulatory	bodies,	especially	in	those	jurisdictions	in	which	we	maintain	an	office.	For	instance,	the	Financial Services	Authority,	the	London	Stock	Exchange,	and	the	Euronext.liffe	regulate	activities	in	the	United	Kingdom;	the	Deutsche	Borse	AG	and	the	Federal	Financial Supervisory	Authority	regulate	activities	in	Germany;	and	the	Financial	Services	Agency,	the	Bank	of	Japan,	the	Japanese	Securities	Dealers	Association	and	several Japanese	securities	and	futures	exchanges,	including	the	Tokyo	Stock	Exchange,	regulate	activities	in	Japan.	We	have	established	policies,	procedures,	and	systems designed	to	comply	with	these	requirements.	However,	as	a	global	financial	services	institution,	we	face	complexity	and	costs	in	our	worldwide	compliance	efforts.

								Most	of	our	non-U.S.	operations	are	conducted	pursuant	to	Federal	Reserve	Board	Regulation	K	through	State	Street	Bank's	Edge	Act	corporation	subsidiary	or through	international	branches	of	State	Street	Bank.	An	Edge	Act	corporation	is	a	corporation	organized	under	federal	law	that	conducts	foreign	business	activities.	In general,	banks	may	not	invest	more	than	20%	of	their	capital	and	surplus	in	their	Edge	Act	corporations	(and	similar	state	law	corporations),	and	the	investment	of	any amount	in	excess	of	10%	of	capital	and	surplus	requires	the	prior	approval	of	the	Federal	Reserve	Board

(which	approval	is	generally	valid	for	a	12-month	period).	State	Street	Bank	periodically	applies	to	the	Federal	Reserve	Board	to	invest	in	excess	of	10%	of	its	capital and	surplus	in	its	Edge	Act	corporation,	and	State	Street	Bank	currently	has	approval	to	continue	investing	a	dollar	amount	up	to	the	equivalent	of	18%	of	its	capital	and surplus.

								In	addition	to	non-U.S.	operations	conducted	pursuant	to	Regulation	K,	we	make	new	investments	abroad	directly	(through	the	parent	company	or	through	non- bank	subsidiaries	of	the	parent	company)	pursuant	to	Federal	Reserve	Board	Regulation	Y,	or	through	international	bank	branch	expansion,	which	are	not	subject	to	the 20%	investment	limitation	for	Edge	Act	corporation	subsidiaries.	We	cannot	predict	with	certainty	what	the	future	impact	of	the	Regulation	K	investment	limitation	may be,	but	in	light	of	available	alternatives,	we	do	not	believe	the	limitation	will	materially	limit	our	ability	to	expand	internationally.

								We	are	subject	to	the	USA	PATRIOT	Act	of	2001,	which	contains	anti-money	laundering	and	financial	transparency	laws	and	requires	implementation	of regulations	applicable	to	financial	services	companies,	including	standards	for	verifying	client	identification	and	monitoring	client	transactions	and	detecting	and reporting	suspicious	activities.	Anti-money	laundering	laws	outside	the	U.S.	contain	similar	requirements.

								We	are	also	subject	to	the	Massachusetts	bank	holding	company	statute.	The	Massachusetts	statute	requires	prior	approval	by	the	Massachusetts	Board	of	Bank Incorporation	for	our	acquisition	of	more	than	5%	of	the	voting	shares	of	any	additional	bank	and	for	other	forms	of	bank	acquisitions.

# Support	of	Subsidiary	Banks

								Under	Federal	Reserve	Board	guidelines,	a	bank	holding	company	is	required	to	act	as	a	source	of	financial	and	managerial	strength	to	its	bank	subsidiaries.	Under these	guidelines,	the	parent	company	is	expected	to	commit	resources	to	State	Street	Bank	and	any	other	bank	subsidiary	in	circumstances	in	which	it	might	not	do	so absent	such	guidelines.	In	the	event	of	our	bankruptcy,	any	commitment	by	the	parent	company	to	a	federal	bank	regulatory	agency	to	maintain	the	capital	of	a	bank subsidiary	will	be	assumed	by	the	bankruptcy	trustee	and	will	be	entitled	to	a	priority	payment.

# ECONOMIC	CONDITIONS	AND	GOVERNMENT	POLICIES

								Economic	policies	of	the	U.S.	government	and	its	agencies	influence	our	operating	environment.	Monetary	policy	conducted	by	the	Federal	Reserve	Board	directly affects	the	level	of	interest	rates,	which	may	impact	overall	credit	conditions	of	the	economy.	Monetary	policy	is	applied	by	the	Federal	Reserve	Board	through	open market	operations	in	U.S.	government	securities,	changes	in	reserve	requirements	for	depository	institutions,	and	changes	in	the	discount	rate	and	availability	of borrowing	from	the	Federal	Reserve.	Government	regulation	of	banks	and	bank	holding	companies	is	intended	primarily	for	the	protection	of	depositors	of	the	banks, rather	than	for	the	shareholders	of	the	institutions.	We	are	also	impacted	by	the	economic	policies	of	non-U.S.	government	agencies,	such	as	the	European	Central	Bank.

# STATISTICAL	DISCLOSURE	BY	BANK	HOLDING	COMPANIES

								The	following	information,	provided	under	Items	6,	7	and	8	of	this	Form	10-K,	is	incorporated	by	reference	herein:

								"Selected	Financial	Data"	table	(Item	6)—presents	return	on	average	common	equity,	return	on	average	assets,	common	dividend	payout	and	equity-to-assets ratios.

								"Distribution	of	Average	Assets,	Liabilities	and	Shareholders'	Equity;	Interest	Rates	and	Interest	Differential"	table	(Item	8)—presents	average	balance	sheet amounts,	related	fully	taxable-equivalent	interest	earned	or	paid,	related	average	yields	and	rates	paid	and	changes	in	fully	taxable-equivalent

interest	revenue	and	expense	for	each	major	category	of	interest-earning	assets	and	interest-bearing	liabilities.

								Note	3,	"Investment	Securities,"	of	the	Notes	to	Consolidated	Financial	Statements	(Item	8)	and	"Investment	Securities"	section	included	in	Management's Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	(Item	7)—disclose	information	regarding	book	values,	market	values,	maturities	and	weighted average	yields	of	securities	(by	category).

								Note	1,	"Summary	of	Significant	Accounting	Policies—Loans	and	Lease	Financing"	of	the	Notes	to	Consolidated	Financial	Statements	(Item	8)—discloses	our policy	for	placing	loans	and	leases	on	non-accrual	status.

								Note	4,	"Loans	and	Lease	Financing,"	of	the	Notes	to	Consolidated	Financial	Statements	(Item	8)	and	"Loans	and	Lease	Financing"	section	included	in Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	(Item	7)—disclose	distribution	of	loans,	loan	maturities	and	sensitivities	of loans	to	changes	in	interest	rates.

								"Loans	and	Lease	Financing"	and	"Cross-Border	Outstandings"	sections	of	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	(Item	7)—disclose	information	regarding	cross-border	outstandings	and	other	loan	concentrations	of	State	Street.

								"Credit	Risk"	section	of	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	(Item	7)	and	note	4,	"Loans	and	Lease Financing,"	of	the	Notes	to	Consolidated	Financial	Statements	(Item	8)—present	the	allocation	of	the	allowance	for	loan	losses,	and	a	description	of	factors	which influenced	management's	judgment	in	determining	amounts	of	additions	or	reductions	to	the	allowance	charged	or	credited	to	results	of	operations.

								"Distribution	of	Average	Assets,	Liabilities	and	Shareholders'	Equity;	Interest	Rates	and	Interest	Differential"	table	(Item	8)—discloses	deposit	information.

								Note	8,	"Short-Term	Borrowings,"	of	the	Notes	to	Consolidated	Financial	Statements	(Item	8)—discloses	information	regarding	short-term	borrowings	of	State Street.

# ITEM	1A.				RISK	FACTORS

								This	Form	10-K	contains	statements	(including,	without	limitation,	statements	in	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations,	included	in	this	Form	10-K	under	Item	7)	that	are	considered	"forward-looking	statements"	within	the	meaning	of	U.S.	federal	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	as	to	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,	and	are	based	on	management's	expectations	and	assumptions	at the	time	the	statements	are	made	and	are	not	guarantees	of	future	results.	These	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,	and 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	and	convert	acquisitions	into	our	business,	including	the	acquisition	of	Investors	Financial	Services	Corp.;

•the	level	and	volatility	of	interest	rates,	particularly	in	the	U.S.	and	Europe;	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;

•the	liquidity	of	the	U.S.	and	European	securities	and	currency	markets,	particularly	the	markets	for	fixed	income	securities,	including	asset-backed commercial	paper,	and	the	liquidity	requirements	of	our	customers;

•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	results	of	litigation	and	similar	disputes	and,	in	particular,	the	effect	that	current	or	potential	litigation	may	have	on	the	reputation	of	SSgA	and	its ability	to	attract	and	retain	customers;

•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;	and	the	possibility	of further	developments	of	the	nature	giving	rise	to	the	legal	exposure	associated	with	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;

•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.

								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	this	Form	10-K	and	in	our	other	SEC	filings,	including	our	reports	on	Form	10-Q	and	Form	8-K, which	are	accessible	on	the	SEC's	website	at	www.sec.gov	or	on	our	website	at	www.statestreet.com.

								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	in	this	Risk	Factors	section	and	elsewhere	in	this	Form	10-K	or	disclosed	in	our	other	SEC	filings,	and	forward-looking	statements	should	not	be	relied upon	as	representing	our	expectations	or	beliefs	as	of	any	date	subsequent	to	the	date	this	Form	10-K	is	filed	with	the	SEC.	State	Street	undertakes	no	obligation	to	revise the	forward-looking	statements	contained	in	this	Form	10-K	to	reflect	events	after	the	date	it	is	filed	with	the	SEC.	The	factors	discussed	above	and	below	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.

# 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	would	reduce	our	asset-based	fee	revenue	and	the value	of	securities	we	hold	in	our	investment	portfolio,	and	may	adversely	impact	other	transaction-based	revenue,	such	as	securities	finance	revenue,	and	the	volume	of transactions	that	we	execute	for	our	customers.	The	assets	held	by	our	asset-backed	commercial	paper	conduits	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.	A	widening	of	credit	spreads	or	credit	deterioration	could	cause	some	or	all	off-balance	sheet	assets	and	liabilities	to	be	consolidated	onto our	balance	sheet.

								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,	typically	resulting	in	stronger	revenues	in	the	second	and	fourth	quarters	and	relatively	weaker	revenues	in	the	first	and	third	quarters.

								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	slowing	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.

								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	related	revenue	growth	or cost	savings	may	not	be	achieved.	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	Investor	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.	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-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	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	approvals	may include	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.	Although	we	would	not	enter	into	a	transaction	anticipating	materially	adverse regulatory	conditions,	such	conditions	may	be	imposed,	or	we	may	experience	regulatory	delays,	that	could	limit	the	benefits	of	the	transaction.

								With	any	acquisition,	the	integration	of	the	operations	and	resources	of	the	two	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.	Where we	acquire	a	business	and	combine	it	with	our	operations,	we	are	also	exposed	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	come	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	intangible	assets	reported	as	part	of	the	acquisition.

								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	fashion	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.

								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,	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.

# Liquidity	Risk	and	Management

								Liquidity	management	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.	Our	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.

								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	our	debt	rating,	may	adversely	affect	our	capital	costs	and	our	ability	to	raise	capital	and,	in turn,	our	liquidity.	Similarly,	the	failure	to	maintain	an	acceptable	credit	rating	on	our	obligations	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.

								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	managed	by	our	Structured	Products	group,	securities	finance	collateral	pools	and	money	market	and other	short-term	investment	funds.	In	the	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	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	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.	Other	institutions	can	and	do	provide	liquidity	to	the	conduits.	In	the	event	that	maturing commercial	paper	cannot	be	placed	by	the	conduits,	the	liquidity	providers	are	required	by	contract	to,	among	other	things,	provide	liquidity	to	the	conduits	by purchasing	portfolio	assets	from	them.	We	may	also	provide	liquidity	by	purchasing	commercial	paper	or	providing	other	extensions	of	credit	to	the	conduits.

								Beginning	in	the	third	quarter	of	2007,	asset-backed	commercial	paper	conduits,	including	those	sponsored	by	State	Street,	experienced	significantly	less	liquidity and	higher	borrowing	costs	in	the	global	fixed-income	securities	markets,	and	in	a	few	cases,	required	liquidity	support	from	their	sponsoring	bank.	The	fixed-income markets	remain	significantly	disrupted,	and	the	potential	for	decreased	liquidity,	increased	funding	costs	and	adverse	asset	valuations	remains	a	material	risk.	We	on occasion	have	purchased,	and	during	the	third	and	fourth	quarters	of	2007	did	purchase,	commercial	paper	from	the	conduits,	the	purchase	of	which	we	recorded	in	our consolidated	balance	sheet.	We	may	continue	to	do	so	in	the	future.	These	purchases	of	commercial	paper	were	funded	from	our	general	liquidity,	and	the	liquidity agreements	were	not	drawn.

								The	conduits	are	not	recorded	in	our	consolidated	financial	statements.	However,	if	circumstances	change	we	may	be	required,	under	existing	accounting	standards, to	consolidate	the	conduits	onto	our	consolidated	balance	sheet.	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.	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. 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	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.	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.

								Other	of	our	business	activities	that	involve	managing	pools	of	assets	that	are	funded	in	the	short-term	markets	and	invested	in	longer-term	markets	include managing	securities	finance	collateral	pools	and	money	market	and	other	short-term	investment	funds.	These	businesses	involve	similar	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	would	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.

								Similarly,	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	substantive	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	if	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.	Certain	accounts	managed	by	SSgA	are managed	in	accordance	with	specific	investment	guidelines	and	have	the	benefit	of	contractual	arrangements	with	third-party	financial	institutions	that	allow	the accounts	to	issue	and	redeem	units	based	upon	the	book	value	of	such	units	rather	than	market	value.	The	third-party	financial	institutions	have	an	obligation	to	fund	any shortfall	after	all	the	units	have	been	redeemed	at	book	value.	Several	of	these	accounts	were	significantly	impacted	by	the	volatility	in	the	fixed-income	markets	in	the second	half	of	2007.	The	continued	willingness	of	these	financial	institutions	to	partner	with	us	in	these	products	may	be	negatively	impacted	if	the	variance	between book	and	market	value	and	other	risk	metrics	fall	or	remain	below	the	financial	institutions'	internal	risk	standards.

								We	used	a	portion	of	the	reserve	announced	on	January	3,	2008	to	reduce	the	differences	between	the	book	and	market	value	of	these	accounts.	This	cash	infusion was	intended	to	reduce	the	difference	between	market	and	book	values	of	these	accounts	to	levels	that	are	within	the	risk	tolerance	of	such	third-party	financial institutions.	If	the	third-party	financial	institutions	are	or	become	unwilling	to	continue	to	partner	with	us,	our	business	may	be	adversely	affected.	There	can	be	no assurance	that	these	and	other	costs	associated	with	our	legal	exposures	resulting	from	SSgA's	active	fixed	income	strategies	will	not	exceed	the	reserve	we	have established.

								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	State	Street	Global	Markets' business	units,	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	large	portfolios	of	certain	types	of	securities	has	been	substantially	impaired.	These	conditions	have	also	led	to greater	difficulty	in	accurately	valuing	portfolio	positions.	These	market	conditions	have	made	the	management	of	our	own	and	our	clients'	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	reputation	depends	not	only	in 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 fees	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	in	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	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	process.	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	balance	sheet	can	significantly	influence	the	success	of	our asset	and	liability	management	process	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	portfolio	management	staff,	either	individually	or	as	a	group,	can	adversely	impact	customer	perception	of	SSgA's ability	to	continue	to	manage	certain	types	of	investment	management	mandates.	In	some	of	our	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	establishing	operations	in	lower	cost	areas,	such	as	Eastern	Europe,	India	and	China,	forming	joint	ventures	in	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.	As	a	result,	we continue	to	invest	significantly	in	this	infrastructure.	Our	businesses	and	our	relationship	with	customers,	are	dependent	upon	our	ability	to	maintain	the	confidentiality of	our	and	our	customers'	trade	secrets	and	confidential	information	(including	personal	data	of	their	customers).	A	failure	of	our	security	measures	in	such	regard	could have	a	material	adverse	impact	on	our	competitive	position,	relationship	with	customers	and	reputation.	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	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	backed	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	inquiries	from	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	on-going	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	the	active	fixed-income	investments.	As	of December	31,	2007,	we	had	entered	into	settlement	agreements	with	aggregate	total	payments	of	$16	million.	We	believe	that	our	reserve	will	be	adequate	to accommodate	the	potential	exposure	relating	to	SSgA's	active	fixed-income	strategies.	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	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.	This	review	has	only	recently	begun	and	no	conclusions	or	recommendations	have	resulted	from	that	review	as	of	the	date	of	this	filing.	While	we	do	not	believe that	such	review	will	identify	material	legal	or	regulatory	exposures,	there	can	be	no	assurance	as	to	the	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	United	States	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	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	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.

								New	accounting	requirements,	or	changes	in	the	interpretation	of	existing	accounting	requirements,	by	the	Financial	Accounting	Standards	Board	or	the	SEC,	can potentially	affect	our	consolidated	financial	condition	and	results	of	operations,	as	accounting	rules	in	the	United	States	and	other	jurisdictions	consistently	evolve	to reflect	the	increasing	complexities	of	business.	These	changes	are	very	difficult	to	predict,	and	can	materially	impact	how	we	record	and	report	our	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.

# Risk	Management

								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 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.

# ITEM	1B.				UNRESOLVED	STAFF	COMMENTS

# ITEM	2.				PROPERTIES

								We	occupy	a	total	of	approximately	6.8	million	square	feet	of	office	space	and	related	facilities	around	the	world,	of	which	approximately	6.1	million	square	feet are	leased.	Of	the	total	leased	space,

approximately	3.4	million	square	feet	are	located	in	eastern	Massachusetts.	An	additional	1.3	million	square	feet	are	located	elsewhere	throughout	the	U.S.	and	in Canada.	We	occupy	approximately	1.0	million	square	feet	in	Europe,	and	approximately	370,000	square	feet	in	the	Asia/Pacific	region.

								Our	headquarters	is	located	at	State	Street	Financial	Center,	One	Lincoln	Street,	Boston,	Massachusetts,	a	36-story	office	building.	We	have	leased	the	entire 1,025,000	square	feet	of	this	building,	as	well	as	the	entire	366,000-square-foot	parking	garage	at	One	Lincoln	Street,	under	20-year	non-cancelable	capital	leases.	A portion	of	the	lease	payments	is	offset	by	subleases	for	153,000	square	feet	of	the	building.	We	occupy	two	buildings	located	in	Quincy,	Massachusetts,	one	of	which	we own	and	the	other	we	lease.	The	buildings,	containing	a	total	of	approximately	821,000	square	feet,	function	as	State	Street	Bank's	principal	operations	facilities.

								Additional	information	about	our	occupancy	costs,	including	commitments	under	non-cancelable	leases,	is	in	note	18	of	the	Notes	to	Consolidated	Financial Statements	included	in	this	Form	10-K	under	Item	8.

# ITEM	3.				LEGAL	PROCEEDINGS

								We	are	involved	in	various	industry-related	and	other	regulatory,	governmental	and	law	enforcement	inquiries	and	subpoenas,	as	well	as	legal	proceedings, including	recent	proceedings	related	to	SSgA's	active	fixed-income	strategies,	that	arise	in	the	normal	course	of	business.	For	a	discussion	of	recent	proceedings, litigation	exposure	and	related	costs	and	other	similar	matters	associated	with	SSgA's	active	fixed-income	strategies,	including	the	establishment	of	a	reserve	of approximately	$625	million,	refer	to	"Risk	Factors—Litigation	Risks"	included	under	Item	1A;	the	"Summary,"	"Financial	Highlights,"	"Operating	Expenses"	and	"Line of	Business	Information"	sections	of	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	included	under	Item	7;	and	note	10	of	the Notes	to	Consolidated	Financial	Statements	included	under	Item	8	of	this	Form	10-K.	In	the	opinion	of	management,	after	discussion	with	counsel,	these	regulatory, governmental	and	law	enforcement	inquiries	and	subpoenas	and	legal	proceedings,	including	the	above-mentioned	matters	associated	with	SSgA's	active	fixed-income strategies,	can	be	defended	or	resolved	without	a	material	adverse	effect	on	our	consolidated	financial	position	or	results	of	operations	in	future	periods.

# ITEM	4.				SUBMISSION	OF	MATTERS	TO	A	VOTE	OF	SECURITIES	HOLDERS

# ITEM	4A.				EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

								The	following	table	sets	forth	certain	information	with	regard	to	each	of	our	executive	officers	as	of	February	15,	2008.

Global	Advisors

								All	executive	officers	are	appointed	by	the	Board	of	Directors.	All	officers	hold	office	at	the	discretion	of	the	Board.	There	are	no	family	relationships	among	any of	our	directors	and	executive	officers.

								Mr.	Logue	joined	State	Street	in	1990.	He	has	served	as	President	since	2001	and	Chief	Operating	Officer	since	2000.	In	June	2004,	he	was	appointed	Chairman and	Chief	Executive	Officer.

								Mr.	Antonellis	joined	State	Street	in	1991.	In	2003,	he	was	named	head	of	Information	Technology	and	Global	Securities	Services.	In	2006,	he	was	appointed	Vice Chairman	with	additional	responsibility	as	head	of	Investor	Services	in	North	America	and	Global	Investment	Manager	Outsourcing	Services.

								Mr.	Hooley	joined	State	Street	in	1986.	Since	2002,	he	has	served	as	Executive	Vice	President	and	head	of	Investor	Services.	In	2006,	he	was	appointed	Vice Chairman	and	global	head	of	Investment	Servicing	and	Investment	Research	and	Trading.

								Mr.	Carp	joined	State	Street	in	January	2006	as	Executive	Vice	President	and	Chief	Legal	Officer.	In	2006,	he	was	also	appointed	Secretary.	From	April	2004	until December	2005,	Mr.	Carp	served	as	executive	vice	president	and	general	counsel	of	Massachusetts	Financial	Services,	an	investment	management	and	research company.	From	1989	until	2004,	Mr.	Carp	was	a	senior	partner	at	the	law	firm	of	Hale	and	Dorr	LLP,	where	he	was	an	attorney	since	1982.

								Mr.	Chow	first	joined	State	Street	in	1990,	retired	in	2003,	and	rejoined	State	Street	in	2004.	When	he	retired	in	2003,	he	was	Executive	Vice	President	and	head	of Credit	and	Risk	Policy.	Since	2004,	he	has	served	as	Executive	Vice	President,	Risk	and	Corporate	Administration,	and	is	engaged	in	a	variety	of	strategic	and management	initiatives	across	the	organization.

								Mr.	Malerba	joined	State	Street	in	November	2004	as	Deputy	Corporate	Controller.	In	2006,	he	was	appointed	Corporate	Controller.	Prior	to	joining	State	Street, he	served	as	Deputy	Controller	at	FleetBoston	Financial	Corporation	from	December	2000	and	continued	in	that	role	after	the	merger	with	Bank	of	America Corporation	in	April	2004.

								Mr.	O'Leary	joined	State	Street	in	2005	as	Executive	Vice	President	and	head	of	Global	Human	Resources.	In	2004,	he	served	as	a	senior	advisor	to	Credit	Suisse First	Boston	Corporation,	a	global

financial	services	company,	after	serving	as	Managing	Director	from	1990	to	2003	and	Global	Head	of	Human	Resources	from	1988	to	2003.

								Mr.	James	Phalen	joined	State	Street	in	1992.	As	of	2003,	he	served	as	Executive	Vice	President	of	State	Street	and	Chairman	and	Chief	Executive	Officer	of CitiStreet,	a	global	benefit	provider	and	retirement	plan	recordkeeper.	In	February	2005,	he	was	appointed	head	of	Investor	Services	in	North	America.	In	2006,	he	was appointed	head	of	international	operations	for	Investment	Servicing	and	Investment	Research	and	Trading,	based	in	Europe.	In	January	2008,	he	was	appointed	Interim President	and	Chief	Executive	Officer	of	State	Street	Global	Advisors.

								Mr.	David	Phelan	joined	State	Street	in	2006	as	Executive	Vice	President,	General	Counsel	and	Assistant	Secretary.	From	1995	until	2006,	he	was	a	senior	partner at	the	law	firm	of	Hale	and	Dorr	LLP	(and,	following	a	merger,	of	Wilmer	Cutler	Pickering	Hale	and	Dorr	LLP),	where	he	was	an	attorney	since	1993.

								Mr.	Resch	joined	State	Street	in	2002	as	Executive	Vice	President	and	Chief	Financial	Officer.	He	also	served	as	Treasurer	from	2006	until	January	2008.

								Mr.	Shelton	joined	State	Street	in	1984.	Since	prior	to	2003,	he	has	served	as	Executive	Vice	President	and	head	of	State	Street	Global	Markets.

# PART	II

# ITEM	5.				MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY

# SECURITIES

# MARKET	FOR	REGISTRANT'S	COMMON	EQUITY

								Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	under	the	ticker	symbol	STT.	There	were	4,432	shareholders	of	record	at	December	31,	2007. Information	concerning	the	market	prices	of,	and	dividends	on,	our	common	stock	during	the	past	two	years	is	included	in	this	Form	10-K	under	Item	8,	under	the caption	"Quarterly	Summarized	Financial	Information."

								In	March	2007,	our	Board	of	Directors	authorized	the	purchase	of	up	to	15	million	shares	of	common	stock	for	general	corporate	purposes,	including	mitigating	the dilutive	impact	of	shares	issued	under	employee	benefit	plans,	in	addition	to	its	previous	authorization	in	2006	of	up	to	15	million	shares,	of	which	12.2	million	shares remained	available	for	purchase	at	December	31,	2006.	We	generally	employ	third-party	broker/dealers	to	acquire	shares	on	the	open	market	in	connection	with	our common	stock	purchase	program.

								Under	the	above-described	authorization,	during	2007	we	repurchased	13.4	million	shares	of	our	common	stock,	and	an	additional	.6	million	shares	in	January 2008,	in	connection	with	a	$1	billion	accelerated	share	repurchase	program	that	concluded	on	January	18,	2008.	As	of	that	date,	approximately	13.2	million	shares remained	available	for	future	purchase	under	the	combined	authorization	described	above.

# RELATED	STOCKHOLDER	MATTERS

								As	a	bank	holding	company,	the	parent	company	is	a	legal	entity	separate	and	distinct	from	its	principal	banking	subsidiary,	State	Street	Bank,	and	its	non-bank subsidiaries.	The	right	of	the	parent	company	to	participate	as	a	shareholder	in	any	distribution	of	assets	of	State	Street	Bank	upon	its	liquidation,	reorganization	or otherwise	is	subject	to	the	prior	claims	by	creditors	of	State	Street	Bank,	including	obligations	for	federal	funds	purchased	and	securities	sold	under	repurchase agreements	and	deposit	liabilities.	Payment	of	dividends	by	State	Street	Bank	is	subject	to	the	provisions	of	Massachusetts	banking	law,	which	provide	that	dividends may	be	paid	out	of	net	profits	provided	(i)	capital	stock	and	surplus	remain	unimpaired,	(ii)	dividend	and	retirement	fund	requirements	of	any	preferred	stock	have	been met,	(iii)	surplus	equals	or	exceeds	capital	stock,	and	(iv)	losses	and	bad	debts,	as	defined,	in	excess	of	reserves	specifically	established	for	such	losses	and	bad	debts, have	been	deducted	from	net	profits.

								Under	the	Federal	Reserve	Act,	the	approval	of	the	Federal	Reserve	Board	would	be	required	if	dividends	declared	by	State	Street	Bank	in	any	year	exceeded	the total	of	its	net	profits	for	that	year	combined	with	retained	net	profits	for	the	preceding	two	years,	less	any	required	transfers	to	surplus.	Information	about	dividends from	our	subsidiary	banks	is	in	note	14	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.	Future	dividend	payments	of	State Street	Bank	and	other	non-bank	subsidiaries	cannot	be	determined	at	this	time.

# SHAREHOLDER	RETURN	PERFORMANCE	PRESENTATION

								The	graph	presented	below	compares	the	cumulative	total	shareholder	return	on	State	Street's	common	stock	to	the	cumulative	total	return	of	the	S&P	500	Index and	the	S&P	Financial	Index	for	the	five	fiscal	years	which	commenced	January	1,	2003	and	ended	December	31,	2007.	The	cumulative	total	shareholder	return	assumes the	investment	of	$100	in	State	Street	common	stock	and	in	each	index	on	December	31,	2002,	and	also	assumes	reinvestment	of	dividends.	The	S&P	Financial	Index	is a	publicly	available	measure	of	92	of	the	Standard	&	Poor's	500	companies,	representing	30	diversified	financial	services	companies,	24	banking	companies,	24 insurance	companies,	and	14	real	estate	companies.

# Comparison	of	Five-Year	Cumulative	Total	Shareholder	Return

# GRAPHIC

|  | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| State\tStreet\tCorporation | $100 | $135 | $129 | $148 | $183 | $223 |
| S&P\t500\tIndex | 100 | 129 | 143 | 150 | 173 | 183 |
| S&P\tFinancial\tIndex | 100 | 131 | 145 | 155 | 184 | 150 |

# ITEM	6.				SELECTED	FINANCIAL	DATA

# (Dollars	in	millions,	except	per	share	amounts	or	where	otherwise	noted)

| FOR	THE	YEAR	ENDED	DECEMBER	31: | 2007 | 2006 | 2005 | 2004 | 2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Total\tfee\trevenue | $6,599 | $5,186 | $4,551 | $4,048 | $3,556 |
| Net\tinterest\trevenue | 1,730 | 1,110 | 907 | 859 | 810 |
| Provision\tfor\tloan\tlosses | — | — | — | (18) | — |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 7 | 15 | (1) | 26 | 23 |
| Gain\ton\tsale\tof\tPrivate\tAsset\tManagement\tbusiness,\tnet\tof\texit\tand\tother\tassociated\tcosts | — | — | 16 | — | 285 |
| Gain\ton\tsale\tof\tCorporate\tTrust\tbusiness,\tnet\tof\texit\tand\tother\tassociated\tcosts | — | — | — | — | 60 |
| Total\trevenue | 8,336 | 6,311 | 5,473 | 4,951 | 4,734 |
| Total\toperating\texpenses | 6,433 | 4,540 | 4,041 | 3,759 | 3,622 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 1,903 | 1,771 | 1,432 | 1,192 | 1,112 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 642 | 675 | 487 | 394 | 390 |
| Income\tfrom\tcontinuing\toperations | 1,261 | 1,096 | 945 | 798 | 722 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | — | 10 | (107) | — | — |
| Net\tincome | $1,261 | $1,106 | $838 | $798 | $722 |
| PER\tCOMMON\tSHARE: |  |  |  |  |  |
| Basic\tearnings: |  |  |  |  |  |
| Continuing\toperations | $3.50 | $3.31 | $2.86 | $2.38 | $2.18 |
| Net\tincome | 3.50 | 3.34 | 2.53 | 2.38 | 2.18 |
| Diluted\tearnings: |  |  |  |  |  |
| Continuing\toperations | 3.45 | 3.26 | 2.82 | 2.35 | 2.15 |
| Net\tincome | 3.45 | 3.29 | 2.50 | 2.35 | 2.15 |
| Cash\tdividends\tdeclared | .88 | .80 | .72 | .64 | .56 |
| Closing\tprice\tof\tcommon\tstock\t(at\tyear\tend) | 81.20 | 67.44 | 55.44 | 49.12 | 52.08 |
| AT\tYEAR\tEND: |  |  |  |  |  |
| Investment\tsecurities | $74,559 | $64,992 | $59,870 | $37,571 | $38,215 |
| Total\tassets | 142,543 | 107,353 | 97,968 | 94,040 | 87,534 |
| Deposits | 95,789 | 65,646 | 59,646 | 55,129 | 47,516 |
| Long-term\tdebt | 3,636 | 2,616 | 2,659 | 2,458 | 2,222 |
| Shareholders'\tequity | 11,299 | 7,252 | 6,367 | 6,159 | 5,747 |
| Assets\tunder\tcustody\t(in\tbillions) | $15,299 | $11,854 | $10,121 | $9,497 | $9,370 |
| Assets\tunder\tmanagement\t(in\tbillions) | 1,979 | 1,749 | 1,441 | 1,354 | 1,106 |
| Number\tof\temployees | 27,110 | 21,700 | 20,965 | 19,668 | 19,850 |
| RATIOS: |  |  |  |  |  |
| Continuing\toperations: |  |  |  |  |  |
| Return\ton\tshareholders'\tequity | 13.4% | 16.2% | 15.3% | 13.3% | 13.9% |
| Return\ton\taverage\tassets | 1.02 | 1.03 | .95 | .84 | .87 |
| Dividend\tpayout | 25.2 | 24.2 | 25.3 | 26.9 | 25.9 |
| Net\tincome: |  |  |  |  |  |
| Return\ton\tshareholders'\tequity | 13.4 | 16.4 | 13.6 | 13.3 | 13.9 |
| Return\ton\taverage\tassets | 1.02 | 1.04 | .84 | .84 | .87 |
| Dividend\tpayout | 25.2 | 24.0 | 28.5 | 26.9 | 25.9 |
| Average\tshareholders'\tequity\tto\taverage\ttotal\tassets | 7.6 | 6.3 | 6.2 | 6.3 | 6.3 |
| Tier\t1\trisk-based\tcapital | 11.2 | 13.7 | 11.7 | 13.3 | 14.0 |
| Total\trisk-based\tcapital | 12.7 | 15.9 | 14.0 | 14.7 | 15.8 |
| Tier\t1\tleverage\tratio | 5.3 | 5.8 | 5.6 | 5.5 | 5.6 |
| Tangible\tcommon\tequity\tto\tadjusted\ttotal\tassets | 3.5 | 5.1 | 4.8 | 4.5 | 4.5 |

# ITEM	7.				MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

								State	Street	Corporation	is	a	financial	holding	company	organized	under	the	laws	of	the	Commonwealth	of	Massachusetts.	All	references	in	this	Management's Discussion	and	Analysis	to	"the	parent	company"	are	to	State	Street	Corporation.	Unless	otherwise	indicated	or	unless	the	context	requires	otherwise,	all	references	in this	Management's	Discussion	to	"State	Street,"	"we,"	"us,"	"our"	or	similar	terms	mean	State	Street	Corporation	and	its	subsidiaries	on	a	consolidated	basis.	State	Street Bank	and	Trust	Company	is	referred	to	as	"State	Street	Bank."	At	December	31,	2007,	we	had	total	assets	of	$142.54	billion,	total	deposits	of	$95.79	billion,	total shareholders'	equity	of	$11.30	billion	and	employed	27,110.	With	$15.30	trillion	of	assets	under	custody	and	$1.98	trillion	of	assets	under	management	at	year-end 2007,	we	are	a	leading	specialist	in	meeting	the	needs	of	institutional	investors	worldwide.

								We	report	two	lines	of	business:	Investment	Servicing	and	Investment	Management.	These	lines	of	business	provide	a	full	range	of	products	and	services	for	our customers,	which	include	mutual	funds	and	other	collective	investment	funds,	corporate	and	public	retirement	plans,	insurance	companies,	foundations,	endowments	and other	investment	pools,	and	investment	managers.	Investment	Servicing	provides	services	to	support	institutional	investors,	such	as	custody,	product-	and	participant- level	accounting,	daily	pricing	and	administration;	master	trust	and	master	custody;	recordkeeping;	shareholder	services,	including	mutual	fund	and	collective	investment fund	shareholder	accounting;	foreign	exchange,	brokerage	and	other	trading	services;	securities	finance;	deposit	and	short-term	investment	facilities;	loans	and	lease financing;	investment	manager	and	hedge	fund	manager	operations	outsourcing;	and	performance,	risk	and	compliance	analytics.	Investment	Management	provides	a broad	array	of	services	for	managing	financial	assets,	such	as	investment	research	services	and	investment	management,	including	passive	and	active	U.S.	and	non-U.S. equity	and	fixed-income	strategies.	For	additional	information	about	our	lines	of	business,	see	the	"Line	of	Business	Information"	section	of	this	Management's Discussion	and	Analysis	and	note	22	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								This	Management's	Discussion	and	Analysis	should	be	read	in	conjunction	with	the	Consolidated	Financial	Statements	and	accompanying	Notes	to	Consolidated Financial	Statements	included	in	this	Form	10-K	under	Item	8.	Certain	previously	reported	amounts	presented	have	been	reclassified	to	conform	to	current	period classifications.	We	prepare	our	consolidated	financial	statements	in	accordance	with	accounting	principles	generally	accepted	in	the	U.S.,	referred	to	as	"GAAP".	The preparation	of	financial	statements	in	accordance	with	GAAP	requires	management	to	make	estimates	and	assumptions	in	the	application	of	certain	accounting	policies that	materially	affect	the	reported	amounts	of	assets,	liabilities,	revenue,	and	expenses.	Accounting	policies	that	require	management	to	make	assumptions	that	are difficult,	subjective,	or	complex	about	matters	that	are	uncertain	and	may	change	in	subsequent	periods	are	discussed	in	more	depth	in	the	"Significant	Accounting Estimates"	section	of	this	Management's	Discussion	and	Analysis.

								This	Management's	Discussion	and	Analysis	contains	statements	that	are	considered	"forward-looking	statements"	within	the	meaning	of	U.S.	federal	securities laws.	Forward-looking	statements	are	based	on	our	current	expectations	about	revenue	and	market	growth,	acquisitions	and	divestitures,	new	technologies,	services	and opportunities,	earnings	and	other	factors.	These	forward-looking	statements	involve	certain	risks	and	uncertainties	which	could	cause	actual	results	to	differ	materially. We	undertake	no	obligation	to	revise	the	forward-looking	statements	contained	in	this	Management's	Discussion	and	Analysis	to	reflect	events	after	the	date	we	file	this Form	10-K	with	the	SEC.	Additional	information	about	forward-looking	statements	and	related	risks	and	uncertainties	is	included	in	the	Risk	Factors	section	of	this Form	10-K	under	Item	1A.

# OVERVIEW	OF	FINANCIAL	RESULTS

| Years	ended	December	31,<br>(Dollars	in	millions,	except	per	share	amounts) | 2007(1) | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Total\tfee\trevenue | $6,599 | $5,186 | $4,551 |
| Net\tinterest\trevenue | 1,730 | 1,110 | 907 |
| Provision\tfor\tloan\tlosses | — | — | — |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 7 | 15 | (1) |
| Gain\ton\tsale\tof\tdivested\tbusiness | — | — | 16 |
| Total\trevenue | 8,336 | 6,311 | 5,473 |
| Total\toperating\texpenses(2) | 6,433 | 4,540 | 4,041 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 1,903 | 1,771 | 1,432 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 642 | 675 | 487 |
| Income\tfrom\tcontinuing\toperations | 1,261 | 1,096 | 945 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | — | 10 | (107) |
| Net\tincome | $1,261 | $1,106 | $838 |
| Earnings\tper\tshare\tfrom\tcontinuing\toperations: |  |  |  |
| Basic | $3.50 | $3.31 | $2.86 |
| Diluted | 3.45 | 3.26 | 2.82 |
| Earnings\tper\tshare: |  |  |  |
| Basic | $3.50 | $3.34 | $2.53 |
| Diluted | 3.45 | 3.29 | 2.50 |
| Average\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic | 360,675 | 331,350 | 330,361 |
| Diluted | 365,488 | 335,732 | 334,636 |
| Return\ton\tshareholders'\tequity\tfrom\tcontinuing\toperations | 13.4% | 16.2% | 15.3% |
| Return\ton\tshareholders'\tequity | 13.4 | 16.4 | 13.6 |

(1) Financial	results	for	the	year	ended	December	31,	2007	include	results	of	the	acquired	Investors	Financial	business	for	the	third	and	fourth	quarters	of	2007.

(2) Operating	expenses	for	the	year	ended	December	31,	2007	include	merger	and	integration	costs	of	$198	million	associated	with	the	acquisition	of	Investors Financial	and	a	net	charge	of	$467	million	related	to	certain	active	fixed-income	strategies	at	State	Street	Global	Advisors.

# Summary

								Our	financial	results	for	2007	reflect	our	overall	objectives	of	consistent	revenue	growth,	managing	growth	in	operating	expenses	and	balancing	growth	in	operating expenses	with	growth	in	revenue.

•All	categories	of	fee	revenue,	as	reported	in	our	consolidated	statement	of	income,	increased	compared	to	2006,	with	the	exception	of	processing	fees	and other	revenue,	which	declined	13%.

•Net	interest	revenue	increased	56%	compared	to	2006.

•We	achieved	positive	operating	leverage	for	2007	compared	to	2006,	as	defined	by	management.

•Our	Investment	Management	business,	State	Street	Global	Advisors,	which	we	refer	to	in	this	Management's	Discussion	and	Analysis	as	"SSgA," contributed	approximately	18%	of	our	consolidated	total	revenue	for	2007,	compared	to	19%	for	2006,	and	generated	net	new	business	of	$116	billion during	2007,	compared	to	$86	billion	for	2006.

•We	ended	2007	with	levels	of	assets	under	custody	and	assets	under	management	that	increased	29%	and	13%,	respectively,	from	year-end	2006.

•We	completed	our	acquisition	of	Currenex	in	March	2007.	For	the	period	March	to	December	2007,	the	acquired	Currenex	business	contributed approximately	$65	million	of	revenue,	primarily	other	trading	services	revenue.

•We	completed	our	acquisition	of	Investors	Financial	in	July	2007,	and	issued	approximately	60.8	million	shares	in	the	transaction.	For	the	second	half	of the	year,	the	acquired	Investors	Financial	business	contributed	$456	million	in	revenue,	including	$395	million	in	fee	revenue,	and	$340	million	in operating	expenses.	In	connection	with	the	acquisition,	during	the	second	half	of	the	year	we	recorded	$198	million,	or	$129	million	after-tax,	of	merger and	integration	costs.

•During	the	second	half	of	2007,	we	purchased	13.4	million	shares	of	our	common	stock,	as	well	as	an	additional	.6	million	shares	in	January	2008,	under a	$1	billion	accelerated	share	repurchase	program,	which	program	concluded	on	January	18,	2008.

•During	the	fourth	quarter	of	2007,	we	recorded	a	net	pre-tax	charge	of	$467	million,	or	$279	million	after-tax,	to	establish	a	reserve	associated	with certain	active	fixed-income	strategies	managed	by	SSgA.

								Certain	financial	information	is	presented	and	discussed	in	the	following	sections	on	both	a	GAAP	basis	and	on	an	"operating"	basis.	Management	measures	certain financial	information	on	an	operating	basis	to	provide	for	meaningful	comparisons	from	period	to	period,	and	to	present	comparable	financial	trends	with	respect	to	our normal	ongoing	business	operations.	Management	believes	that	operating-basis	financial	information,	which	includes	the	impact	of	revenue	from	non-taxable	sources and	excludes	the	impact	of	non-recurring	expenses,	facilitates	an	investor's	understanding	and	analysis	of	State	Street's	underlying	performance	and	trends	in	addition	to financial	information	prepared	in	accordance	with	GAAP.

# Financial	Highlights

								For	2007,	we	recorded	income	from	continuing	operations	of	$1.3	billion,	or	$3.45	per	diluted	share,	compared	to	$1.1	billion,	or	$3.26	per	diluted	share,	for	2006. Total	revenue	increased	32%	from	2006,	and	return	on	equity	from	continuing	operations	was	13.4%	compared	to	16.2%	for	2006.	Results	for	2007	included	two significant	expenses.	First,	we	recorded	aggregate	merger	and	integration	costs	of	$198	million,	or	$129	million	after-tax,	in	connection	with	our	acquisition	of	Investors Financial.	Second,	we	recorded	a	net	pre-tax	charge	of	$467	million,	or	$279	million	after-tax,	in	connection	with	the	establishment	of	a	reserve	to	address	legal exposure	and	other	costs	associated	with	the	underperformance	of	certain	active	fixed-income	strategies	managed	by	SSgA,	and	customer	concerns	as	to	whether	the execution	of	these	strategies	was	consistent	with	the	customers'	investment	intent.	These	costs	are	more	fully	discussed	in	the	"Consolidated	Results	of	Operations— Operating	Expenses"	section	of	this	Management's	Discussion	and	Analysis.

								Our	results	for	2006	included	income	from	discontinued	operations	of	$10	million	(pre-tax	income	of	$16	million	reduced	by	related	income	tax	expense	of $6	million),	or	$.03	per	diluted	share,	the	result	of	the	finalization	of	certain	legal,	selling	and	other	costs	recorded	in	connection	with	our	divestiture	of	Bel	Air Investment	Advisors	LLC.

								Total	revenue	for	2007	grew	32%	from	2006.	Total	fee	revenue	for	2007,	which	grew	27%,	reflected	consistent	growth	throughout	the	year	in	servicing	fees	and management	fees,	up	24%	and	21%,	respectively,	compared	to	2006,	and	trading	services	and	securities	finance	revenue,	up	34%	and	76%,	respectively.	Generally, servicing	fees	benefited	from	the	inclusion	of	the	acquired	Investors	Financial

business,	net	new	business	and	favorable	equity	markets,	and	management	fees	benefited	primarily	from	net	new	business	and	favorable	equity	markets.	Trading services	revenue	grew	primarily	as	a	result	of	increases	in	customer	volumes	and	the	inclusion	of	the	acquired	Investors	Financial	business,	with	respect	to	foreign exchange	revenue,	and	as	a	result	of	the	inclusion	of	revenue	from	the	acquired	Currenex	business,	with	respect	to	other	trading	services	revenue.	Securities	finance revenue	benefited	from	increases	in	volumes	of	securities	loaned,	both	from	new	customers	and	from	growth	in	volume	from	existing	customers,	and	increases	in spreads.

								Net	interest	revenue	increased	56%	compared	to	2006,	and	net	interest	margin	increased	to	1.71%	from	1.25%.	This	growth	was	the	result	of	several	favorable trends—(1)	favorable	rates	and	volumes	on	non-U.S.	deposits;	(2)	the	addition	of	interest-earning	assets	from	Investors	Financial's	balance	sheet;	and	(3)	the	favorable impact	of	fixed-rate	investments.

								Total	operating	expenses	increased	42%	from	2006,	partly	reflective	of	the	$665	million	aggregate	impact	of	merger	and	integration	costs	associated	with	Investors Financial	and	a	net	pre-tax	charge	associated	with	certain	SSgA	active	fixed-income	strategies.	If	these	aggregate	costs	are	excluded,	total	operating	expenses	for	2007 totaled	$5.768	billion	($6.433	billion	less	$665	million),	an	increase	of	27%	from	$4.54	billion	for	2006,	as	we	continued	to	carefully	manage	operating	expenses	and balance	growth	in	operating	expenses	with	growth	in	revenue.	Most	of	the	increase	resulted	from	the	inclusion	of	the	operating	expenses	of	the	acquired	Investors Financial	business	for	the	second	half	of	2007,	as	well	as	increased	incentive	compensation	due	to	improved	performance	and	increased	staffing	levels	to	support	new business,	particularly	internationally.	Excluding	the	aggregate	$665	million	of	merger	and	integration	costs	and	the	net	pre-tax	charge,	as	a	result	of	year-over-year growth	in	revenue	of	32%	and	year-over-year	growth	in	total	operating	expenses	of	27%	as	described	above,	we	generated	positive	operating	leverage	of	approximately 500	basis	points.	We	define	positive	operating	leverage	as	a	rate	of	total	revenue	growth	that	exceeds	the	rate	of	growth	of	total	operating	expenses,	determined	on	an operating	basis.

								SSgA	was	a	significant	contributor	to	our	overall	results	for	2007.	Its	total	revenue	increased	25%	for	2007	over	2006,	and	comprised	about	18%	of	our	total consolidated	revenue	for	2007,	compared	to	19%	for	2006.	In	addition,	SSgA	generated	net	new	business	in	assets	under	management,	which	we	expect	will	generate management	fee	revenue	in	future	years,	of	approximately	$116	billion	for	2007,	compared	to	$86	billion	for	2006.	The	decline	in	SSgA's	relative	contribution	to	our consolidated	total	revenue	was	the	result	of	the	impact	of	the	acquired	Investors	Financial	business's	revenue	on	total	revenue	of	our	Investment	Servicing	line	of business,	which	increased	34%	for	2007	over	2006.

								We	continue	to	expand	our	business	outside	of	the	U.S.,	particularly	in	Europe	and	the	Asia/Pacific	region.	For	2007,	approximately	$3.42	billion,	or	41%	of	our consolidated	total	revenue	of	$8.336	billion,	was	generated	from	non-U.S.	activities,	compared	to	43%	for	2006.	The	2007	percentage	reflects	revenue	from	the	acquired Investors	Financial	business,	which	was	predominantly	generated	in	the	U.S.	For	illustrative	purposes,	if	we	exclude	total	revenue	from	the	acquired	Investors	Financial business	for	2007	of	$456	million,	non-U.S.	revenue	of	$3.42	billion	for	2007	comprised	approximately	43%	of	consolidated	total	revenue	for	2007	of	$7.88	billion ($8.336	billion	less	$456	million).	At	year-end	2007,	we	employed	9,500	outside	the	U.S.,	compared	to	8,630	at	year-end	2006.	Our	goal	is	to	eventually	generate	50% of	our	consolidated	total	revenue	from	outside	the	United	States.

								Assets	under	custody	and	assets	under	management	both	increased	from	year-end	2006,	with	assets	under	custody	at	$15.30	trillion,	up	29%	from	$11.85	trillion	a year	ago,	and	assets	under	management	at	$1.98	trillion,	up	13%	from	$1.75	trillion	a	year	ago.	The	acquired	Investors	Financial	business	contributed	$1.9	trillion	of assets	under	custody.	Assets	under	custody	have	grown	at	a	compound	annual	rate	of	13%	since	year-end	2003,	with	U.S.	assets	growing	by	12%	and	non-U.S.	assets growing	by	16%,	while	assets	under	management	have	grown	at	a	compound	annual	rate	of	16%	over	the	same	period.

# CONSOLIDATED	RESULTS	OF	OPERATIONS

								This	section	discusses	our	consolidated	results	of	operations	for	2007	compared	to	2006,	and	should	be	read	in	conjunction	with	the	consolidated	financial statements	and	accompanying	notes	included	in	this	Form	10-K	under	Item	8.	A	comparison	of	consolidated	results	of	operations	for	2006	with	those	for	2005	is provided	in	the	"Comparison	of	2006	and	2005—Overview	of	Consolidated	Results	of	Operations"	section	of	this	Management's	Discussion	and	Analysis.

# TOTAL	REVENUE

| Years	ended	December	31,<br>(Dollars	in	millions) | 2007 | 2006 | 2005 | 2006-2007 |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Fee\trevenue: |  |  |  |  |  |
| Servicing\tfees | $3,388 | $2,723 | $2,474 |  | 24% |
| Management\tfees | 1,141 | 943 | 751 |  | 21 |
| Trading\tservices | 1,152 | 862 | 694 |  | 34 |
| Securities\tfinance | 681 | 386 | 330 |  | 76 |
| Processing\tfees\tand\tother | 237 | 272 | 302 |  | (13) |
| Total\tfee\trevenue | 6,599 | 5,186 | 4,551 |  | 27 |
| Net\tinterest\trevenue: |  |  |  |  |  |
| Interest\trevenue | 5,212 | 4,324 | 2,930 |  | 21 |
| Interest\texpense | 3,482 | 3,214 | 2,023 |  | 8 |
| Net\tinterest\trevenue | 1,730 | 1,110 | 907 |  | 56 |
| Provision\tfor\tloan\tlosses | — | — | — |  |  |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 1,730 | 1,110 | 907 |  | 56 |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 7 | 15 | (1) |  |  |
| Gain\ton\tsale\tof\tPrivate\tAsset\tManagement\tbusiness | — | — | 16 |  |  |
| Total\trevenue | $8,336 | $6,311 | $5,473 |  | 32 |

								We	are	one	of	the	world's	leading	specialists	in	servicing	mutual	funds,	other	collective	investment	funds	and	pension	plans.	We	are	consistently	gaining	business globally,	and	for	2007,	our	non-U.S.	revenue	was	approximately	41%	of	our	total	revenue,	compared	to	43%	for	2006	and	24%	for	2002.	We	provide	a	broad	range	of reliable,	easy-to-integrate	investment	services	that	are	global	and	enable	our	customers	to	develop	and	launch	competitive	new	investment	products.	We	also	provide active	management	products,	including	enhanced	indexing,	hedge	fund	strategies	and	quantitative	management,	and	passive	investment	management	products	and strategies.

								We	provide	fund	accounting,	custody,	investment	management,	securities	finance,	transfer	agency	services,	and	operations	outsourcing	for	investment	managers and	hedge	fund	managers.	These	services	support	the	complex	financial	strategies	and	transactions	of	our	customers	worldwide,	in	any	time	zone	across	multiple currencies.	Our	focus	on	the	total	needs	of	the	customer	allows	us	to	develop	active,	long-term	relationships	that	result	in	high	customer	retention,	cross-selling opportunities,	and	recurring	revenue.	The	servicing	markets	in	which	we	compete	are	very	price-competitive,	and	we	consistently	focus	on	winning	and	retaining customer	business.	This	focus	requires	a	strong	commitment	to	customers	while	constantly	working	toward	providing	services	at	lower	costs.

								Our	broad	range	of	services	generates	fee	revenue	and	net	interest	revenue.	Fee	revenue	generated	by	investment	servicing	and	investment	management	is augmented	by	securities	finance,	trading	services	and	other	processing	fee	revenue.	We	earn	net	interest	revenue	from	customers'	deposits	and	short-term	investment activities,	by	providing	deposit	services	and	short-term	investment	vehicles,	such	as	repurchase	agreements	and	commercial	paper,	to	meet	customers'	needs	for	high- grade	liquid	investments,	and	investing	these	sources	of	funds	and	additional	borrowings	in	assets	yielding	a	higher	rate.

# Fee	Revenue

								Servicing	and	management	fees	are	the	largest	components	of	fee	revenue,	and	collectively	comprised	approximately	69%	of	total	fee	revenue	for	2007	and	71%	for 2006.	These	fees	are	a	function	of	several	factors,	including	the	mix	and	volume	of	assets	under	custody	and	assets	under	management,	securities	positions	held	and	the volume	of	portfolio	transactions,	and	the	types	of	products	and	services	used	by	customers,	and	are	affected	by	changes	in	worldwide	equity	and	fixed-income valuations.

								Generally,	servicing	fees	are	impacted,	in	part,	by	changes	in	daily	average	valuations	of	assets	under	custody,	while	management	fees	are	impacted	by	changes	in month-end	valuations	of	assets	under	management.	Additional	factors,	such	as	the	level	of	transaction	volumes,	changes	in	service	level,	balance	credits,	customer minimum	balances,	pricing	concessions	and	other	factors	may	have	a	significant	impact	on	servicing	fee	revenue.	Generally,	management	fee	revenue	is	more	sensitive to	market	valuations	than	servicing	fee	revenue.	Management	fees	also	include	performance	fees,	which	amounted	to	approximately	6%	of	management	fees	for	2007 compared	to	9%	for	2006.	Performance	fees	are	generated	when	the	performance	of	managed	funds	exceeds	benchmarks	specified	in	the	management	agreements,	and we	experience	more	volatility	with	performance	fees	than	with	more	traditional	management	fees.

								In	light	of	the	above,	we	estimate,	assuming	all	other	factors	remain	constant,	that	a	10%	increase	or	decrease	in	worldwide	equity	values	would	result	in	a corresponding	change	in	our	total	revenue	of	approximately	2%.	If	fixed-income	security	values	were	to	increase	or	decrease	by	10%,	we	would	anticipate	a corresponding	change	of	approximately	1%	in	our	total	revenue.

								The	following	table	presents	selected	equity	market	indices.	Daily	averages	and	the	averages	of	month-end	indices	demonstrate	worldwide	equity	market	valuation changes	that	impact	servicing	and	management	fee	revenue,	respectively.	Year-end	indices	impact	the	value	of	assets	under	custody	and	management	at	those	dates. The	index	names	listed	in	the	table	and	elsewhere	in	this	Management's	Discussion	and	Analysis	are	service	marks	of	their	respective	owners.

# INDEX

								Approximately	61%	of	the	$1.4	billion	increase	in	total	fee	revenue	over	2006	was	generated	from	servicing	and	management	fees.

# Servicing	Fees

								Servicing	fees	include	fee	revenue	from	U.S.	mutual	funds,	collective	investment	funds	worldwide,	corporate	and	public	retirement	plans,	insurance	companies, foundations,	endowments,	and	other	investment	pools.	Products	and	services	include	custody;	product-	and	participant-level	accounting;	daily	pricing	and administration;	recordkeeping;	investment	manager	and	hedge	fund	manager	operations	outsourcing	services;	master	trust	and	master	custody;	and	performance,	risk	and compliance	analytics.

								The	increase	in	servicing	fees	of	$665	million	from	2006	primarily	resulted	from	the	inclusion	of	$304	million	of	servicing	fee	revenue	from	the	acquired	Investors Financial	business,	net	new	business	from	existing	and	new	customers,	higher	average	equity	market	valuations	and	higher	customer	transaction	volumes.	Net	new business	is	defined	as	new	business	net	of	lost	business.	For	2007,	servicing	fees	generated	from	customers	outside	the	U.S.	were	approximately	41%	of	total	servicing fees,	down	from	44%	in	2006.	The	decrease	in	the	non-U.S.	proportion	reflected	the	contribution	of	servicing	fees	from	the	acquired	Investors	Financial	business,	which are	generated	predominantly	in	the	U.S.

								We	are	the	largest	provider	of	mutual	fund	custody	and	accounting	services	in	the	United	States.	We	distinguish	ourselves	from	other	mutual	fund	service	providers by	offering	customers	a	broad	array	of	integrated	products	and	services,	including	accounting,	daily	pricing	and	fund	administration.	We	calculate	more	than	34%	of	the U.S.	mutual	fund	prices	provided	to	NASDAQ	that	appear	daily	in	The	Wall	Street	Journal	and	other	publications	with	an	accuracy	rate	of	99.9%.

								We	have	a	leading	position	for	servicing	U.S.	tax-exempt	assets	for	corporate	and	public	pension	funds.	We	provide	trust	and	valuation	services	for	more	than 4,000	daily-priced	portfolios,	making	us	a	leader	for	both	monthly	and	daily	valuation	services.

								We	are	a	leading	service	provider	outside	of	the	U.S.	as	well.	In	Germany,	we	provide	Depotbank	services	for	approximately	16%	of	retail	and	institutional	fund assets.	In	the	United	Kingdom,	we	provide	custody	services	for	18%	of	pension	fund	assets	and	provide	administration	services	to	more	than	24%	of	mutual	fund	assets. We	service	approximately	23%	of	the	hedge	fund	market	and	more	than	$650	billion	of	offshore	assets,	primarily	domiciled	in	Ireland	and	Luxembourg.	We	have	more than	$1	trillion	in	assets	under	administration	in	the	Asia/Pacific	region,	and	are	the	largest	non-domestic	trust	bank	in	Japan.

								At	year-end	2007,	our	total	assets	under	custody	were	$15.30	trillion,	compared	to	$11.85	trillion	a	year	earlier.	The	value	of	assets	under	custody	is	a	broad measure	of	the	relative	size	of	various	markets	served.	Changes	in	the	value	of	assets	under	custody	do	not	necessarily	result	in	proportional	changes	in	revenue.	Assets under	custody	consisted	of	the	following	at	December	31:

# ASSETS	UNDER	CUSTODY

| As	of	December	31,<br>(Dollars	in	billions) | 2007 | 2006 | 2005 | 2004 | 2003 | 2006-2007<br>AGR |  | 2003-2007<br>CAGR |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Mutual\tfunds | $4,803 | $3,738 | $3,442 | $3,088 | $3,094 |  | 28% |  | 12% |
| Collective\tfunds | 3,199 | 1,665 | 1,001 | 911 | 1,153 |  | 92 |  | 29 |
| Pension\tproducts | 3,960 | 3,713 | 3,358 | 3,254 | 3,026 |  | 7 |  | 7 |
| Insurance\tand\tother\tproducts | 3,337 | 2,738 | 2,320 | 2,244 | 2,097 |  | 22 |  | 12 |
| Total | $15,299 | $11,854 | $10,121 | $9,497 | $9,370 |  | 29 |  | 13 |

# FINANCIAL	INSTRUMENT	MIX	OF	ASSETS	UNDER	CUSTODY

| As	of	December	31,<br>(In	billions) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Equities | $8,653 | $5,821 | $4,814 |
| Fixed-income | 4,087 | 4,035 | 3,797 |
| Short-term\tand\tother\tinvestments | 2,559 | 1,998 | 1,510 |
| Total | $15,299 | $11,854 | $10,121 |

# GEOGRAPHIC	MIX	OF	ASSETS	UNDER	CUSTODY(1)

| As	of	December	31,<br>(In	billions) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| United\tStates | $11,792 | $8,962 | $7,773 |
| Other\tAmericas | 698 | 607 | 508 |
| Europe/Middle\tEast/Africa | 2,163 | 1,815 | 1,454 |
| Asia/Pacific | 646 | 470 | 386 |
| Total | $15,299 | $11,854 | $10,121 |

# (1) Geographic	mix	is	based	on	the	location	where	the	assets	are	serviced.

# Management	Fees

								We	provide	a	broad	range	of	investment	management	strategies,	specialized	investment	management	advisory	services	and	other	financial	services	for	corporations, public	funds,	and	other	sophisticated	investors.	These	services	are	offered	through	SSgA.	Based	upon	assets	under	management,	SSgA	is	the	largest	manager	of institutional	assets	worldwide,	the	largest	manager	of	assets	for	tax-exempt	organizations	(primarily	pension	plans)	in	the	United	States,	and	the	third	largest	investment manager	overall	in	the	world.	SSgA	offers	a	broad	array	of	investment	management	strategies,	including	passive	and	active,	such	as	enhanced	indexing	and	hedge	fund strategies,	using	quantitative	and	fundamental	methods	for	both	U.S.	and	global	equities	and	fixed	income	securities.	SSgA	also	offers	exchange	traded	funds,	or "ETFs,"	such	as	the	SPDR®	Dividend	ETFs.

								The	$198	million	increase	in	management	fees	from	2006	primarily	resulted	from	net	new	business	and	higher	equity	market	valuations.	Performance	fees decreased	from	$84	million	in	2006	to	$72	million	in	2007.	Management	fees	generated	from	customers	outside	the	United	States	were	approximately	41%	of	total management	fees,	up	from	32%	for	2006.

								At	year-end	2007,	assets	under	management	were	$1.98	trillion,	compared	to	$1.75	trillion	at	year-end	2006.	While	certain	management	fees	are	directly determined	by	the	value	of	assets	under	management	and	the	investment	strategy	employed,	management	fees	reflect	other	factors	as	well,	including	our	relationship pricing	for	customers	who	use	multiple	services,	and	the	benchmarks	specified	in	the	respective	management	agreements	related	to	performance	fees.	Accordingly,	no direct	correlation	necessarily	exists	between	the	value	of	assets	under	management,	market	indices	and	management	fee	revenue.	Assets	under	management	consisted	of the	following	at	December	31:

# ASSETS	UNDER	MANAGEMENT

| As	of	December	31,<br>(Dollars	in	billions) | 2007 | 2006 | 2005 | 2004 | 2003 | 2006-2007<br>AGR |  | 2003-2007<br>CAGR |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Equities: |  |  |  |  |  |  |  |  |  |
| Passive | $803 | $691 | $625 | $600 | $519 |  | 16% |  | 12% |
| Active\tand\tother | 206 | 181 | 147 | 122 | 81 |  | 14 |  | 26 |
| Company\tstock/ESOP | 79 | 85 | 76 | 77 | 76 |  | (7) |  | 1 |
| Total\tequities | 1,088 | 957 | 848 | 799 | 676 |  | 14 |  | 13 |
| Fixed-income: |  |  |  |  |  |  |  |  |  |
| Passive | 216 | 180 | 128 | 106 | 81 |  | 20 |  | 28 |
| Active | 43 | 34 | 28 | 35 | 10 |  | 26 |  | 44 |
| Cash\tand\tmoney\tmarket | 632 | 578 | 437 | 414 | 339 |  | 9 |  | 17 |
| Total\tfixed-income\tand\tcash | 891 | 792 | 593 | 555 | 430 |  | 13 |  | 20 |
| Total | $1,979 | $1,749 | $1,441 | $1,354 | $1,106 |  | 13 |  | 16 |

# GEOGRAPHIC	MIX	OF	ASSETS	UNDER	MANAGEMENT(1)

| As	of	December	31,<br>(In	billions) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| United\tStates | $1,353 | $1,202 | $1,023 |
| Other\tAmericas | 36 | 30 | 24 |
| Europe/Middle\tEast/Africa | 427 | 384 | 275 |
| Asia/Pacific | 163 | 133 | 119 |
| Total | $1,979 | $1,749 | $1,441 |

(1) Geographic	mix	is	based	on	the	location	where	the	assets	are	managed.

								The	following	table	presents	a	roll-forward	of	assets	under	management	for	the	three	years	ended	December	31,	2007:

| Years	Ended	December	31,<br>(In	billions) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tyear | $1,749 | $1,441 | $1,354 |
| Net\tnew\tbusiness | 116 | 86 | 36 |
| Market\tappreciation | 114 | 222 | 51 |
| Balance\tat\tend\tof\tyear | $1,979 | $1,749 | $1,441 |

# Trading	Services

								Trading	services	revenue	includes	revenue	from	foreign	exchange	trading	and	brokerage	and	other	trading	services.	We	offer	a	complete	range	of	foreign	exchange services	under	an	account	model	that	focuses	on	the	global	requirements	of	our	customers	to	execute	trades	and	receive	market	insights	in	any	time	zone.	In	March 2007,	we	acquired	Currenex's	electronic	foreign	exchange	trading	platform.	The	Currenex	business	serves	hedge	funds,	banks	and	other	commercial	enterprises	in	the active-trading	segment	of	the	foreign	exchange	market.	We	have	exclusive	ownership	of	FX	Connect®,	the	world's	first	foreign	exchange	trading	platform,	and	we provide	quantitatively-based	research	into	investor	behavior,	as	well	as	consultative	services	that	use	quantitative	tools	designed	to	optimize	our

customers'	returns.	Foreign	exchange	trading	revenue	is	influenced	by	three	principal	factors:	the	volume	and	type	of	customer	foreign	exchange	transactions;	currency volatility;	and	the	management	of	currency	market	risks.

								For	2007,	foreign	exchange	trading	revenue	increased	31%,	to	$802	million	from	$611	million	in	2006,	and	benefited	from	the	disruption	in	the	global	securities markets	that	occurred	in	the	second	half	of	the	year.	The	increase	was	mainly	driven	by	a	39%	increase	in	customer	volumes,	but	also	was	the	result	of	the	inclusion	of $43	million	of	foreign	exchange	revenue	from	the	acquired	Investors	Financial	business.	These	increases	were	partly	offset	by	an	unfavorable	transaction	mix	influenced by	lower	margin	transactions	and	a	5%	decline	in	currency	volatility.

								We	also	offer	a	range	of	brokerage	and	other	trading	products	tailored	specifically	to	meet	the	needs	of	the	global	pension	community,	including	transition management,	commission	recapture	and	self-directed	brokerage.	These	products	are	differentiated	by	our	position	as	an	agent	of	the	institutional	investor.	Brokerage	and other	trading	fees	were	$350	million	in	2007,	up	39%	compared	to	2006.	The	increase	was	attributable	to	the	contribution	of	revenue	from	the	acquired	Currenex business	and	an	increase	in	revenue	from	transition	management.

# Securities	Finance

								Securities	finance	provides	liquidity	to	the	financial	markets	and	an	effective	means	for	customers	to	earn	revenue	on	their	existing	portfolios.	By	acting	as	a	lending agent	and	coordinating	loans	between	lenders	and	borrowers,	we	lend	securities	and	provide	liquidity	to	customers	around	the	world.	Borrowers	provide	collateral	in	the form	of	cash	or	securities	to	State	Street	in	return	for	loaned	securities.	For	cash	collateral,	we	pay	a	usage	fee	to	the	provider	of	the	cash	collateral,	and	invest	the	cash collateral	in	certain	investment	vehicles.	The	spread	between	the	yield	on	the	investment	vehicle	and	the	usage	fee	paid	to	the	provider	of	the	collateral	is	split	between the	lender	of	the	securities	and	State	Street	as	agent.	For	non-cash	collateral,	the	borrower	pays	a	fee	for	the	loaned	securities,	and	the	fee	is	split	between	the	lender	of the	securities	and	State	Street.

								Securities	finance	revenue	is	principally	a	function	of	the	volume	of	securities	loaned	and	the	interest-rate	spreads	earned	on	the	collateral.	For	2007,	securities finance	revenue	increased	76%	from	a	year	earlier,	as	loan	volumes	increased	30%,	with	this	volume	resulting	from	both	new	customer	demand	and	increased	demand from	existing	customers.	Consolidated	spread	also	increased,	primarily	in	the	domestic	and	non-U.S.	equity	portfolios	and	the	corporate	bond	and	fixed-income portfolios.	Spreads	benefited	from	reductions	in	federal	funds	rates	during	2007,	as	well	as	from	the	above-mentioned	market	disruption.

# Processing	Fees	and	Other

								Processing	fees	and	other	revenue	includes	diverse	types	of	fees	and	other	revenue,	including	fees	from	our	structured	products	business,	fees	from	software licensing	and	maintenance,	profits	and	losses	from	unconsolidated	subsidiaries,	gains	and	losses	on	sales	of	leased	equipment	and	other	assets,	and	amortization	of investments	in	tax-advantaged	financings.	Processing	fees	and	other	revenue	decreased	13%	from	2006,	with	an	additional	$32	million	of	revenue	from	the	acquired Investors	Financial	business	and	improved	joint	venture	performance	more	than	offset	by	reduced	revenue	from	the	structured	products	business,	primarily	from	the asset-backed	commercial	paper	program,	and	the	absence	of	revenue	from	our	tax-exempt	investment	program.	The	absence	of	revenue	from	the	tax-exempt	investment program	resulted	from	the	impact	of	the	consolidation	of	the	program	onto	our	balance	sheet	on	September	30,	2006.	As	a	result	of	this	consolidation,	revenue	from	the program,	previously	recorded	in	processing	fees	and	other,	is	now	recorded	in	net	interest	revenue.

# NET	INTEREST	REVENUE

|  | Average<br>Balance | Interest<br>Revenue/<br>Expense | Rate | Average<br>Balance | Interest<br>Revenue/<br>Expense | Rate | Average<br>Balance | Interest<br>Revenue/<br>Expense | Rate |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions;\tfully\ntaxable-equivalent\tbasis) |  |  |  |  |  |  |  |  |  |
| Federal\tfunds\tsold\tand\tsecurities |  |  |  |  |  |  |  |  |  |
| purchased\tunder\tresale\tagreements | $14,402 | $756 | 5.25% $ | 12,820 | $663 | 5.17% $ | 12,890 | $412 | 3.20% |
| Investment\tsecurities | 70,990 | 3,649 | 5.14 | 61,579 | 2,956 | 4.80 | 51,153 | 1,817 | 3.55 |
| Loans\tand\tleases | 10,753 | 394 | 3.67 | 7,670 | 288 | 3.75 | 6,013 | 193 | 3.21 |
| Other | 8,405 | 471 | 5.60 | 10,596 | 462 | 4.36 | 17,730 | 550 | 3.10 |
| Total\tinterest-earning\tassets | $104,550 | $5,270 | 5.04 | $92,665 | $4,369 | 4.72 | $87,786 | $2,972 | 3.39 |
| Deposits | $68,220 | $2,298 | 3.37% $ | 55,635 | $1,891 | 3.40% $ | 49,703 | $1,132 | 2.28% |
| Short-term\tborrowings | 22,024 | 959 | 4.36 | 25,699 | 1,145 | 4.46 | 26,708 | 753 | 2.82 |
| Long-term\tdebt | 3,402 | 225 | 6.62 | 2,621 | 178 | 6.77 | 2,461 | 138 | 5.63 |
| Total\tinterest-bearing\tliabilities | $93,646 | $3,482 | 3.72 | $83,955 | $3,214 | 3.83 | $78,872 | $2,023 | 2.57 |
| Interest-rate\tspread |  |  | 1.32% |  |  | .89% |  |  | .82% |
| Net\tinterest\trevenue\t-\tfully\ttaxable- |  |  |  |  |  |  |  |  |  |
| equivalent\tbasis(1) |  | $1,788 |  |  | $1,155 |  |  | $949 |  |
| Net\tinterest\tmargin\t-\tfully\ttaxable-\nequivalent\tbasis |  |  | 1.71% |  |  | 1.25% |  |  | 1.08% |
| Net\tinterest\trevenue\t—\nGAAP\tbasis |  | $1,730 |  |  | $1,110 |  |  | $907 |  |

								Net	interest	revenue	is	defined	as	the	total	of	interest	revenue	on	interest-earning	assets	less	interest	expense	on	interest-bearing	liabilities.	Interest-earning	assets, which	consist	of	investment	securities,	loans	and	leases	and	money	market	assets,	are	financed	primarily	by	customer	deposits	and	short-term	borrowings.	Additional detail	about	the	components	of	interest	revenue	and	interest	expense	is	in	note	16	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under Item	8.

								On	a	fully	taxable-equivalent	basis,	net	interest	revenue	increased	55%	(56%	on	a	GAAP	basis)	compared	to	2006,	and	net	interest	margin	increased	to	1.71%	from 1.25%.	This	growth	was	the	result	of	several	favorable	trends.	First,	transaction	deposit	volume,	particularly	with	respect	to	non-U.S.	deposits,	increased	28%,	and	spread increased	29%.	Volume	increases	resulted	from	net	new	business	in	non-U.S.	assets	under	custody,	as	we	continue	to	grow	our	servicing	business	internationally,	and spreads	increased	because	deposit	rates	lagged	rate	increases	by	foreign	central	banks	during	2006	and	2007.	Second,	the	acquired	Investors	Financial	business	added interest-earning	assets	and	related	net	interest	revenue.	Third,	as	fixed-rate	investment	securities	matured,	they	were	replaced	by	higher	yielding	investments.

								Net	interest	margin	represents	the	relationship	between	net	interest	revenue	and	average	interest-earning	assets.	Changes	in	the	components	of	interest-earning assets,	as	well	as	interest-bearing	liabilities,	are	discussed	in	more	detail	below.

								Average	federal	funds	sold	and	securities	purchased	under	resale	agreements	increased	12.3%	or	$1.58	billion,	from	$12.82	billion	in	2006	to	$14.40	billion	for 2007.	The	increase	was	primarily	the	result	of	excess	liquidity.

								Our	average	investment	securities	portfolio	increased	from	approximately	$61.58	billion	to	approximately	$70.99	billion,	primarily	due	to	the	acquisition	of investment	securities	of	Investors	Financial	and	increases	in	our	tax-exempt	securities	portfolio.	The	investment	portfolio	now	includes	a	higher	percentage	of collateralized	mortgage	obligations	and	mortgage-	and	asset-	backed	securities	compared	to	a	year	earlier.	These	increases	did	not	adversely	affect	overall	risk,	as	we continued	to	invest	conservatively	in	"AA"	and	"AAA"	rated	securities.	Securities	rated	"AA"	and	"AAA"	comprised	approximately	95%	of	the	investment	securities portfolio,	with	approximately	89%	"AAA"	rated,	at	December	31,	2007.

								Loans	and	leases	averaged	$10.75	billion,	up	40%	from	$7.67	billion	in	2006.	The	increase	was	related	to	higher	levels	of	customer	overdraft	activity. Approximately	70%	of	the	loans	and	leases	portfolio	is	composed	of	U.S.	and	non-U.S.	short-duration	advances,	primarily	related	to	the	processing	of	custodied customer	investments,	which	averaged	approximately	$7.53	billion	for	2007,	up	from	$5.21	billion	in	2006.

								The	$12.59	billion	increase	in	average	interest-bearing	deposits	from	2006	was	mainly	due	to	the	acquisition	of	Investors	Financial	and	an	increase	in	low	cost customer	deposits,	primarily	non-U.S.	deposits.	This	deposit	growth	funded	the	$11.89	billion	increase	in	average	interest-earning	assets.

								Average	short-term	borrowings	decreased	primarily	due	to	the	liquidity	provided	by	the	increase	in	customer	deposits,	and	long-term	debt	increased	due	to	debt issuances	associated	with	the	Investors	Financial	acquisition.

								Several	factors	could	affect	future	levels	of	net	interest	revenue	and	margin,	including	the	Federal	Reserve's	ongoing	actions	to	manage	short-term	interest	rates,	the level	and	pace	of	changes	in	non-U.S.	interest	rates,	particularly	as	a	result	of	actions	of	the	European	Central	Bank	and	the	Bank	of	England,	the	mix	of	customer liabilities,	and	the	shapes	of	the	various	yield	curves	around	the	world.

# Gains	(Losses)	on	Sales	of	Available-for-Sale	Securities,	Net

								Our	management	of	the	investment	securities	portfolio	has	many	objectives,	the	foremost	of	which	are	to	provide	liquidity	and	to	serve	as	a	source	of	collateral	for customer	activities.	These	objectives	may	entail	strategic	sales	of	specific	securities	as	market	conditions	warrant.	We	recorded	net	gains	of	$7	million	on	sales	of available-for-sale	securities	for	2007,	compared	to	net	gains	of	$15	million	for	2006.	At	December	31,	2007,	approximately	94%	of	the	investment	securities	portfolio,	or $70.33	billion,	was	classified	as	available	for	sale.	Additional	information	about	available-for-sale	securities,	and	the	gross	gains	and	losses	that	comprise	the	net	gains, is	in	note	3	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# OPERATING	EXPENSES

| Years	Ended	December	31,<br>(Dollars	in	millions) | 2007 | 2006 | 2005 | 2006—2007 |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Salaries\tand\temployee\tbenefits | $3,256 | $2,652 | $2,231 |  | 23% |
| Information\tsystems\tand\tcommunications | 546 | 501 | 486 |  | 9 |
| Transaction\tprocessing\tservices | 619 | 496 | 449 |  | 25 |
| Occupancy | 408 | 373 | 391 |  | 9 |
| Provision\tfor\tlegal\texposure | 600 | — | — |  | — |
| Merger\tand\tintegration\tcosts | 198 | — | — |  | — |
| Other | 806 | 518 | 484 |  | 56 |
| Total\toperating\texpenses | $6,433 | $4,540 | $4,041 |  | 42 |
| Number\tof\temployees\tat\tyear-end | 27,110 | 21,700 | 20,965 |  |  |

								The	23%	increase	in	salaries	and	employee	benefits	from	2006	was	driven	primarily	by	the	inclusion	of	approximately	$180	million	of	salaries	and	benefits	expense of	the	acquired	Investors	Financial	business	and	salaries	and	benefits	expense	of	the	acquired	Currenex	business,	higher	incentive	compensation	costs	due	to	improved performance	which	were	offset	by	the	reduction	of	incentive	compensation	recorded	as	part	of	the	net	pre-tax	charge	related	to	SSgA	discussed	later	in	this	section,	and the	impact	of	higher	staffing	levels.	Staffing	levels	increased	to	support	growth	in	our	Investment	Servicing	business,	particularly	in	Europe,	and	in	our	Investment Management	business,	as	well	as	in	information	technology	and	risk	management.

								The	increase	in	information	systems	and	communications	expense	included	approximately	$21	million	from	the	acquired	Investors	Financial	business,	as	well	as increased	spending	internationally	to	support	growth.

								Transaction	processing	services	expenses	are	volume-related,	and	include	equity	trading	services	and	fees	related	to	securities	settlement,	sub-custodian	fees	and external	contract	services.	The	25%	increase	included	approximately	$39	million	from	the	acquired	Investors	Financial	business,	specifically	sub-custody	costs,	higher transaction	volumes,	and	external	contract	services,	primarily	in	Europe.

								Occupancy	expense	was	up	9%	from	2006,	primarily	due	to	additional	leased	space	acquired	as	part	of	the	Investors	Financial	acquisition,	as	well	as	higher occupancy	costs	in	support	of	growth	in	Europe.

								During	the	fourth	quarter	of	2007,	we	recorded	a	net	pre-tax	charge	of	$467	million	in	connection	with	the	establishment	of	a	reserve	to	address	litigation	exposure and	other	costs	associated	with	certain	active	fixed-income	strategies	managed	by	SSgA	and	customer	concerns	as	to	whether	the	execution	of	these	strategies	was consistent	with	customers'	investment	intent.	The	net	charge	had	the	following	components—a	provision	for	legal	exposure	of	$625	million	offset	by	$25	million	of insurance	coverage;	a	$156	million	reduction	of	salaries	and	benefits	expense	related	to	reduced	incentive	compensation	primarily	associated	with	SSgA,	offset	by $15	million	of	severance	costs;	and	$8	million	of	other	expenses	related	to	professional	fees.	More	information	about	this	litigation	exposure	is	included	in	note	10	of	the Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								During	the	second	half	of	2007,	in	connection	with	the	Investors	Financial	acquisition,	we	recorded	merger	and	integration	costs	of	$198	million.	These	costs consisted	only	of	direct	and	incremental	costs	to	integrate	the	acquired	Investors	Financial	business	into	our	operations,	and	did	not	include	on-going	expenses	of	the combined	organization.	The	costs	included	a	non-cash	charge	of	approximately	$91	million	resulting	from	the	termination	of	an	operating	lease	related	to	one	of	our office	buildings	in	Boston.	This	termination	was	completed	in	connection	with	an	overall	evaluation	of	our	requirements	for	office	space	as	a	result	of	the	acquisition.

								The	merger	and	integration	costs	also	included	$42	million	associated	with	employee	retention	and	other	compensation,	and	$22	million	associated	with	the integration	of	the	acquired	Investors	Financial	business's	accounting	and	management	systems.	In	addition,	subsequent	to	the	completion	of	the	acquisition,	we redeemed	an	aggregate	of	$500	million	of	unsecured	junior	subordinated	debentures	issued	by	the	parent	company	to	two	of	our	statutory	business	trusts,	composed	of $200	million	of	7.94%	debentures	issued	in	1996	and	$300	million	of	8.035%	debentures	issued	in	1997.	We	paid	the	trusts	the	outstanding	amount	on	the	debentures plus	accrued	interest	and	an	aggregate	redemption	premium	of	approximately	$20	million,	which	was	included	in	the	merger	and	integration	costs.

								The	56%	increase	in	other	expenses	from	2006	primarily	resulted	from	the	acquired	Investors	Financial	business,	increases	in	professional	services,	securities processing	costs,	higher	sales	promotion	costs	and	increased	amortization	of	intangibles	that	resulted	from	the	acquisitions	of	Investors	Financial	and	Currenex.

# Income	Taxes

								Income	tax	expense	totaled	$642	million	for	2007,	compared	to	$675	million	from	continuing	operations	a	year	ago.	The	decrease	was	primarily	the	result	of	the absence	of	the	impact	of	federal	tax	legislation	that	increased	income	tax	expense	for	2006.	The	overall	effective	tax	rate	for	2007	was	33.7%,	compared	to	38.1%	for 2006.	Additional	information	about	income	tax	expense	is	in	note	20	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								The	2006	income	tax	expense	from	discontinued	operations	of	$6	million	was	related	to	$16	million	of	income	associated	with	the	finalization	of	certain	costs recorded	in	connection	with	our	divestiture	of	Bel	Air,	which	was	completed	during	2006.

								Information	about	income	tax	contingencies	related	to	our	leveraged	lease	portfolio	is	in	note	10	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.

# LINE	OF	BUSINESS	INFORMATION

								We	report	two	lines	of	business:	Investment	Servicing	and	Investment	Management.	Given	our	services	and	management	organization,	the	results	of	operations	for these	lines	of	business	are	not	necessarily	comparable	with	those	of	other	companies,	including	companies	in	the	financial	services	industry.	Information	about	revenue, expense	and	capital	allocation	methodologies	is	in	note	22	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								The	following	is	a	summary	of	line	of	business	results.	Results	presented	exclude	the	income	(loss)	from	discontinued	operations	related	to	our	divestiture	of	Bel Air.	The	amount	presented	in	the	"Other/One-Time"	column	for	2007	represents	merger	and	integration	costs	recorded	in	connection	with	our	acquisition	of	Investors Financial.	The	amount	presented	in	the	same	column	for	2005	represents	additional	gain	from	our	sale	of	the	Private	Asset	Management	business.	The	amount

|  | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (Dollars\tin\tmillions,\texcept |  |  |  |  |  |  |  |  |  |  |  |  |
| where\totherwise\tnoted) |  |  |  |  |  |  |  |  |  |  |  |  |
| Fee\trevenue: |  |  |  |  |  |  |  |  |  |  |  |  |
| Servicing\tfees | $3,388 | $2,723 | $2,474 |  |  |  |  |  |  | $3,388 | $2,723 | $2,474 |
| Management\tfees | — | — | — | $1,141 | $943 | $751 |  |  |  | 1,141 | 943 | 751 |
| Trading\tservices | 1,152 | 862 | 694 | — | — | — |  |  |  | 1,152 | 862 | 694 |
| Securities\tfinance | 518 | 292 | 260 | 163 | 94 | 70 |  |  |  | 681 | 386 | 330 |
| Processing\tfees\tand\tother | 162 | 208 | 221 | 75 | 64 | 81 |  |  |  | 237 | 272 | 302 |
| Total\tfee\trevenue | 5,220 | 4,085 | 3,649 | 1,379 | 1,101 | 902 |  |  |  | 6,599 | 5,186 | 4,551 |
| Net\tinterest\trevenue | 1,573 | 986 | 826 | 157 | 124 | 81 |  |  |  | 1,730 | 1,110 | 907 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — |  |  |  | — | — | — |
| Net\tinterest\trevenue\tafter |  |  |  |  |  |  |  |  |  |  |  |  |
| provision\tfor\tloan\tlosses | 1,573 | 986 | 826 | 157 | 124 | 81 |  |  |  | 1,730 | 1,110 | 907 |
| Gains\t(Losses)\ton\tsales\tof |  |  |  |  |  |  |  |  |  |  |  |  |
| available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |
| investment\tsecurities,\tnet | 7 | 15 | (1) | — | — | — |  |  |  | 7 | 15 | (1) |
| Gain\ton\tsale\tof\tdivested |  |  |  |  |  |  |  |  |  |  |  |  |
| business | — | — | — | — | — | — |  |  | $16 | — | — | 16 |
| Total\trevenue | 6,800 | 5,086 | 4,474 | 1,536 | 1,225 | 983 |  |  | 16 | 8,336 | 6,311 | 5,473 |
| Operating\texpenses | 4,787 | 3,742 | 3,363 | 981 | 798 | 678 |  |  |  | 5,768 | 4,540 | 4,041 |
| Net\tcharge: |  |  |  |  |  |  |  |  |  |  |  |  |
| Provision\tfor\tlegal |  |  |  |  |  |  |  |  |  |  |  |  |
| exposure | — | — | — | 600 | — | — |  |  |  | 600 | — | — |
| Reduction\tof\tincentive |  |  |  |  |  |  |  |  |  |  |  |  |
| compensation | (47) | — | — | (109) | — | — |  |  |  | (156) | — | — |
| Severance\tand |  |  |  |  |  |  |  |  |  |  |  |  |
| professional\tfees | — | — | — | 23 | — | — |  |  |  | 23 | — | — |
| Total\tnet\tcharge | (47) | — | — | 514 | — | — |  |  |  | 467 | — | — |
| Merger\tand\tintegration |  |  |  |  |  |  |  |  |  |  |  |  |
| costs | — | — | — | — | — | — | $198 |  |  | 198 | — | — |
| Total\toperating\texpenses | 4,740 | 3,742 | 3,363 | 1,495 | 798 | 678 | 198 |  | — | 6,433 | 4,540 | 4,041 |
| Income\tfrom\tcontinuing |  |  |  |  |  |  |  |  |  |  |  |  |
| operations\tbefore\tincome |  |  |  |  |  |  |  |  |  |  |  |  |
| taxes | $2,060 | $1,344 | $1,111 | $41 | $427 | $305 | $(198) |  | $16 | $1,903 | $1,771 | $1,432 |
| Pre-tax\tmargin | 30% | 26% | 25% | 3% | 35% | 31% |  |  |  |  |  |  |
| Average\tassets |  |  |  |  |  |  |  |  |  |  |  |  |
| (in\tbillions) | $120.0 | $103.4 | $96.9 | $3.5 | $3.0 | $2.9 |  |  |  | $123.5 | $106.4 | $99.8 |

# Investment	Servicing

								The	34%	increase	in	total	revenue	from	2006	was	primarily	driven	by	increases	in	servicing	fees	and	trading	services	and	securities	finance	revenue,	as	well	as	a 60%	increase	in	net	interest	revenue,	slightly	offset	by	a	decline	in	processing	fees	and	other	revenue.

								Servicing	fees	increased	from	2006	primarily	due	to	the	contribution	of	fees	from	the	acquired	Investors	Financial	business,	increases	in	net	new	business	from existing	and	new	customers,	higher	equity	valuations	and	higher	customer	transaction	volumes.	The	increase	in	trading	services	revenue	reflected	a	higher	dollar	volume of	foreign	exchange	trades	for	customers	and	a	higher	volume	of	fixed-income	transition	management	business.	Securities	finance	revenue	increased	as	a	result	of	higher lending	volumes	and	increased	spreads.	Processing	fees	and	other	revenue	declined	from	2006,	primarily	as	a	result	of	declines	in	revenue	associated	with	the commercial	paper	conduits	and	our

tax-exempt	investment	program,	the	latter	of	which	was	consolidated	onto	our	balance	sheet	in	2006.	Revenue	from	this	program	is	now	recorded	in	net	interest	revenue.

								Servicing	fees,	trading	services	revenue	and	net	gains	(losses)	on	sales	of	available-for-sale	securities	for	our	Investment	Servicing	business	line	are	identical	to	the respective	consolidated	results.	Refer	to	the	"Servicing	Fees,"	"Trading	Services"	and	"Gains	(Losses)	on	Sales	of	Available-For-Sale	Securities,	Net"	captions	in	the "Total	Revenue"	section	of	this	Management's	Discussion	and	Analysis	for	a	more	in-depth	discussion.	A	discussion	of	processing	fees	and	other	revenue	is	provided under	the	caption	"Processing	Fees	and	Other"	in	the	"Total	Revenue"	section.

								Net	interest	revenue	increased	60%	from	2006	due	to	an	increase	in	average	interest-earning	assets,	including	those	from	the	acquired	Investors	Financial	business, as	well	as	higher	yields	on	our	investment	securities	portfolio	A	portion	of	net	interest	revenue	is	recorded	in	the	Investment	Management	business	line	based	on	the volume	of	customer	liabilities	attributable	to	that	business.

								Operating	expenses	increased	from	2006,	driven	primarily	by	the	inclusion	of	the	operating	expenses	of	the	acquired	Investors	Financial	business	and	Currenex,	as well	as	higher	incentive	compensation	costs	due	to	improved	performance	and	the	impact	of	higher	staffing	levels.	Staffing	levels	increased	to	support	growth	in business,	particularly	in	Europe.	Transaction	processing	costs	increased	due	to	a	higher	volume	of	sub-custodian	fees,	particularly	from	the	acquired	Investors	Financial business.	Other	expenses	increased	as	a	result	of	the	inclusion	of	expenses	of	the	acquired	Investors	Financial	business,	increases	in	professional	services,	securities processing	costs	and	increased	amortization	of	intangibles	that	resulted	from	the	Investors	Financial	and	Currenex	acquisitions.

# Investment	Management

								Total	revenue	for	2007	increased	25%	from	2006.	Management	fees	for	the	Investment	Management	business	line,	which	were	up	21%,	are	identical	to	the respective	consolidated	results.	Refer	to	the	"Management	Fees"	caption	in	the	"Total	Revenue"	section	of	this	Management's	Discussion	and	Analysis	for	a	more	in- depth	discussion.	Securities	finance	revenue	for	2007	was	up	73%	from	2006,	reflecting	higher	lending	volumes	and	increased	spreads.	Net	interest	revenue	improved due	to	higher	volumes	of	customer	liabilities,	primarily	resulting	from	the	growth	of	our	non-U.S.	operations,	as	well	as	a	more	favorable	mix	of	deposits.

								Operating	expenses	of	$981	million,	which	do	not	include	the	net	pre-tax	charge	allocated	to	Investment	Management	of	$514	million,	increased	23%	from $798	million	in	2006,	primarily	due	to	the	cost	of	increases	in	staffing	levels	to	support	growth	in	business,	and	related	increases	in	information	systems	and communications	expenses.	The	net	pre-tax	charge	was	recorded	in	connection	with	the	establishment	of	a	reserve	to	address	legal	exposure	and	other	costs	associated with	the	under-performance	of	certain	active	fixed-income	strategies	managed	by	SSgA	and	customer	concerns	as	to	whether	the	execution	of	these	strategies	was consistent	with	the	customers'	investment	intent.	The	net	charge	had	the	following	components—a	provision	for	legal	exposure	of	$625	million	offset	by	$25	million	of insurance	coverage;	a	$109	million	reduction	of	salaries	and	benefits	expense	related	to	reduced	incentive	compensation	offset	by	$15	million	of	severance	costs;	and $8	million	of	other	expenses	related	to	professional	fees.	More	information	about	this	charge	is	included	in	the	"Consolidated	Results	of	Operations—Operating Expenses"	section	of	this	Management's	Discussion	and	Analysis.

								The	pre-tax	margin	for	Investment	Management,	which	is	the	percentage	of	the	business	line's	pre-tax	income	to	its	total	revenue,	was	3%	for	2007	compared	to 35%	for	2006	and	31%	for	2005.	The	significant	decrease	in	margin	was	the	result	of	the	net	charge	described	above.	Without	the	net	charge,	Investment	Management's pre-tax	income	would	have	been	$555	million	($41	million	plus	$514	million),	and	its	pre-tax	margin	would	have	been	36%	for	2007.

								During	the	second	half	of	2007,	the	global	markets	for	fixed-income	securities,	particularly	the	markets	for	financial	instruments	collateralized	by	sub-prime mortgages,	experienced	significant	disruption.	This	disruption	affected	the	liquidity	and	pricing	of	securities	traded	in	these	markets,	as	well	as	the	returns	of,	and	levels of	redemptions	in,	investment	vehicles	investing	in	those	instruments.	Additional	information	about	the	impact	of	these	market	conditions	on	the	asset-backed commercial	paper	conduits	administered	by	State	Street	is	provided	in	the	"Off	Balance	Sheet	Arrangements"	section	of	this	Management's	Discussion	and	Analysis	and in	the	Risk	Factors	section	included	under	Item	1A	of	this	Form	10-K.

								As	of	December	31,	2007,	global	fixed-income	assets	under	management	totaled	approximately	$259	billion,	an	increase	of	approximately	$45	billion	compared	to $214	billion	at	December	31,	2006,	with	approximately	$43	billion	under	active	management.	This	amount	included	approximately	$6.1	billion	of	SSgA	customer	assets which	were	invested	in	strategies	that	were	adversely	affected	by	a	combination	of	holdings	in	financial	instruments	collateralized	by	sub-prime	mortgages,	illiquidity	in the	fixed-income	markets	generally,	and	customer	redemptions.	These	strategies	included	approximately	$2.2	billion	of	institutional	customer	investments	in	non- registered	pooled	investment	funds;	approximately	$2.1	billion	of	unit	investments	by	other	SSgA	investment	funds	in	the	same	non-registered	pooled	investment	funds; approximately	$1.6	billion	of	institutional	customer	investments	in	separately-managed	customer	accounts;	and	approximately	$0.2	billion	of	customer	investments	in mutual	funds.

								Information	about	recent	proceedings,	legal	exposure	and	related	costs	and	other	similar	matters	associated	with	SSgA's	active	fixed-income	strategies,	including the	establishment	of	a	reserve	of	approximately	$625	million,	is	included	in	"Risk	Factors—Litigation	Risks"	included	under	Item	1A;	the	"Consolidated	Results	of Operations—Operating	Expenses"	section	of	this	Management's	Discussion	and	Analysis;	and	note	10	of	the	Notes	to	Consolidated	Financial	Statements	included	under Item	8	of	this	Form	10-K.

# OVERVIEW	OF	CONSOLIDATED	RESULTS	OF	OPERATIONS

| Years	ended	December	31,<br>(Dollars	in	millions,	except	per	share	amounts) | 2006 | 2005 | $	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- |
| Total\tfee\trevenue | $5,186 | $4,551 | $635 | 14% |
| Net\tinterest\trevenue | 1,110 | 907 | 203 | 22 |
| Provision\tfor\tloan\tlosses | — | — | — | — |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 15 | (1) | 16 | — |
| Gain\ton\tsale\tof\tdivested\tbusiness | — | 16 | (16) | — |
| Total\trevenue | 6,311 | 5,473 | 838 | 15 |
| Total\toperating\texpenses | 4,540 | 4,041 | 499 | 12 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 1,771 | 1,432 | 339 | 24 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 675 | 487 | 188 | 39 |
| Income\tfrom\tcontinuing\toperations | 1,096 | 945 | 151 | 16 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | 10 | (107) | 117 | — |
| Net\tincome | $1,106 | $838 | $268 | 32 |
| Earnings\tper\tshare\tfrom\tcontinuing\toperations: |  |  |  |  |
| Basic | $3.31 | $2.86 | $.45 | 16 |
| Diluted | 3.26 | 2.82 | .44 | 16 |
| Earnings\tper\tshare: |  |  |  |  |
| Basic | $3.34 | $2.53 |  |  |
| Diluted | 3.29 | 2.50 |  |  |
| Return\ton\tshareholders'\tequity\tfrom\tcontinuing\toperations | 16.2% | 15.3% |  |  |
| Return\ton\tshareholders'\tequity | 16.4% | 13.6% |  |  |

								The	income	from	discontinued	operations	in	2006	of	$10	million,	or	$.03	per	share,	resulted	from	the	finalization	of	legal,	selling	and	other	costs	recorded	in connection	with	our	divestiture	of	Bel	Air.	The	loss	in	2005	of	$107	million,	or	$.32	per	share,	was	the	result	of	our	agreement	to	divest	Bel	Air.

| Years	ended	December	31,<br>(Dollars	in	millions) | 2006 | 2005 | $	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- |
| Fee\trevenue: |  |  |  |  |
| Servicing\tfees | $2,723 | $2,474 | $249 | 10% |
| Management\tfees | 943 | 751 | 192 | 26 |
| Trading\tservices | 862 | 694 | 168 | 24 |
| Securities\tfinance | 386 | 330 | 56 | 17 |
| Processing\tfees\tand\tother | 272 | 302 | (30) | (10) |
| Total\tfee\trevenue | 5,186 | 4,551 | 635 | 14 |
| Net\tinterest\trevenue: |  |  |  |  |
| Interest\trevenue | 4,324 | 2,930 | 1,394 | 48 |
| Interest\texpense | 3,214 | 2,023 | 1,191 | 59 |
| Net\tinterest\trevenue | 1,110 | 907 | 203 | 22 |
| Provision\tfor\tloan\tlosses | — | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 1,110 | 907 | 203 | 22 |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 15 | (1) | 16 |  |
| Gain\ton\tsale\tof\tPrivate\tAsset\tManagement\tbusiness | — | 16 | (16) |  |
| Total\trevenue | $6,311 | $5,473 | $838 | 15 |

								The	increase	in	total	revenue	for	2006	compared	to	2005	primarily	reflected	growth	in	fee	revenue,	which	mainly	reflected	growth	in	servicing	and	management fees,	with	almost	70%	of	the	overall	growth	in	fee	revenue	generated	from	these	two	services.

								The	increase	in	servicing	fees	was	the	result	of	new	business	from	existing	and	new	customers,	and	higher	equity	market	valuations.	Our	business	continued	to	grow outside	the	U.S.,	with	approximately	44%	of	our	servicing	fees	derived	from	non-U.S.	customers,	up	from	40%	in	2005.	Assets	under	custody	increased	to $11.85	trillion	at	December	31,	2006,	up	17%	from	$10.12	trillion	a	year	earlier.

								The	increase	in	management	fees	reflected	net	new	business	and	higher	average	month-end	equity	market	valuations.	Approximately	32%	of	management	fees were	derived	from	customers	outside	the	U.S.	in	2006,	up	from	30%	for	2005.	Assets	under	management	increased	to	$1.75	trillion	at	December	31,	2006,	up $308	billion	from	$1.44	trillion	a	year	earlier.

								The	growth	in	trading	services	revenue,	which	includes	foreign	exchange	trading	and	brokerage	and	other	trading	revenue,	reflected	an	increase	in	foreign exchange	trading	revenue	of	$143	million,	primarily	due	to	increased	transaction	volumes,	a	favorable	transaction	mix	related	to	custody	foreign	exchange	services,	and an	increase	in	foreign	exchange	trading	profits.	Brokerage	and	other	fees	increased	from	$251	million	in	2006,	up	11%	compared	to	2005	due	to	a	significant	increase	in other	trading	services	and	trading	profits,	offset	by	a	slight	decrease	in	brokerage	revenue,	the	result	of	a	decline	in	commission	recapture	revenue.

								The	increase	in	securities	finance	revenue	reflected	the	effect	of	improved	interest	rate	spreads	and	a	22%	increase	in	securities	lending	volumes.

								The	decline	in	processing	fees	and	other	revenue	reflected	a	decrease	of	$30	million	in	payments	made	by	Deutsche	Bank	AG	in	consideration	of	net	interest revenue	earned	from	acquired	customer	deposits,	largely	offset	by	an	increase	in	revenue	from	our	structured	products	business.	The	deposits	were	held	by	Deutsche Bank	until	customers	and	their	related	deposits	were	converted	to	our	systems.	Net	gains	on	sales	of	available-for-sale	securities	of	$15	million	in	2006	compared	to	net losses	of	$1	million	in	2005.

								The	increase	in	net	interest	revenue	reflected	an	increase	in	the	size	of	our	average	balance	sheet	and	the	impact	of	investment	securities	portfolio	repositioning	and increasing	the	average	size	of	the	portfolio.

| Years	ended	December	31,<br>(Dollars	in	millions) | 2006 | 2005 | $	Change | %	Change |
| :--- | :--- | :--- | :--- | :--- |
| Salaries\tand\temployee\tbenefits | $2,652 | $2,231 | $421 | 19% |
| Information\tsystems\tand\tcommunications | 501 | 486 | 15 | 3 |
| Transaction\tprocessing\tservices | 496 | 449 | 47 | 10 |
| Occupancy | 373 | 391 | (18) | (5) |
| Other | 518 | 484 | 34 | 7 |
| Total\toperating\texpenses | $4,540 | $4,041 | $499 | 12 |

								The	increase	in	operating	expenses	from	2005	reflected	higher	expenses	for	salaries	and	employee	benefits,	information	systems	and	communications,	transaction processing	and	other	expenses,	somewhat	offset	by	a	decline	in	occupancy.

								The	increase	in	salaries	and	employee	benefits	was	driven	by	higher	incentive	compensation	costs	due	to	improved	performance,	the	impact	of	higher	staffing	levels associated	with	the	growth	of	the	Investment	Servicing	business	in	Europe,	annual	merit	increases	and	planned	benefit	increases.

								Information	systems	and	communications	expense	slightly	increased	due	to	higher	telecommunications	costs	and	third-party	software	expenditures	to	support overseas	growth.

								Transaction	processing	services	expenses,	which	in	large	part	are	volume-related,	include	equity	trading	services	and	fees	related	to	securities	settlement,	sub- custodian	fees	and	external	contract	services.	The	increase	resulted	from	a	higher	transaction	volumes,	as	well	as	expansion	of	our	operations	in	Europe.

								Occupancy	expense	decreased	primarily	due	to	the	absence	of	the	$26	million	charge	recorded	in	2005	related	to	a	long-term	sub-lease	agreement	for	space	in	our headquarters	building,	offset	by	a	slight	increase	in	energy	and	other	utility	costs.

								The	increase	in	other	operating	expenses	was	primarily	due	to	increased	costs	to	support	growth	initiatives,	offset	by	a	decline	in	professional	services	fees	related to	information	technology	and	the	restructuring	of	our	Global	Treasury	function,	which	occurred	in	2005.

								The	increase	in	income	tax	expense	from	continuing	operations	for	2006	compared	to	2005	resulted	from	increased	pre-tax	earnings,	as	well	as	additional	income tax	expense	recorded	in	2006	primarily	related	to	federal	tax	legislation	and	certain	leveraged	leases.	The	effective	tax	rate	for	continuing	operations	for	2006	was 38.1%.	Our	effective	rate	for	2005	was	34%.	The	2005	income	tax	benefit	from	discontinued	operations	of	$58	million	was	related	to	the	loss	of	$165	million	recorded in	connection	with	our	agreement	to	divest	Bel	Air	in	2005.

# SIGNIFICANT	ACCOUNTING	ESTIMATES

								Our	consolidated	financial	statements	are	prepared	in	accordance	with	GAAP.	Our	significant	accounting	policies	are	described	in	note	1	of	the	Notes	to Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								The	majority	of	these	accounting	policies	do	not	involve	difficult,	subjective	or	complex	judgments	or	estimates	in	their	application,	or	the	variability	of	the estimates	is	not	material	to	the	consolidated	financial	statements.	However,	certain	of	these	accounting	policies,	by	their	nature,	require	management	to	make	judgments, involving	significant	estimates	and	assumptions,	about	the	effects	of	matters	that	are	inherently	uncertain.	These	estimates	and	assumptions	are	based	on	information available	as	of	the	date	of	the	financial	statements,	and	changes	in	this	information	over	time	could

materially	impact	amounts	of	assets,	liabilities,	revenue	and	expenses	reported	in	subsequent	financial	statements.

								Based	on	the	sensitivity	of	reported	financial	statement	amounts	to	the	underlying	policies,	estimates	and	assumptions,	the	relatively	more	significant	accounting policies	applied	by	State	Street	have	been	identified	by	management	as	accounting	for	fair	value	of	financial	instruments;	accounting	for	special	purpose	entities; accounting	for	goodwill;	and	accounting	for	income	taxes.	These	policies	require	the	most	subjective	or	complex	judgments,	and	related	estimates	and	assumptions could	be	most	subject	to	revision	as	new	information	becomes	available.	An	understanding	of	the	judgments,	estimates	and	assumptions	underlying	these	accounting policies	is	essential	in	order	to	understand	our	reported	consolidated	financial	condition	and	results	of	operations.

								The	following	is	a	brief	discussion	of	the	above-mentioned	significant	accounting	policies.	Management	of	State	Street	has	discussed	these	significant	accounting estimates	with	the	Examining	and	Audit	Committee	of	our	Board	of	Directors.

# Fair	Value	of	Financial	Instruments

								We	carry	certain	of	our	assets	and	liabilities	at	fair	value	in	our	consolidated	financial	statements,	including	trading	assets,	investment	securities	available	for	sale and	derivative	instruments.	At	December	31,	2007,	approximately	$75.43	billion	of	our	assets	and	approximately	$4.57	billion	of	our	liabilities	were	carried	at	fair value.	The	fair	value	of	a	financial	instrument	is	defined	as	the	amount	at	which	the	instrument	could	be	exchanged	in	an	arm's	length	transaction	between	willing parties,	other	than	in	a	forced	or	liquidation	sale.	The	degree	of	management	judgment	involved	in	determining	the	fair	value	of	a	financial	instrument	is	dependent	upon the	availability	of	quoted	market	prices	and	observable	market	inputs.	For	a	significant	amount	of	our	assets	and	liabilities	which	are	measured	at	fair	value,	those	fair values	are	determined	based	upon	quotations	provided	by	independent	third-party	pricing	services	or	observable	market	inputs,	and	as	a	result	there	is	little	or	no management	judgment	involved	in	determining	fair	value.	Prices	provided	by	independent	third-party	pricing	services	are	subject	to	review	by	management.	In developing	their	quotations,	the	independent	pricing	services	seek	to	utilize	observable	inputs,	including	trade	and	market	information.	However,	because	many	fixed- income	securities	do	not	trade	regularly,	the	pricing	services'	quotations	may	also	be	based	on	proprietary	financial	models	that	incorporate	available	information,	such as	benchmarking	to	similar	securities,	sector	groupings	or	matrix	pricing.

								Quotations	may	not	always	be	available	for	some	securities	or	in	markets	where	trading	activity	has	slowed	or	ceased.	When	quotations	are	not	available,	and	are not	provided	by	third-party	pricing	services,	management	judgment	is	necessary	to	determine	fair	value.	In	situations	involving	management	judgment,	fair	value	is determined	using	discounted	cash	flow	analysis	or	other	valuation	models,	which	incorporate	available	market	information,	including	appropriate	benchmarking	to similar	instruments,	analysis	of	default	and	recovery	rates,	estimation	of	prepayment	characteristics	and	implied	volatilities.

								Discounted	cash	flow	analysis	is	dependent	upon	estimated	future	cash	flows	and	the	level	of	interest	rates.	Expected	cash	flows	are	discounted	using	market interest	rates	commensurate	with	the	credit	quality	and	duration	of	the	investment.	Valuation	models	use	as	their	basis	independently-sourced	market	inputs	including, for	example,	interest	rate	yield	curves	and	foreign	currency	exchange	rates.	Our	valuation	process	using	models	considers	factors	such	as	credit	quality,	product structure,	third-party	enhancements	and	guarantees.	We	apply	judgment	in	the	application	of	these	factors.	Other	factors	can	affect	our	estimates	of	fair	value,	including market	dislocations,	incorrect	model	assumptions	and	unexpected	correlations.	These	valuation	methods	could	expose	us	to	materially	different	results	should	the	models used	or	underlying	assumptions	be	inaccurate.

								We	determine	fair	value	for	trading	account	assets	primarily	by	using	quoted	market	prices	for	identical	or	similar	instruments	in	active	markets	for	those	securities. Fair	value	for	investment

securities	available	for	sale	is	determined	using	quotations	from	independent	third-party	pricing	services,	which	generally	are	based	on	observable	market	inputs	for identical	or	similar	instruments	in	active	and	non-active	markets	for	those	securities.	We	value	derivative	instruments	primarily	by	using	valuation	models.	These	models generally	do	not	involve	material	subjectivity	because	the	methodologies	used	do	not	necessitate	significant	judgment,	and	the	pricing	inputs	are	observed	from	actively quoted	markets,	for	instance	with	over-the-counter	interest-rate	swap	and	option	contracts,	and	foreign	exchange	forward	and	option	contracts.

								Management	reviews	the	fair	value	of	the	portfolio	at	least	quarterly,	and	evaluates	individual	securities	for	declines	in	fair	value	that	may	be	other	than	temporary. This	review	considers	factors	such	as	current	and	expected	future	interest	rates,	external	credit	ratings,	dividend	payments,	the	financial	health	of	the	issuer	and	other pertinent	information.	Other	pertinent	information	includes	current	developments	with	respect	to	the	issuer,	the	length	of	time	the	cost	basis	has	exceeded	the	fair	value, the	severity	of	the	impairment	measured	as	the	ratio	of	fair	value	to	amortized	cost	and	management's	intent	and	ability	to	hold	the	security.

								The	review	includes	all	investment	securities	for	which	we	have	issuer	specific	concerns	regardless	of	quantitative	factors.	The	review	considers	current	economic conditions,	adverse	situations	that	might	affect	our	ability	to	fully	collect	interest	and	principal,	the	timing	of	future	payments,	the	credit	quality	and	performance	of underlying	collateral	and	guarantees	and	other	relevant	factors.	If	declines	are	deemed	other	than	temporary,	an	impairment	loss	is	recognized	and	the	amortized	cost basis	of	the	investment	security	is	written	down	to	its	current	fair	value,	which	becomes	the	new	cost	basis.

								Additional	information	about	fair	values	of	financial	instruments	and	fair	value	estimates	is	included	in	note	24	of	the	Notes	to	Consolidated	Financial	Statements included	under	Item	8	of	this	Form	10-K.

# Special	Purpose	Entities

								In	the	normal	course	of	business,	we	utilize	three	types	of	special	purpose	entities,	referred	to	as	"SPEs,"	two	of	which	are	not	recorded	in	our	consolidated financial	statements.	Information	about	the	activities	of	these	SPEs,	which	are	used	in	connection	with	our	tax-exempt	investment	program,	our	involvement	with managed	investment	vehicles	and	our	asset-backed	commercial	paper	program,	is	in	notes	10	and	11	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.	Additional	information	about	SPEs	used	in	connection	with	our	commercial	paper	program	is	provided	below.

								In	our	role	as	a	financial	intermediary,	we	administer	four	third-party	asset-backed	commercial	paper	conduits,	which	are	structured	as	bankruptcy-remote,	limited liability	companies,	and	which	are	not	included	in	our	consolidated	financial	statements.	These	conduits	purchase	a	variety	of	financial	assets	from	third-party	financial institutions,	and	fund	these	purchases	by	issuing	commercial	paper.	The	financial	assets	purchased	by	the	conduits	are	not	originated	by	us,	and	we	do	not	hold	any equity	ownership	interest	in	the	conduits.	Additional	information	about	the	conduits	and	their	business	activities	is	in	the	"Off-Balance	Sheet	Arrangements"	section	of this	Management's	Discussion	and	Analysis	and	in	note	11	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8	of	this	Form	10-K.

								Our	accounting	for	the	conduits'	activities,	and	our	conclusion	that	we	are	not	required	to	include	each	or	all	of	the	conduits'	assets	and	liabilities	in	our consolidated	financial	statements,	is	based	on	our	application	of	the	provisions	of	FASB	Interpretation	No.	46(R),	which	governs	our	accounting	for	the	conduits	and which	is	discussed	in	more	detail	in	note	11.	Expected	losses,	which	we	estimate	using	a	financial	model	as	described	below,	form	the	basis	for	our	application	of	the provisions	of	FIN	46(R).	Expected	losses,	as	defined	by	FIN	46(R),	are	not	economic	losses.	Instead,	expected	losses	are	calculated	by	comparing	projected	possible cash	flows,	which	are	probability-weighted,	with	expected	cash	flows	for	the	risk(s)	the	entity	was	designed	to	create	and	distribute;	they	represent	the	variability

in	potential	cash	flows	of	the	entity's	designated	risks.	We	believe	that	credit	risk	is	the	predominant	risk	that	is	designed	to	be	created	and	distributed	by	these	entities. There	is	also	a	modest	amount	of	basis	risk	within	each	conduit.	Basis	risk	arises	when	commercial	paper	funding	costs	move	at	a	different	rate	than	the	comparable floating-rate	asset	benchmark	rates	(generally	LIBOR).	This	risk	is	mitigated	through	the	use	of	derivative	instruments,	principally	basis	swaps,	which	remove	this variability	from	each	conduit.	Accordingly,	basis	risk	is	not	a	significant	assumption	in	the	financial	model.

								Any	credit	losses	of	the	conduits	would	be	absorbed	by	(1)	investors	in	the	subordinated	debt,	commonly	referred	to	as	"first-loss	notes,"	issued	by	the	conduits; (2)	State	Street;	and	(3)	the	holders	of	the	conduits'	commercial	paper,	in	order	of	priority.	The	investors	in	the	first-loss	notes,	which	are	independent	third	parties, would	absorb	the	first	dollar	of	any	credit	loss	on	the	conduits'	assets.	If	credit	losses	exceeded	the	first-loss	notes,	we	would	absorb	credit	losses	through	our	credit facilities	provided	to	the	conduits.	The	commercial	paper	holders	would	absorb	credit	losses	after	the	first-loss	notes	and	State	Street's	credit	facilities	have	been exhausted.	We	have	developed	a	financial	model	to	estimate	and	allocate	each	conduit's	expected	losses.	Our	model	has	determined	that,	as	of	December	31,	2007,	the amount	of	first-loss	notes	of	each	conduit	held	by	the	third-party	investors	causes	them	to	absorb	a	majority	of	each	conduit's	expected	losses,	as	defined	by	FIN	46(R), and,	accordingly,	the	investors	in	the	first-loss	notes	are	considered	to	be	the	primary	beneficiary	of	the	conduits.	The	aggregate	amount	of	first-loss	notes	issued	by	the conduits	totaled	approximately	$32	million	as	of	December	31,	2007.

								In	order	to	estimate	expected	losses	as	required	by	FIN	46(R),	we	estimate	possible	defaults	of	the	conduits'	assets.	These	expected	losses	are	allocated	to	the conduits'	variable	interest	holders	based	on	the	order	in	which	actual	losses	would	be	absorbed,	as	described	above.	We	use	the	model	to	estimate	expected	losses	based on	hundreds	of	thousands	of	probability-weighted	loss	scenarios.	These	simulations	incorporate	published	rating	agency	data	to	estimate	expected	losses	due	to	credit risk.	Primary	assumptions	incorporated	into	the	financial	model	relative	to	credit	risk	variability,	such	as	default	probabilities	and	loss	severities,	are	directly	linked	to the	conduit's	underlying	assets.	These	default	probabilities	and	loss	severity	assumptions	vary	by	asset	class	and	ratings	of	individual	conduit	assets.	Accordingly,	the model's	calculation	of	expected	losses	is	significantly	affected	by	the	credit	ratings	and	asset	mix	of	each	conduit's	assets.	These	statistics	are	reviewed	by	management regularly	and	more	formally	on	an	annual	basis.	If	downgrades	and	asset	mix	change	significantly,	or	if	defaults	occur	on	the	conduits'	underlying	assets,	we	may conclude	that	the	current	level	of	first-loss	notes	is	insufficient	to	absorb	a	majority	of	the	conduits'	expected	losses.

								We	perform	stress	tests	and	sensitivity	analyses,	with	respect	to	each	conduit	individually,	in	order	to	model	potential	scenarios	that	could	cause	the	amount	of	first- loss	notes	to	be	insufficient	to	absorb	the	majority	of	the	conduits'	expected	losses.	As	part	of	these	analyses,	we	have	identified	certain	conduit	assets	that	could	be	more susceptible	to	credit	downgrade	because	of	their	underlying	credit	characteristics.	Our	scenario	testing	specifically	addresses	asset	classes	that	have	experienced significant	price	erosion	and/or	have	little	observed	market	activity.	Examples	of	scenarios	that	are	designed	to	measure	the	sensitivity	of	the	sufficiency	of	the	first-loss notes	include	performing	a	downgrade	of	all	assets	which	have	underlying	monoline	insurance	provider	support,	and	a	downgrade	scenario	on	certain	other	conduit securities	where	our	analysis	of	the	timing	and	amount	of	expected	cash	flows	for	selected	security	default	expectations	does	not	re-affirm	the	security's	current	external credit	rating.	These	simulations	do	not	include	a	scenario	whereby	all	positions	are	simultaneously	downgraded,	the	possibility	of	which	we	consider	remote.	In	addition, a	scenario	could	arise	where	one	or	more	defaults	could	be	so	severe	that	the	associated	losses	would	exhaust	the	conduits'	total	first-loss	notes	currently	outstanding.

								We	believe	that	the	current	level	of	first-loss	notes	of	approximately	$32	million	as	of	December	31,	2007	is	sufficient	to	support	default	scenarios	that	we	believe are	more	likely,	including	the	stress	tests	previously	described.	However,	in	the	future,	if	the	determination	and	allocation	of

conduit	expected	losses	by	the	financial	model	indicates	that	the	current	level	of	first-loss	notes	is	insufficient	to	absorb	a	majority	of	the	conduits'	expected	losses,	we would	be	required	to	either	(1)	issue	additional	first-loss	notes	to	third	parties;	(2)	change	the	composition	of	conduit	assets;	or	(3)	take	other	actions	in	order	to	avoid being	determined	to	be	the	primary	beneficiary	of	the	conduits.	If	we	were	unable	to	accomplish	any	of	the	above,	we	would	be	determined	to	be	the	primary	beneficiary of	the	conduits,	and	would	be	required	to	consolidate	the	conduits'	assets	and	liabilities.	For	illustrative	purposes	only,	if	consolidation	of	all	four	of	the	conduits	had been	required	on	December	31,	2007,	we	would	have	recognized	an	extraordinary	after-tax	loss	of	approximately	$530	million	in	our	consolidated	statement	of	income. In	addition,	the	consolidation	of	the	conduit's	assets	would	have	had	a	direct	impact	on	our	leverage	capital	ratios.	The	illustrative	impact	of	consolidation	of	the conduits	and	the	assumptions	underlying	its	calculation	are	discussed	in	the	"Off-Balance	Sheet	Arrangements"	section	of	this	Management's	Discussion	and	Analysis.

								The	conduits	do	not	regularly	trade	their	assets.	That	is,	the	design	of	the	conduits	is	such	that	conduit	assets	are	purchased	with	the	intent	to	hold	to	them	to	their maturities.	Accordingly,	changes	in	the	fair	values	of	the	conduits'	assets	do	not	impact	the	day-to-day	management	of	the	conduits.	However,	we	closely	monitor changes	in	fair	values	of	the	conduits'	assets	to	ensure	that	the	default	assumptions	in	our	financial	model	continue	to	be	appropriate.	As	of	December	31,	2007,	total assets	in	the	unconsolidated	conduits	were	approximately	$28.76	billion,	and	the	pre-tax	unrealized	loss	on	those	assets	was	approximately	$850	million,	or	$530	million after-tax.	We	believe	the	fair	values	of	the	conduits'	assets	are	impacted	by	a	number	of	factors,	including	the	lack	of	liquidity	of	mortgage-	and	asset-backed	securities, supply	and	demand	imbalance	in	the	market,	and	a	risk	aversion	premium	being	demanded	by	investors	for	certain	asset	types.	We	do	not	believe	that	the	current	fair values	of	some	of	the	conduits'	assets	are	necessarily	indicative	of	a	change	in	marketplace	participants'	view	of	the	default	probabilities	for	these	assets.

# Goodwill

								Goodwill	is	created	when	the	purchase	price	exceeds	the	assigned	value	of	net	assets	of	acquired	businesses,	and	represents	the	value	attributable	to	unidentifiable intangible	elements	being	acquired.	Almost	all	of	our	goodwill	has	resulted	from	business	acquisitions	of	our	Investment	Servicing	line	of	business.	As	a	result, substantially	all	of	the	total	goodwill	recorded	in	our	consolidated	statement	of	condition	was	recorded	by	this	business	line,	with	the	remainder	recorded	by	Investment Management.

								The	sustained	value	of	the	majority	of	this	goodwill	is	supported	ultimately	by	revenue	from	our	investment	servicing	business.	A	decline	in	earnings	as	a	result	of a	lack	of	growth,	or	our	inability	to	deliver	cost-effective	services	over	sustained	periods,	could	lead	to	a	perceived	impairment	of	goodwill,	which	would	be	evaluated and,	if	necessary,	be	recorded	as	a	write-down	of	the	reported	amount	of	goodwill	through	a	charge	to	earnings	in	our	consolidated	statement	of	income.

								On	an	annual	basis,	or	more	frequently	if	circumstances	dictate,	management	reviews	goodwill	and	evaluates	events	or	other	developments	that	may	indicate impairment	in	the	carrying	amount.	We	perform	this	evaluation	at	the	reporting	unit	level,	which	is	one	level	below	our	two	major	business	lines.	The	evaluation methodology	for	potential	impairment	is	inherently	complex	and	involves	significant	management	judgment	in	the	use	of	estimates	and	assumptions.

								We	evaluate	impairment	using	a	two-step	process.	First,	we	compare	the	aggregate	fair	value	of	the	reporting	unit	to	its	carrying	amount,	including	goodwill.	If	the fair	value	exceeds	the	carrying	amount,	no	impairment	exists.	If	the	carrying	amount	of	the	reporting	unit	exceeds	the	fair	value,	then	we	compare	the	"implied"	fair value	of	the	reporting	unit's	goodwill	with	its	carrying	amount.	If	the	carrying	amount	of	the	goodwill	exceeds	the	implied	fair	value,	then	goodwill	impairment	is recognized	by	writing	the	goodwill	down	to	the	implied	fair	value.	The	implied	fair	value	of	the	goodwill	is	determined	by	allocating	the	fair	value	of	the	reporting	unit	to all	of	the	assets	and	liabilities	of	that	unit,	as	if	the	unit	had	been	acquired	in	a	business	combination	and	the	overall	fair	value	of	the	unit	was	the	purchase	price.

								To	determine	the	aggregate	fair	value	of	the	reporting	unit	being	evaluated	for	goodwill	impairment,	we	use	one	of	two	principal	methodologies—external	or independent	valuation,	using	quoted	market	prices	in	active	markets;	or	an	analysis	of	comparable	recent	external	sales	or	market	data,	such	as	multiples	of	earnings	or similar	performance	measures.	In	limited	circumstances,	these	methodologies	are	not	available,	and	as	such,	we	estimate	future	cash	flows	using	present-value techniques.

								Events	that	may	indicate	goodwill	impairment	include	significant	or	adverse	changes	in	the	business,	economic	or	political	climate;	an	adverse	action	or	assessment by	a	regulator;	unanticipated	competition;	and	a	more-likely-than-not	expectation	that	we	will	sell	or	otherwise	dispose	of	a	business	to	which	the	goodwill	relates.	Our goodwill	impairment	testing	for	2007	indicated	that	none	of	our	goodwill	was	impaired.	Goodwill	recorded	in	our	consolidated	statement	of	condition	at	December	31, 2007	totaled	approximately	$4.57	billion.

								Additional	information	about	goodwill,	including	information	by	line	of	business,	is	in	note	5	of	the	Notes	to	Consolidated	Financial	Statements	included	under Item	8	of	this	Form	10-K.

								Our	overall	tax	position	is	fundamentally	complex,	and	management	judgment	is	involved	in	the	analysis	of	income	tax	assets	and	liabilities.	We	are	subject	to	the income	tax	laws	of	the	U.S.,	its	states	and	municipalities	and	those	of	the	foreign	jurisdictions	in	which	we	operate.	These	tax	laws	can	be	subject	to	different interpretations	by	the	taxpayer	and	the	taxing	authorities.

								In	establishing	a	provision	for	income	tax	expense,	we	must	make	judgments	and	interpretations	about	the	application	of	these	inherently	complex	tax	laws. Disputes	over	interpretations	of	the	tax	laws	may	be	adjudicated	by	the	court	systems	of	the	various	tax	jurisdictions	or	may	be	settled	with	the	taxing	authority	upon examination	or	administrative	appeal.

								Management's	determination	of	the	likelihood	that	deferred	tax	assets	can	be	realized	is	subjective	and	involves	estimates	and	assumptions	about	matters	that	are inherently	uncertain.	The	realization	of	deferred	tax	assets	arises	from	future	taxable	income,	including	foreign-source	income,	and	the	achievement	of	tax	planning strategies.	Underlying	estimates	and	assumptions	can	change	over	time,	influencing	our	overall	tax	positions,	as	a	result	of	unanticipated	events	or	circumstances.

								Management	continually	monitors	and	evaluates	the	worldwide	impact	of	tax	legislation,	decisions,	rulings	and	other	current	developments	on	the	estimates	and assumptions	underlying	our	calculations	of	current	and	deferred	taxes	and	our	analysis	of	the	expected	realization	of	deferred	tax	assets.	Additional	information	about income	taxes	is	in	notes	10	and	20	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8	of	this	Form	10-K.

# FINANCIAL	CONDITION

| Years	ended	December	31,<br>(In	millions) | 2007	Average	Balance | 2006	Average	Balance |
| :--- | :--- | :--- |
| Assets: |  |  |
| Interest-bearing\tdeposits\twith\tbanks | $7,433 | $9,621 |
| Securities\tpurchased\tunder\tresale\tagreements | 12,466 | 12,543 |
| Federal\tfunds\tsold | 1,936 | 277 |
| Trading\taccount\tassets | 972 | 975 |
| Investment\tsecurities | 70,990 | 61,579 |
| Loans | 10,753 | 7,670 |
| Total\tinterest-earning\tassets | 104,550 | 92,665 |
| Cash\tand\tdue\tfrom\tbanks | 3,272 | 2,977 |
| Other\tassets | 15,660 | 10,802 |
| Total\tassets | $123,482 | $106,444 |
| Liabilities\tand\tshareholders'\tequity: |  |  |
| Interest-bearing\tdeposits: |  |  |
| U.S. | $7,557 | $2,453 |
| Non-U.S. | 60,663 | 53,182 |
| Total\tinterest-bearing\tdeposits | 68,220 | 55,635 |
| Securities\tsold\tunder\trepurchase\tagreements | 16,132 | 20,883 |
| Federal\tfunds\tpurchased | 1,667 | 2,777 |
| Other\tshort-term\tborrowings | 4,225 | 2,039 |
| Long-term\tdebt | 3,402 | 2,621 |
| Total\tinterest-bearing\tliabilities | 93,646 | 83,955 |
| Noninterest-bearing\tdeposits | 10,640 | 8,274 |
| Other\tliabilities | 9,769 | 7,471 |
| Shareholders'\tequity | 9,427 | 6,744 |
| Total\tliabilities\tand\tshareholders'\tequity | $123,482 | $106,444 |

# Overview	of	Consolidated	Statement	of	Condition

								The	structure	of	our	consolidated	statement	of	condition,	or	balance	sheet,	is	primarily	driven	by	the	liabilities	generated	by	our	core	Investment	Servicing	and Investment	Management	businesses.	As	our	customers	execute	their	worldwide	cash	management	and	investment	activities,	they	use	short-term	investments	and deposits	that	constitute	the	majority	of	our	liabilities.	These	liabilities	are	generally	in	the	form	of	non-interest-bearing	demand	deposits;	interest-bearing	transaction account	deposits,	which	are	denominated	in	a	variety	of	currencies;	and	repurchase	agreements,	which	generally	serve	as	short-term	investment	alternatives	for	our customers.

								Our	customers'	needs	and	our	operating	objectives	determine	the	volume,	mix	and	currency	denomination	of	our	consolidated	balance	sheet.	Deposits	and	other liabilities	generated	by	customer	activities	are	invested	in	assets	that	generally	match	the	liquidity	and	interest-rate	characteristics	of	the	liabilities.	As	a	result,	our	assets consist	primarily	of	high-quality,	marketable	securities	held	in	our	available-for-sale	or	held-to-maturity	investment	securities	portfolio	and	short-term	money-market instruments,	such	as	interest-bearing	deposits,	federal	funds	sold	and	securities	purchased	under	resale	agreements.	The	actual	mix	of	assets	is	determined	by	the characteristics	of	the	customer	liabilities	and	our	desire	to	maintain	a	well-diversified	portfolio	of	high-quality	assets.	Managing	our	consolidated

balance	sheet	structure	is	a	disciplined	process	conducted	within	specific	Board-approved	policies	for	interest-rate	risk,	credit	risk	and	liquidity.

								For	2007,	the	growth	in	average	interest-bearing	liabilities	of	$9.7	billion	was	primarily	composed	of	a	$12.6	billion	increase	in	customer	deposits,	$7.5	billion	of which	were	foreign,	offset	by	a	decline	in	repurchase	agreements	of	$4.8	billion.	These	changes	are	representative	of	the	higher	levels	of	customer	activity	outside	the U.S.	Average	interest-earning	assets	in	2007	increased	$11.9	billion	from	2006,	consistent	with	the	increased	level	of	customer	liabilities.	Additional	information	about our	average	balance	sheet,	primarily	interest-earning	assets	and	interest-bearing	liabilities,	is	included	in	the	"Consolidated	Results	of	Operations—Net	Interest Revenue"	section	of	this	Management's	Discussion	and	Analysis.

# Investment	Securities

								The	carrying	values	of	investment	securities	were	as	follows	as	of	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Available\tfor\tsale: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |
| Direct\tobligations | $8,181 | $7,612 | $10,214 |
| Mortgage-backed\tsecurities | 14,585 | 11,454 | 11,138 |
| Asset-backed\tsecurities | 25,069 | 25,634 | 23,842 |
| Collateralized\tmortgage\tobligations | 11,892 | 8,476 | 5,527 |
| State\tand\tpolitical\tsubdivisions | 5,813 | 3,749 | 1,868 |
| Other\tdebt\tinvestments | 4,041 | 3,027 | 1,695 |
| Money-market\tmutual\tfunds | 243 | 201 | 232 |
| Other\tequity\tsecurities | 502 | 292 | 463 |
| Total | $70,326 | $60,445 | $54,979 |
| Held\tto\tmaturity: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |
| Direct\tobligations | $757 | $846 | $1,657 |
| Mortgage-backed\tsecurities | 940 | 1,084 | 925 |
| Collateralized\tmortgage\tobligations | 2,190 | 2,357 | 2,086 |
| Other\tinvestments | 346 | 260 | 223 |
| Total | $4,233 | $4,547 | $4,891 |

								We	consider	a	well-diversified,	high-credit	quality	investment	securities	portfolio	to	be	an	important	element	in	the	management	of	our	consolidated	balance	sheet. The	portfolio	continues	to	be	concentrated	in	securities	with	high	credit	quality,	with	approximately	95%	of	the	carrying	value	of	the

portfolio	"AAA"	or	"AA"	rated.	The	percentages	of	the	carrying	value	of	the	investment	securities	portfolio	by	external	credit	rating	were	as	follows	as	of	December	31:

| AAA(1) | 89% | 88% |
| :--- | :--- | :--- |
| AA | 6 | 6 |
| A | 3 | 4 |
| BBB | 1 | 1 |
| Non-rated | 1 | 1 |
|  | 100% | 100% |

# (1) Includes	U.S.	Treasury	securities.

								The	investment	securities	portfolio	is	also	diversified	with	respect	to	asset	class.	The	majority	of	the	portfolio	is	in	high-grade	mortgage-backed	and	asset-backed securities.	The	largely	floating-rate	asset-backed	portfolio	consists	of	home-equity	loan,	credit	card,	auto-	and	student-loan	securities.	Mortgage-backed	securities	are split	between	securities	of	Federal	National	Mortgage	Association,	Federal	Home	Loan	Mortgage	Corporation	and	large-issuer	collateralized	mortgage	obligations.	As of	December	31,	2007,	the	asset-backed	securities	in	the	portfolio	included	$6.2	billion	collateralized	by	sub-prime	mortgages.	Of	this	total,	71%	were	AAA	rated	and 29%	were	AA	rated.

								We	had	$1.105	billion	of	net	pre-tax	unrealized	losses	on	available-for-sale	investment	securities	at	December	31,	2007,	or	$678	million	after-tax.	Net	pre-tax unrealized	losses	on	available-for-sale	securities	at	December	31,	2006	were	$378	million,	or	$227	million	after	tax.	Management	considers	the	aggregate	decline	in	fair value	and	the	resulting	net	unrealized	losses	to	be	temporary	and	not	the	result	of	any	material	changes	in	the	credit	characteristics	of	the	investment	securities	portfolio. Management	has	the	ability	and	the	intent	to	hold	the	securities	until	recovery	in	market	value.

								We	intend	to	continue	managing	our	investment	securities	portfolio	to	align	with	interest-rate	and	duration	characteristics	of	our	customer	liabilities	and	in	the context	of	our	overall	balance	sheet	structure,	which	is	maintained	within	internally	approved	risk	limits,	and	in	consideration	of	the	global	interest-rate	environment. Even	with	material	changes	in	unrealized	losses	on	available-for-sale	securities,	we	may	not	experience	material	changes	in	our	interest-rate	risk	profile,	or	experience	a material	impact	on	our	net	interest	revenue.	Additional	information	about	these	and	other	unrealized	losses	is	in	notes	3	and	12	of	the	Notes	to	Consolidated	Financial Statements	included	in	this	Form	10-K	under	Item	8.

								The	carrying	amounts,	by	contractual	maturity,	of	debt	securities	available	for	sale	and	held	to	maturity,	and	the	related	weighted-average	contractual	yields,	were as	follows	as	of	December	31,	2007:

|  | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |  |  |  |  |
| Available\tfor\tsale(2): |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $5,683 | 4.43% $ | 1,072 | 3.91% $ | 520 | 6.27% $ | 906 | 7.63% |
| Mortgage-backed\tsecurities | 116 | 4.16 | 1,384 | 4.31 | 4,152 | 4.90 | 8,933 | 5.18 |
| Asset-backed\tsecurities | 1,304 | 4.68 | 11,321 | 5.13 | 8,223 | 5.21 | 4,221 | 5.21 |
| Collateralized\tmortgage\tobligations | 170 | 4.90 | 3,156 | 5.07 | 3,617 | 5.48 | 4,949 | 5.45 |
| State\tand\tpolitical\tsubdivisions(1) | 370 | 5.94 | 1,997 | 5.74 | 1,644 | 5.60 | 1,802 | 5.41 |
| Other\tinvestments | 1,686 | 6.46 | 1,405 | 5.48 | 906 | 5.33 | 44 | 5.61 |
| Total | $9,329 |  | $20,335 |  | $19,062 |  | $20,855 |  |
| Held\tto\tmaturity(2): |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $256 | 3.89% $ | 501 | 4.38% |  |  |  |  |
| Mortgage-backed\tsecurities | — | — | 30 | 3.95 | $329 | 4.85% $ | 581 | 5.35% |
| Collateralized\tmortgage\tobligations | — | — | 725 | 4.94 | 970 | 5.03 | 495 | 5.03 |
| Other\tinvestments | 163 | 1.99 | 119 | 5.81 | 61 | 6.02 | 3 | 7.16 |
| Total | $419 |  | $1,375 |  | $1,360 |  | $1,079 |  |

(1) Yields	have	been	calculated	on	a	fully	taxable-equivalent	basis,	using	applicable	federal	and	state	income	tax	rates.

(2) The	maturities	of	mortgage-backed	securities,	asset-backed	securities	and	collateralized	mortgage	obligations	are	based	upon	expected	principal	payments.

# Loans	and	Lease	Financing

								U.S.	and	non-U.S.	loans	and	lease	financing	as	of	December	31,	and	average	loans	and	lease	financing,	were	as	follows	for	the	years	ended	December	31:

|  | 2007 | 2006 | 2005 | 2004 | 2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |
| U.S.: |  |  |  |  |  |
| Commercial\tand\tfinancial | $9,402 | $3,480 | $2,298 | $1,826 | $2,344 |
| Lease\tfinancing | 396 | 415 | 404 | 373 | 395 |
| Total\tU.S. | 9,798 | 3,895 | 2,702 | 2,199 | 2,739 |
| Non-U.S.: |  |  |  |  |  |
| Commercial\tand\tfinancial | 4,420 | 3,137 | 1,854 | 526 | 424 |
| Lease\tfinancing | 1,584 | 1,914 | 1,926 | 1,904 | 1,858 |
| Total\tnon-U.S. | 6,004 | 5,051 | 3,780 | 2,430 | 2,282 |
| Total\tloans | $15,802 | $8,946 | $6,482 | $4,629 | $5,021 |
| Average\tloans\tand\tlease\tfinancing | $10,753 | $7,670 | $6,013 | $5,689 | $5,568 |

								At	December	31,	2007,	approximately	11%	of	our	consolidated	total	assets	consisted	of	loans	and	lease	financing.	The	aggregate	increase	in	loans	from	2006 reflected	an	increase	in	overdrafts,	which	result	primarily	from	securities	settlement	activities	of	our	customers.	Overdrafts	included	in	loans	were	$11.65	billion	and $5.69	billion	at	December	31,	2007	and	December	31,	2006,	respectively.	Average

overdrafts	were	approximately	$7.53	billion	and	$5.21	billion	for	the	years	ended	December	31,	2007	and	2006,	respectively.	These	balances	do	not	represent	significant credit	risk	because	of	their	short-term	nature,	which	is	generally	overnight,	the	lack	of	significant	concentration,	and	their	occurrence	in	the	normal	course	of	the	cash and	securities	settlement	process.

								Maturities	for	loan	and	lease	financing	categories	were	as	follows	as	of	December	31,	2007:

|  | Total | Under	1 | 1	to	5 | Over	5 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |
| U.S.: |  |  |  |  |
| Commercial\tand\tfinancial | $9,402 | $9,372 | $10 | $20 |
| Lease\tfinancing | 396 | 8 | — | 388 |
| Total\tU.S. | 9,798 | 9,380 | 10 | 408 |
| Non-U.S.: |  |  |  |  |
| Commercial\tand\tfinancial | 4,420 | 4,419 | 1 | — |
| Lease\tfinancing | 1,584 | — | 53 | 1,531 |
| Total\tnon-U.S. | 6,004 | 4,419 | 54 | 1,531 |
| Total | $15,802 | $13,799 | $64 | $1,939 |

								The	following	table	presents	the	classification	of	loans	and	leases	due	after	one	year	according	to	sensitivity	to	changes	in	interest	rates	as	of	December	31,	2007:

| (In	millions) |  |
| :--- | :--- |
| Loans\tand\tleases\twith\tpredetermined\tinterest\trates | $1,973 |
| Loans\tand\tleases\twith\tfloating\tor\tadjustable\tinterest\trates | 30 |
| Total | $2,003 |

# Cross-Border	Outstandings

								Cross-border	outstandings,	as	defined	by	bank	regulatory	rules,	are	amounts	payable	to	State	Street	by	residents	of	foreign	countries,	regardless	of	the	currency	in which	the	claim	is	denominated,	and	local	country	claims	in	excess	of	local	country	obligations.	These	cross-border	outstandings	consist	primarily	of	deposits	with banks,	loans	and	lease	financing	and	investment	securities.

								In	addition	to	credit	risk,	cross-border	outstandings	have	the	risk	that,	as	a	result	of	political	or	economic	conditions	in	a	country,	borrowers	may	be	unable	to	meet their	contractual	repayment	obligations	of	principal	and/or	interest	when	due	because	of	the	unavailability	of,	or	restrictions	on,	foreign	exchange	needed	by	borrowers	to repay	their	obligations.

								Cross-border	outstandings	to	countries	in	which	we	do	business	which	amounted	to	at	least	1%	of	our	consolidated	total	assets	were	as	follows	as	of	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| United\tKingdom | $5,951 | $5,531 | $2,696 |
| Canada | 4,565 | — | 1,463 |
| Australia | 3,567 | 1,519 | 1,441 |
| Netherlands | — | — | 992 |
| Germany | 2,944 | 2,696 | 4,217 |
| Total\tcross-border\toutstandings | $17,027 | $9,746 | $10,809 |

								The	total	cross-border	outstandings	presented	in	the	table	represented	12%,	9%	and	11%	of	our	consolidated	total	assets	as	of	December	31,	2007,	2006	and	2005, respectively.	There	were	no	cross-border	outstandings	to	countries	which	totaled	between	.75%	and	1%	of	our	consolidated	total	assets	as	of	December	31,	2007. Aggregate	cross-border	outstandings	to	countries	which	totaled	between	.75%	and	1%	of	our	consolidated	total	assets	at	December	31,	2006,	amounted	to	$1.05	billion (Canada)	and	at	December	31,	2005,	amounted	to	$1.86	billion	(Belgium	and	Japan).

# Capital

								Regulatory	and	economic	capital	management	both	use	key	metrics	evaluated	by	management	to	ensure	that	our	actual	level	of	capital	is	commensurate	with	our risk	profile,	is	in	compliance	with	all	regulatory	requirements,	and	is	sufficient	to	provide	us	with	the	financial	flexibility	to	undertake	future	strategic	business	initiatives.

# Regulatory	Capital

								Our	objective	with	respect	to	regulatory	capital	management	is	to	maintain	a	strong	capital	base	in	order	to	provide	financial	flexibility	for	our	business	needs, including	funding	corporate	growth	and	supporting	customers'	cash	management	needs,	and	to	provide	protection	against	loss	to	depositors	and	creditors.	We	strive	to maintain	an	optimal	level	of	capital,	commensurate	with	our	risk	profile,	on	which	an	attractive	return	to	shareholders	will	be	realized	over	both	the	short	and	long	term, while	protecting	our	obligations	to	depositors	and	creditors	and	satisfying	regulatory	requirements.	Our	capital	management	process	focuses	on	our	risk	exposures,	our capital	position	relative	to	our	peers,	regulatory	capital	requirements	and	the	evaluations	of	the	major	independent	credit	rating	agencies	that	assign	ratings	to	our	public debt.	The	Capital	Committee,	working	in	conjunction	with	the	Asset	and	Liability	Committee,	referred	to	as	"ALCO,"	oversees	the	management	of	regulatory	capital, and	is	responsible	for	ensuring	capital	adequacy	with	respect	to	regulatory	requirements,	internal	targets	and	the	expectations	of	the	major	independent	credit	rating agencies.

								The	primary	regulator	of	both	State	Street	and	State	Street	Bank	for	regulatory	capital	purposes	is	the	Federal	Reserve	Board.	Both	State	Street	and	State	Street Bank	are	subject	to	the	minimum	capital	requirements	established	by	the	Federal	Reserve	Board	and	defined	in	the	Federal	Deposit	Insurance	Corporation	Improvement Act	of	1991.	State	Street	Bank	must	meet	the	regulatory	capital	thresholds	for	"well	capitalized"	in	order	for	the	parent	company	to	maintain	its	status	as	a	financial holding	company.

								Regulatory	capital	ratios	and	related	regulatory	guidelines	for	State	Street	and	State	Street	Bank	were	as	follows	as	of	December	31:

|  | Minimum |  | Well<br>Capitalized |  | 2007 | 2006 | 2007 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Regulatory\tcapital\tratios: |  |  |  |  |  |  |  |  |
| Tier\t1\trisk-based\tcapital |  | 4% |  | 6% | 11.2% | 13.7% | 11.2% | 12.0% |
| Total\trisk-based\tcapital |  | 8 |  | 10 | 12.7 | 15.9 | 12.7 | 14.1 |
| Tier\t1\tleverage\tratio(1) |  | 4 |  | 5 | 5.3 | 5.8 | 5.5 | 5.6 |

(1) Regulatory	guideline	for	well	capitalized	applies	only	to	State	Street	Bank.

								At	December	31,	2007,	State	Street's	and	State	Street	Bank's	regulatory	capital	ratios	decreased	compared	to	year-end	2006.	Growth	in	capital	from	earnings	and the	issuance	of	our	common	stock	to	acquire	Investors	Financial	were	offset	by	the	repurchase	of	our	common	stock	under	the	accelerated	share	repurchase	program	and the	impact	of	goodwill	and	other	intangible	assets	recorded	in	connection	with	the	Currenex	and	Investors	Financial	acquisitions.	Total	risk-weighted	assets	increased year	over	year,	as	balance	sheet	risk-weighted	assets,	partly	from	the	Investors	Financial	acquisition,	and	off-balance	sheet	equivalent	risk-weighted	assets	both	grew from	year-end	2006.	All	ratios	for	State	Street	and	State	Street	Bank	exceeded	the	regulatory	minimum	and	well-capitalized	thresholds.

								To	manage	fluctuations	in	the	tier	1	and	total	risk-based	capital	of	State	Street	and	State	Street	Bank	resulting	from	foreign	currency	translation,	we	have	entered into	foreign	exchange	forward	contracts	to	hedge	a	portion	of	our	net	foreign	investment	in	non-U.S.	subsidiaries.	The	notional	value	of	these	contracts	was	€100	million, or	approximately	$146	million,	at	December	31,	2007.

								In	2004,	the	Committee	on	Banking	Supervision	released	the	final	version	of	its	capital	adequacy	framework,	commonly	referred	to	as	"Basel	II".	In	2006,	the	four U.S.	banking	regulatory	agencies	jointly	issued	their	second	draft	of	implementation	rules,	with	industry	comment	provided	by	the	end	of	March	2007.	Additional supervisory	guidance	from	the	agencies	was	released	late	in	February	2007;	comments	to	the	agencies	were	provided	by	the	end	of	May	2007,	and	the	final	rules	were released	on	December	7,	2007,	with	a	stated	effective	date	of	April	1,	2008.	State	Street	previously	established	a	comprehensive	implementation	program	to	ensure these	regulatory	requirements	are	met	within	prescribed	timeframes.	We	anticipate	adopting	the	most	advanced	approaches	for	assessing	capital	adequacy.

								In	March	2007,	our	Board	of	Directors	authorized	the	purchase	of	up	to	15	million	shares	of	common	stock	for	general	corporate	purposes,	including	mitigating	the dilutive	impact	of	shares	issued	under	employee	benefit	plans,	in	addition	to	its	previous	authorization	in	2006	of	up	to	15	million	shares,	of	which	12.2	million	shares remained	available	for	purchase	at	December	31,	2006.	We	generally	employ	third-party	broker-dealers	to	acquire	shares	on	the	open	market	in	connection	with	our stock	purchase	program.

								Under	the	above-described	authorization,	during	2007	we	repurchased	13.4	million	shares	of	our	common	stock,	and	an	additional	.6	million	shares	in	January 2008,	in	connection	with	a	$1	billion	accelerated	share	repurchase	program	that	concluded	on	January	18,	2008.	As	of	that	date,	approximately	13.2	million	shares remain	available	for	future	purchase	under	the	combined	authorization	described	above.

								We	have	increased	our	quarterly	dividend	twice	each	year	since	1978.	Over	the	last	ten	years,	dividends	per	share	have	grown	at	a	15%	compound	annual	growth rate.	Funds	for	cash	distributions	to	our	shareholders	by	the	parent	company	are	derived	from	a	variety	of	sources.	The	level	of	dividends

to	shareholders	on	our	common	stock,	which	totaled	$320	million	in	2007,	is	reviewed	regularly	and	determined	by	the	Board	of	Directors	considering	our	liquidity, capital	adequacy	and	recent	earnings	history	and	prospects,	as	well	as	economic	conditions	and	other	factors	deemed	relevant.	Federal	and	state	banking	regulations place	certain	restrictions	on	dividends	paid	by	subsidiary	banks	to	the	parent	holding	company.	In	addition,	bank	regulators	have	the	authority	to	prohibit	bank	holding companies	from	paying	dividends	if	they	deem	such	payment	to	be	an	unsafe	or	unsound	practice.	Information	concerning	limitations	on	dividends	from	our	subsidiary banks	is	in	note	14	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# Economic	Capital

								We	define	economic	capital	as	the	common	equity	required	to	protect	debt	holders	against	unexpected	economic	losses	over	a	one-year	period	at	a	level	consistent with	the	solvency	of	a	firm	with	our	target	"AA"	debt	rating.	Our	entire	economic	capital	process	is	the	responsibility	of	our	Capital	Committee.	The	framework	and methodologies	used	to	quantify	economic	capital	for	each	of	the	risk	types	described	below	have	been	developed	by	our	Enterprise	Risk	Management,	Global	Treasury and	Finance	groups,	and	are	designed	to	be	generally	consistent	with	our	risk	management	principles.	This	framework	has	been	approved	by	senior	management	and	has been	reviewed	by	the	Executive	Committee	of	the	Board.	Due	to	the	evolving	nature	of	quantification	techniques,	we	expect	to	periodically	refine	the	methodologies used	to	estimate	our	economic	capital	requirements,	which	could	result	in	a	different	amount	of	capital	needed	to	support	our	risk	profile.

								We	quantify	capital	requirements	for	the	risks	inherent	in	our	business	activities	and	group	them	into	one	of	the	following	broadly-defined	categories:

•Market	risk:	the	risk	of	adverse	financial	impact	due	to	fluctuations	in	market	prices,	primarily	as	they	relate	to	our	trading	activities

•Interest-rate	risk:	the	risk	of	loss	in	non-trading	asset	and	liability	management	positions,	primarily	the	impact	of	adverse	movements	in	interest	rates	on the	repricing	mismatches	that	exist	between	balance	sheet	assets	and	liabilities

•Credit	risk:	the	risk	of	loss	that	may	result	from	the	default	or	downgrade	of	a	borrower	or	counterparty

•Operational	risk:	the	risk	of	loss	from	inadequate	or	failed	internal	processes,	people	and	systems,	or	from	external	events

•Business	risk:	the	risk	of	adverse	changes	in	our	earnings	from	business	factors,	including	changes	in	the	competitive	environment,	changes	in	the operational	economics	of	business	activities,	and	the	effect	of	strategic	and	reputation	risks

								Economic	capital	for	each	of	these	five	categories	is	estimated	on	a	stand-alone	basis	using	statistical	modeling	techniques	applied	to	internally	generated	and,	in some	cases,	external	data.	These	individual	results	are	then	aggregated	at	the	State	Street	consolidated	level.	A	capital	reduction	or	diversification	benefit	is	then	applied to	reflect	the	unlikely	event	of	experiencing	an	extremely	large	loss	in	each	risk	type	at	the	same	time.

# Liquidity

								The	objective	of	liquidity	management	is	to	ensure	that	we	have	the	ability	to	meet	our	financial	obligations	in	a	timely	and	cost-effective	manner,	and	that	we maintain	sufficient	flexibility	to	fund	strategic	corporate	initiatives	as	they	arise.	Effective	management	of	liquidity	involves	assessing	the	potential	mismatch	between the	future	cash	needs	of	our	customers	and	our	available	sources	of	cash	under	normal	and	adverse	economic	and	business	conditions.	Uses	of	liquidity	consist	primarily of	meeting	deposit	withdrawals;	funding	outstanding	commitments	to	extend	credit	or	purchase	securities

as	they	are	drawn	upon;	overdraft	facilities;	and	liquidity	asset	purchase	agreements.	Liquidity	is	provided	by	the	maintenance	of	broad	access	to	the	global	capital markets	and	our	balance	sheet	asset	structure.

								Global	Treasury	is	responsible	for	the	day-to-day	management	of	our	global	liquidity	position,	which	is	conducted	within	risk	guidelines	established	and	monitored by	ALCO.	Management	maintains	a	liquidity	measurement	framework	to	assess	the	sources	and	uses	of	liquidity	that	is	continuously	monitored	by	Global	Treasury	and Enterprise	Risk	Management.	Embedded	in	this	framework	is	a	process	that	outlines	several	levels	of	potential	risk	to	our	liquidity	and	identifies	"triggers"	that	we	use as	early	warning	signals	of	a	possible	difficulty.	These	triggers	are	a	combination	of	internal	and	external	measures	of	potential	increases	in	cash	needs	or	decreases	in available	sources	of	cash	and	possible	impairment	of	our	ability	to	access	the	global	capital	markets.	Another	important	component	of	the	framework	is	a	contingency funding	plan	that	is	designed	to	identify	and	manage	through	a	potential	liquidity	crisis.	The	plan	defines	roles,	responsibilities	and	management	actions	to	be undertaken	in	the	event	of	a	deterioration	in	our	liquidity	profile	caused	by	either	a	State	Street-specific	event	or	a	broader	disruption	in	the	capital	markets.	Specific actions	are	linked	to	the	levels	of	"triggers."

								We	generally	manage	our	liquidity	risk	on	a	global	basis	at	the	consolidated	level.	We	also	manage	parent	company	liquidity,	and	in	certain	cases	branch	liquidity, separately.	State	Street	Bank	generally	has	broader	access	to	funding	products	and	markets	limited	to	banks,	specifically	the	federal	funds	market	and	the	Federal Reserve's	discount	window.	The	parent	company	is	managed	to	a	more	conservative	liquidity	profile,	reflecting	narrower	market	access.	We	typically	hold	enough	cash, primarily	in	the	form	of	interest-bearing	deposits	with	subsidiary	banks,	to	meet	current	debt	maturities	and	cash	needs,	as	well	as	those	projected	over	the	next	one-year period.

								Sources	of	liquidity	come	from	two	primary	areas:	access	to	the	global	capital	markets	and	liquid	assets	maintained	on	our	consolidated	balance	sheet.	Our	ability	to source	incremental	funding	at	reasonable	rates	of	interest	from	wholesale	investors	in	the	capital	markets	is	the	first	source	of	liquidity	we	would	tap	to	accommodate	the uses	of	liquidity	described	below.	On-balance	sheet	liquid	assets	are	also	an	integral	component	of	our	liquidity	management	strategy.	These	assets	provide	liquidity through	maturities	of	the	assets,	but	more	importantly,	they	provide	us	with	the	ability	to	raise	funds	by	pledging	the	securities	as	collateral	or	through	outright	sales. Each	of	these	sources	is	used	in	the	management	of	daily	cash	needs	and	in	a	crisis	scenario	where	we	would	need	to	accommodate	potential	large,	unexpected	demand for	funds.

								Uses	of	liquidity	result	from	four	primary	areas:	withdrawals	of	unsecured	customer	deposits;	draws	on	unfunded	commitments	to	extend	credit	or	purchase securities,	generally	provided	through	lines	of	credit;	overdraft	facilities;	and	liquidity	asset	purchase	agreements	supporting	the	four	commercial	paper	conduits	that	we administer.	Customer	deposits	are	generated	largely	from	our	investment	servicing	activities,	and	are	invested	in	a	combination	of	term	investment	securities	and	short- term	money	market	assets	whose	mix	is	determined	by	the	characteristics	of	the	deposits.	Most	of	the	customer	liabilities	are	payable	upon	demand	or	are	short-term	in nature,	which	means	that	withdrawals	can	potentially	occur	quickly	and	in	large	amounts.	Similarly,	customers	can	request	disbursement	of	funds	under	commitments	to extend	credit,	or	can	overdraw	deposit	accounts	rapidly	and	in	large	volumes.

								Material	risks	to	sources	of	short-term	liquidity	would	include,	among	other	things,	external	rating	agency	downgrades	of	our	deposits	and	debt	securities,	which would	restrict	our	ability	to	access	the	capital	markets	and	may	lead	to	withdrawals	of	unsecured	deposits	by	our	customers.	In	addition,	a	large	volume	of	unanticipated funding	requirements,	such	as	fundings	under	liquidity	asset	purchase	agreements	that	have	met	draw	conditions,	or	large	draw-downs	of	existing	lines	of	credit,	could require	additional	liquidity.	During	the	summer	of	2007,	the	disruption	in	the	global	fixed-income	securities

markets,	which	largely	stemmed	from	sub-prime	mortgages	and	securities	collateralized	by	them	and	later	spread	to	asset-backed	securities	in	general,	caused	us	to invoke	some	elements	of	our	contingency	funding	plan,	resulting	in	more	active	monitoring	of	our	liquidity	position	and	more	frequent	reporting	to	management.	Of primary	concern	was	our	ability	to	replace	maturing	commercial	paper	issued	by	the	conduits.	As	more	fully	discussed	in	the	"Off-Balance	Arrangements"	section	of	this Management's	Discussion	and	Analysis,	we	have	been	able	to	reissue	the	paper,	but	with	some	difficulty	and	at	higher	rates	of	interest	because	of	a	significant	decline	in the	demand	for	asset-backed	commercial	paper	in	the	market	generally.	One	action	we	have	taken	to	improve	our	liquidity	position	has	been	the	issuance	of	term wholesale	certificates	of	deposit	and	the	placement	of	those	funds	into	short-term	money	market	assets	where	they	would	be	available	to	meet	cash	needs.	This	portfolio stood	at	$4.57	billion	as	of	December	31,	2007.	It	is	important	to	note	that	we	did	not	experience	any	deterioration	in	our	customer	deposit	base;	it	was	stable	to	growing during	2007.

								While	maintenance	of	our	high	investment-grade	credit	rating	is	of	primary	importance	to	our	liquidity	management	program,	on-balance	sheet	liquid	assets represent	significant	liquidity	that	we	can	directly	control,	and	provide	a	source	of	cash	in	the	form	of	principal	maturities	and	the	ability	to	borrow	from	the	capital markets	using	our	securities	as	collateral.	Our	liquid	assets	consist	primarily	of	short-term	money-market	assets,	such	as	federal	funds	sold	and	interest-bearing	deposits with	banks,	the	latter	of	which	are	multicurrency	instruments	invested	with	major	multinational	banks;	and	high-quality,	marketable	investment	securities	not	already pledged,	which	generally	are	more	liquid	than	other	types	of	assets	and	can	be	sold	or	borrowed	against	to	quickly	generate	cash.	As	of	December	31,	2007,	the	cash value	of	our	liquid	assets,	as	defined,	totaled	$55.14	billion.	Securities	carried	at	$39.84	billion	as	of	December	31,	2007	were	designated	as	pledged	for	public	and	trust deposits,	borrowed	funds	and	for	other	purposes	as	provided	by	law,	and	are	excluded	from	the	liquid	assets	calculation.	Included	in	liquid	assets	are	securities	that	have been	pledged	to	the	Federal	Reserve	Bank	of	Boston	in	order	to	secure	our	ability	to	borrow	from	the	discount	window	should	the	need	arise.	This	access	to	the	discount window,	including	the	Federal	Reserve's	recently	announced	term	auction	facility,	is	an	important	source	of	back-up	liquidity	for	State	Street	Bank.	As	of	December	31, 2007,	we	had	no	outstanding	borrowings	from	the	discount	window.

								Based	upon	our	level	of	liquid	assets	and	our	ability	to	access	the	capital	markets	for	additional	funding	when	necessary,	management	considers	overall	liquidity	at December	31,	2007	more	than	sufficient	to	meet	State	Street's	current	commitments	and	business	needs,	including	accommodating	the	transaction	and	cash	management needs	of	its	customers.

								In	April	2007,	the	parent	company	issued	$700	million	of	senior	debt,	consisting	of	$250	million	of	floating-rate	notes	due	in	2012	and	$450	million	of	5.375% notes	due	in	2017.	In	addition,	State	Street	Capital	Trust	IV,	a	Delaware	statutory	trust	wholly	owned	by	the	parent	company,	issued	$800	million	in	aggregate liquidation	amount	of	floating-rate	capital	securities	and	used	the	proceeds	to	purchase	a	like	amount	of	floating-rate	junior	subordinated	debentures	from	the	parent company.	The	capital	securities	represent	an	undivided	preferred	beneficial	interest	in	those	junior	subordinated	debentures,	which	are	the	only	assets	of	the	trust.	The junior	subordinated	debentures	have	an	initial	scheduled	maturity	in	June	2037	and	an	initial	final	repayment	date	in	June	2067,	each	of	which	we	may	extend	by	ten years	in	specified	circumstances.	In	accordance	with	existing	accounting	standards,	we	did	not	record	the	trust	in	our	consolidated	financial	statements.	The	junior subordinated	debentures	qualify	for	inclusion	in	tier	1	regulatory	capital.

								In	connection	with	the	issuance	of	the	junior	subordinated	debentures,	the	parent	company	entered	into	a	replacement	capital	covenant	in	which	it	agreed,	for	the benefit	of	the	holders	of	its	junior	subordinated	debentures	due	2028	underlying	the	floating-rate	capital	securities	issued	by	State	Street	Capital	Trust	I,	that	it	will	not repay,	redeem	or	repurchase,	and	that	none	of	its	subsidiaries	will	purchase,	any	part	of	the	newly	issued	debentures	or	the	floating-rate	capital	securities	on	or	before June	1,	2047,	unless	the	repayment,	redemption	or	repurchase	is	made	from	the	net	cash	proceeds	of

the	issuance	of	certain	qualified	securities	and	pursuant	to	the	other	terms	and	conditions	set	forth	in	the	covenant.

								In	July	2007,	we	redeemed	an	aggregate	of	$500	million	of	unsecured	junior	subordinated	debentures	issued	by	the	parent	company	to	two	of	our	statutory	business trusts,	State	Street	Capital	Trusts	A	and	B,	composed	of	$200	million	of	7.94%	debentures	issued	in	1996	and	$300	million	of	8.035%	debentures	issued	in	1997.	We paid	the	trusts	the	outstanding	amount	on	the	debentures	plus	accrued	interest	and	an	aggregate	redemption	premium	of	approximately	$20	million.	This	redemption premium	was	included	in	the	merger	and	integration	costs	which	we	recorded	during	the	third	quarter	of	2007	in	connection	with	the	Investors	Financial	acquisition. Additional	information	about	these	costs	is	in	the	"Consolidated	Results	of	Operations—Operating	Expenses"	section	of	this	Management's	Discussion	and	Analysis.

								In	July	2007,	the	trusts,	consistent	with	the	terms	of	their	applicable	governing	documents,	redeemed	their	respective	outstanding	capital	securities,	with	an aggregate	liquidation	amount	of	$500	million,	corresponding	to	the	debentures.	The	trusts	paid	to	the	holders	of	the	outstanding	capital	securities	the	same	amount	that was	paid	by	the	parent	company	to	the	trusts	to	redeem	the	debentures.

								In	January	2008,	State	Street	Capital	Trust	III,	a	Delaware	statutory	trust	wholly	owned	by	the	parent	company,	issued	$500	million	in	aggregate	liquidation amount	of	8.250%	fixed-to-floating	rate	normal	automatic	preferred	enhanced	capital	securities,	referred	to	as	"normal	APEX,"	and	used	the	proceeds	to	purchase	a	like amount	of	remarketable	6.001%	junior	subordinated	debentures	due	2042	from	the	parent	company.	In	addition,	the	trust	entered	into	stock	purchase	contracts	with	the parent	company	under	which	the	trust	agrees	to	purchase,	and	the	parent	company	agrees	to	sell,	on	the	stock	purchase	date,	a	like	amount	in	aggregate	liquidation amount	of	the	parent	company's	non-cumulative	perpetual	preferred	stock,	series	A,	$100,000	liquidation	preference	per	share.	State	Street	will	make	contract	payments to	the	trust	at	an	annual	rate	of	2.249%	of	the	stated	amount	of	$100,000	per	stock	purchase	contract.	The	normal	APEX	are	beneficial	interests	in	the	trust.	The	trust	will pass	through,	as	distributions	on	or	the	redemption	price	of	normal	APEX,	amounts	that	it	receives	on	its	assets	that	are	the	corresponding	assets	for	the	normal	APEX. The	corresponding	assets	for	each	normal	APEX,	$1,000	liquidation	amount,	initially	are	$1,000	principal	amount	of	the	6.001%	junior	subordinated	debentures	and	a 1/100 ,	or	a	$1,000,	interest	in	a	stock	purchase	contract	for	the	purchase	and	sale	of	one	share	of	the	Series	A	preferred	stock	for	$100,000.	The	stock	purchase	date	is th expected	to	be	March	15,	2011,	but	it	may	occur	on	an	earlier	date	or	as	late	as	March	15,	2012.	From	and	after	the	stock	purchase	date,	the	corresponding	asset	for	each normal	APEX	will	be	a	1/100 ,	or	a	$1,000,	interest	in	one	share	of	the	Series	A	preferred	stock.	In	accordance	with	existing	accounting	standards,	we	did	not	record	the th trust	in	our	consolidated	financial	statements.	The	6.001%	junior	debentures	qualify	for	inclusion	in	tier	1	regulatory	capital.

								As	stated	previously,	our	ability	to	maintain	consistent	access	to	liquidity	is	fostered	by	the	maintenance	of	high	investment-grade	ratings	on	our	debt,	as	measured by	the	major	independent	credit	rating	agencies.	Factors	essential	to	retaining	high	credit	ratings	include	diverse	and	stable	core	earnings;	strong	risk	management; strong	capital	ratios;	diverse	liquidity	sources,	including	the	global	capital	markets	and	customer	deposits;	and	strong	liquidity	monitoring	procedures.	High	ratings	on debt	minimize	borrowing	costs	and	enhance	our	liquidity	by	ensuring	the	largest	possible	market	for	our	debt.	A	downgrade	or	reduction	of	these	credit	ratings	could have	an	adverse	impact	to	our	ability	to	access	funding	at	favorable	interest	rates.	Following	our	January	3,	2008	announcement	of	a	net	charge	to	establish	a	reserve associated	with	certain	active	fixed-income	strategies	managed	by	SSgA,	the	major	national	rating	agencies	affirmed	their	ratings	for	State	Street	and	State	Street	Bank. However,	Moody's	Investors	Service	and	Fitch	changed	their	outlook	from	stable	to	negative.	These

changes	have	not	had	a	material	impact	on	our	liquidity	position	or	on	our	ability	to	access	the	global	capital	markets	at	reasonable	rates	of	interest.

(1) Long-term	debt	above	excludes	capital	leases	(reported	as	a	separate	line	item)	and	the	effect	of	interest-rate	swaps.	Interest	payments	were	calculated	at	the stated	rate	with	the	exception	of	floating-rate	debt,	for	which	payments	were	calculated	using	the	indexed	rate	in	effect	on	December	31,	2007.

								The	obligations	presented	in	the	table	are	recorded	in	our	consolidated	statement	of	condition	at	December	31,	2007.	The	table	does	not	include	obligations	which will	be	settled	in	cash,	primarily	in	less	than	one	year,	such	as	deposits,	federal	funds	purchased,	securities	sold	under	repurchase	agreements	and	other	short-term borrowings.	Additional	information	about	deposits,	federal	funds	purchased,	securities	sold	under	repurchase	agreements	and	other	short-term	borrowings	is	in	notes	7 and	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								The	table	does	not	include	obligations	related	to	derivative	instruments,	because	the	amounts	included	in	our	consolidated	statement	of	condition	at	December	31, 2007	related	to	derivatives	do	not	represent	the	amounts	that	may	ultimately	be	paid	under	the	contracts.	Additional	information	about	derivative	contracts	is	in	note	15 of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.	We	have	obligations	under	pension	and	other	post-retirement	benefit	plans, which	are	more	fully	described	in	note	17	of	the	Notes	to	Consolidated	Financial	Statements,	which	are	not	included	in	the	above	table.

								Additional	information	about	contractual	cash	obligations	related	to	long-term	debt	and	operating	and	capital	leases	is	in	notes	9	and	18	of	the	Notes	to Consolidated	Financial	Statements.	The	consolidated	statement	of	cash	flows,	included	in	this	Form	10-K	under	Item	8,	provides	additional	liquidity	information.

# OTHER	COMMERCIAL	COMMITMENTS

# TENURE	OF	COMMITMENT

|  | Total |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | amounts | Less\tthan | 1-3 | 4-5 | Over\t5 |
| As\tof\tDecember\t31,\t2007 | committed(1) | 1\tyear | years | years | years |
| (In\tmillions) |  |  |  |  |  |
| Indemnified\tsecurities\tfinancing | $558,368 | $558,368 |  |  |  |
| Liquidity\tasset\tpurchase\tagreements | 34,947 | 29,321 | $1,569 | $2,379 | $1,678 |
| Unfunded\tcommitments\tto\textend\tcredit | 17,404 | 13,555 | 1,175 | 2,599 | 75 |
| Standby\tletters\tof\tcredit | 4,505 | 925 | 2,567 | 1,002 | 11 |
| Total\tcommercial\tcommitments | $615,224 | $602,169 | $5,311 | $5,980 | $1,764 |

(1) Total	amounts	committed	are	reported	net	of	participations	to	independent	third	parties.

								Additional	information	about	the	commercial	commitments	disclosed	in	this	section	is	in	note	10	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.

								The	global	scope	of	our	business	activities	requires	that	we	balance	what	we	perceive	to	be	the	primary	risks	in	our	businesses	with	a	comprehensive	and	well- integrated	risk	management	function.	The	measurement,	monitoring	and	mitigation	of	risks	are	essential	to	the	financial	performance	and	successful	management	of	our businesses.	These	risks,	if	not	effectively	managed,	can	result	in	current	losses	to	State	Street	as	well	as	erosion	of	our	capital	and	damage	to	our	reputation.	Our systematic	approach	also	allows	for	a	more	precise	assessment	of	risks	within	a	framework	for	evaluating	opportunities	for	the	prudent	use	of	capital.

								We	have	a	disciplined	approach	to	risk	management	that	involves	all	levels	of	management.	The	Board	of	Directors	provides	extensive	review	and	oversight	of	our overall	risk	management	programs,	including	the	approval	of	key	risk	management	policies	and	the	periodic	review	of	State	Street's	key	risk	indicators.	These	indicators are	designed	to	identify	major	business	activities	of	State	Street	with	significant	risk	content,	and	to	establish	quantifiable	thresholds	for	risk	measurement.	Key	risk indicators	are	reported	regularly	to	the	Executive	Committee	of	the	Board,	and	are	reviewed	periodically	for	appropriateness.	Modifications	to	the	indicators	are	made	to reflect	changes	in	our	business	activities	or	refinements	to	existing	measurements.	Enterprise	Risk	Management,	or	ERM,	a	dedicated	corporate	group,	provides oversight,	support	and	coordination	across	business	units	and	is	responsible	for	the	formulation	and	maintenance	of	enterprise-wide	risk	management	policies	and guidelines.	In	addition,	ERM	establishes	and	reviews	approved	limits,	and	with	business	line	management,	monitors	key	risks.	The	head	of	ERM	meets	regularly	with the	Board	or	a	Board	committee,	as	appropriate,	and	has	the	authority	to	escalate	issues	as	necessary.

								The	execution	of	duties	in	the	management	of	people,	products,	business	operations	and	processes	is	the	responsibility	of	business	unit	managers.	The	function	of risk	management	is	responsible	for	designing,	orchestrating	and	directing	the	implementation	of	risk	management	programs	and	processes	consistent	with	corporate	and regulatory	standards.	Accordingly,	risk	management	is	a	shared	responsibility	between	ERM	and	the	business	lines	and	requires	joint	efforts	in	goal	setting,	program design	and	implementation,	resource	management,	and	performance	evaluation	between	business	and	functional	units.

								Responsibility	for	risk	management	is	overseen	by	a	series	of	management	committees.	The	Major	Risk	Committee,	or	MRC,	is	responsible	for	the	formulation	and recommendation	of	policies,	and	the	approval	of	guidelines	and	programs	governing	the	identification,	analysis,	measurement	and	control	of	material	risks	across	State Street.	Chaired	by	the	head	of	ERM,	the	MRC	focuses	on	the	review	of

business	activities	with	significant	risk	content	and	the	assessment	of	risk	management	programs	and	initiatives.	The	Capital	Committee,	chaired	by	the	Chief	Financial Officer,	oversees	the	management	of	our	regulatory	and	economic	capital,	the	determination	of	the	framework	for	capital	allocation	and	strategies	for	capital	structure and	debt	and	equity	issuances.	ALCO,	chaired	by	the	Treasurer,	oversees	the	management	of	our	consolidated	balance	sheet,	including	management	of	our	global liquidity	and	interest-rate	risk	positions.	The	Fiduciary	Review	Committee	reviews	the	criteria	for	the	acceptance	of	fiduciary	duties,	and	assists	our	business	lines	with their	fiduciary	responsibilities	executed	on	behalf	of	customers.	The	Credit	Committee,	chaired	within	ERM,	acts	as	the	credit	policy	committee	for	State	Street.	The Operational	Risk	Committee,	chaired	within	ERM,	provides	cross-business	oversight	of	operational	risk	to	identify,	measure,	manage	and	control	operational	risk	in	an effective	and	consistent	manner	across	State	Street.	The	Model	Assessment	Committee,	chaired	within	ERM,	provides	unbiased	recommendations	concerning	technical modeling	issues	and	independently	validates	qualifying	financial	models	utilized	by	our	businesses.	Several	other	committees	with	specialized	risk	management functions	report	to	the	MRC.

								Corporate	Audit	serves	in	a	complementary	role	to	our	program	of	risk	management,	providing	the	Board	and	management	with	continuous	monitoring	and	control assessments	to	ensure	adherence	to	State	Street's	policies	and	procedures	and	the	effectiveness	of	its	system	of	internal	controls.	Additionally,	the	internal	control environment	is	evaluated	through	external	examinations	and	regulatory	compliance	efforts.	The	Corporate	Compliance,	Regulatory	and	Industry	Affairs,	and	Legal groups	also	serve	essential	roles	in	risk	management.	Corporate	Compliance	is	responsible	for	the	design,	implementation	and	oversight	of	policies,	guidelines	and programs	to	ensure	our	compliance	with	applicable	laws	and	regulations	wherever	we	conduct	business.	The	Regulatory	and	Industry	Affairs	group	monitors	proposed changes	in	rules	and	legislation,	and	the	Legal	group	provides	counsel	that	enables	us	to	deal	with	complex	legal	and	regulatory	environments,	maximize	business opportunities	and	minimize	legal,	regulatory	and	other	risks.

								While	we	believe	that	our	risk	management	program	is	effective	in	managing	the	risks	in	our	businesses,	external	factors	may	create	risks	that	cannot	always	be identified	or	anticipated.	For	example,	a	material	counterparty	failure	or	a	default	of	a	material	obligor	could	have	a	material	adverse	effect	on	our	consolidated	results of	operations.

# Market	Risk

								Market	risk	is	defined	as	the	risk	of	adverse	financial	impact	due	to	fluctuations	in	interest	rates,	foreign	exchange	rates	and	other	market-driven	rates	or	prices.	We are	exposed	to	market	risk	both	in	our	trading	and	non-trading,	or	asset	and	liability	management,	activities.	We	manage	our	overall	market	risk	through	a comprehensive	risk	management	framework.	This	framework	includes	risk	management	groups	that	report	independently	to	senior	management	through	ERM.	The process	of	managing	market	risk	for	these	activities,	discussed	in	further	detail	below,	applies	to	both	on-balance	sheet	and	off-balance	sheet	exposures.

# Trading	Activities

								We	primarily	engage	in	trading	and	investment	activities	to	serve	our	customers'	needs	and	to	contribute	to	overall	corporate	earnings	and	liquidity.	In	the	conduct of	these	activities,	we	are	subject	to,	and	assume,	market	risk.	The	level	of	market	risk	that	we	assume	is	a	function	of	our	overall	objectives	and	liquidity	needs, customer	requirements	and	market	volatility.	Interest-rate	risk,	a	component	of	market	risk,	is	more	thoroughly	discussed	in	the	"Asset	and	Liability	Management" portion	of	this	"Market	Risk"	section.

								Market	risk	associated	with	foreign	exchange	and	trading	activities	is	controlled	through	established	limits	on	aggregate	and	net	open	positions,	sensitivity	to changes	in	interest	rates,	and

concentrations,	which	are	supplemented	by	stop-loss	thresholds.	We	use	an	array	of	risk	management	tools	and	methodologies,	including	value-at-risk,	to	measure, monitor	and	control	market	risk.	All	limits	and	measurement	techniques	are	reviewed	and	adjusted	as	necessary	on	a	regular	basis	by	business	managers,	the	market	risk management	group	and	the	Trading	and	Market	Risk	Committee.

								We	use	a	variety	of	derivative	financial	instruments	to	support	customers'	needs,	conduct	trading	activities	and	manage	our	interest-rate	and	currency	risk.	These activities	are	designed	to	create	trading	revenue	or	to	hedge	volatility	in	net	interest	revenue.	In	addition,	we	provide	services	related	to	derivative	financial	instruments	in our	role	as	both	a	manager	and	servicer	of	financial	assets.

								Our	customers	use	derivative	financial	instruments	to	manage	the	financial	risks	associated	with	their	investment	goals	and	business	activities.	With	the	growth	of cross-border	investing,	customers	have	an	increasing	need	for	foreign	exchange	forward	contracts	to	convert	currency	for	international	investment	and	to	manage	the currency	risk	in	international	investment	portfolios.	As	an	active	participant	in	the	foreign	exchange	markets,	we	provide	foreign	exchange	forward	contracts	and	options in	support	of	these	customer	needs.

								As	part	of	our	trading	activities,	we	assume	positions	in	the	foreign	exchange	and	interest-rate	markets	by	buying	and	selling	cash	instruments	and	using	derivative financial	instruments,	including	foreign	exchange	forward	contracts,	foreign	exchange	and	interest-rate	options	and	interest-rate	swaps.	As	of	December	31,	2007,	the notional	amounts	of	all	of	these	derivative	financial	instruments	were	$796.19	billion,	of	which	$732.01	billion	were	foreign	exchange	forward	contracts.	In	the aggregate,	long	and	short	foreign	exchange	forward	positions	are	closely	matched	to	minimize	currency	and	interest-rate	risk.	All	foreign	exchange	contracts	are	valued daily	at	current	market	rates.

								We	use	a	variety	of	risk	measurement	and	estimation	techniques,	including	value-at-risk.	Value-at-risk	is	an	estimate	of	potential	loss	for	a	given	period	within	a stated	statistical	confidence	interval.	We	use	a	system	of	risk	management	to	estimate	value-at-risk	daily	for	all	material	trading	positions.	We	have	adopted	standards	for estimating	value-at-risk,	and	we	maintain	capital	for	market	risk	in	accordance	with	applicable	regulatory	guidelines.	Value-at-risk	is	estimated	for	a	99%	one-tail confidence	interval	and	an	assumed	one-day	holding	period	using	a	historical	observation	period	of	greater	than	one	year.	A	99%	one-tail	confidence	interval	implies that	daily	trading	losses	should	not	exceed	the	estimated	value-at-risk	more	than	1%	of	the	time,	or	approximately	three	days	out	of	the	year.	The	methodology	uses	a simulation	approach	based	on	observed	changes	in	market	prices	and	takes	into	account	the	resulting	diversification	benefits	provided	from	the	mix	of	our	trading positions.

								Like	all	quantitative	risk	measures,	value-at-risk	is	subject	to	certain	limitations	and	assumptions	inherent	in	the	methodology.	Our	methodology	gives	equal	weight to	all	market-rate	observations	regardless	of	how	recently	the	market	rates	were	observed.	The	estimate	is	calculated	using	static	portfolios	consisting	of	positions	held	at the	end	of	the	trading	day.	Implicit	in	the	estimate	is	the	assumption	that	no	intraday	action	is	taken	by	management	during	adverse	market	movements.	As	a	result,	the methodology	does	not	represent	risk	associated	with	intraday	changes	in	positions	or	intraday	price	volatility.

								The	following	table	presents	market	risk	related	to	our	trading	activities	as	measured	by	our	value-at-risk	methodology:

# VALUE-AT-RISK

|  | Annual |  |  | Annual |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | Average | Maximum | Minimum | Average | Maximum | Minimum |
| (In\tmillions) |  |  |  |  |  |  |
| Foreign\texchange\tproducts | $1.8 | $4.0 | $.7 | $1.7 | $4.3 | $.7 |
| Interest-rate\tproducts | 1.4 | 3.7 | .1 | .8 | 1.8 | .2 |

								We	compare	daily	profits	and	losses	from	trading	activities	to	estimated	one-day	value-at-risk.	For	the	years	ended	December	31,	2007,	2006	and	2005,	we	did	not experience	any	trading	losses	in	excess	of	our	end-of-day	value-at-risk	estimate.

# Asset	and	Liability	Management	Activities

								The	primary	objective	of	asset	and	liability	management	is	to	provide	sustainable	and	growing	net	interest	revenue,	or	"NIR,"	under	varying	economic environments,	while	protecting	the	economic	values	of	our	balance	sheet	assets	and	liabilities	from	the	adverse	effects	of	changes	in	interest	rates.	Most	of	our	NIR	is earned	from	the	investment	of	deposits	generated	by	our	core	Investment	Servicing	and	Investment	Management	businesses.	We	structure	our	balance	sheet	assets	to generally	conform	to	the	characteristics	of	our	balance	sheet	liabilities,	but	we	manage	our	overall	interest-rate	risk	position	in	the	context	of	current	and	anticipated market	conditions	and	within	internally	approved	risk	guidelines.

								Our	overall	interest-rate	risk	position	is	maintained	within	a	series	of	policies	approved	by	the	Board	and	guidelines	established	and	monitored	by	ALCO.	Our Global	Treasury	unit	has	responsibility	for	managing	State	Street's	day-to-day	interest-rate	risk.	To	effectively	manage	the	consolidated	balance	sheet	and	related	NIR, Global	Treasury	has	the	authority	to	take	a	limited	amount	of	interest-rate	risk	based	on	market	conditions	and	its	views	about	the	direction	of	global	interest	rates	over both	short-term	and	long-term	time	horizons.	Global	Treasury	manages	our	exposure	to	changes	in	interest	rates	on	a	consolidated	basis,	and	they	have	organized themselves	into	three	regional	treasury	units,	North	America,	Europe,	and	Asia/Pacific,	to	reflect	the	growing,	global	nature	of	our	exposures	and	to	capture	the	impact of	change	in	regional	market	environments	on	our	total	risk	position.

								Our	investment	activities	and	our	use	of	derivative	financial	instruments	are	the	primary	tools	used	in	managing	interest-rate	risk.	We	invest	in	financial	instruments with	currency,	repricing,	and	maturity	characteristics	we	consider	appropriate	to	manage	our	overall	interest-rate	risk	position.	In	addition	to	on-balance	sheet	assets,	we use	certain	derivatives,	primarily	interest-rate	swaps,	to	alter	the	interest-rate	characteristics	of	specific	balance	sheet	assets	or	liabilities.	The	use	of	derivatives	is	subject to	ALCO-approved	guidelines.	Additional	information	about	our	use	of	derivatives	is	in	note	15	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.

								As	a	result	of	growth	in	our	non-U.S.	operations,	non-U.S.	dollar	denominated	customer	liabilities	are	a	significant	portion	of	our	consolidated	balance	sheet.	This growth	results	in	exposure	to	changes	in	the	shape	and	level	of	non-U.S.	dollar	yield	curves,	which	we	include	in	our	consolidated	interest-rate	risk	management	process.

								Because	no	one	individual	measure	can	accurately	assess	all	of	our	risks	to	changes	in	rates,	we	use	several	quantitative	measures	in	our	assessment	of	current	and potential	future	exposures	to	changes	in	interest	rates	and	their	impact	on	net	interest	revenue	and	balance	sheet	values.	Net	interest	revenue	simulation	is	the	primary	tool used	in	our	evaluation	of	the	potential	range	of	possible	net	interest	revenue	results	that	could	occur	under	a	variety	of	interest-rate	environments.	We	also	use

market	valuation	and	duration	analysis	to	assess	changes	in	the	economic	value	of	balance	sheet	assets	and	liabilities	caused	by	assumed	changes	in	interest	rates. Finally,	gap	analysis—the	difference	between	the	amount	of	balance	sheet	assets	and	liabilities	re-pricing	within	a	specified	time	period—is	used	as	a	measurement	of our	interest-rate	risk	position.

								To	measure,	monitor,	and	report	on	our	interest-rate	risk	position,	we	use	(1)	NIR	simulation,	or	"NIR-at-risk,"	which	measures	the	impact	on	NIR	over	the	next twelve	months	to	immediate,	or	"rate	shock,"	and	gradual,	or	"rate	ramp,"	changes	in	market	interest	rates;	and	(2)	economic	value	of	equity,	or	"EVE,"	which	measures the	impact	on	the	present	value	of	all	NIR-related	principal	and	interest	cash	flows	of	an	immediate	change	in	interest	rates.	NIR-at-risk	is	designed	to	measure	the potential	impact	of	changes	in	market	interest	rates	on	NIR	in	the	short	term.	EVE,	on	the	other	hand,	is	a	long-term	view	of	interest-rate	risk,	but	with	a	view	toward liquidation	of	State	Street.	Both	of	these	measures	are	subject	to	ALCO-established	guidelines,	and	are	monitored	regularly,	along	with	other	relevant	simulations, scenario	analyses	and	stress	tests	by	both	Global	Treasury	and	ALCO.

								In	calculating	our	NIR-at-risk,	we	start	with	a	base	amount	of	NIR	that	is	projected	over	the	next	twelve	months,	assuming	that	the	then-current	yield	curve	remains unchanged	over	the	period.	Our	existing	balance	sheet	assets	and	liabilities	are	adjusted	by	the	amount	and	timing	of	transactions	that	are	forecasted	to	occur	over	the next	twelve	months.	That	yield	curve	is	then	"shocked,"	or	moved	immediately,	±100	basis	points	in	a	parallel	fashion,	or	at	all	points	along	the	yield	curve.	Two	new twelve-month	NIR	projections	are	then	developed	using	the	same	balance	sheet	and	forecasted	transactions,	but	with	the	new	yield	curves,	and	compared	to	the	base scenario.	We	also	perform	the	calculations	using	interest	rate	ramps,	which	are	±100	basis	point	changes	in	interest	rates	that	are	assumed	to	occur	gradually	over	the next	twelve-month	period,	rather	than	immediately	as	we	do	with	interest-rate	shocks.

								EVE	is	based	on	the	change	in	the	present	value	of	all	NIR-related	principal	and	interest	cash	flows	for	changes	in	market	rates	of	interest.	The	present	value	of existing	cash	flows	with	a	then-current	yield	curve	serves	as	the	base	case.	We	then	apply	an	immediate	parallel	shock	to	that	yield	curve	of	±200	basis	points	and recalculate	the	cash	flows	and	related	present	values.	A	large	shock	is	used	to	better	capture	the	embedded	option	risk	in	our	mortgage-backed	securities	that	results from	the	borrower's	prepayment	opportunity.

								Key	assumptions	used	in	the	models	described	above	include	the	timing	of	cash	flows;	the	maturity	and	repricing	of	balance	sheet	assets	and	liabilities,	especially option-embedded	financial	instruments	like	mortgage-backed	securities;	changes	in	market	conditions;	and	interest-rate	sensitivities	of	our	customer	liabilities	with respect	to	the	interest	rates	paid	and	the	level	of	balances.	These	assumptions	are	inherently	uncertain	and,	as	a	result,	the	models	cannot	precisely	calculate	future	NIR or	predict	the	impact	of	changes	in	interest	rates	on	NIR	and	economic	value.	Actual	results	could	differ	from	simulated	results	due	to	the	timing,	magnitude	and frequency	of	changes	in	interest	rates	and	market	conditions,	changes	in	spreads	and	management	strategies,	among	other	factors.	Projections	of	potential	future	streams of	NIR	are	assessed	as	part	of	our	forecasting	process.

								The	following	table	presents	the	estimated	exposure	of	NIR	for	the	next	twelve	months,	calculated	as	of	December	31,	2007	and	2006,	due	to	an	immediate	±	100 basis	point	shift	in	then-current	interest	rates.	Estimated	incremental	exposures	presented	below	are	dependent	on	management's	assumptions	about	asset	and	liability sensitivities	under	various	interest-rate	scenarios,	such	as	those	previously	discussed,	and	do	not	reflect	any	actions	management	may	undertake	in	order	to	mitigate some	of	the	adverse	effects	of	interest-rate	changes	on	State	Street's	financial	performance.

# NIR-AT-RISK

# Estimated	Exposure	to	Net

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Rate\tchange: |  |  |
| +100\tbps\tshock | $(98) | $(90) |
| -100\tbps\tshock | 7 | 52 |
| +100\tbps\tramp | (44) | (57) |
| -100\tbps\tramp | 20 | 46 |

								The	following	table	presents	estimated	EVE	exposures,	calculated	as	of	December	31,	2007	and	2006,	assuming	an	immediate	and	prolonged	shift	in	interest	rates, the	impact	of	which	would	be	spread	over	a	number	of	years.

# ECONOMIC	VALUE	OF	EQUITY

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Rate\tchange: |  |  |
| +200\tbps\tshock | $(1,195) | $(1,023) |
| -\t200\tbps\tshock | 48 | 371 |

								With	respect	to	the	December	31,	2007	information	presented	in	the	tables	above,	the	balance	sheet	of	Investors	Financial	is	reflected	in	the	estimated	NIR-at-risk and	the	estimated	EVE	exposure.	Information	for	prior	periods	was	not	restated.	The	incremental	increases	in	the	levels	of	NIR-at-risk	and	EVE	exposure	to	upward shifts	in	interest	rates	are	largely	attributable	to	increased	purchases	of	fixed-rate	securities	in	the	first	quarter	of	2007,	slower	projected	prepayment	speeds	for	mortgage- backed	securities	effective	in	the	fourth	quarter	of	2007,	and	the	contribution	of	the	acquired	Investors	Financial	business	during	the	third	quarter	of	2007.	While	the dollar	amount	of	NIR-at-risk	increased,	its	rate	of	increase	was	lower	than	the	reported	growth	rate	for	NIR.

								While	the	measures	presented	in	the	tables	above	are	not	a	prediction	of	future	NIR	or	valuations,	they	do	suggest	that	if	all	other	variables	remained	constant,	in the	short	term,	falling	interest	rates	would	lead	to	NIR	that	is	higher	than	it	would	otherwise	have	been,	and	rising	rates	would	lead	to	lower	NIR.	Other	important factors	that	impact	the	levels	of	NIR	are	balance	sheet	size	and	mix;	interest-rate	spreads;	the	slope	and	interest-rate	level	of	U.S.	dollar	and	non-U.S.	dollar	yield	curves and	the	relationship	between	them;	the	pace	of	change	in	market	interest	rates;	and	management	actions	taken	in	response	to	the	preceding	conditions.

								One	of	the	most	important	assumptions	in	our	management	of	interest	rate	risk	is	the	response	of	customer	liabilities	to	changes	in	market	interest	rates.	As	such, we	regularly	reassess	the	characteristics	of	customer	liabilities.	Our	most	recent	assessment	was	completed	during	the	second	quarter	of	2007	and	resulted	in	a	small lengthening	in	the	estimated	duration	of	customer	liabilities.	The	impact	of	this	longer	estimated	duration	for	customer	liabilities	reduced	both	NIR-at-risk	and	EVE exposure	to	increases	in	market	interest	rates,	partially	mitigating	the	factors	responsible	for	higher	interest-rate	risk	detailed	above.

								Credit	and	counterparty	risk	is	defined	as	the	risk	of	financial	loss	if	a	borrower	or	counterparty	is	either	unable	or	unwilling	to	repay	borrowings	or	settle	in accordance	with	contractual	terms.	The	extension	of	credit	and	acceptance	of	counterparty	risk	by	State	Street	are	governed	by	corporate

guidelines	based	on	the	prospective	customer's	risk	profile,	the	markets	served,	counterparty	and	country	concentrations,	and	regulatory	compliance.	Our	focus	on	large institutional	investors	and	their	businesses	requires	that	we	assume	concentrated	credit	risk	in	a	variety	of	forms	to	certain	highly-rated	entities.	This	concentration	risk	is mitigated	by	comprehensive	guidelines	and	procedures	to	monitor	and	manage	all	aspects	of	credit	and	counterparty	risk	that	we	undertake.	Exposures	are	evaluated	on an	individual	basis	at	least	annually.

								We	provide,	on	a	limited	basis,	traditional	loan	products	and	services	to	key	customers	and	prospects	in	a	manner	that	enhances	customer	relationships,	increases profitability	and	minimizes	risk.	We	employ	a	relationship	model	in	which	credit	decisions	are	based	upon	credit	quality	and	the	overall	institutional	relationship.	This model	is	typical	of	financial	institutions	that	provide	credit	to	institutional	customers	in	the	markets	that	we	serve.

								An	allowance	for	loan	losses	is	maintained	to	absorb	probable	credit	losses	in	the	loan	portfolio	and	is	reviewed	regularly	by	management	for	adequacy.	An	internal rating	system	is	used	to	assess	potential	risk	of	loss	based	on	customer	investment	profile,	current	economic	and/or	customer	financial	indicators.	The	provision	for	loan losses	is	a	charge	to	earnings	to	maintain	the	overall	allowance	for	loan	losses	at	a	level	considered	adequate	relative	to	the	level	of	credit	risk	in	the	loan	and	lease financing	portfolio.	No	provision	was	recorded	in	either	2007,	2006	or	2005.

								At	December	31,	2007	and	2006,	the	allowance	for	loan	losses	was	$18	million.	Changes	in	the	allowance	for	loan	losses	were	as	follows	for	the	years	ended December	31:

|  | 2007 | 2006 | 2005 | 2004(1) | 2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |
| U.S.: |  |  |  |  |  |
| Balance\tat\tbeginning\tof\tyear | $18 | $18 | $17 | $43 | $43 |
| Provision\tfor\tloan\tlosses | — | — | — | (15) | — |
| Loan\tcharge-offs—commercial\tand\tfinancial | — | — | — | — | — |
| Recoveries—commercial\tand\tfinancial | — | — | — | — | — |
| Reclassification | — | — | — | (14) | — |
| Balance\tat\tend\tof\tyear—U.S. | 18 | 18 | 17 | 14 | 43 |
| Non-U.S.: |  |  |  |  |  |
| Balance\tat\tbeginning\tof\tyear | — | — | 1 | 18 | 18 |
| Provision\tfor\tloan\tlosses | — | — | — | (3) | — |
| Reclassification | — | — | — | (11) | — |
| Balance\tat\tend\tof\tyear—Non-U.S. | — | — | 1 | 4 | 18 |
| Total\tbalance\tat\tend\tof\tyear | $18 | $18 | $18 | $18 | $61 |

(1) In	2004,	we	reclassified	$25	million	of	the	allowance	for	loan	losses	to	other	liabilities	as	a	reserve	for	off-balance	sheet	commitments.	Subsequent	to	the reclassification,	the	reserve	for	off-balance	sheet	commitments	was	reduced	by	$10	million,	and	recorded	as	an	offset	to	other	operating	expenses.	We	also reversed	$18	million	through	the	provision	for	loan	losses	as	a	result	of	reduced	credit	risk	exposures	and	improved	credit	quality.

								Past-due	loans	are	loans	on	which	principal	or	interest	payments	are	over	90	days	delinquent,	but	where	interest	continues	to	be	accrued.	There	were	no	past-due loans	as	of	December	31,	2007,	2006,	2005,	2004	and	2003.

								We	generally	place	loans	on	non-accrual	status	once	payments	are	60	days	past	due,	or	earlier	if	management	determines	that	full	collection	is	not	probable.	Loans 60	days	past	due,	but	considered	both	well-secured	and	in	the	process	of	collection,	may	be	excluded	from	non-accrual	status.	For	loans

placed	on	non-accrual	status,	revenue	recognition	is	suspended.	There	were	no	non-accrual	loans	at	year-end	2007,	2006,	2005,	2004	and	2003.

								We	purchase	securities	under	agreements	to	resell.	Risk	is	minimized	by	establishing	the	acceptability	of	counterparties;	limiting	purchases	almost	exclusively	to low-risk	U.S.	government	securities;	taking	possession	or	control	of	transaction	assets;	monitoring	levels	of	underlying	collateral;	and	limiting	the	duration	of	the agreements.	Securities	are	revalued	daily	to	determine	if	additional	collateral	is	necessary	from	the	borrower.	Most	repurchase	agreements	are	short-term,	with	maturities of	less	than	90	days.

								We	also	provide	customers	with	off-balance	sheet	liquidity	and	credit	enhancement	facilities	in	the	form	of	letters	of	credit,	lines	of	credit	and	liquidity	asset purchase	agreements.	These	exposures	are	subject	to	an	initial	credit	analysis,	with	detailed	approval	and	review	processes.	These	facilities	are	also	actively	monitored and	reviewed	on	an	annual	basis.	We	maintain	a	separate	reserve	for	probable	credit	losses	related	to	certain	of	these	off-balance	sheet	activities.	Management	reviews the	adequacy	of	this	reserve	on	a	regular	basis.

								On	behalf	of	our	customers,	we	lend	their	securities	to	creditworthy	banks,	broker/dealers	and	other	institutions.	In	most	circumstances,	we	indemnify	our customers	for	the	fair	market	value	of	those	securities	against	a	failure	of	the	borrower	to	return	such	securities.	Though	these	transactions	are	well-collateralized,	the substantial	volume	of	these	activities	necessitates	thorough	credit-based	underwriting	and	monitoring	processes.	State	Street	requires	the	borrowers	to	provide	collateral in	an	amount	equal	to	or	in	excess	of	100%	of	the	fair	market	value	of	the	securities	borrowed.	Collateral	funds	received	in	connection	with	our	securities	lending services	are	held	by	us	as	agent	and	are	not	recorded	in	our	consolidated	statement	of	condition.	The	borrowed	securities	and	collateral	are	revalued	daily	to	determine	if additional	collateral	is	necessary.	State	Street	held,	as	agent,	cash	and	securities	totaling	$572.93	billion	and	$527.37	billion	as	collateral	for	indemnified	securities financing	at	December	31,	2007	and	2006,	respectively.

								Processes	for	credit	approval	and	monitoring	are	in	place	for	other	credit	extensions.	As	part	of	the	approval	and	renewal	process,	appropriate	due	diligence	is conducted	based	on	the	size	and	term	of	the	exposure,	as	well	as	the	quality	of	the	counterparty.	Exposures	to	these	entities	are	aggregated	and	evaluated	by	ERM.

								Investments	in	debt	and	equity	securities,	including	investments	in	affiliates,	are	monitored	regularly	by	Corporate	Finance	and	ERM.	To	the	extent	necessary, procedures	are	in	place	for	evaluating	potentially	impaired	securities,	as	discussed	in	notes	1	and	3	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.	Total	non-performing	investment	securities	were	$3	million	and	$4	million	at	December	31,	2007	and	2006,	respectively.

								We	define	operational	risk	as	the	potential	for	loss	resulting	from	inadequate	or	failed	internal	processes,	people	and	systems,	or	from	external	events.	As	a	leading provider	of	services	to	institutional	investors,	our	customers	have	a	broad	array	of	complex	and	specialized	servicing,	confidentiality	and	fiduciary	requirements.	Active management	of	operational	risk	is	an	integral	component	of	all	aspects	of	our	business,	and	responsibility	for	the	management	of	operational	risk	lies	with	every individual	at	State	Street.	Our	Operational	Risk	Policy	Statement	defines	operational	risk	and	details	roles	and	responsibilities	for	managing	operational	risk.	The	Policy Statement	is	reinforced	by	the	Operational	Risk	Guidelines,	which	codify	our	approach	to	operational	risk.	The	Guidelines	document	our	sound	practices	and	provide	a mandate	within	which	programs,	processes,	and	regulatory	elements	are	implemented	to	ensure	that	operational	risk	is	identified,	measured,	managed	and	controlled	in an	effective	and	consistent	manner	across	State	Street.

								We	maintain	an	operational	risk	governance	structure	to	ensure	that	responsibilities	are	clearly	defined	and	to	provide	independent	oversight	of	operational	risk management.	Business	units	periodically	review	the	status	of	the	business	controls	and	monitor	and	report	key	risk	indicator	results.	ERM	oversees	the	overall operational	risk	management	program.	The	MRC	and	the	Operational	Risk	Committee	review	key	risk	indicators	and	policies	related	to	operational	risk,	provide oversight	to	ensure	compliance	with	the	operational	risk	program,	and	escalate	operational	risk	issues	of	note	to	the	Executive	Committee	of	the	Board.	Corporate	Audit performs	independent	reviews	of	the	application	of	operational	risk	management	practices	and	methodologies	and	reports	to	the	Examining	and	Audit	Committee	of	the Board.

								State	Street's	internal	control	environment	is	designed	to	provide	a	sound	operational	environment.	Our	discipline	in	managing	operational	risk	provides	the structure	to	identify,	evaluate,	control,	monitor,	measure,	mitigate	and	report	operational	risk.

# Business	Risk

								We	define	business	risk	as	the	risk	of	adverse	changes	in	our	earnings	related	to	business	factors,	including	changes	in	the	competitive	environment,	changes	in	the operational	economics	of	business	activities	and	the	potential	effect	of	strategic	and	reputation	risks,	not	already	captured	as	market,	interest-rate,	credit	or	operational risks.	We	incorporate	business	risk	into	our	assessment	of	our	economic	capital	needs.	Active	management	of	business	risk	is	an	integral	component	of	all	aspects	of	our business,	and	responsibility	for	the	management	of	business	risk	lies	with	every	individual	at	State	Street.

								It	is	sometimes	difficult	to	separate	the	effects	of	a	potential	material	adverse	event	into	operational	and	business	risks.	For	instance,	the	direct	financial	impact	of an	unfavorable	event	in	the	form	of	fines	or	penalties	would	be	classified	as	an	operational	risk	loss,	while	the	impact	on	our	reputation	and	the	potential	loss	of customers	and	corresponding	decline	in	revenue	would	be	classified	as	a	business	risk	loss.	An	additional	example	of	business	risk	is	the	integration	of	a	major acquisition.	Failure	to	successfully	integrate	the	operations	of	an	acquired	business,	and	the	resultant	inability	to	retain	customers,	would	be	classified	as	a	business	risk loss.

								Business	risk	is	managed	with	a	long-term	focus.	Techniques	include	the	careful	development	of	business	plans	and	appropriate	management	oversight.	The potential	impact	of	the	various	elements	of	business	risk	is	difficult	to	quantify	with	any	degree	of	precision.	We	use	a	combination	of	historical	earnings	volatility, scenario	analysis,	stress-testing	and	management	judgment	to	help	assess	the	potential	effect	on	State	Street	attributable	to	business	risk.	Management	and	control	of business	risks	are	generally	the	responsibility	of	the	business	units	as	part	of	their	overall	and	strategic	planning	and	internal	risk	management	processes.

# OFF-BALANCE	SHEET	ARRANGEMENTS

								In	the	normal	course	of	business,	we	hold	assets	under	custody	and	assets	under	management	in	a	custodial	or	fiduciary	capacity	for	our	customers,	and,	in accordance	with	GAAP,	we	do	not	record	these	assets	in	our	consolidated	statement	of	condition.	Similarly,	collateral	funds	associated	with	our	securities	finance activities	are	held	by	us	as	agent;	therefore,	we	do	not	record	these	assets	in	our	consolidated	statement	of	condition.	Additional	information	about	these	and	other	off- balance	sheet	activities	is	in	note	10	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

								In	the	normal	course	of	business,	we	utilize	derivative	financial	instruments	to	support	our	customers'	needs,	to	conduct	trading	activities	and	to	manage	our interest-rate	and	foreign	currency	risk.	Additional	information	about	our	use	of	derivatives	is	in	note	15	of	the	Notes	to	Consolidated	Financial	Statements	included	in this	Form	10-K	under	Item	8.

								In	the	normal	course	of	business,	we	utilize	three	types	of	special	purpose	entities,	referred	to	as	SPEs,	two	of	which	are	not	recorded	in	our	consolidated	financial statements.	Information	about	the	activities	of	these	SPEs,	which	are	used	in	connection	with	our	tax-exempt	investment	program,	our	involvement	with	managed investment	vehicles	and	our	asset-backed	commercial	paper	conduits,	is	in	notes	10	and	11	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10- K	under	Item	8.	Additional	information	about	the	commercial	paper	conduits	is	provided	below.

								The	risks	associated	with	providing	administration,	liquidity,	and/or	credit	enhancements	to	these	special	purpose	entities	are	reviewed	as	part	of	our	corporate	risk management	process	in	a	manner	that	is	consistent	with	applicable	policies	and	guidelines.	We	believe	that	we	have	sufficient	liquidity	and	have	provided	adequate credit	reserves	to	cover	any	risks	associated	with	these	activities.

# Asset-Backed	Commercial	Paper	Programs

								As	further	described	in	note	11	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8,	we	administer	four	third-party-owned, special-purpose,	multi-seller	asset-backed	commercial	paper	programs,	commonly	referred	to	as	"conduits,"	the	first	of	which	was	established	in	1992.	These	conduits, which	are	structured	as	bankruptcy-remote	entities	and	are	not	recorded	in	our	consolidated	financial	statements	under	existing	accounting	standards,	are	designed	to satisfy	the	demand	of	our	institutional	customers,	particularly	mutual	fund	customers,	for	commercial	paper.

								Total	assets	in	the	four	unconsolidated	conduits	were	approximately	$28.76	billion	at	December	31,	2007	and	$25.25	billion	at	December	31,	2006.	The	conduits obtain	funding	through	the	issuance	of	commercial	paper	and	hold	diversified	portfolios	of	investments,	which	are	predominately	composed	of	securities	purchased	in the	capital	markets.	These	investments	are	collateralized	by	mortgages,	student	loans,	automobile	and	equipment	loans	and	credit	card	receivables,	most	of	which securities	are	investment	grade.	Conduit	assets	are	not	sourced	from	our	consolidated	balance	sheet.

								The	following	tables	provide	additional	information	regarding	the	composition	of	the	conduits'	asset	portfolios,	in	the	aggregate,	as	of	December	31,	2007.	As	of this	date,	none	of	the	conduits'	portfolio	securities	were	predominantly	collateralized	by	sub-prime	real	estate	mortgages.

| Australian	residential	mortgage-backed	securities | $4.7 | 16% |
| :--- | :--- | :--- |
| European\tresidential\tmortgage-backed\tsecurities | 4.7 | 16 |
| U.S.\tresidential\tmortgage-backed\tsecurities | 4.2 | 15 |
| United\tKingdom\tresidential\tmortgage-backed\tsecurities | 2.3 | 8 |
| Student\tloans | 3.3 | 11 |
| Auto\tand\tequipment\tloans | 2.8 | 10 |
| Credit\tcards | 2.0 | 7 |
| Other(1) | 4.8 | 17 |
| Total\tconduit\tassets | $28.8 | 100% |

(1) "Other"	included	trade	receivables,	collateralized	debt	obligations,	business/commercial	loans	and	other	financial	instruments.	No	individual	asset class	represented	more	than	2%	of	total	conduit	assets,	except	trade	receivables,	which	were	3%	of	total	conduit	assets.

| AAA/Aaa | $17.7 | 61% |
| :--- | :--- | :--- |
| AA/Aa | 4.5 | 16 |
| A/A | 2.3 | 8 |
| BBB/Baa | 1.5 | 5 |
| Not\trated(2) | 2.8 | 10 |
| Total\tconduit\tassets | $28.8 | 100% |

(2) These	assets	reflect	structured	transactions.	The	transactions	have	been	reviewed	by	rating	agencies	and	have	been	structured	to	maintain	the conduits'	P1	or	similar	rating.

| U.S. | $12.2 | 42% |
| :--- | :--- | :--- |
| Australia | 6.1 | 21 |
| Great\tBritain | 2.9 | 10 |
| Spain | 1.9 | 7 |
| Italy | 1.9 | 7 |
| Portugal | 0.7 | 2 |
| Germany | 0.7 | 2 |
| Netherlands | 0.5 | 2 |
| Greece | 0.3 | 1 |
| Other | 1.6 | 6 |
| Total\tconduit\tassets | $28.8 | 100% |

								Since	the	conduits	were	first	organized	beginning	in	1992,	we	have	entered	into	contractual	obligations	in	the	form	of	liquidity	asset	purchase	agreements	to	support most	or	all	of	the	liquidity	of	the	conduits.	We	also	provide	credit	enhancement	to	the	conduits	in	the	form	of	standby	letters	of	credit.	Other	institutions	can	and	do provide	contractual	liquidity	to	the	conduits.	As	provided	for	in	these	agreements,	we	provide	back-up	liquidity	in	the	event	that	the	conduits	cannot	meet	their	funding needs	through	the	issuance	of	commercial	paper.	In	the	event	that	maturing	commercial	paper	cannot	be	reissued	into	the	market	by	the	conduits'	dealer	group,	we	and the	other	institutions	providing	liquidity	may	be	required	to	provide	liquidity	by	purchasing	portfolio	assets	from	the	conduits.	State	Street	may	also	provide	liquidity	by purchasing	commercial	paper	or	providing	other	extensions	of	credit	to	the	conduits.	As	of	December	31,	2007,	State	Streets'	commitments	under	these	liquidity	asset purchase	agreements	and	back-up	lines	of	credit	totaled	approximately	$28.37	billion,	and	our	commitments	under	standby	letters	of	credit	totaled	$1.04	billion.

								The	conduits	generally	sell	commercial	paper	to	third-party	investors;	however,	we	sometimes	purchase	commercial	paper	from	the	conduits.	At	December	31, 2007,	we	held	on	our	consolidated	balance	sheet	an	aggregate	of	approximately	$2	million	of	commercial	paper	issued	by	the	conduits.	The	highest	total	overnight position	in	the	conduits'	commercial	paper	held	by	State	Street	was	approximately	$1.25	billion	during	2007.	This	was	higher	than	the	levels	of	commercial	paper	we have	historically	held,	and	was	reflective	of	both	the	reduced	liquidity	in	the	asset-backed	commercial	paper	markets	during	the	third	and	fourth	quarters	and	our	desire to	provide	short-term	stability	to	funding	costs	given	the	lack	of	liquidity	in	the	marketplace.	There	were	no	draw-downs	on	the	liquidity	asset	purchase	agreements	or standby	letters	of	credit	during	2007.

								As	the	third	quarter	of	2007	progressed	and	investors	became	increasingly	concerned	about	the	credit	quality	of	the	underlying	assets	generally	held	in	asset-backed commercial	paper	conduits	and	similar	vehicles,	the	resulting	reduction	in	liquidity	in	the	global	fixed-income	securities	markets	made	the	funding	of	the	State	Street- administered	conduits	more	challenging	than	in	normal	market	conditions,	and	the	yields	that	issuers	had	to	pay	on	asset-backed	commercial	paper	increased.	Consistent with	the	experience	of	other	market	participants,	commercial	paper	was	generally	being	placed	by	the	State	Street-administered	conduits	with	shorter	maturities	and higher	investor	yields	than	historically	experienced.	This	compressed	the	spread	between	the	rate	earned	on	the	conduits'	assets	and	the	conduits'	funding	costs.	The weighted-average	maturity	of	the	conduits'	commercial	paper	was	approximately	20	days	as	of	December	31,	2007,	compared	to	approximately	23	days	as	of December	31,	2006.	However,	the	conduits	continue	to	roll	over	the	commercial	paper	as	it	matures,	i.e.,	place	the	commercial	paper	with	market	participants,	including State	Street.

								We	intend	to	continue	to	manage	the	liquidity	of	the	programs,	if	and	as	needed,	through	purchases	of	commercial	paper	as	necessary;	however,	if	due	to	further deterioration	in	the	liquidity	of	the	fixed-income	markets	or	otherwise,	it	would	become	necessary	to	purchase	assets	from	the	conduits,	we	anticipate	that	we	could	fund those	purchases.

								During	2007,	we	did	not	experience	any	losses	in	our	role	as	a	liquidity	and	credit	enhancement	provider	to	the	conduits,	although	the	margins	that	we	generated from	administration	of	the	conduits	were	lower	than	the	levels	historically	achieved	on	commercial	paper	issued	by	the	conduits.	The	fee	revenue	we	generated	from	our involvement	with	the	conduits	was	approximately	$66	million	for	2007,	$62	million	for	2006	and	$58	million	for	2005.	We	earn	fees	from	our	role	as	administrator, liquidity	or	credit	enhancement	provider	and	as	one	of	the	dealers,	which	fees	are	priced	on	a	market	basis.	These	fees	are	recorded	in	processing	fees	and	other	revenue in	our	consolidated	statement	of	income.	Our	overall	conduit	business	activities	generated	pre-tax	income,	which	included	the	fee	revenue	described	above,	of approximately	$23	million	for	2007,	compared	to	pre-tax	income	of	$49	million	for	2006	and	$45	million	for	2005.	The	decrease	in	this	income	from	2006	to	2007 primarily	resulted	from	the	change	in	fair	value	of	basis	swaps,	as	well	as	other	conduit	operating	expenses.

								As	described	above,	we	provide	the	conduits	with	contractual	liquidity	in	the	form	of	liquidity	asset	purchase	agreements.	If	a	conduit	experienced	a	problem	with an	asset,	such	as	a	default	or	credit	rating	downgrade,	subject	to	certain	conditions,	the	liquidity	asset	purchase	agreement	could	be	invoked	by	the	conduit,	requiring State	Street	to	purchase	the	asset	from	the	conduit	at	prices	which	may	exceed	the	fair	value	of	the	assets.	If	that	occurred,	we	would	be	required	to	recognize	a	loss	upon purchase	of	the	asset.	Any	loss	from	a	credit	default	would	first	be	offset	by	the	level	of	funding	provided	by	the	first-loss	note	holders.	Currently,	in	light	of	the	recent reduction	in	liquidity	in	the	markets,	with	spreads	on	virtually	all	asset	classes	except	U.S.	treasuries	having	widened,	we	expect	that	an	asset	purchase	would	result	in	a loss.	This	loss	may	be	recovered	in	future	periods,	depending	on	State	Street's	actions	after	the	asset	is	purchased	and	market	conditions.

								It	is	also	possible	that	we	would	be	required	to	consolidate	one	or	more	of	the	conduits'	assets	and	liabilities	onto	our	consolidated	balance	sheet.	This	consolidation would	occur	if	we	were	determined	to	be	the	primary	beneficiary	of	the	conduits	as	defined	in	FIN	46(R).	For	example,	if	we	updated	our	expected	loss	model assumptions	as	a	result	of	changes	in	market	conditions	or	a	downgrade	of	securities,	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.	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	would	be	required	to	consolidate	the	conduits'	assets	and	liabilities	onto	our consolidated	balance	sheet.	Additional	information	about	our	use	of	an	expected	loss	model	and	the	third-party	investors	in	first-loss	notes	is	provided	in	the	"Significant Accounting	Estimates—Special	Purpose	Entities"	section	of	this	Management's	Discussion	and	Analysis	and	in	note	11	of	the	Notes	to	Consolidated	Financial Statements	included	in	this	Form	10-K	under

Item	8.	Our	accounting	treatment	of	the	conduits	is	reviewed	at	least	quarterly,	and	more	frequently	if	specific	events	warrant.

								As	a	result	of	the	events	in	the	global	fixed-income	securities	markets,	we	reviewed	the	underlying	assumptions	incorporated	in	our	FIN	46(R)	expected	loss	model. We	concluded	as	of	December	31,	2007,	that	our	model	assumptions	were	appropriate	and	were	reflective	of	market	participant	assumptions,	and	appropriately considered	the	probability	of,	and	potential	for,	the	recurrence	of	these	events.

								If	consolidation	were	to	occur	because	we	were	determined	to	be	the	primary	beneficiary	of	the	conduits	as	defined	in	FIN	46(R),	we	would	consolidate	the conduits'	assets	and	liabilities	onto	our	consolidated	balance	sheet	at	fair	value.	We	expect	that	we	would	recognize	an	extraordinary	loss	on	the	date	of	consolidation	if the	fair	value	of	the	conduits'	liabilities	exceeded	the	fair	value	of	the	conduits'	assets,	as	they	do	currently.	This	loss	would	be	recovered	back	into	income	over	the remaining	lives	of	the	assets,	assuming	that	the	assets	were	held	to	maturity	and	that	we	recovered	the	full	principal	amount	of	the	securities.

								Purchasing	or	consolidating	all	or	a	significant	portion	of	the	assets	of	the	conduits	would	affect	the	size	and	composition	of	our	consolidated	balance	sheet	and alter	our	financial	and	regulatory	capital	ratios,	and	may	affect	our	earnings.	In	light	of	our	continued	ability	to	manage	the	liquidity	of	the	commercial	paper,	we	do	not currently	anticipate	that	this	action	will	become	necessary.	However,	for	illustrative	purposes	only,	assuming	estimated	fair	values	of	the	conduits'	assets	as	of December	31,	2007,	if	all	of	the	conduits'	assets	were	purchased	under	the	liquidity	asset	purchase	agreements,	or	if	the	conduits'	assets	and	liabilities	were	consolidated onto	our	consolidated	balance	sheet,	we	estimate	that	we	would	recognize	an	after-tax	loss	of	approximately	$530	million	in	our	consolidated	statement	of	income.

								This	estimate	assumes	that	all	of	the	conduits,	with	total	assets	of	approximately	$28.76	billion	as	of	December	31,	2007,	are	consolidated	on	that	date;	that	the assets	of	the	conduits	are	recorded	at	fair	value,	which	is	based	on	State	Street's	consistent	application	of	its	pricing	policies	for	conduit	assets;	and	that	the	pre-tax	loss	is tax-effected	at	a	40%	marginal	income	tax	rate.	If	this	consolidation	were	to	occur	in	the	future,	or	we	were	required	to	purchase	assets	pursuant	to	the	liquidity	asset purchase	agreements	at	prices	in	excess	of	the	fair	value	of	the	assets,	the	ultimate	amount	of	loss	will	be	based	upon	market	conditions	at	the	date	such	a	determination is	made,	which	could	differ	from	the	estimate	provided	above.	If	the	assets	were	consolidated	for	accounting	purposes	pursuant	to	FIN	46(R),	we	expect	that	this	loss would	be	recorded	as	an	extraordinary	loss,	after	income	from	continuing	operations.	If	we	were	to	purchase	the	assets	under	the	liquidity	asset	purchase	agreements,	to the	extent	that	a	loss	was	incurred,	we	expect	that	the	loss	would	be	recognized	in	continuing	operations.

								We	consider	the	activities	of	the	conduits	in	our	liquidity	management	process,	as	more	fully	described	in	the	"Liquidity"	section	of	this	Management's	Discussion and	Analysis.	We	would	be	able	to	access	multiple	sources	of	liquidity	to	fund	required	asset	purchases,	including	sales	of	other	assets,	asset	repurchase	agreements,	the issuance	of	corporate	commercial	paper,	the	issuance	of	bank	certificates	of	deposit	and	time	deposits,	and	accessing	the	Federal	Reserve	discount	window	or	similar facilities	in	other	jurisdictions	in	which	we	maintain	significant	banking	operations.	The	consolidation	of	the	conduits	for	accounting	purposes	alone	would	not	require additional	funding	or	liquidity	for	the	conduits	to	fund	their	asset	portfolios.	However,	if	the	reasons	for	consolidation	related	to	an	inability	of	the	conduits	to	issue commercial	paper,	the	conduits	would	require	additional	liquidity.

								If	we	were	required	to	consolidate	the	conduits'	assets	and	liabilities,	our	regulatory	capital	ratios	would	be	negatively	impacted	for	a	period	of	time.	With	respect	to regulatory	capital,	the	consolidation	of	the	conduits'	assets	and	liabilities	would	cause	a	reduction	of	our	tier	1	and	total	risk-based	capital	ratios.	The	impact	of consolidation	on	our	tier	1	leverage	ratio	would	be	more	significant,	but	the

degree	of	impact	would	depend	on	how	and	when	consolidation	occurred,	since	this	ratio	is	a	function	of	our	consolidated	total	average	assets	over	an	entire	quarter.

								Assuming	estimated	fair	values	of	the	conduits'	assets	as	of	December	31,	2007,	priced	as	described	above,	if	all	of	the	conduits'	assets	and	liabilities	were consolidated	onto	our	consolidated	balance	sheet	on	December	31,	2007,	and	no	other	management	actions	were	taken	with	respect	to	regulatory	capital,	the	following table	presents	the	estimated	impact	on	State	Street's	and	State	Street	Bank's	regulatory	capital	ratios.

|  | Reported	as	of	December	31, | Adjusted	as	of	December	31, | Reported	as	of	December	31, | Adjusted	as	of	December	31, |
| :--- | :--- | :--- | :--- | :--- |
|  | 2007 | 2007 | 2007 | 2007 |
| Tier\t1\tleverage\tratio | 5.3% | 4.9% | 5.5% | 5.0% |
| Tier\t1\trisk-based\tcapital\tratio | 11.2 | 10.3 | 11.2 | 10.3 |
| Total\trisk-based\tcapital\tratio | 12.7 | 11.8 | 12.7 | 11.8 |

# RECENT	ACCOUNTING	DEVELOPMENTS

								Information	with	respect	to	recent	accounting	developments	is	in	note	1	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# ITEM	7A.				QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

								The	information	set	forth	in	the	"Market	Risk"	section	of	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,"	included	in this	Form	10-K	under	Item	7,	is	incorporated	by	reference	herein.

# ITEM	8.				FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

								Additional	information	about	restrictions	on	the	transfer	of	funds	from	State	Street	Bank	to	the	parent	company	is	included	in	this	Form	10-K	under	Item	5,	and	in the	"Financial	Condition	Capital"	section	of	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	under	Item	7.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# THE	SHAREHOLDERS	AND	BOARD	OF	DIRECTORS	OF

								We	have	audited	the	accompanying	consolidated	statement	of	condition	of	State	Street	Corporation	as	of	December	31,	2007	and	2006,	and	the	related	consolidated statements	of	income,	changes	in	shareholders'	equity,	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2007.	These	financial	statements	are the	responsibility	of	the	Corporation's	management.	Our	responsibility	is	to	express	an	opinion	on	these	financial	statements	based	on	our	audits.

								We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

								In	our	opinion,	the	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	consolidated	financial	position	of	State	Street	Corporation	at December	31,	2007	and	2006,	and	the	consolidated	results	of	its	operations	and	its	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2007,	in conformity	with	U.S.	generally	accepted	accounting	principles.

								We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	effectiveness	of	State	Street Corporation's	internal	control	over	financial	reporting	as	of	December	31,	2007,	based	on	criteria	established	in	Internal	Control—Integrated	Framework	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	and	our	report	dated	February	14,	2008	expressed	an	unqualified	opinion	thereon.

								As	discussed	in	note	1	to	the	consolidated	financial	statements,	in	2007	the	Corporation	has	adopted	Financial	Accounting	Standards	Board	Staff	Position	FAS	13- 2,	"Accounting	for	a	Change	or	Projected	Change	in	the	Timing	of	Cash	Flows	Relating	to	Income	Taxes	Generated	by	a	Leveraged	Lease	Transaction"	and	Financial Accounting	Standards	Board	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes."

# CONSOLIDATED	FINANCIAL	STATEMENTS

# Consolidated	Statement	of	Income

| Years	ended	December	31,<br>(Dollars	in	millions,	except	per	share	amounts) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Fee\trevenue: |  |  |  |
| Servicing\tfees | $3,388 | $2,723 | $2,474 |
| Management\tfees | 1,141 | 943 | 751 |
| Trading\tservices | 1,152 | 862 | 694 |
| Securities\tfinance | 681 | 386 | 330 |
| Processing\tfees\tand\tother | 237 | 272 | 302 |
| Total\tfee\trevenue | 6,599 | 5,186 | 4,551 |
| Net\tinterest\trevenue: |  |  |  |
| Interest\trevenue | 5,212 | 4,324 | 2,930 |
| Interest\texpense | 3,482 | 3,214 | 2,023 |
| Net\tinterest\trevenue | 1,730 | 1,110 | 907 |
| Provision\tfor\tloan\tlosses | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 1,730 | 1,110 | 907 |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 7 | 15 | (1) |
| Gain\ton\tsale\tof\tPrivate\tAsset\tManagement\tbusiness | — | — | 16 |
| Total\trevenue | 8,336 | 6,311 | 5,473 |
| Operating\texpenses: |  |  |  |
| Salaries\tand\temployee\tbenefits | 3,256 | 2,652 | 2,231 |
| Information\tsystems\tand\tcommunications | 546 | 501 | 486 |
| Transaction\tprocessing\tservices | 619 | 496 | 449 |
| Occupancy | 408 | 373 | 391 |
| Provision\tfor\tlegal\texposure | 600 | — | — |
| Merger\tand\tintegration\tcosts | 198 | — | — |
| Other | 806 | 518 | 484 |
| Total\toperating\texpenses | 6,433 | 4,540 | 4,041 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 1,903 | 1,771 | 1,432 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 642 | 675 | 487 |
| Income\tfrom\tcontinuing\toperations | 1,261 | 1,096 | 945 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations\tbefore\tincome\ttax\texpense | — | 16 | (165) |
| Income\ttax\texpense\t(benefit)\tfrom\tdiscontinued\toperations | — | 6 | (58) |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | — | 10 | (107) |
| Net\tincome | $1,261 | $1,106 | $838 |
| Earnings\tper\tshare\tfrom\tcontinuing\toperations: |  |  |  |
| Basic | $3.50 | $3.31 | $2.86 |
| Diluted | 3.45 | 3.26 | 2.82 |
| Income\t(Loss)\tper\tshare\tfrom\tdiscontinued\toperations: |  |  |  |
| Basic | — | $.03 | $(.33) |
| Diluted | — | .03 | (.32) |
| Earnings\tper\tshare: |  |  |  |
| Basic | $3.50 | $3.34 | $2.53 |
| Diluted | 3.45 | 3.29 | 2.50 |
| Average\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic | 360,675 | 331,350 | 330,361 |
| Diluted | 365,488 | 335,732 | 334,636 |

The	accompanying	notes	are	an	integral	part	of	these	consolidated	financial	statements.

# Consolidated	Statement	of	Condition

| As	of	December	31,<br>(Dollars	in	millions,	except	per	share	amounts) | 2007 | 2006 |
| :--- | :--- | :--- |
| Assets |  |  |
| Cash\tand\tdue\tfrom\tbanks | $4,733 | $2,368 |
| Interest-bearing\tdeposits\twith\tbanks | 5,579 | 5,236 |
| Securities\tpurchased\tunder\tresale\tagreements | 19,133 | 14,678 |
| Federal\tfunds\tsold | 4,540 | — |
| Trading\taccount\tassets | 589 | 785 |
| Investment\tsecurities\tavailable\tfor\tsale | 70,326 | 60,445 |
| Investment\tsecurities\theld\tto\tmaturity\t(fair\tvalue\tof\t$4,225\tand\t$4,484) | 4,233 | 4,547 |
| Loans\tand\tleases\t(less\tallowance\tof\t$18) | 15,784 | 8,928 |
| Premises\tand\tequipment\t(net\tof\taccumulated\tdepreciation\tof\t$2,650\tand\t$2,415) | 1,894 | 1,560 |
| Accrued\tincome\treceivable | 2,096 | 1,617 |
| Goodwill | 4,567 | 1,384 |
| Other\tintangible\tassets | 1,990 | 434 |
| Other\tassets | 7,079 | 5,371 |
| Total\tassets | $142,543 | $107,353 |
| Liabilities |  |  |
| Deposits: |  |  |
| Noninterest-bearing | $15,039 | $10,194 |
| Interest-bearing—U.S. | 14,790 | 1,272 |
| Interest-bearing—Non-U.S. | 65,960 | 54,180 |
| Total\tdeposits | 95,789 | 65,646 |
| Securities\tsold\tunder\trepurchase\tagreements | 14,646 | 19,147 |
| Federal\tfunds\tpurchased | 425 | 2,147 |
| Other\tshort-term\tborrowings | 5,557 | 2,835 |
| Accrued\ttaxes\tand\tother\texpenses | 4,392 | 3,143 |
| Other\tliabilities | 6,799 | 4,567 |
| Long-term\tdebt | 3,636 | 2,616 |
| Total\tliabilities | 131,244 | 100,101 |
| Commitments\tand\tcontingencies\t(note\t10) |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock,\tno\tpar:\tauthorized\t3,500,000\tshares;\tissued\tnone |  |  |
| Common\tstock,\t$1\tpar:\tauthorized\t750,000,000\tshares;\tissued\t398,366,000\tand\t337,126,000\tshares | 398 | 337 |
| Surplus | 4,630 | 399 |
| Retained\tearnings | 7,745 | 7,030 |
| Accumulated\tother\tcomprehensive\tloss | (575) | (224) |
| Treasury\tstock,\tat\tcost\t(12,082,000\tand\t4,688,000\tshares) | (899) | (290) |
| Total\tshareholders'\tequity | 11,299 | 7,252 |
| Total\tliabilities\tand\tshareholders'\tequity | $142,543 | $107,353 |

# Consolidated	Statement	of	Changes	in	Shareholders'	Equity

|  | COMMON	STOCK | COMMON	STOCK |  |  |  | TREASURY	STOCK |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | Accumulated\tOther |  |  |  |
|  |  |  |  | Retained | Comprehensive |  |  |  |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts, | Shares | Amount | Surplus | Earnings | (Loss)\tIncome | Shares | Amount | Total |
| shares\tin\tthousands) |  |  |  |  |  |  |  |  |
| Balance\tat\tDecember\t31,\t2004 | 337,126 | $337 | $289 | $5,590 | $92 | 3,481 | $(149) | $6,159 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  | 838 |  |  |  | 838 |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tavailable-for-sale |  |  |  |  |  |  |  |  |
| securities,\tnet\tof\trelated\ttaxes\tof\t$(150)\tand\treclassification |  |  |  |  |  |  |  |  |
| adjustment |  |  |  |  | (229) |  |  | (229) |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$(54) |  |  |  |  | (140) |  |  | (140) |
| Change\tin\tunrealized\tgains/losses\ton\thedges\tof\tnet\tinvestments\tin |  |  |  |  |  |  |  |  |
| non-U.S.\tsubsidiaries,\tnet\tof\trelated\ttaxes\tof\t$20 |  |  |  |  | 37 |  |  | 37 |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof |  |  |  |  |  |  |  |  |
| related\ttaxes\tof\t$6 |  |  |  |  | 9 |  |  | 9 |
| Total\tcomprehensive\tincome |  |  |  | 838 | (323) |  |  | 515 |
| Cash\tdividends\tdeclared—$.72\tper\tshare |  |  |  | (239) |  |  |  | (239) |
| Common\tstock\tacquired |  |  |  |  |  | 13,130 | (664) | (664) |
| Common\tstock\tissued\tunder\tSPACES |  |  | (73) |  |  | (8,712) | 418 | 345 |
| Common\tstock\tawards\tand\toptions\texercised,\tincluding\ttax\tbenefit |  |  |  |  |  |  |  |  |
| of\t$20 |  |  | 50 |  |  | (4,319) | 197 | 247 |
| Other |  |  |  |  |  | (79) | 4 | 4 |
| Balance\tat\tDecember\t31,\t2005 | 337,126 | 337 | 266 | 6,189 | (231) | 3,501 | (194) | 6,367 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  | 1,106 |  |  |  | 1,106 |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tavailable-for-sale |  |  |  |  |  |  |  |  |
| securities,\tnet\tof\trelated\ttaxes\tof\t$40\tand\treclassification |  |  |  |  |  |  |  |  |
| adjustment |  |  |  |  | 58 |  |  | 58 |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$56 |  |  |  |  | 124 |  |  | 124 |
| Change\tin\tunrealized\tgains/losses\ton\thedges\tof\tnet\tinvestments\tin |  |  |  |  |  |  |  |  |
| non-U.S.\tsubsidiaries,\tnet\tof\trelated\ttaxes\tof\t$(10) |  |  |  |  | (18) |  |  | (18) |
| Change\tin\tminimum\tpension\tliability,\tnet\tof\trelated\ttaxes\tof\t$2 |  |  |  |  | 4 |  |  | 4 |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof |  |  |  |  |  |  |  |  |
| related\ttaxes\tof\t$2 |  |  |  |  | 3 |  |  | 3 |
| Total\tcomprehensive\tincome |  |  |  | 1,106 | 171 |  |  | 1,277 |
| taxes\tof\t$(109) |  |  |  |  | (164) |  |  | (164) |
| Cash\tdividends\tdeclared—$.80\tper\tshare |  |  |  | (265) |  |  |  | (265) |
| Common\tstock\tacquired |  |  |  |  |  | 5,782 | (368) | (368) |
| Common\tstock\treceived\tunder\tCOVERS\tcontracts |  |  | 30 |  |  | 1,199 | (26) | 4 |
| Common\tstock\tawards\tand\toptions\texercised,\tincluding\ttax\tbenefit |  |  |  |  |  |  |  |  |
| of\t$43 |  |  | 103 |  |  | (5,782) | 300 | 403 |
| Other |  |  |  |  |  | (12) | (2) | (2) |
| Balance\tat\tDecember\t31,\t2006 | 337,126 | 337 | 399 | 7,030 | (224) | 4,688 | (290) | 7,252 |
| Adjustment\tfor\teffect\tof\tapplying\tprovisions\tof\tFASB\tStaff\tPosition |  |  |  |  |  |  |  |  |
| No.\tFAS\t13-2 |  |  |  | (226) |  |  |  | (226) |
| Adjusted\tbalance\tat\tJanuary\t1,\t2007 | 337,126 | 337 | 399 | 6,804 | (224) | 4,688 | (290) | 7,026 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  | 1,261 |  |  |  | 1,261 |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tavailable-for-sale |  |  |  |  |  |  |  |  |
| securities,\tnet\tof\trelated\ttaxes\tof\t$(276)\tand\treclassification |  |  |  |  |  |  |  |  |
| adjustment |  |  |  |  | (451) |  |  | (451) |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tfair\tvalue\thedges\tof |  |  |  |  |  |  |  |  |
| available-for-sale\tsecurities,\tnet\tof\trelated\ttaxes\tof\t$(37) |  |  |  |  | (55) |  |  | (55) |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$62 |  |  |  |  | 134 |  |  | 134 |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof |  |  |  |  |  |  |  |  |
| related\ttaxes\tof\t$(7) |  |  |  |  | (11) |  |  | (11) |
| Change\tin\tunrealized\tgains/losses\ton\thedges\tof\tnet\tinvestments\tin |  |  |  |  |  |  |  |  |
| non-U.S.\tsubsidiaries,\tnet\tof\trelated\ttaxes\tof\t$(4) |  |  |  |  | (8) |  |  | (8) |
| Change\tin\tminimum\tpension\tliability,\tnet\tof\trelated\ttaxes\tof\t$28 |  |  |  |  | 40 |  |  | 40 |
| Total\tcomprehensive\tincome |  |  |  | 1,261 | (351) |  |  | 910 |
| Cash\tdividends\tdeclared—$.88\tper\tshare |  |  |  | (320) |  |  |  | (320) |
| Common\tstock\tacquired |  |  |  |  |  | 13,369 | (1,002) | (1,002) |
| Common\tstock\tawards\tand\toptions\texercised,\tincluding\ttax\tbenefit |  |  |  |  |  |  |  |  |
| of\t$52 | 401 | — | 65 |  |  | (5,975) | 393 | 458 |
| Common\tstock\tissued\tin\tconnection\twith\tacquisition | 60,839 | 61 | 4,166 |  |  |  |  | 4,227 |
| Balance\tat\tDecember\t31,\t2007 | 398,366 | $398 | $4,630 | $7,745 | $(575) | 12,082 | $(899) | $11,299 |

# Consolidated	Statement	of	Cash	Flows

| Years	ended	December	31, | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Operating\tActivities: |  |  |  |
| Net\tincome | $1,261 | $1,106 | $838 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Non-cash\tadjustments\tfor\tdepreciation,\tamortization,\taccretion,\tprovision\tfor\tloan\tlosses\tand\tdeferred\tincome |  |  |  |
| tax\texpense | 130 | 385 | 499 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | — | (16) | 165 |
| Gain\ton\tsale\tof\tdivested\tbusiness | — | — | (16) |
| Securities\t(gains)\tlosses,\tnet | (7) | (15) | 1 |
| Change\tin\ttrading\taccount\tassets,\tnet | 195 | (179) | (19) |
| Other,\tnet | 1,360 | (300) | 1,015 |
| Net\tcash\tprovided\tby\toperating\tactivities | 2,939 | 981 | 2,483 |
| Investing\tActivities: |  |  |  |
| Net\t(increase)\tdecrease\tin\tinterest-bearing\tdeposits\twith\tbanks | (337) | 6,039 | 9,359 |
| Net\t(increase)\tdecrease\tin\tfederal\tfunds\tsold\tand\tsecurities\tpurchased\tunder\tresale\tagreements | (2,832) | (5,999) | 9,649 |
| Proceeds\tfrom\tsales\tof\tavailable-for-sale\tsecurities | 4,731 | 3,571 | 3,299 |
| Proceeds\tfrom\tmaturities\tof\tavailable-for-sale\tsecurities | 21,750 | 16,602 | 22,129 |
| Purchases\tof\tavailable-for-sale\tsecurities | (27,578) | (23,920) | (44,758) |
| Proceeds\tfrom\tmaturities\tof\theld-to-maturity\tsecurities | 859 | 1,590 | 1,132 |
| Purchases\tof\theld-to-maturity\tsecurities | (539) | (1,246) | (4,623) |
| Net\tincrease\tin\tloans | (6,226) | (2,464) | (1,801) |
| Proceeds\tfrom\tsale\tof\tdivested\tbusiness | — | — | 16 |
| Business\tacquisitions,\tnet\tof\tcash\tacquired | (647) | — | (43) |
| Purchases\tof\tequity\tinvestments\tand\tother\tlong-term\tassets | (192) | (168) | (55) |
| Purchases\tof\tpremises\tand\tequipment | (476) | (310) | (314) |
| Other | 95 | 114 | 58 |
| Net\tcash\tused\tin\tinvesting\tactivities | (11,392) | (6,191) | (5,952) |
| Financing\tActivities: |  |  |  |
| Net\tincrease\t(decrease)\tin\ttime\tdeposits | 4,158 | (1,261) | (5,341) |
| Net\tincrease\tin\tall\tother\tdeposits | 14,617 | 7,258 | 9,895 |
| Net\tdecrease\tin\tshort-term\tborrowings | (7,794) | (653) | (341) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt,\tnet\tof\tissuance\tcosts | 1,488 | — | 595 |
| Payments\tfor\tlong-term\tdebt\tand\tobligations\tunder\tcapital\tleases | (533) | (16) | (370) |
| Proceeds\tfrom\tSPACES,\tnet\tof\tissuance\tcosts | — | — | 345 |
| Purchases\tof\tcommon\tstock | (1,002) | (368) | (664) |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock\tfor\tstock\tawards\tand\toptions\texercised | 185 | 193 | 231 |
| Payments\tfor\tcash\tdividends | (301) | (259) | (232) |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 10,818 | 4,894 | 4,118 |
| Net\tincrease\t(decrease) | 2,365 | (316) | 649 |
| Cash\tand\tdue\tfrom\tbanks\tat\tbeginning\tof\tyear | 2,368 | 2,684 | 2,035 |
| Cash\tand\tdue\tfrom\tbanks\tat\tend\tof\tyear | $4,733 | $2,368 | $2,684 |
| Supplemental\tdisclosure: |  |  |  |
| Interest\tpaid | $3,403 | $3,177 | $1,965 |
| Income\ttaxes\tpaid | 593 | 533 | 331 |
| Non-cash\tinvestments\tin\tcapital\tleases\tand\tother\tpremises\tand\tequipment | 194 | 109 | 9 |
| Non-cash\tacquisitions\tof\tinvestment\tsecurities\tavailable\tfor\tsale | — | 1,464 | — |

# Notes	to	Consolidated	Financial	Statements

# Note	1.				Summary	of	Significant	Accounting	Policies

								The	accounting	and	financial	reporting	policies	of	State	Street	Corporation	conform	to	accounting	principles	generally	accepted	in	the	United	States	of	America, referred	to	as	"GAAP."	Unless	otherwise	indicated	or	unless	the	context	requires	otherwise,	all	references	in	these	Notes	to	Consolidated	Financial	Statements	to	"State Street,"	"we,"	"us,"	"our"	or	similar	references	mean	State	Street	Corporation	and	its	subsidiaries	on	a	consolidated	basis.	The	parent	company	is	a	financial	holding company	headquartered	in	Boston,	Massachusetts.	We	report	two	lines	of	business:

•Investment	Servicing	provides	services	for	U.S.	mutual	funds	and	collective	investment	funds,	corporate	and	public	retirement	plans,	insurance companies,	foundations,	endowments	and	other	investment	pools	worldwide.	Products	include	custody,	product-	and	participant-level	accounting;	daily pricing	and	administration;	master	trust	and	master	custody;	recordkeeping;	foreign	exchange,	brokerage	and	other	trading	services;	securities	finance; deposit	and	short-term	investment	facilities;	loans	and	lease	financing;	investment	manager	and	hedge	fund	manager	operations	outsourcing;	and performance,	risk	and	compliance	analytics	to	support	institutional	investors.

•Investment	Management	offers	a	broad	array	of	services	for	managing	financial	assets,	including	investment	management	and	investment	research services,	primarily	for	institutional	investors	worldwide.	These	services	include	passive	and	active	U.S.	and	non-U.S.	equity	and	fixed-income	strategies, and	other	related	services,	such	as	securities	finance.

								The	preparation	of	consolidated	financial	statements	requires	management	to	make	estimates	and	assumptions	in	the	application	of	certain	of	our	accounting policies	that	materially	affect	the	reported	amounts	of	assets,	liabilities,	revenue	and	expenses.	As	a	result	of	unanticipated	events	or	circumstances,	actual	results	could differ	from	those	estimates.	The	following	is	a	summary	of	our	significant	accounting	policies.

# Basis	of	Presentation:

								Our	consolidated	financial	statements	include	the	accounts	of	the	parent	company	and	its	majority-owned	subsidiaries,	including	its	principal	banking	subsidiary, State	Street	Bank	and	Trust	Company,	referred	to	as	"State	Street	Bank."	All	material	inter-company	transactions	and	balances	have	been	eliminated.	Certain	previously reported	amounts	have	been	reclassified	to	conform	to	current	year	presentation.

								We	consolidate	subsidiaries	in	which	we	hold	a	majority	of	the	voting	rights	or	exercise	control.	Investments	in	unconsolidated	subsidiaries,	recorded	in	other assets,	are	generally	accounted	for	using	the	equity	method	of	accounting	if	we	have	the	ability	to	exercise	significant	influence	over	the	operations	of	the	investee.	For investments	accounted	for	under	the	equity	method,	our	share	of	income	or	loss	is	recorded	in	processing	fees	and	other	revenue.	Investments	not	meeting	the	criteria	for equity	method	treatment	are	accounted	for	using	the	cost	method	of	accounting.

# Foreign	Currency	Translation:

								The	assets	and	liabilities	of	our	operations	with	functional	currencies	other	than	the	U.S.	dollar	are	translated	at	month-end	exchange	rates,	and	revenue	and expenses	are	translated	at	rates	that	approximate	average	monthly	exchange	rates.	Gains	or	losses	from	the	translation	of	the	net	assets	of	subsidiaries	with	functional currencies	other	than	the	U.S.	dollar,	net	of	related	taxes,	are	recorded	in	accumulated	other	comprehensive	income.

# Cash	and	Cash	Equivalents:

								For	purposes	of	the	consolidated	statement	of	cash	flows,	cash	equivalents	have	been	defined	as	cash	and	due	from	banks.

Securities	Purchased	Under	Resale	Agreements	and	Securities	Sold	Under	Repurchase	Agreements:

								U.S.	Treasury	and	federal	agency	securities,	referred	to	as	"U.S.	government	securities,"	purchased	under	resale	agreements	or	sold	under	repurchase	agreements are	treated	as	collateralized	financing	transactions,	and	are	recorded	in	our	consolidated	statement	of	condition	at	the	amounts	at	which	the	securities	will	be subsequently	resold	or	repurchased,	plus	accrued	interest.	Our	policy	is	to	take	possession	or	control	of	securities	underlying	resale	agreements,	allowing	borrowers	the right	of	collateral	substitution	and/or	short-notice	termination.	We	revalue	these	securities	daily	to	determine	if	additional	collateral	is	necessary	from	the	borrower	to protect	us	against	credit	exposure.	We	can	use	these	securities	as	collateral	for	repurchase	agreements.	For	securities	sold	under	repurchase	agreements	collateralized	by our	U.S.	government	securities	portfolio,	the	dollar	value	of	the	U.S.	government	securities	remains	in	investment	securities	in	our	consolidated	statement	of	condition. Where	a	master	netting	agreement	exists	or	both	parties	are	members	of	a	common	clearing	organization,	resale	and	repurchase	agreements	with	the	same	counterparty or	clearing	house	and	maturity	date	are	reported	on	a	net	basis.

# Investment	Securities	Available	for	Sale	and	Held	to	Maturity:

								Securities	held	in	our	investment	securities	portfolio	are	classified	at	the	time	of	purchase,	based	on	management's	intentions,	as	available	for	sale	or	held	to maturity.	Securities	available	for	sale	are	those	that	management	intends	to	hold	for	an	indefinite	period	of	time,	including	securities	used	as	part	of	our	asset	and	liability management	strategy	that	may	be	sold	in	response	to	changes	in	interest	rates,	pre-payment	risk,	liquidity	needs	or	other	similar	factors.	Debt	and	marketable	equity securities	classified	as	available	for	sale	are	reported	at	fair	value,	and	after-tax	net	unrealized	gains	and	losses	are	reported	in	accumulated	other	comprehensive	income, a	component	of	shareholders'	equity.	Gains	or	losses	on	sales	of	available-for-sale	securities	are	computed	using	the	specific	identification	method.	Securities	held	to maturity	are	debt	securities	that	management	has	the	positive	intent	and	ability	to	hold	to	maturity.	Securities	classified	as	held	to	maturity	are	reported	at	cost,	adjusted for	amortization	of	premiums	and	accretion	of	discounts.

								Management	reviews	the	fair	value	of	the	portfolio	at	least	quarterly,	and	evaluates	individual	securities	for	declines	in	fair	value	that	may	be	other	than	temporary, considering	factors	such	as	current	and	expected	future	interest	rates,	external	credit	ratings,	dividend	payments,	the	performance	of	underlying	collateral,	if	any,	the financial	health	of	the	issuer	and	other	pertinent	information,	including	current	developments	with	respect	to	the	issuer,	as	well	as	the	duration	of	the	decline	and management's	intent	and	ability	to	hold	the	security.	If	declines	are	deemed	other	than	temporary,	an	impairment	loss	is	recognized	and	the	amortized	cost	basis	of	the investment	security	is	written	down	to	its	current	fair	value,	which	becomes	the	new	cost	basis.	Other-than-temporary	unrealized	losses	on	available-for-sale	and	held-to- maturity	securities,	if	any,	are	recorded	as	a	reduction	of	processing	fees	and	other	revenue.

								Loans	are	generally	reported	at	the	principal	amount	outstanding,	net	of	the	allowance	for	loan	losses,	unearned	income,	and	any	net	unamortized	deferred	loan origination	fees.	Interest	revenue	is	recognized	using	the	interest	method	or	on	a	basis	approximating	a	level	rate	of	return	over	the	term	of	the	loan.	Fees	received	for providing	loan	commitments	and	letters	of	credit	that	we	anticipate	will	result	in	loans	typically	are	deferred	and	amortized	to	interest	revenue	over	the	life	of	the	related loan,

beginning	with	the	initial	borrowing.	Fees	on	commitments	and	letters	of	credit	are	amortized	to	processing	fees	and	other	revenue	over	the	commitment	period	when funding	is	not	known	or	expected.

								Loans	are	placed	on	non-accrual	status	when	they	become	60	days	past	due	as	to	either	principal	or	interest,	or	earlier	when,	in	the	opinion	of	management,	full collection	of	principal	or	interest	is	not	probable.	Loans	60	days	past	due,	but	considered	both	well	secured	and	in	the	process	of	collection,	are	treated	as	exceptions	and may	be	exempted	from	non-accrual	status.	When	we	place	a	loan	on	non-accrual	status,	the	accrual	of	interest	is	discontinued	and	previously	recorded	but	unpaid interest	is	reversed	and	generally	charged	against	net	interest	revenue.	For	loans	on	non-accrual	status,	revenue	is	recognized	on	a	cash	basis	after	recovery	of	principal, if	and	when	interest	payments	are	received.

								Leveraged	lease	investments	are	reported	at	the	aggregate	of	lease	payments	receivable	and	estimated	residual	values,	net	of	non-recourse	debt	and	unearned income.	Lease	residual	values	are	reviewed	regularly	for	other-than-temporary	impairment,	with	valuation	adjustments	recorded	currently	against	processing	fees	and other	revenue.	Unearned	income	is	recognized	to	yield	a	level	rate	of	return	on	the	net	investment	in	the	leases.	Gains	and	losses	on	residual	values	of	leased	equipment sold	are	recorded	in	processing	fees	and	other	revenue.

# Allowance	for	Loan	Losses:

								The	adequacy	of	the	allowance	for	loan	losses	is	evaluated	on	a	regular	basis	by	management.	Factors	considered	in	evaluating	the	adequacy	of	the	allowance include	previous	loss	experience,	current	economic	conditions	and	adverse	situations	that	may	affect	the	borrower's	ability	to	repay,	the	estimated	value	of	the	underlying collateral	and	the	performance	of	individual	credits	in	relation	to	contract	terms,	and	other	relevant	factors.	The	provision	for	loan	losses	charged	to	earnings	is	based upon	management's	estimate	of	the	amount	necessary	to	maintain	the	allowance	at	a	level	adequate	to	absorb	estimated	probable	credit	losses.

								Loans	are	charged	off	to	the	allowance	for	loan	losses	in	the	reporting	period	in	which	either	an	event	occurs	that	confirms	the	existence	of	a	loss	or	it	is	determined that	a	loan	or	a	portion	of	a	loan	is	not	collectible.	Recoveries	are	recorded	on	a	cash	basis.

								In	addition,	we	maintain	a	reserve	for	off-balance	sheet	credit	exposures	that	is	recorded	in	other	liabilities.	The	adequacy	of	this	reserve	is	subject	to	the	same considerations	and	review	as	the	allowance	for	loan	losses.	Provisions	to	change	the	level	of	this	reserve	are	recorded	in	other	operating	expenses.

# Premises	and	Equipment:

								Buildings,	leasehold	improvements,	computers,	software	and	other	equipment	are	carried	at	cost	less	accumulated	depreciation	and	amortization.	Depreciation	and amortization	recorded	in	operating	expenses	are	computed	using	the	straight-line	method	over	the	estimated	useful	lives	of	the	related	assets	or	the	remaining	terms	of the	leases,	generally	3	to	40	years.	Maintenance	and	repairs	are	charged	to	expense	as	incurred,	while	major	leasehold	improvements	are	capitalized	and	expensed	over their	estimated	useful	lives	or	terms	of	the	lease.	For	premises	held	under	leases	where	we	have	an	obligation	to	restore	the	facilities	to	their	original	condition	upon expiration	of	the	lease,	we	expense	the	anticipated	related	costs	over	the	term	of	the	lease.

								Costs	related	to	internal-use	software	development	projects	that	provide	significant	new	functionality	are	capitalized.	We	consider	projects	for	capitalization	that	are expected	to	yield	long-term	operational	benefits,	such	as	applications	that	result	in	operational	efficiencies	and/or	incremental	revenue	streams.	Software	customization costs	relating	to	specific	customer	enhancements	are	expensed	as	incurred.

# Goodwill	and	Other	Intangible	Assets:

								Goodwill	represents	the	excess	of	the	cost	of	an	acquisition	over	the	fair	value	of	the	net	tangible	and	other	intangible	assets	acquired.	Other	intangible	assets represent	purchased	assets	that	can	be	distinguished	from	goodwill	because	of	contractual	rights	or	because	the	asset	can	be	exchanged	on	its	own	or	in	combination with	a	related	contract,	asset	or	liability.	Goodwill	is	not	amortized,	but	is	subject	to	annual	impairment	tests.	Customer	relationship	intangible	assets	generally	are amortized	on	a	straight-line	basis	over	periods	ranging	from	twelve	to	twenty	years,	and	core	deposit	intangible	assets	over	twenty-two	years,	with	amortization	expense recorded	in	other	operating	expenses.	Impairment	of	goodwill	is	deemed	to	exist	if	the	carrying	value	of	a	reporting	unit,	including	its	allocation	of	goodwill	and	other intangible	assets,	exceeds	its	estimated	fair	value.	Impairment	of	other	intangibles	is	deemed	to	exist	if	the	balance	of	the	other	intangible	asset	exceeds	the	cumulative net	cash	inflows	related	to	the	asset	over	its	remaining	estimated	useful	life.	If	it	is	determined,	based	on	these	reviews,	that	goodwill	or	other	intangible	assets	are impaired,	the	value	of	the	goodwill	or	the	other	intangible	asset	is	written	down	through	a	charge	to	other	operating	expenses.

# Fee	and	Net	Interest	Revenue:

								Fees	from	investment	servicing,	investment	management,	securities	finance,	trading	services	and	certain	types	of	processing	fees	and	other	revenue	are	recorded based	on	estimates	or	specific	contractual	terms	as	transactions	occur	or	services	are	rendered,	provided	that	persuasive	evidence	exists,	the	price	to	the	customer	is	fixed or	determinable	and	collectibility	is	reasonably	assured.	Amounts	accrued	at	period-end	are	recorded	in	accrued	income	receivable	in	our	consolidated	statement	of condition.	Investment	management	performance	fees	are	recorded	when	earned,	based	on	predetermined	benchmarks	associated	with	the	applicable	fund's	performance. Interest	revenue	on	interest-earning	assets	and	interest	expense	on	interest-bearing	liabilities	is	recorded	based	on	the	effective	yield	of	the	related	financial	instrument.

# Employee	Benefits	Expense:

								Employee	benefits	expense	includes	prior	and	current	service	costs	of	pension	and	other	postretirement	benefit	plans,	which	are	accrued	on	a	current	basis,	as	well as	contributions	under	defined	contribution	savings	plans,	unrestricted	awards	under	other	employee	compensation	plans,	and	the	amortization	of	restricted	stock awards.

# Equity-Based	Compensation:

								We	record	compensation	expense,	equal	to	the	estimated	fair	value	of	employee	stock	options	on	the	grant	date,	on	a	straight-line	basis	over	the	options'	vesting period.	We	use	a	Black-Scholes	option-pricing	model	to	determine	the	fair	value	of	the	options	granted.

								On	January	1,	2006,	we	adopted	Statement	of	Financial	Accounting	Standards	No.	123	(revised	2004),	Share-Based	Payment.	This	standard	requires	the	fair	value of	all	share-based	payments	to	employees,	including	awards	made	prior	to	January	1,	2003,	to	be	recognized	in	the	consolidated	statement	of	income.	We	elected	to	use the	modified	prospective	method,	under	which	compensation	expense	is	recorded	over	the	remaining	vesting	period	for	only	the	portion	of	stock	awards	not	fully	vested as	of	January	1,	2006.	The	impact	of	adoption	of	the	standard	was	not	material	to	our	consolidated	financial	position	or	results	of	operations,	because	the	number	of options	granted	prior	to	January	1,	2003,	that	were	not	fully	vested	as	of	January	1,	2006,	was	not	significant.	In	addition,	we	elected	to	adopt	the	alternative	transition method	prescribed	by	Financial	Accounting	Standards	Board	Staff	Position	No.	FAS	123(R)-3,	and	reclassified	$86	million	of	tax	benefits	related	to	equity-based compensation	from	a	general	surplus	account	to	a	specifically	designated	surplus	account	within	shareholders'	equity.

								The	following	table	illustrates	the	pro	forma	effect	on	net	income	and	earnings	per	share	as	if	all	outstanding	and	unvested	stock	options	in	2005	were	accounted	for using	estimated	fair	value.

								We	use	an	asset	and	liability	approach	to	account	for	income	taxes.	Our	objective	is	to	recognize	the	amount	of	taxes	payable	or	refundable	for	the	current	year through	charges	or	credits	to	the	current	tax	provision,	and	to	recognize	deferred	tax	assets	and	liabilities	for	the	future	tax	consequences	resulting	from	temporary differences	between	the	amounts	reported	in	the	consolidated	financial	statements	and	their	respective	tax	bases.	The	measurement	of	tax	assets	and	liabilities	is	based on	enacted	tax	laws	and	applicable	tax	rates.	The	financial	statement	effects	of	a	tax	position	are	recognized	when	we	believe	it	more	likely	than	not	that	the	position	will be	sustained.	A	deferred	tax	valuation	allowance	is	established	if	it	is	considered	more	likely	than	not	that	all	or	a	portion	of	the	deferred	tax	assets	will	not	be	realized.

# Earnings	Per	Share:

								Basic	earnings	per	share	is	calculated	by	dividing	net	income	available	to	common	shareholders	by	the	weighted-average	number	of	common	shares	outstanding	for the	period,	which	excludes	unvested	shares	of	restricted	stock.	Diluted	earnings	per	share	is	calculated	by	dividing	net	income	available	to	common	shareholders	by	the weighted-average	number	of	common	shares	outstanding	for	the	period	and	the	shares	representing	the	dilutive	effect	of	stock	options	and	awards	and	other	equity- related	financial	instruments.	The	effect	of	stock	options	and	restricted	stock	outstanding	is	excluded	from	the	calculation	of	diluted	earnings	per	share	in	periods	in which	their	effect	would	be	antidilutive.

								We	are	involved	with	various	legal	forms	of	special	purpose	entities,	or	SPEs,	in	the	normal	course	of	our	business.

								We	use	trusts	to	structure	and	sell	certificated	interests	in	pools	of	tax-exempt	investment-grade	assets	principally	to	our	mutual	fund	customers.	These	trusts	are recorded	in	our	consolidated	financial	statements.	We	transfer	assets	to	these	trusts,	which	are	legally	isolated	from	us,	from	our	investment	securities	portfolio	at adjusted	book	value.	The	trusts	finance	the	acquisition	of	these	assets	by	selling	certificated	interests	issued	by	the	trusts	to	third-party	investors.	The	investment securities	of	the	trusts	are	carried	in	investments	securities	available	for	sale	at	fair	value.	The	certificated	interests	are	carried	in	other	short-term	borrowings	at	the amount	owed	to	the	third-party	investors.	The	interest	revenue	and	interest	expense	generated	by	the	investments	and	certificated	interests,	respectively,	are	recorded	in net	interest	revenue	when	earned	or	incurred.

								We	use	conduits	in	connection	with	an	asset-backed	commercial	paper	program	that	provides	short-term	investments	for	our	customers.	The	conduits,	which	are administered	by	us,	are	third-party	owned	and	are	structured	as	bankruptcy-remote	limited	liability	companies.	The	conduits	purchase	financial	assets	with	various	asset classifications	from	a	variety	of	third-parties	and	fund	those	purchases	by	issuing	commercial	paper.	We	do	not	sell	our	own	assets	to	these	conduits.	These	conduits typically	meet	the	definition	of	a	variable	interest	entity,	or	VIE,	as	defined	by	FASB	Interpretation	No.	46(R),	Consolidation	of	Variable	Interest	Entities	(revised December	2003)—an	interpretation	of	ARB	No.	51.	We	have	determined	that	we	are	not	the	primary	beneficiary	of	the	conduits,	as	defined	by	FIN	46(R),	and	do	not record	them	in	our	consolidated	financial	statements.	We	periodically	re-assess	this	determination,	using	a	financial	model,	referred	to	as	an	"expected	loss	model,"	to ensure	that	consolidation	is	not	required	pursuant	to	FIN	46(R).

								The	primary	beneficiary	is	the	party	that	has	one	or	more	variable	interests	that	will	absorb	a	majority	of	a	VIE's	expected	losses,	receive	a	majority	of	the	VIE's expected	residual	returns,	or	both.	If	we	were	to	determine	that	we	were	the	primary	beneficiary	of	the	conduits,	we	would	consolidate	them.	We	apply	the	expected	loss model	to	the	conduits	to	determine	the	primary	beneficiaries	of	conduits	meeting	the	definition	of	variable	interest	entities.	Variabilities	factored	into	the	model	include basis	risk	and	credit	risk,	which	are	then	allocated	to	the	variable	interest	holders	to	determine	which	of	those	variable	interest	holders	is	the	primary	beneficiary.	We hold	no	equity	ownership	interest	in	these	conduits.

								Investors	in	commercial	paper	issued	by	the	conduits	benefit	from	the	liquidity	support	provided	to	the	conduits,	the	majority	of	which	is	provided	by	us	in	the	form of	liquidity	asset	purchase	agreements	and	backup	liquidity	lines	of	credit.	We	also	provide	direct	credit	support	to	the	conduits	in	the	form	of	standby	letters	of	credit. Liquidity	asset	purchase	agreements,	backup	liquidity	lines	of	credit	and	standby	letters	of	credit	are	not	recorded	in	our	consolidated	financial	statements	but	are reported	as	off-balance	sheet	commitments.	We	receive	fees	for	providing	administrative	services	to	the	conduits,	as	well	as	liquidity	and	direct	credit	support,	all	of which	are	based	on	market	price	and	are	recorded	in	processing	fees	and	other	revenue	when	earned.

								We	manage	the	collateral	in	certain	third-party	investment	vehicles,	referred	to	as	CDOs,	which	structure	and	sell	debt	and	equity	securities	to	investors.	These CDOs	purchase	a	portfolio	of	diversified	assets	and	fund	these	asset	purchases	through	the	issuance	of	several	tranches	of	debt	and	equity,	the	repayment	and	return	of which	are	linked	to	the	performance	of	the	assets	in	the	CDO.	Typically,	our	involvement	is	only	as	collateral	manager.	We	may	also	invest	in	a	small	percentage	of	the debt	issued.	These	CDOs	typically	meet	the	definition	of	a	variable	interest	entity	as	defined	by	FIN	46(R).	We	have	determined	that	we	are	not	the	primary	beneficiary of	these	CDOs,	and	do	not	record	them	in	our	consolidated	financial	statements.	We	receive	fees	for	asset	management	services	provided	to	the	CDOs,	which	are	based on	market	price	and	are	recorded	in	processing	fees	and	other	revenue	when	earned.

# Derivative	Financial	Instruments:

								A	derivative	financial	instrument	is	a	financial	instrument	or	other	contract	which	has	one	or	more	underlying	and	one	or	more	notional	amounts,	no	initial	net investment,	or	a	smaller	initial	net	investment	than	would	be	expected	for	similar	types	of	contracts,	and	which	requires	or	permits	net	settlement.	Derivatives	that	we enter	into	include	forwards,	futures,	swaps,	options	and	other	instruments	with	similar	characteristics.

								We	record	derivatives	in	our	consolidated	statement	of	condition	at	their	fair	value.	On	the	date	a	derivative	contract	is	entered	into,	we	designate	the	derivative	as: (1)	a	hedge	of	the	fair	value	of	a	recognized	fixed-rate	asset	or	liability	or	of	an	unrecognized	firm	commitment	(a	"fair	value"	hedge);	(2)	a	hedge	of	a	forecasted transaction	or	of	the	variability	of	cash	flows	to	be	received	or	paid	related

to	a	recognized	variable-rate	asset	or	liability	(a	"cash	flow"	hedge);	(3)	a	foreign	currency	fair	value	or	cash	flow	hedge	(a	"foreign	currency"	hedge);	(4)	a	hedge	of	a	net investment	in	a	non-U.S.	operation;	or	(5)	held	for	trading	purposes	("trading"	instruments).

								Changes	in	the	fair	value	of	a	derivative	that	is	highly	effective—and	that	is	designated	and	qualifies	as	a	fair	value	hedge—are	recorded	currently	in	processing fees	and	other	revenue,	along	with	the	changes	in	fair	value	of	the	hedged	asset	or	liability	attributable	to	the	hedged	risk.	Changes	in	the	fair	value	of	a	derivative	that	is highly	effective—and	that	is	designated	and	qualifies	as	a	cash	flow	hedge—are	recorded,	net	of	tax,	in	other	comprehensive	income,	until	earnings	are	affected	by	the hedged	cash	flows	(e.g.,	when	periodic	settlements	on	a	variable-rate	asset	or	liability	are	recorded	in	earnings).	Cash	flow	hedge	ineffectiveness,	defined	as	the	extent	to which	the	changes	in	fair	value	of	the	derivative	exceed	the	variability	of	cash	flows	of	the	forecasted	transaction,	is	recorded	in	processing	fees	and	other	revenue.

								Changes	in	the	fair	value	of	a	derivative	that	is	highly	effective—and	that	is	designated	and	qualifies	as	a	foreign	currency	hedge—are	recorded	currently	either	in processing	fees	and	other	revenue	or	in	other	comprehensive	income,	net	of	tax,	depending	on	whether	the	hedge	transaction	meets	the	criteria	for	a	fair	value	or	a	cash flow	hedge.	If,	however,	a	derivative	is	used	as	a	hedge	of	a	net	investment	in	a	non-U.S.	operation,	its	changes	in	fair	value,	to	the	extent	effective	as	a	hedge,	are recorded,	net	of	tax,	in	the	foreign	currency	translation	component	of	other	comprehensive	income.	Lastly,	entire	changes	in	the	fair	value	of	derivatives	classified	as trading	instruments	are	recorded	in	trading	services	revenue.

								At	both	the	inception	of	the	hedge	and	on	an	ongoing	basis,	we	formally	assess	and	document	the	effectiveness	of	a	derivative	designated	as	a	hedge	in	offsetting changes	in	the	fair	value	of	hedged	items	and	the	likelihood	that	the	derivative	will	be	an	effective	hedge	in	future	periods.	We	discontinue	hedge	accounting prospectively	when	we	determine	that	the	derivative	will	not	remain	effective	in	offsetting	changes	in	fair	value	or	cash	flows	of	the	underlying	risk	being	hedged,	the derivative	expires,	terminates	or	is	sold,	or	management	discontinues	the	hedge	designation.

								Unrealized	gains	and	losses	on	foreign	exchange	and	interest-rate	contracts	are	reported	at	fair	value	in	the	consolidated	statement	of	condition	as	a	component	of other	assets	and	other	liabilities,	respectively,	on	a	gross	basis,	except	where	such	gains	and	losses	arise	from	contracts	covered	by	qualifying	master	netting	agreements.

								In	December	2007,	the	FASB	issued	SFAS	No.	160,	Noncontrolling	Interests	in	Consolidated	Financial	Statements,	an	amendment	of	ARB	No.	51.	SFAS	No.	160 will	change	the	accounting	and	reporting	for	minority	interests,	which	will	be	recharacterized	as	"noncontrolling	interests"	and	classified	as	a	component	of	equity.	This new	consolidation	method	will	significantly	change	the	accounting	for	transactions	with	minority	interest	holders.	The	provisions	of	this	standard	are	effective	beginning January	1,	2009.	We	are	currently	evaluating	the	potential	impact	of	adoption	of	this	standard	on	our	consolidated	financial	position	and	results	of	operations.

								In	December	2007,	the	FASB	issued	SFAS	No.	141	(revised	2007),	Business	Combinations.	SFAS	No.	141(R)	will	significantly	change	the	accounting	for	business combinations	in	a	number	of	areas,	including	the	treatment	of	contingent	consideration,	contingencies,	acquisition	costs,	in-process	research	and	development	costs	and restructuring	costs.	In	addition,	under	SFAS	No.	141(R),	changes	in	deferred	tax	asset	valuation	allowances	and	acquired	income	tax	uncertainties	in	a	business combination	after	the	measurement	period	will	impact	income	tax	expense.	The	provisions	of	this	standard	are	effective	beginning	January	1,	2009.	We	are	currently evaluating	the	potential	impact	of	adoption	of	this	new	standard	on	our	consolidated	financial	position	and	results	of	operations.

								In	February	2007,	the	FASB	issued	SFAS	No.	159,	The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities—Including	an	amendment	of	FASB Statement	No.	115.	This	new	standard	is	designed	to	reduce	complexity	in	accounting	for	financial	instruments	and	lessen	earnings	volatility	caused	by	measuring	related assets	and	liabilities	differently.	The	standard	creates	presentation	and	disclosure	requirements	designed	to	aid	comparisons	between	companies	that	use	different measurement	attributes	for	similar	types	of	assets	and	liabilities.	The	standard,	which	is	expected	to	expand	the	use	of	fair	value	measurement,	permits	entities	to	choose to	measure	many	financial	instruments	and	certain	other	items	at	fair	value,	with	unrealized	gains	and	losses	on	those	assets	and	liabilities	recorded	in	earnings.	The	fair value	option	may	be	applied	on	a	financial	instrument	by	financial	instrument	basis,	with	a	few	exceptions,	and	is	irrevocable	for	those	financial	instruments	once applied.	The	fair	value	option	may	only	be	applied	to	entire	financial	instruments,	not	portions	of	instruments.

								The	standard	does	not	eliminate	disclosures	required	by	SFAS	No.	107,	Disclosures	About	Fair	Value	of	Financial	Instruments,	or	SFAS	No.	157,	Fair	Value Measurements,	the	latter	of	which	is	described	below.	The	provisions	of	the	standard	were	effective	for	our	consolidated	financial	statements	beginning	January	1,	2008. We	have	not	elected	the	fair	value	option	under	SFAS	No.	159,	but	may	elect	to	do	so	in	future	periods.

								In	September	2006,	the	FASB	issued	SFAS	No.	157,	Fair	Value	Measurements.	This	new	standard	defines	fair	value,	establishes	a	framework	for	measuring	fair value	in	conformity	with	GAAP,	and	expands	disclosures	about	fair	value	measurements.	Prior	to	this	standard,	there	were	varying	definitions	of	fair	value,	and	the limited	guidance	for	applying	those	definitions	under	GAAP	was	dispersed	among	the	many	accounting	pronouncements	that	require	fair	value	measurements.	The	new standard	defines	fair	value	as	the	exchange	price	that	would	be	received	for	an	asset	or	paid	to	transfer	a	liability	(an	exit	price)	in	the	principal	or	most	advantageous market	for	the	asset	or	liability	in	an	orderly	transaction	between	market	participants	on	the	measurement	date.

								The	standard	applies	under	other	accounting	pronouncements	that	require	or	permit	fair	value	measurements,	since	the	FASB	previously	concluded	in	those accounting	pronouncements	that	fair	value	is	the	relevant	measurement	attribute.	As	a	result,	the	new	standard	does	not	establish	any	new	fair	value	measurements	itself, but	applies	to	other	accounting	standards	that	require	the	use	of	fair	value	for	recognition	or	disclosure.	In	particular,	the	framework	in	the	new	standard	will	be	required for	financial	instruments	for	which	fair	value	is	elected,	such	as	under	the	newly	issued	SFAS	No.	159,	discussed	above.

								The	new	standard	requires	companies	to	disclose	the	fair	value	of	its	financial	instruments	according	to	a	fair	value	hierarchy.	The	fair	value	hierarchy	ranks	the quality	and	reliability	of	the	information	used	to	determine	fair	values.	Financial	instruments	carried	at	fair	value	will	be	classified	and	disclosed	in	one	of	the	three categories	in	accordance	with	the	hierarchy.	The	three	levels	of	the	fair	value	hierarchy	are:

•level	1:	Quoted	market	prices	for	identical	assets	or	liabilities	in	active	markets;

•level	2:	Observable	market-based	inputs	or	unobservable	inputs	corroborated	by	market	data;	and

•level	3:	Unobservable	inputs	that	are	not	corroborated	by	market	data.

								In	addition,	the	standard	requires	enhanced	disclosure	with	respect	to	the	activities	of	those	financial	instruments	classified	within	the	level	3	category,	including	a roll-forward	analysis	of	fair	value	balance	sheet	amounts	for	each	major	category	of	assets	and	liabilities	and	disclosure	of	the	unrealized	gains	and	losses	for	level	3 positions	held	at	the	reporting	date.

								The	standard	is	intended	to	increase	consistency	and	comparability	in	fair	value	measurements	and	disclosures	about	fair	value	measurements,	and	encourages entities	to	combine	the	fair	value	information	disclosed	under	the	standard	with	the	fair	value	information	disclosed	under	other	accounting	pronouncements,	including SFAS	No.	107,	Disclosures	about	Fair	Value	of	Financial	Instruments,	where	practicable.	The	provisions	of	this	standard	were	effective	beginning	January	1,	2008.	Our adoption	of	the	standard's	provisions	did	not	materially	impact	our	consolidated	financial	position	and	results	of	operations.	We	will	provide	the	disclosures	required	by the	new	standard	in	our	first	quarter	2008	Form	10-Q.

								In	July	2006,	the	FASB	issued	FASB	Staff	Position	No.	FAS	13-2,	Accounting	for	a	Change	or	Projected	Change	in	the	Timing	of	Cash	Flows	Relating	to	Income Taxes	Generated	by	a	Leveraged	Lease	Transaction.	The	Staff	Position,	the	provisions	of	which	were	applied	on	January	1,	2007,	requires	that	the	recognition	of	lease income	over	the	term	of	a	lease	be	recalculated	if	a	change	in	the	expected	timing	of	tax-related	cash	flows	occurs.	Our	application	of	the	Staff	Position's	provisions	to certain	of	our	leveraged	leases	resulted	in	a	cumulative	after-tax	reduction	of	the	beginning	balance	of	retained	earnings	on	January	1,	2007	of	approximately $226	million.	Future	income	from	the	affected	leases	is	expected	to	increase	over	the	remaining	terms	of	the	affected	leases	by	an	amount	approximately	equal	to	the after-tax	reduction.

								In	July	2006,	to	improve	comparability	in	the	reporting	of	income	tax	assets	and	liabilities	in	the	absence	of	guidance	in	existing	income	tax	accounting	standards, the	FASB	issued	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes—an	interpretation	of	FASB	Statement	No.	109.	Generally,	this	Interpretation clarifies	the	accounting	for	uncertainty	in	income	taxes	recognized	in	a	company's	financial	statements	in	accordance	with	existing	income	tax	accounting	standards,	and prescribes	certain	thresholds	and	attributes	for	the	financial	statement	recognition	and	measurement	of	tax	positions	taken	or	expected	to	be	taken	in	a	tax	return.	The provisions	of	the	Interpretation	were	applied	on	January	1,	2007,	and	did	not	have	a	material	impact	on	our	consolidated	financial	position	or	results	of	operations. Disclosures	required	by	the	Interpretation	are	provided	in	note	20.

# Note	2.				Acquisitions	and	Divestitures

								On	July	2,	2007,	we	completed	our	acquisition	of	Investors	Financial	Services	Corp.,	a	bank	holding	company	based	in	Boston,	Massachusetts	with	approximately $17	billion	in	total	assets	and	approximately	$1.9	trillion	in	assets	under	custody.	We	acquired	Investors	Financial	in	order	to	enhance	our	position	as	a	worldwide service	provider	to	institutional	investors.	We	exchanged	approximately	60.8	million	shares	of	our	common	stock,	with	an	aggregate	value	of	approximately	$4.2	billion, for	all	of	the	outstanding	common	stock	of	Investors	Financial.	Financial	results	of	the	acquired	Investors	Financial	business	are	included	in	our	consolidated	financial statements	beginning	on	July	2,	2007.

								As	presented	in	the	following	table,	the	purchase	price	was	allocated	to	the	assets	acquired	and	the	liabilities	assumed	based	on	their	fair	values	at	the	acquisition date.	Customer	relationship	and	core	deposit	intangible	assets	are	being	amortized	on	a	straight-line	basis	over	20	years	and	22	years,	respectively.	Additional information	about	goodwill	and	other	intangible	assets	is	in	note	5.

(1) The	value	per	share	of	State	Street	common	stock	exchanged	with	Investors	Financial	shareholders	was	based	on	a	five-day	average	closing	share	price	for	two days	before	and	two	days	after	the	announcement	date	of	February	5,	2007.

								The	following	table	presents	pro	forma	combined	consolidated	results	of	operations	of	State	Street	and	Investors	Financial	as	though	the	acquisition	had	been completed	on	January	1,	2006.

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |
| Total\tfee\trevenue | $6,966 | $5,822 |
| Net\tinterest\trevenue | 1,832 | 1,274 |
| Gains\ton\tsales\tof\tavailable-for-sale\tinvestment\tsecurities,\tnet | 7 | 18 |
| Total\trevenue | 8,805 | 7,114 |
| Total\toperating\texpenses | 6,831 | 5,187 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 1,974 | 1,927 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 666 | 721 |
| Income\tfrom\tcontinuing\toperations | $1,308 | $1,206 |
| Earnings\tper\tshare\tfrom\tcontinuing\toperations: |  |  |
| Basic | $3.35 | $3.08 |
| Diluted | 3.30 | 3.04 |
| Average\tshares\toutstanding\t(in\tthousands): |  |  |
| Basic | 390,565 | 390,901 |
| Diluted | 396,734 | 396,881 |

								During	the	second	half	of	2007,	in	connection	with	the	acquisition,	we	recorded	merger	and	integration	costs	of	approximately	$198	million	in	our	consolidated statement	of	income.	These	costs	consisted	only	of	direct	and	incremental	costs	to	integrate	the	acquired	Investors	Financial	business	into	our	operations.	These	costs	do not	include	on-going	expenses	of	the	combined	organization.

								In	connection	with	the	acquisition,	we	recorded	liabilities	for	exit	and	termination	costs	related	to	the	acquired	Investors	Financial	business	of	approximately $67	million.	These	costs	were	recorded	as	part	of	the	purchase	price,	and	resulted	in	additional	goodwill.	Payment	of	liabilities	associated	with	contract	terminations	and severance	is	expected	to	be	substantially	completed	by	the	end	of	2008.	The	liability	related	to	lease	abandonments	will	be	amortized	over	the	term	of	the	related	leases, which	is	approximately	twelve	years.

								The	following	table	presents	activity	related	to	these	liabilities	for	2007.

| (In	millions) | Contract<br>terminations | Severance | Lease<br>abandonments | Total |
| :--- | :--- | :--- | :--- | :--- |
| Balance\ton\tJuly\t2,\t2007 | $10 | $26 | $31 | $67 |
| Payments | — | 6 | — | 6 |
| Balance\tat\tend\tof\tyear | $10 | $20 | $31 | $61 |

								In	March	2007,	we	completed	our	acquisition	of	Currenex,	Inc.,	an	independently	owned	electronic	foreign	exchange	trading	platform.	We	paid	approximately $564	million,	net	of	liabilities	assumed,	and	recorded	the	following	significant	assets:	goodwill—$437	million;	customer	relationship	and	other	intangible	assets— $174	million;	and	other	tangible	assets—$25	million.	The	customer	relationship	and	other	intangible	assets	are	being	amortized	on	a	straight-line	basis	over	periods ranging	from	eight	to	twelve	years.	Financial	results	of	Currenex	are	included	in	the	accompanying	consolidated	financial	statements	beginning	on	March	2,	2007.

								During	the	first	quarter	of	2006,	we	agreed	to	a	plan	of	sale	to	finalize	the	divestiture	of	our	ownership	interest	in	Bel	Air	Investment	Advisors	LLC,	and	recorded income	of	approximately	$16	million,	or	$10	million	after-tax,	related	to	the	finalization	of	legal,	selling	and	other	costs	recorded	in	connection	with	the	divestiture.	We completed	the	divestiture	in	July	2006.

# Note	3.				Investment	Securities

|  | Amortized<br>Cost | Gross<br>Unrealized<br>Gains | Losses | Fair<br>Value | Amortized<br>Cost | Gross<br>Unrealized<br>Gains | Losses | Fair<br>Value |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |  |  |  |
| Available\tfor\tsale: |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $8,163 | $32 | $14 | $8,181 | $7,701 | $89 | $89 | $7,612 |
| Mortgage-backed\tsecurities | 14,631 | 54 | 100 | 14,585 | 11,685 | $15 | 246 | 11,454 |
| Asset-backed\tsecurities | 26,100 | 2 | 1,033 | 25,069 | 25,646 | 28 | 40 | 25,634 |
| Collateralized\tmortgage\tobligations | 12,018 | 41 | 167 | 11,892 | 8,538 | 17 | 79 | 8,476 |
| State\tand\tpolitical\tsubdivisions | 5,756 | 79 | 22 | 5,813 | 3,740 | 20 | 11 | 3,749 |
| Other\tdebt\tinvestments | 4,041 | 27 | 27 | 4,041 | 3,043 | 7 | 23 | 3,027 |
| Money-market\tmutual\tfunds | 243 | — | — | 243 | 201 | — | — | 201 |
| Other\tequity\tsecurities | 479 | 24 | 1 | 502 | 269 | 24 | 1 | 292 |
| Total | $71,431 | $259 | $1,364 | $70,326 | $60,823 | $111 | $489 | $60,445 |
| Held\tto\tmaturity: |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $757 | $9 | $1 | $765 | $846 | $15 | $15 | $831 |
| Mortgage-backed\tsecurities | 940 | 7 | 6 | 941 | 1,084 | $5 | 17 | 1,072 |
| Collateralized\tmortgage\tobligations | 2,190 | 5 | 24 | 2,171 | 2,357 | 5 | 41 | 2,321 |
| Other\tinvestments | 346 | 2 | — | 348 | 260 | 1 | 1 | 260 |
| Total | $4,233 | $23 | $31 | $4,225 | $4,547 | $11 | $74 | $4,484 |

								Aggregate	investment	securities	carried	at	$39.84	billion	and	$23.28	billion	at	December	31,	2007	and	2006,	respectively,	were	designated	as	pledged	for	public and	trust	deposits,	short-term	borrowings	and	for	other	purposes	as	provided	by	law.

								Gross	unrealized	losses	on	investment	securities	on	a	pre-tax	basis	consisted	of	the	following	as	of	December	31,	2007:

|  | Fair	Value | Gross<br>Unrealized<br>Losses | Fair	Value | Gross<br>Unrealized<br>Losses | Fair	Value | Gross<br>Unrealized<br>Losses |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |
| Direct\tobligations | $2,414 | $11 | $1,350 | $4 | $3,764 | $15 |
| Mortgage-backed\tsecurities | 2,501 | 19 | 6,682 | 87 | 9,183 | 106 |
| Asset-backed\tsecurities | 2,277 | 46 | 20,965 | 987 | 23,242 | 1,033 |
| Collateralized\tmortgage\tobligations | 2,603 | 53 | 7,388 | 138 | 9,991 | 191 |
| State\tand\tpolitical\tsubdivisions | 1,010 | 20 | 134 | 2 | 1,144 | 22 |
| Other\tdebt\tinvestments | 758 | 9 | 928 | 18 | 1,686 | 27 |
| Other\tequity\tsecurities | 18 | 1 | — | — | 18 | 1 |
| Total | $11,581 | $159 | $37,447 | $1,236 | $49,028 | $1,395 |

								As	described	in	note	1,	management	periodically	reviews	the	investment	securities	portfolio	to	determine	if	other-than-temporary	impairment	has	occurred.	This review	encompasses	all	investment	securities	and	includes	such	quantitative	factors	as	current	and	expected	future	interest	rates,	the	length	of	time	the	cost	basis	has exceeded	the	fair	value	and	the	severity	of	the	impairment	measured	as	the	ratio	of	fair	value	to	amortized	cost,	and	includes	all	investment	securities	for	which	we	have issuer-specific	concerns	regardless	of	quantitative	factors.	After	a	full	review	of	all	investment	securities,	taking	into	consideration	current	economic	conditions,	adverse situations	that	might	affect	our	ability	to	fully	collect	interest	and	principal,	the	timing	of	future	payments,	the	credit	quality	and	performance	of	the	underlying	collateral of	asset-backed	securities,	and	other	relevant	factors,	management	considers	the	aggregate	decline	in	fair	value	and	the	resulting	gross	unrealized	losses	of	$1.40	billion on	2,702	securities	at	December	31,	2007	to	be	temporary.	The	losses	are	not	considered	to	be	the	result	of	any	material	changes	in	the	credit	characteristics	of	the investment	securities.	Management	has	the	ability	and	the	intent	to	hold	the	securities	until	recovery	in	market	value.

								Gross	gains	and	losses	realized	from	sales	of	available-for-sale	securities	were	as	follows	for	the	years	indicated:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Gross\tgains | $24 | $33 | $9 |
| Gross\tlosses | 17 | 18 | 10 |
| Net\tgains\t(losses) | $7 | $15 | $(1) |

								Contractual	maturities	of	debt	investment	securities	were	as	follows	as	of	December	31,	2007:

|  | Under	1<br>Year | 1	to	5<br>Years | 6	to	10<br>Years | Over	10<br>Years |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |
| Available\tfor\tsale: |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |
| Direct\tobligations | $5,683 | $1,072 | $520 | $906 |
| Mortgage-backed\tsecurities | 116 | 1,384 | 4,152 | 8,933 |
| Asset-backed\tsecurities | 1,304 | 11,321 | 8,223 | 4,221 |
| Collateralized\tmortgage\tobligations | 170 | 3,156 | 3,617 | 4,949 |
| State\tand\tpolitical\tsubdivisions | 370 | 1,997 | 1,644 | 1,802 |
| Other\tinvestments | 1,686 | 1,405 | 906 | 44 |
| Total | $9,329 | $20,335 | $19,062 | $20,855 |
| Held\tto\tmaturity: |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |
| Direct\tobligations | $256 | $501 |  |  |
| Mortgage-backed\tsecurities | — | 30 | $329 | $581 |
| Collateralized\tmortgage\tobligations | — | 725 | 970 | 495 |
| Other\tinvestments | 163 | 119 | 61 | 3 |
| Total | $419 | $1,375 | $1,360 | $1,079 |

								The	maturities	of	asset-backed	securities,	mortgage-backed	securities	and	collateralized	mortgage	obligations	are	based	upon	expected	principal	payments.

# Note	4.				Loans	and	Lease	Financing

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Commercial\tand\tfinancial: |  |  |
| U.S. | $9,402 | $3,480 |
| Non-U.S. | 4,420 | 3,137 |
| Lease\tfinancing: |  |  |
| U.S. | 396 | 415 |
| Non-U.S. | 1,584 | 1,914 |
| Total\tloans | 15,802 | 8,946 |
| Less\tallowance\tfor\tloan\tlosses | (18) | (18) |
| Net\tloans | $15,784 | $8,928 |

								Aggregate	securities	settlement	advances	and	overdrafts	included	in	commercial	and	financial	loans	in	the	table	above	were	$11.65	billion	and	$5.69	billion	at December	31,	2007	and	2006,	respectively.

								The	components	of	the	net	investment	in	leveraged	leases	were	as	follows	as	of	December	31:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Net\trental\tincome\treceivable | $3,264 | $3,272 |
| Estimated\tresidual\tvalues | 222 | 196 |
| Unearned\tincome | (1,506) | (1,139) |
| Investment\tin\tleveraged\tleases | 1,980 | 2,329 |
| Less\trelated\tdeferred\tincome\ttaxes | (1,177) | (1,779) |
| Net\tinvestment\tin\tleveraged\tleases | $803 | $550 |

								Changes	in	the	allowance	for	loan	losses	were	as	follows	for	the	years	ended	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Balance\tat\tbeginning\tof\tyear | $18 | $18 | $18 |
| Provision\tfor\tloan\tlosses | — | — | — |
| Reclassification | — | — | — |
| Balance\tat\tend\tof\tyear | $18 | $18 | $18 |

# Note	5.				Goodwill	and	Other	Intangible	Assets

								Changes	in	the	carrying	amount	of	goodwill	were	as	follows	for	the	years	ended	December	31:

|  | Investment<br>Servicing | Investment<br>Management | Total |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Balance\tat\tDecember\t31,\t2005 | $1,330 | $7 | $1,337 |
| Foreign\tcurrency\ttranslation\tadjustments | 46 | 1 | 47 |
| Balance\tat\tDecember\t31,\t2006 | 1,376 | 8 | 1,384 |
| Acquisition\tof\tCurrenex | 437 | — | 437 |
| Acquisition\tof\tInvestors\tFinancial | 2,710 | — | 2,710 |
| Other\tacquisitions | 26 | — | 26 |
| Foreign\tcurrency\ttranslation\tadjustments | 10 | — | 10 |
| Balance\tat\tDecember\t31,\t2007 | $4,559 | $8 | $4,567 |

								The	gross	carrying	amount	and	accumulated	amortization	of	other	intangible	assets	were	as	follows	as	of	December	31:

|  | Gross<br>Carrying<br>Amount | Accumulated<br>Amortization | Net<br>Carrying<br>Amount | Gross<br>Carrying<br>Amount | Accumulated<br>Amortization | Net<br>Carrying<br>Amount |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |  |
| Customer\trelationships | $1,695 | $(253) | $1,442 | $564 | $(170) $ | 394 |
| Core\tdeposits | 500 | (11) | 489 | — | — | — |
| Other | 75 | (16) | 59 | 50 | (10) | 40 |
| Total | $2,270 | $(280) | $1,990 | $614 | $(180) $ | 434 |

# Note	6.				Other	Assets

								Other	assets	consisted	of	the	following	as	of	December	31:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments | $4,513 | $3,060 |
| Equity\tinvestments\tin\tunconsolidated\tsubsidiaries | 398 | 336 |
| Prepaid\tpension\texpense | 93 | 53 |
| Other | 2,075 | 1,922 |
| Total | $7,079 | $5,371 |

# Note	8.				Short-Term	Borrowings

								Our	short-term	borrowings	include	securities	sold	under	repurchase	agreements,	federal	funds	purchased	and	other	short-term	borrowings,	including	commercial paper.	Collectively,	short-term	borrowings	had	weighted-average	interest	rates	of	4.36%	and	4.46%	for	the	years	ended	December	31,	2007	and	2006,	respectively.

								The	following	table	reflects	the	amounts	outstanding	and	weighted-average	interest	rates	of	the	primary	components	of	short-term	borrowings	as	of	and	for	the years	ended	December	31:

|  | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |  |  |
| Balance\tat\tDecember\t31 | $425 | $2,147 | $1,204 | $14,646 | $19,147 | $20,895 |
| Maximum\toutstanding\tat\tany\tmonth\tend | 5,007 | 8,040 | 3,982 | 20,108 | 23,024 | 24,690 |
| Average\toutstanding\tduring\tthe\tyear | 1,667 | 2,777 | 2,306 | 16,132 | 20,883 | 22,432 |
| Weighted\taverage\tinterest\trate\tat\tend\tof\tyear | 3.06% | 5.18% | 4.08% | 3.40% | 4.43% | 3.79% |
| Weighted\taverage\tinterest\trate\tduring\tthe\tyear | 5.15 | 5.04 | 3.23 | 4.35 | 4.38 | 2.73 |

								The	obligations	to	repurchase	securities	sold	are	recorded	as	a	liability	in	our	consolidated	statement	of	condition.	U.S.	government	securities	with	a	fair	value	of $5.48	billion	underlying	the	repurchase	agreements	remained	in	investment	securities.	Information	about	these	U.S.	government	securities	and	the	related	repurchase agreements,	including	accrued	interest,	as	of	December	31,	2007,	is	presented	in	the	following	table.	The	table	excludes	repurchase	agreements	collateralized	with securities	purchased	under	resale	agreements.

|  | Amortized<br>Cost | Fair	Value | Amortized<br>Cost | Rate |
| :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |
| Overnight\tmaturity | $5,395 | $5,479 | $5,292 | 3.40% |

								During	2005,	we	entered	into	an	agreement	with	a	clearing	organization	that	enables	us	to	net	all	securities	purchased	under	resale	agreements	and	sold	under repurchase	agreements	with	counterparties	that	are	also	members	of	this	organization.	As	a	result	of	netting,	the	average	balances	of	securities	purchased	under	resale agreements	and	securities	sold	under	repurchase	agreements	were	each	reduced	by	$13.38	billion	for	2007	and	$6.41	billion	for	2006.

								Other	short-term	borrowings	at	December	31,	2007	and	2006,	included	$3.08	billion	and	$1.79	billion,	respectively,	of	certificated	interests	related	to	our	tax- exempt	investment	program,	which	is	discussed	in	note	11.

								We	maintain	a	commercial	paper	program	under	which	we	can	issue	up	to	$3	billion	with	original	maturities	of	up	to	270	days	from	the	date	of	issue.	At December	31,	2007	and	2006,	$2.36	billion	and	$998	million,	respectively,	of	commercial	paper	were	outstanding.	In	addition,	State	Street	Bank	has	authority	to	issue bank	notes	up	to	an	aggregate	of	$750	million	with	original	maturities	ranging	from	14	days	to	five	years.	At	December	31,	2007	and	2006,	no	notes	payable	were outstanding,	and	at	December	31,	2007,	all	$750	million	was	available	for	issuance.

								State	Street	Bank	maintains	a	line	of	credit	of	CAD	$800	million,	or	approximately	$805	million,	to	support	its	Canadian	securities	processing	operations.	The	line of	credit	has	no	stated	termination

date	and	is	cancelable	by	either	party	with	prior	notice.	At	December	31,	2007,	no	balance	was	due	on	this	line	of	credit.

| Floating-rate	subordinated	notes	due	to	State	Street	Capital	Trust	IV	in	2067 | $800 |  |
| :--- | :--- | :--- |
| 8.035%\tsubordinated\tnotes\tdue\tto\tState\tStreet\tCapital\tTrust\tB\tin\t2027 | — | $309 |
|  | — | 206 |
| Floating-rate\tsubordinated\tnotes\tdue\tto\tState\tStreet\tCapital\tTrust\tI\tin\t2028(2) | 155 | 155 |
| 9.77%\tsubordinated\tnotes\tdue\tto\tInvestors\tCapital\tTrust\tI\tin\t2027 | 25 | — |
| Parent\tcompany\tand\tnon-bank\tsubsidiary\tissuances: |  |  |
| Long-term\tcapital\tlease | 486 | 501 |
| 5.375%\tnotes\tdue\t2017 | 450 | — |
| 7.65%\tsubordinated\tnotes\tdue\t2010(1) | 304 | 294 |
| Floating-rate\tnotes\tdue\t2012 | 250 | — |
| 7.35%\tnotes\tdue\t2026 | 150 | 150 |
| 9.50%\tmortgage\tnote\tdue\t2009 | 3 | 6 |
| State\tStreet\tBank\tissuances: |  |  |
| 5.25%\tsubordinated\tnotes\tdue\t2018(1) | 413 | 396 |
| 5.30%\tsubordinated\tnotes\tdue\t2016 | 400 | 399 |
| Floating-rate\tsubordinated\tnotes\tdue\t2015(2) | 200 | 200 |
| Total\tlong-term\tdebt | $3,636 | $2,616 |

(1) We	have	entered	into	various	interest-rate	swap	contracts	to	modify	our	interest	expense	on	certain	subordinated	notes	from	a	fixed	rate	to	a	floating	rate.	These swaps	are	recorded	as	fair	value	hedges,	and	at	December	31,	2007	and	2006,	we	recorded	an	increase	of	$19	million	and	a	decrease	of	$9	million,	respectively, in	the	carrying	value	of	long-term	debt.

(2) We	have	entered	into	interest-rate	swaps,	which	are	recorded	as	cash	flow	hedges,	to	modify	our	floating-rate	interest	expense	on	the	subordinated	notes	due 2028	and	2015	to	a	fixed	rate.

# See	note	15	for	additional	information	about	derivatives.

								We	maintain	an	effective	universal	shelf	registration	that	allows	for	the	offering	and	sale	of	debt	securities,	capital	securities,	common	stock,	depositary	shares	and preferred	stock,	and	warrants	to	purchase	such	securities,	including	any	shares	into	which	the	preferred	stock	and	depositary	shares	may	be	convertible,	or	any combination	thereof.

# Statutory	Business	Trusts:

								As	of	December	31,	2007,	we	had	three	statutory	business	trusts,	State	Street	Capital	Trusts	I	and	IV,	and	Investors	Capital	Trust	I,	which	as	of	December	31, 2007,	collectively	had	issued	$975	million	of	cumulative	quarterly	income	trust	preferred	capital	securities.

								Proceeds	received	by	the	trusts	from	their	capitalization	and	from	their	capital	securities	issuances	are	invested	in	junior	subordinated	debentures	issued	by	the parent	company.	The	junior	subordinated	debentures	are	the	sole	assets	of	the	trusts.	The	trusts	are	wholly-owned	by	us;	however,	we	do	not	consolidate	the	trusts	under existing	accounting	standards.

								Payments	made	by	the	trusts	on	the	capital	securities	are	dependent	on	our	payments	made	to	the	trusts	on	the	junior	subordinated	debentures.	Our	fulfillment	of these	commitments	has	the	effect	of	providing	a	full,	irrevocable	and	unconditional	guarantee	of	the	trusts'	obligations	under	the	capital	securities.	While	the	capital securities	issued	by	the	trusts	are	not	recorded	in	our	consolidated	statement	of	condition,	the	junior	subordinated	debentures	qualify	for	inclusion	in	tier	1	regulatory capital	under	federal	regulatory	capital	guidelines.	Information	about	restrictions	on	our	ability	to	obtain	funds	from	our	subsidiary	banks	is	in	note	14.

								Interest	paid	on	the	debentures	is	recorded	in	interest	expense.	Distributions	on	the	capital	securities	are	payable	from	interest	payments	received	on	the	debentures and	are	due	quarterly	by	State	Street	Capital	Trusts	I	and	IV,	subject	to	deferral	for	up	to	five	years	under	certain	conditions.	The	capital	securities	are	subject	to mandatory	redemption	in	whole	at	the	stated	maturity	upon	repayment	of	the	debentures,	with	an	option	by	us	to	redeem	the	debentures	at	any	time	upon	the	occurrence of	certain	tax	events	or	changes	to	tax	treatment,	investment	company	regulation	or	capital	treatment;	or	at	any	time	after	May	15,	2008	for	the	Capital	Trust	I	securities and	any	time	after	June	15,	2012	for	the	Capital	Trust	IV	securities.	Redemptions	are	subject	to	federal	regulatory	approval.

								In	April	2007,	State	Street	Capital	Trust	IV,	a	Delaware	statutory	trust	wholly	owned	by	the	parent	company,	issued	$800	million	in	aggregate	liquidation	amount of	floating-rate	capital	securities	and	used	the	proceeds	to	purchase	a	like	amount	of	floating-rate	junior	subordinated	debentures	from	the	parent	company.	The	capital securities	represent	an	undivided	preferred	beneficial	interest	in	those	junior	subordinated	debentures,	which	are	the	only	assets	of	the	trust.	The	junior	subordinated debentures	have	an	initial	scheduled	maturity	in	June	2037	and	an	initial	final	repayment	date	in	June	2067,	each	of	which	we	may	extend	by	ten	years	in	specified circumstances.	In	accordance	with	existing	accounting	standards,	we	did	not	record	the	trust	in	our	consolidated	financial	statements.	The	junior	subordinated	debentures qualify	for	inclusion	in	tier	1	regulatory	capital.

								In	connection	with	the	issuance	of	the	junior	subordinated	debentures,	the	parent	company	entered	into	a	replacement	capital	covenant	in	which	it	agreed,	for	the benefit	of	the	holders	of	its	junior	subordinated	debentures	due	2028	underlying	the	floating-rate	capital	securities	issued	by	State	Street	Capital	Trust	I,	that	it	will	not repay,	redeem	or	repurchase,	and	that	none	of	its	subsidiaries	will	purchase,	any	part	of	the	newly	issued	debentures	or	the	floating-rate	capital	securities	on	or	before June	1,	2047,	unless	the	repayment,	redemption	or	repurchase	is	made	from	the	net	cash	proceeds	of	the	issuance	of	certain	qualified	securities	and	pursuant	to	the	other terms	and	conditions	set	forth	in	the	covenant.

								In	July	2007,	we	redeemed	an	aggregate	of	$500	million	of	unsecured	junior	subordinated	debentures	issued	by	the	parent	company	to	two	of	our	statutory	business trusts,	State	Street	Capital	Trusts	A	and	B,	composed	of	$200	million	of	7.94%	debentures	issued	in	1996	and	$300	million	of	8.035%	debentures	issued	in	1997.	We paid	the	trusts	the	outstanding	amount	on	the	debentures	plus	accrued	interest	and	an	aggregate	redemption	premium	of	approximately	$20	million.	This	redemption premium	was	included	in	the	merger	and	integration	costs	which	were	recorded	during	the	second	half	of	2007	in	connection	with	the	Investors	Financial	acquisition.

								In	January	2008,	State	Street	Capital	Trust	III,	a	Delaware	statutory	trust	wholly	owned	by	the	parent	company,	issued	$500	million	in	aggregate	liquidation amount	of	8.250%	fixed-to-floating	rate	normal	automatic	preferred	enhanced	capital	securities,	referred	to	as	"normal	APEX,"	and	used	the

proceeds	to	purchase	a	like	amount	of	remarketable	6.001%	junior	subordinated	debentures	due	2042	from	the	parent	company.	In	addition,	the	trust	entered	into	stock purchase	contracts	with	the	parent	company	under	which	the	trust	agrees	to	purchase,	and	the	parent	company	agrees	to	sell,	on	the	stock	purchase	date,	a	like	amount	in aggregate	liquidation	amount	of	the	parent	company's	non-cumulative	perpetual	preferred	stock,	series	A,	$100,000	liquidation	preference	per	share.	State	Street	will make	contract	payments	to	the	trust	at	an	annual	rate	of	2.249%	of	the	stated	amount	of	$100,000	per	stock	purchase	contract.	The	normal	APEX	are	beneficial	interests in	the	trust.	The	trust	will	pass	through,	as	distributions	on	or	the	redemption	price	of	normal	APEX,	amounts	that	it	receives	on	its	assets	that	are	the	corresponding assets	for	the	normal	APEX.	The	corresponding	assets	for	each	normal	APEX,	$1,000	liquidation	amount,	initially	are	$1,000	principal	amount	of	the	6.001%	junior subordinated	debentures	and	a	1/100 ,	or	a	$1,000,	interest	in	a	stock	purchase	contract	for	the	purchase	and	sale	of	one	share	of	the	Series	A	preferred	stock	for th $100,000.	The	stock	purchase	date	is	expected	to	be	March	15,	2011,	but	it	may	occur	on	an	earlier	date	or	as	late	as	March	15,	2012.	From	and	after	the	stock	purchase date,	the	corresponding	asset	for	each	normal	APEX	will	be	a	1/100 ,	or	a	$1,000,	interest	in	one	share	of	the	Series	A	preferred	stock.	In	accordance	with	existing th accounting	standards,	we	did	not	record	the	trust	in	our	consolidated	financial	statements.	The	junior	subordinated	debentures	qualify	for	inclusion	in	tier	1	regulatory capital.

# Parent	Company	and	Non-Bank	Subsidiary	Issuances:

								At	December	31,	2007	and	2006,	$486	million	and	$501	million,	respectively,	were	included	in	long-term	debt	related	to	the	capital	leases	for	One	Lincoln	Street and	the	One	Lincoln	Street	parking	garage.	See	note	18	for	additional	information.	The	7.65%	subordinated	notes	due	2010	qualify	as	tier	2	regulatory	capital	under federal	regulatory	capital	guidelines.	The	7.35%	notes	are	unsecured.	The	9.50%	mortgage	note	was	fully	collateralized	by	property	at	December	31,	2005.	The scheduled	principal	payments	for	the	next	two	years	are	$3	million	for	2008	and	less	than	$1	million	for	2009,	at	which	time	the	debt	will	be	entirely	paid	off.

								In	April	2007,	the	parent	company	issued	$700	million	of	senior	debt,	consisting	of	$250	million	of	floating-rate	notes	due	in	2012	and	$450	million	of	5.375% notes	due	in	2017.	Interest	on	the	floating-rate	notes	will	be	paid	quarterly,	and	on	the	5.375%	notes	will	be	paid	semi-annually.	Neither	the	floating-rate	notes	nor	the 5.375%	notes	may	be	redeemed	prior	to	maturity.	Both	the	floating-rate	notes	and	the	5.375%	notes	are	unsecured.

# State	Street	Bank	Issuances:

								State	Street	Bank	has	authority	to	issue	up	to	an	aggregate	of	$1	billion	of	subordinated	fixed-rate,	floating-rate	or	zero-coupon	bank	notes	with	a	maturity	of	five	to fifteen	years.	With	respect	to	the	5.25%	subordinated	bank	notes	due	2018,	State	Street	Bank	is	required	to	make	semi-annual	interest	payments	on	the	outstanding principal	balance	of	the	notes	on	April	15	and	October	15	of	each	year,	and	the	notes	qualify	for	inclusion	in	tier	2	regulatory	capital.

								With	respect	to	the	5.30%	subordinated	notes	due	2016	and	the	floating-rate	subordinated	notes	due	2015,	State	Street	Bank	is	required	to	make	semi-annual interest	payments	on	the	outstanding	principal	balance	of	the	5.30%	notes	on	January	15	and	July	15	of	each	year	beginning	in	July	2006,	and	quarterly	interest payments	on	the	outstanding	principal	balance	of	the	floating-rate	notes	on	March	8,	June	8,	September	8	and	December	8	of	each	year	beginning	in	March	2006.	The notes	qualify	for	inclusion	in	tier	2	regulatory	capital.

# Note	10.				Commitments	and	Contingencies

# Off-Balance	Sheet	Commitments	and	Contingencies:

								Credit-related	financial	instruments	include	indemnified	securities	financing,	unfunded	commitments	to	extend	credit	or	purchase	assets	and	standby	letters	of credit.	The	total	potential	loss	on	unfunded	commitments,	standby	letters	of	credit	and	securities	finance	indemnifications	is	equal	to	the	total	contractual	amount,	which does	not	consider	the	value	of	any	collateral.

								The	following	is	a	summary	of	the	contractual	amount	of	credit-related,	off-balance	sheet	financial	instruments	at	December	31.	Amounts	reported	do	not	reflect participations	to	independent	third	parties.

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Indemnified\tsecurities\tfinancing | $558,368 | $506,032 |
| Liquidity\tasset\tpurchase\tagreements | 35,339 | 30,251 |
| Unfunded\tcommitments\tto\textend\tcredit | 17,533 | 16,354 |
| Standby\tletters\tof\tcredit | 4,711 | 4,926 |

								On	behalf	of	our	customers,	we	lend	their	securities	to	creditworthy	brokers	and	other	institutions.	In	certain	circumstances,	we	may	indemnify	our	customers	for the	fair	market	value	of	those	securities	against	a	failure	of	the	borrower	to	return	such	securities.	Collateral	funds	received	in	connection	with	our	securities	finance services	are	held	by	us	as	agent	and	are	not	recorded	in	our	consolidated	statement	of	condition.	We	require	the	borrowers	to	provide	collateral	in	an	amount	equal	to	or in	excess	of	100%	of	the	fair	market	value	of	the	securities	borrowed.	The	borrowed	securities	are	revalued	daily	to	determine	if	additional	collateral	is	necessary.	In	this regard,	we	held,	as	agent,	cash	and	U.S.	government	securities	totaling	$572.93	billion	and	$527.37	billion	as	collateral	for	indemnified	securities	on	loan	at December	31,	2007	and	2006,	respectively.

								Approximately	82%	of	the	unfunded	commitments	to	extend	credit	and	liquidity	asset	purchase	agreements	expire	within	one	year	from	the	date	of	issue.	Since many	of	the	commitments	are	expected	to	expire	or	renew	without	being	drawn	upon,	the	total	commitment	amounts	do	not	necessarily	represent	future	cash requirements.

								In	the	normal	course	of	business,	we	provide	liquidity	and	credit	enhancements	to	asset-backed	commercial	paper	programs,	referred	to	as	"conduits."	These conduits	are	described	in	note	11.	The	commercial	paper	issuances	and	commitments	of	the	conduits	to	provide	funding	are	supported	by	liquidity	asset	purchase agreements	and	backup	liquidity	lines	of	credit,	the	majority	of	which	are	provided	by	us.	In	addition,	we	provide	direct	credit	support	to	the	conduits	in	the	form	of standby	letters	of	credit.	Our	commitments	under	liquidity	asset	purchase	agreements	and	back-up	lines	of	credit	totaled	$28.37	billion	at	December	31,	2007,	and	are included	in	the	preceding	table.	Our	commitments	under	standby	letters	of	credit	totaled	$1.04	billion	at	December	31,	2007,	and	are	also	included	in	the	preceding table.

								Deterioration	in	asset	performance	or	certain	other	factors	affecting	the	liquidity	of	the	commercial	paper	may	shift	the	asset	risk	from	the	commercial	paper investors	to	us	as	the	liquidity	or	credit	enhancement	provider.	In	addition,	the	conduits	may	need	to	draw	upon	the	back-up	facilities	to	repay	maturing	commercial paper.	In	these	instances,	we	would	either	acquire	the	assets	of	the	conduits	or	make	loans	to	the	conduits	secured	by	the	conduits'	assets.

								In	the	normal	course	of	business,	we	offer	products	that	provide	book	value	protection	primarily	to	plan	participants	in	stable	value	funds	of	postretirement	defined contribution	benefit	plans,	particularly	401(k)	plans.	The	book	value	protection	is	provided	on	portfolios	of	intermediate,	investment	grade	fixed-income	securities,	and is	intended	to	provide	safety	and	stable	growth	of	principal	invested.	The	protection	is	intended	to	cover	any	shortfall	in	the	event	that	a	significant	number	of	plan participants

withdraw	funds	when	book	value	exceeds	market	value	and	the	liquidation	of	the	assets	is	not	sufficient	to	redeem	the	participants.	To	manage	our	exposure,	we	impose significant	restrictions	and	constraints	on	the	timing	and	cause	of	the	withdrawals,	the	manner	in	which	the	portfolio	is	liquidated	and	the	funds	are	accessed,	and	the investment	parameters	of	the	underlying	portfolio.	These	constraints,	combined	with	structural	protections,	are	designed	to	provide	adequate	cushion	and	guard	against payments	even	under	extreme	stress	scenarios.	As	of	December	31,	2007	and	2006,	the	notional	amount	of	these	guarantees	totaled	$44.99	billion	and	$38.37	billion, respectively.	As	of	December	31,	2007,	we	have	not	made	a	payment	under	these	products,	and	management	believes	that	the	probability	of	payment	under	these guarantees	is	remote.

								In	the	normal	course	of	business,	we	hold	assets	under	custody	and	management	in	a	custodial	or	fiduciary	capacity.	Management	conducts	regular	reviews	of	its responsibilities	in	this	regard	and	considers	the	results	in	preparing	the	consolidated	financial	statements.	In	this	regard,	in	the	opinion	of	management,	no	contingent liabilities	existed	at	December	31,	2007,	that	would	have	had	a	material	adverse	effect	on	State	Street's	consolidated	financial	position	or	results	of	operations.

# Legal	Proceedings:

								Several	customers	have	filed	litigation	claims	against	us,	some	of	which	are	putative	class	actions	purportedly	on	behalf	of	customers	invested	in	certain	of	State Street	Global	Advisors',	or	"SSgA's",	active	fixed-income	strategies.	These	claims	related	to	investment	losses	in	one	or	more	of	SSgA's	strategies	that	included	sub- prime	investments.	In	December	2007,	we	established	a	reserve	of	approximately	$625	million	to	address	legal	exposure	associated	with	the	under-performance	of certain	active	fixed-income	strategies	managed	by	SSgA	and	customer	concerns	as	to	whether	the	execution	of	these	strategies	was	consistent	with	the	customers' investment	intent.	These	strategies	were	adversely	impacted	by	exposure	to,	and	the	lack	of	liquidity	in,	sub-prime	mortgage	markets	that	resulted	from	the	disruption	in the	global	securities	markets	during	the	second	half	of	2007.	After	payments	for	settlement	agreements,	the	reserve	totaled	approximately	$609	million	at	December	31, 2007.

								We	are	involved	in	various	industry-related	and	other	regulatory,	governmental	and	law	enforcement	inquiries	and	subpoenas,	as	well	as	legal	proceedings including	the	proceedings	related	to	SSgA's	active	fixed-income	strategies	referenced	above,	that	arise	in	the	normal	course	of	business.	In	the	opinion	of	management, after	discussion	with	counsel,	these	regulatory,	governmental	and	law	enforcement	inquiries	and	subpoenas	and	legal	proceedings	can	be	defended	or	resolved	without	a material	adverse	effect	on	our	consolidated	financial	position	or	results	of	operations	in	future	periods.

# Tax	Contingencies:

								In	the	normal	course	of	business,	we	are	subject	to	challenges	from	U.S.	and	non-U.S.	income	tax	authorities	regarding	the	amount	of	taxes	due.	These	challenges may	result	in	adjustments	to	the	timing	or	amount	of	taxable	income	or	deductions	or	the	allocation	of	income	among	tax	jurisdictions.

								As	a	result	of	its	review	of	our	1997	-	1999	income	tax	returns,	the	IRS	proposed	to	disallow	tax	losses	resulting	from	leveraged	leases	known	as	lease-in,	lease- out,	or	LILO,	transactions.	We	appealed	the	disallowance	and	finalized	a	settlement	with	the	IRS	during	the	fourth	quarter	of	2007.	We	had	sufficient	reserves	to	cover the	final	settlement	agreement.

								Currently,	the	IRS	is	reviewing	our	2000	-	2003	income	tax	returns.	During	those	years,	we	entered	into	leveraged	leases	known	as	sale-in,	lease-out,	or	SILO, transactions,	which	the	IRS	has	since	classified	as	tax	shelters.	The	IRS	has	proposed	to	disallow	tax	losses	resulting	from	these	leases.	We	believe	that	we	reported	the tax	effects	of	all	SILO	lease	transactions	properly	based	upon	applicable	statutes,	regulations	and	case	law	in	effect	at	the	time	we	entered	into	them,	and	we	expect	to appeal	the	disallowance.

								While	it	is	unclear	whether	we	will	be	able	to	reach	an	acceptable	resolution	with	the	IRS,	management	believes	we	are	sufficiently	accrued	as	of	December	31, 2007	for	tax	exposures,	including	exposures	related	to	SILO	transactions,	and	related	interest	expense.	In	future	periods,	if	management	revises	its	evaluation	of	this	tax position,	the	effect	of	the	revision	will	be	recorded	in	income	tax	expense	in	that	period.	In	note	20,	information	is	provided	with	respect	to	our	application	of	the provisions	of	FASB	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes,	to	tax	positions	for	certain	of	our	leveraged	leases	for	which	the	timing	of	our tax	deductions	is	uncertain.

# Note	11.				Securitizations	and	Variable	Interest	Entities

# Tax-Exempt	Investment	Programs:

								In	the	normal	course	of	business,	we	structure	and	sell	certificated	interests	in	pools	of	tax-exempt	investment-grade	assets,	principally	to	our	mutual	fund customers.	We	structure	these	pools	as	partnership	trusts,	and	the	trusts	are	recorded	in	our	consolidated	statement	of	condition	as	municipal	securities	available	for	sale and	related	short-term	borrowings.	We	may	also	provide	liquidity	and	re-marketing	services	to	the	trusts.

								We	transfer	assets	to	the	trusts	from	our	investment	securities	portfolio	at	adjusted	book	value,	and	the	trusts	finance	the	acquisition	of	these	assets	by	selling certificated	interests	issued	by	the	trusts	to	third-party	investors	and	to	State	Street	as	residual	holder.	These	transfers	do	not	meet	the	de-recognition	criteria	of	SFAS No.	140,	Accounting	for	the	Transfers	and	Servicing	of	Financial	Assets	and	Extinguishments	of	Liabilities,	and	therefore	are	recorded	in	our	consolidated	financial statements.	The	trusts	had	a	weighted-average	life	of	approximately	8.6	years	at	December	31,	2007,	compared	to	approximately	4.9	years	at	December	31,	2006.	Under separate	agreements,	we	provide	standby	bond	purchase	agreements	to	these	trusts,	which	obligate	State	Street	to	acquire	the	certificated	interests	at	par	value	in	the event	that	the	re-marketing	agent	is	unable	to	place	the	certificated	interests	with	investors.	Our	obligations	as	standby	bond	purchase	agreement	provider	terminate	in the	event	of	the	following	credit	events:	payment	default,	bankruptcy	of	issuer	or	credit	enhancement	provider,	imposition	of	taxability,	or	downgrade	of	an	asset	held by	the	trust	below	investment	grade.	Our	commitments	to	the	trusts	under	these	standby	bond	purchase	agreements	totaled	$3.21	billion	at	December	31,	2007,	none	of which	were	utilized	at	period-end.	In	the	event	that	our	obligations	under	these	agreements	are	triggered,	no	material	impact	to	our	consolidated	financial	position	or results	of	operations	is	expected	to	occur,	because	the	bonds	are	already	recorded	at	fair	value	in	our	consolidated	statement	of	condition.

								We	established	our	first	asset-backed	commercial	paper	program	in	1992,	primarily	to	satisfy	the	demand	from	our	institutional	customers,	particularly	mutual	fund customers,	for	commercial	paper	for	their	money	market	funds.	Currently,	we	administer	four	third-party	owned,	multi-seller	asset-backed	commercial	paper	programs, referred	to	as	"conduits,"	that	purchase	financial	instruments,	predominantly	securities,	from	the	capital	markets.	These	conduits,	which	are	structured	as	special purpose,	bankruptcy-remote	entities,	provide	our	customers	with	short-term	investment	products	for	cash	management	and	other	investment	purposes.	Our	relationship with	the	conduits	is	contractual.	We	hold	no	direct	or	indirect	equity	ownership	in	these	entities.

								Under	FIN	46(R),	the	conduits	meet	the	definition	of	variable	interest	entities.	In	applying	the	provisions	of	FIN	46(R),	we	apply	a	financial	model,	referred	to	as	an "expected	loss	model,"	to	the	activities	of	the	conduits	to	determine	the	primary	beneficiaries	of	the	conduits.	As	a	result	of	application	of	this	model,	we	concluded	that we	were	not	the	primary	beneficiary	of	the	conduits,	as	defined	by	FIN	46(R),	and	as	a	result,	we	do	not	record	these	conduits	in	our	consolidated	financial	statements. The	conduits	have	third-party	investors	who	hold	subordinated	debt,	referred	to	as	"first-

loss	notes,"	issued	by	the	conduits.	These	investors	are	in	a	first-loss	position	and	bear	the	majority	of	the	expected	losses,	as	defined	by	FIN	46(R),	of	the	conduits.	We re-perform	our	expected	loss	model	at	least	quarterly,	and	more	frequently	if	specific	events	occur.

								During	the	second	half	of	2007,	as	a	result	of	disruption	in	the	global	fixed-income	securities	markets,	we	reviewed	the	underlying	assumptions	incorporated	in	our FIN	46(R)	expected	loss	model.	We	concluded	as	of	December	31,	2007,	that	our	model	assumptions	were	appropriate	and	were	reflective	of	market	participant assumptions,	and	appropriately	considered	the	probability	of,	and	potential	for,	the	recurrence	of	recent	events.	At	December	31,	2007	and	December	31,	2006,	total assets	in	these	unconsolidated	conduits	were	$28.76	billion	and	$25.25	billion,	respectively.	Our	off-balance	commitments	to	the	conduits	are	disclosed	in	note	10.

								The	conduit	structure	is	not	designed	to	distribute	interest-rate	and/or	foreign	currency	risk	to	commercial	paper	investors	or	the	subordinated	note	holders. Accordingly,	the	conduits	take	measures	to	mitigate	these	risks	through	the	use	of	derivative	financial	instruments.	These	derivatives	are	generally	with	State	Street Bank	as	a	counterparty,	and	are	based	upon	market	observable	rates	and	indices.	Among	the	most	significant	derivatives	are	basis	swaps,	whereby	the	conduit	receives its	cost	of	funds	and	pays	LIBOR	plus	a	spread	to	State	Street	Bank.	This	structure	mitigates	a	portion	of	the	risk	of	erosion	in	the	expected	spread	between	the	conduits' cost	of	funds	and	the	respective	currency	LIBOR	rate.

# Collateralized	Debt	Obligations:

								We	manage	a	series	of	collateralized	debt	obligations,	referred	to	as	"CDOs."	A	CDO	is	a	managed	investment	vehicle	which	purchases	a	portfolio	of	diversified assets.	A	CDO	funds	purchases	through	the	issuance	of	several	tranches	of	debt	and	equity,	the	repayment	and	return	of	which	are	linked	to	the	performance	of	the assets	in	the	CDO.	Typically,	our	involvement	is	as	collateral	manager.	We	may	also	invest	in	a	small	percentage	of	the	debt	issued.	These	entities	typically	meet	the definition	of	a	variable	interest	entity	as	defined	by	FIN	46(R).	We	are	not	the	primary	beneficiary	of	these	CDOs,	as	defined	by	FIN	46(R),	and	do	not	record	these CDOs	in	our	consolidated	financial	statements.	At	December	31,	2007	and	2006,	total	assets	in	these	CDOs	were	$6.73	billion	and	$3.48	billion,	respectively.	We	did not	acquire	or	transfer	any	investment	securities	to	a	CDO	during	2007	or	2006.

# Note	12.				Shareholders'	Equity

								In	March	2007,	our	Board	of	Directors	authorized	the	purchase	of	up	to	15	million	shares	of	common	stock	for	general	corporate	purposes,	including	mitigating	the dilutive	impact	of	shares	issued	under	employee	benefit	plans,	in	addition	to	its	previous	authorization	in	2006	of	up	to	15	million	shares,	of	which	12.2	million	shares remained	available	for	purchase	at	December	31,	2006.	We	generally	employ	third-party	broker-dealers	to	acquire	shares	on	the	open	market	in	connection	with	our stock	purchase	programs.

								In	addition,	our	common	shares	may	be	acquired	for	other	deferred	compensation	plans,	held	by	an	external	trustee,	that	are	not	part	of	the	common	stock	purchase program.	As	of	December	31,	2007,	on	a	cumulative	basis,	approximately	396,500	shares	have	been	purchased	and	are	held	in	trust.	These	shares	are	recorded	as treasury	stock	in	our	consolidated	statement	of	condition.

								During	2007,	2006	and	2005,	we	purchased	and	recorded	as	treasury	stock	a	total	of	13.4	million	shares,	5.8	million	shares	and	13.1	million	shares,	respectively,	at an	average	historical	cost	per	share	of	approximately	$75,	$63	and	$51,	respectively.

								Accumulated	other	comprehensive	(loss)	income	consisted	of	the	following	components	as	of	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Foreign\tcurrency\ttranslation | $331 | $197 | $73 |
| Unrealized\tgain\t(loss)\ton\thedges\tof\tnet\tinvestments\tin\tnon-U.S.\tsubsidiaries | (15) | (7) | 11 |
| Unrealized\tloss\ton\tavailable-for-sale\tsecurities | (678) | (227) | (285) |
| Unrealized\tloss\ton\tfair\tvalue\thedges\tof\tavailable-for-sale\tsecurities | (55) | — | — |
| Minimum\tpension\tliability | (146) | (186) | (26) |
| Unrealized\tloss\ton\tcash\tflow\thedges | (12) | (1) | (4) |
| Total | $(575) | $(224) | $(231) |

								For	the	year	ended	December	31,	2007,	we	realized	net	gains	of	$7	million	on	sales	of	available-for-sale	securities.	Unrealized	losses	of	$32	million	were	included in	other	comprehensive	income	at	December	31,	2006,	net	of	deferred	taxes	of	$19	million,	related	to	these	sales.

								For	the	year	ended	December	31,	2005,	we	realized	net	losses	of	$1	million	on	sales	of	available-for-sale	securities.	Unrealized	gains	of	$1	million	were	included	in other	comprehensive	income	at	December	31,	2004,	net	of	deferred	taxes	of	less	than	$1	million,	related	to	these	sales.

# Note	13.				Equity-Based	Compensation

								We	have	a	2006	Equity	Incentive	Plan,	with	20,000,000	shares	of	common	stock	approved	for	issuance	for	stock	and	stock-based	awards,	including	stock	options, stock	appreciation	rights,	restricted	stock,	deferred	stock	and	performance	awards.	In	addition,	up	to	8,000,000	shares	from	our	1997	Equity	Incentive	Plan,	that	were available	to	issue	or	become	available	due	to	cancellations	and	forfeitures,	may	be	awarded	under	the	2006	Plan.	The	1997	Plan	expired	on	December	18,	2006.	As	of December	31,	2006,	1,305,420	shares	from	the	1997	Plan	have	been	added	to	and	may	be	awarded	from	the	2006	Plan.	As	of	December	31,	2007,	6,369,222	shares have	been	awarded	under	the	2006	Plan.	We	have	stock	options	outstanding	from	previous	plans,	including	the	1997	Plan,	under	which	no	further	grants	can	be	made.

								The	exercise	price	of	non-qualified	and	incentive	stock	options	and	stock	appreciation	rights	may	not	be	less	than	the	fair	value	of	such	shares	at	the	date	of	grant. Stock	options	and	stock	appreciation	rights	issued	under	the	2006	Plan	and	the	1997	Plan	generally	vest	over	four	years	and	expire	no	later	than	ten	years	from	the	date of	grant.	For	restricted	stock	awards	issued	under	the	2006	Plan	and	the	1997	Plan,	stock	certificates	are	issued	at	the	time	of	grant	and	recipients	have	dividend	and voting	rights.	In	general,	these	grants	vest	over	three	years.	For	deferred	stock	awards	issued	under	the	2006	Plan	and	the	1997	Plan,	no	stock	is	issued	at	the	time	of grant.	Generally,	these	grants	vest	over	two-,	three-	or	four-year	periods.	Performance	awards	granted	under	the	2006	Plan	and	the	1997	Plan	are	earned	over	a performance	period	based	on	achievement	of	goals,	generally	over	two-	to	four-year	periods.	Payment	for	performance	awards	is	made	in	shares	of	our	common	stock equal	to	its	fair	market	value	per	share,	based	on	certain	financial	ratios	after	the	conclusion	of	each	performance	period.

								We	record	compensation	expense,	equal	to	the	estimated	fair	value	of	the	options	on	the	grant	date,	on	a	straight-line	basis	over	the	options'	vesting	period.	We	use	a Black-Scholes	option-pricing	model	to	estimate	the	fair	value	of	the	options	granted.

								The	weighted-average	assumptions	used	in	connection	with	the	option-pricing	model	were	as	follows	for	the	years	indicated:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | 1.34% | 1.41% | 1.85% |
| Expected\tvolatility | 23.30 | 26.50 | 28.70 |
| Risk-free\tinterest\trate | 4.69 | 4.60 | 4.19 |
| Expected\toption\tlives\t(in\tyears) | 7.8 | 7.8 | 7.8 |

								Compensation	expense	related	to	stock	options,	stock	appreciation	rights,	restricted	stock	awards,	deferred	stock	awards	and	performance	awards,	which	we	record as	a	component	of	salaries	and	employee	benefits	expense	in	our	consolidated	statement	of	income,	was	$272	million,	$208	million	and	$110	million	for	the	years	ended December	31,	2007,	2006	and	2005,	respectively.	The	related	total	income	tax	benefit	recorded	in	our	consolidated	statement	of	income	was	$109	million,	$83	million and	$44	million	for	2007,	2006	and	2005,	respectively.

								Information	about	the	2006	Plan	and	1997	Plan	as	of	December	31,	2007,	and	activity	during	the	year	then	ended,	is	presented	below:

|  | Shares<br>(in	thousands) | Weighted<br>Average<br>Exercise<br>Price | Remaining<br>Contractual<br>Term<br>(in	years) |  | Aggregate<br>Intrinsic<br>Value<br>(in	millions) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Stock\tOptions\tand\tStock\tAppreciation\tRights |  |  |  |  |  |
| Outstanding\tat\tDecember\t31,\t2005 | 23,956 | $44.60 |  |  |  |
| Granted | 972 | 62.63 |  |  |  |
| Exercised | (4,823) | 40.81 |  |  |  |
| Forfeited\tor\texpired | (316) | 51.32 |  |  |  |
| Outstanding\tat\tDecember\t31,\t2006 | 19,789 | 46.28 |  |  |  |
| Granted | 1,091 | 70.59 |  |  |  |
| Exercised | (4,415) | 42.36 |  |  |  |
| Forfeited\tor\texpired | (97) | 47.12 |  |  |  |
| Outstanding\tat\tDecember\t31,\t2007 | 16,368 | $48.94 |  | 5.1 | $528 |
| Exercisable\tat\tDecember\t31,\t2007 | 13,409 | $46.48 |  | 4.4 | $466 |

								As	of	December	31,	2007,	total	unrecognized	compensation	cost	related	to	stock	options	and	stock	appreciation	rights	was	$26	million,	which	is	expected	to	be recognized	over	a	weighted-average	period	of	25	months.

								Other	stock	awards	and	related	activity	consisted	of	the	following	for	the	years	ended	December	31,	2006	and	2007:

|  | Shares<br>(in	thousands) | Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Restricted\tStock\tAwards |  |  |
| Outstanding\tat\tDecember\t31,\t2005 | 378 | $46.82 |
| Granted | 184 | 62.62 |
| Vested | (168) | 46.49 |
| Forfeited | (21) | 51.12 |
| Outstanding\tat\tDecember\t31,\t2006 | 373 | 54.42 |
| Granted | 401 | 69.06 |
| Vested | (201) | 54.75 |
| Forfeited | (19) | 64.50 |
| Outstanding\tat\tDecember\t31,\t2007 | 554 | $64.77 |

								The	weighted-average	grant	date	fair	value	of	restricted	stock	awards	granted	in	2005	was	$45.26	per	share.	The	total	fair	value	of	restricted	stock	awards	vested was	$11	million,	$8	million	and	$8	million	for	2007,	2006	and	2005,	respectively.	As	of	December	31,	2007,	total	unrecognized	compensation	cost	related	to	restricted stock	was	$23	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	22	months.

|  | Shares<br>(in	thousands) | Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Deferred\tStock\tAwards |  |  |
| Outstanding\tat\tDecember\t31,\t2005 | 3,203 | $43.60 |
| Granted | 3,083 | 60.94 |
| Vested | (1,270) | 43.80 |
| Forfeited | (162) | 53.33 |
| Outstanding\tat\tDecember\t31,\t2006 | 4,854 | 54.21 |
| Granted | 3,542 | 68.33 |
| Vested | (2,289) | 52.26 |
| Forfeited | (235) | 62.50 |
| Outstanding\tat\tDecember\t31,\t2007 | 5,872 | $63.26 |

								The	weighted-average	grant	date	fair	value	of	deferred	stock	awards	granted	in	2005	was	$43.40	per	share.	The	total	fair	value	of	deferred	stock	awards	vested	was $120	million,	$56	million	and	$14	million	for	2007,	2006	and	2005,	respectively.	As	of	December	31,	2007,	total	unrecognized	compensation	cost	related	to	deferred stock	awards	was	$208	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	25	months.

|  | Shares<br>(in	thousands) | Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Performance\tAwards |  |  |
| Outstanding\tat\tDecember\t31,\t2005 | 1,283 | $48.52 |
| Granted | 959 | 59.87 |
| Forfeited | (193) | 52.71 |
| Paid\tout | (160) | 52.78 |
| Outstanding\tat\tDecember\t31,\t2006 | 1,889 | 53.49 |
| Granted | 1,203 | 67.84 |
| Forfeited | (161) | 59.23 |
| Paid\tout | (673) | 44.25 |
| Outstanding\tat\tDecember\t31,\t2007 | 2,258 | $63.02 |

								The	weighted-average	grant	date	fair	value	of	performance	awards	granted	in	2005	was	$47.91	per	share.	The	total	fair	value	of	performance	awards	paid	out	was $33	million,	$9	million	and	$12	million	for	2007,	2006	and	2005,	respectively.	As	of	December	31,	2007,	total	unrecognized	compensation	cost	related	to	performance awards	was	$55	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	22	months.

								We	generally	utilize	treasury	shares	to	satisfy	the	issuance	of	stock	under	our	equity	incentive	plans.	We	do	not	have	a	specific	policy	concerning	purchases	of	our common	stock	to	satisfy	stock	issuances,	including	exercises	of	options.	We	have	a	general	policy	concerning	purchases	of	stock	to	meet	common	stock	issuances	under our	employee	benefit	plans,	including	option	exercises	and	other	corporate	purposes.	Various	factors	determine	the	amount	and	timing	of	our	purchases	of	our	common stock,	including	our	capital	requirements,	the	number	of	shares	we	expect	to	issue	under	employee	benefit	plans,	market	conditions	(including	the	trading	price	of	our common	stock),	and	legal	considerations.	These	factors	can	change	at	any	time,	and	there	can	be	no	assurance	as	to	the	number	of	shares	of	common	stock	we	will purchase	or	when	we	will	purchase	them.

# Note	14.				Regulatory	Matters

								We	are	subject	to	various	regulatory	capital	requirements	administered	by	federal	banking	agencies.	Failure	to	meet	minimum	capital	requirements	can	initiate certain	mandatory	and	discretionary	actions	by	regulators	that,	if	undertaken,	could	have	a	direct	material	effect	on	our	consolidated	financial	condition.	Under regulatory	capital	adequacy	guidelines,	we	must	meet	specific	capital	requirements	that	involve	quantitative	measures	of	our	consolidated	assets,	liabilities	and	off- balance	sheet	exposures	as	calculated	in	accordance	with	regulatory	accounting	practices.	Our	capital	amounts	and	classification	are	subject	to	qualitative	judgments	by the	regulators	about	components,	risk	weightings	and	other	factors.

								Quantitative	measures	established	by	regulation	to	ensure	capital	adequacy	require	State	Street	and	State	Street	Bank	to	maintain	minimum	risk-based	capital	and leverage	ratios	as	set	forth	in	the	following	table.	The	risk-based	capital	ratios	are	tier	1	capital	and	total	capital	divided	by	adjusted	total	risk-weighted	assets	and market-risk	equivalents,	and	the	tier	1	leverage	ratio	is	tier	1	capital	divided	by	adjusted	quarterly	average	assets.	As	of	December	31,	2007	and	2006,	State	Street	and State	Street	Bank	met	all	capital	adequacy	requirements	to	which	they	were	subject.

								As	of	December	31,	2007,	State	Street	Bank	was	categorized	as	"well	capitalized"	under	the	regulatory	framework.	To	be	categorized	as	"well	capitalized,"	State Street	Bank	must	exceed	the	"well	capitalized"	guideline	ratios,	as	set	forth	in	the	table,	and	meet	certain	other	requirements.	State	Street	Bank	exceeded	all	"well capitalized"	requirements	as	of	December	31,	2007	and	2006.	There	are	no	conditions	or	events	since	December	31,	2007	that	management	believes	have	changed	the capital	category	of	State	Street	Bank.

								The	regulatory	capital	ratios	and	related	amounts	were	as	follows	as	of	December	31:

| Tier	1	capital | 4% | 6% | 11.2% | 13.7% | 11.2% | 12.0% |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Total\tcapital | 8 | 10 | 12.7 | 15.9 | 12.7 | 14.1 |
| Tier\t1\tleverage\tratio | 4 | 5 | 5.3 | 5.8 | 5.5 | 5.6 |
| Shareholders'\tequity |  |  | $11,299 | $7,252 | $11,932 | $6,769 |
| Capital\ttrust\tsecurities |  |  | 975 | 650 | — | — |
| Unrealized\tlosses\ton\tavailable-for-sale\tsecurities |  |  | 733 | 227 | 745 | 239 |
| Unrealized\tlosses\ton\tcash\tflow\thedges |  |  | 11 | — | 5 | — |
| Deferred\ttax\tliability\tassociated\twith\tacquisitions |  |  | 526 | — | 526 | — |
| Recognition\tof\tpension\tplan\tfunded\tstatus |  |  | 145 | 164 | 145 | 163 |
| Less: |  |  |  |  |  |  |
| Goodwill |  |  | 4,567 | 1,384 | 4,480 | 1,297 |
| Other\tintangible\tassets |  |  | 1,990 | 434 | 1,958 | 401 |
| Other\tdeductions |  |  | 1 | 2 | — | — |
| Tier\t1\tcapital |  |  | 7,131 | 6,473 | 6,915 | 5,473 |
| Qualifying\tsubordinated\tdebt |  |  | 1,118 | 1,178 | 998 | 998 |
| Allowances\tfor\ton-\tand\toff-balance\tsheet\tcredit |  |  |  |  |  |  |
| exposures |  |  | 31 | 30 | 31 | 30 |
| Unrealized\tgains\ton\tavailable-for-sale\tequity |  |  |  |  |  |  |
| securities |  |  | 3 | 10 | 2 | 1 |
| Tier\t2\tcapital |  |  | 1,152 | 1,218 | 1,031 | 1,029 |
| Deduction\tfor\tinvestments\tin\tfinance\tsubsidiaries |  |  | (212) | (184) | (68) | (62) |
| Total\tcapital |  |  | $8,071 | $7,507 | $7,878 | $6,440 |
| Adjusted\ttotal\trisk-weighted\tassets\tand\tmarket-risk |  |  |  |  |  |  |
| equivalents: |  |  |  |  |  |  |
| On-balance\tsheet |  |  | $42,968 | $31,447 | $41,283 | $30,000 |
| Off-balance\tsheet |  |  | 20,248 | 15,371 | 20,254 | 15,375 |
| Market-risk\tequivalents |  |  | 321 | 395 | 317 | 394 |
| Total |  |  | $63,537 | $47,213 | $61,854 | $45,769 |
| Adjusted\tquarterly\taverage\tassets |  |  | $135,686 | $110,794 | $126,746 | $97,132 |

(1) State	Street	Bank	must	meet	the	regulatory	designation	of	"well	capitalized"	in	order	for	us	to	maintain	our	status	as	a	financial	holding	company,	including maintaining	a	minimum	tier	1	risk-based	capital	ratio	(tier	1	capital	divided	by	adjusted	total	risk-weighted	assets	and	market-risk	equivalents)	of	6%,	a minimum	total	risk-based	capital	ratio	(total	capital	divided	by	adjusted	total	risk-weighted	assets	and	market-risk	equivalents)	of	10%,	and	a	tier	1	leverage	ratio (tier	1	capital	divided	by	adjusted	quarterly	average	assets)	of	5%.	In	addition,	Federal	Reserve	Regulation	Y	defines	"well	capitalized"	for	a	bank	holding company	such	as	us	for	purposes	of	determining	eligibility	for	a	streamlined	review	process	for	acquisition	proposals.	For	such	Regulation	Y	purposes,	"well capitalized"	requires	us	to	maintain	a	minimum	tier	1	risk-based	capital	ratio	of	6%	and	a	minimum	total	risk-based	capital	ratio	of	10%.

# Cash,	Dividend,	Loan	and	Other	Restrictions:

								During	2007,	our	bank	subsidiaries	were	required	by	the	Federal	Reserve	to	maintain	average	cash	reserve	balances	of	$53	million.	In	addition,	federal	and	state banking	regulations	place	certain	restrictions	on	dividends	paid	by	bank	subsidiaries	to	a	parent	holding	company.	For	2008,	aggregate	dividends	by	State	Street	Bank without	prior	regulatory	approval	are	limited	to	approximately	$1.78	billion	of	its	undistributed	earnings	at	December	31,	2007,	plus	an	additional	amount	equal	to	its net	profits,	as	defined,	for	2008	up	to	the	date	of	any	dividend.

								The	Federal	Reserve	Act	requires	that	extensions	of	credit	by	State	Street	Bank	to	certain	affiliates,	including	the	parent	company,	be	secured	by	specific	collateral, that	the	extension	of	credit	to	any	one	affiliate	be	limited	to	10%	of	its	capital	and	surplus	(as	defined),	and	that	extensions	of	credit	to	all	such	affiliates	be	limited	to 20%	of	its	capital	and	surplus.

								At	December	31,	2007,	consolidated	retained	earnings	included	$295	million	representing	undistributed	earnings	of	affiliates	that	are	accounted	for	using	the	equity method.

# Note	15.				Derivative	Financial	Instruments

								We	use	derivatives	to	support	customers'	needs,	conduct	trading	activities,	and	manage	our	interest-rate	and	currency	risk.

								As	part	of	our	trading	activities,	we	assume	positions	in	both	the	foreign	exchange	and	interest-rate	markets	by	buying	and	selling	cash	instruments	and	using derivative	financial	instruments,	including	foreign	exchange	forward	contracts,	foreign	exchange	and	interest-rate	options,	and	interest-rate	swaps.	In	the	aggregate,	long and	short	foreign	exchange	forward	positions	are	matched	closely	to	minimize	currency	and	interest-rate	risk.	All	foreign	exchange	contracts	are	valued	daily	at	current market	rates.

								Interest-rate	contracts	involve	an	agreement	with	a	counterparty	to	exchange	cash	flows	based	on	the	movement	of	an	underlying	interest-rate	index.	An	interest-rate swap	agreement	involves	the	exchange	of	a	series	of	interest	payments,	either	at	a	fixed	or	variable	rate,	based	upon	the	notional	amount	without	the	exchange	of	the underlying	principal	amount.	An	interest-rate	option	contract	provides	the	purchaser,	for	a	premium,	the	right,	but	not	the	obligation,	to	receive	an	interest	rate	based upon	a	predetermined	notional	value	during	a	specified	period.	An	interest-rate	futures	contract	is	a	commitment	to	buy	or	sell,	at	a	future	date,	a	financial	instrument	at a	contracted	price;	it	may	be	settled	in	cash	or	through	the	delivery	of	the	contracted	instrument.

								Foreign	exchange	contracts	involve	an	agreement	to	exchange	one	currency	for	another	currency	at	an	agreed-upon	rate	and	settlement	date.	Foreign	exchange contracts	generally	consist	of	cross-currency	swap	agreements	and	foreign	exchange	forward	and	spot	contracts.

								The	following	table	summarizes	the	contractual,	or	notional,	amounts	of	derivative	financial	instruments	held	or	issued	for	trading	and	asset	and	liability management	as	of	December	31:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Trading: |  |  |
| Interest-rate\tcontracts: |  |  |
| Swap\tagreements | $11,637 | $5,782 |
| Options\tand\tcaps\tpurchased | 1,241 | 1,216 |
| Options\tand\tcaps\twritten | 5,519 | 3,224 |
| Futures | 957 | 154 |
| Options\ton\tfutures\tpurchased | 2,245 | — |
| Foreign\texchange\tcontracts: |  |  |
| Forward,\tswap\tand\tspot | 732,013 | 492,063 |
| Options\tpurchased | 21,538 | 8,313 |
| Options\twritten | 20,967 | 8,063 |
| Credit\tderivative\tcontracts: |  |  |
| Credit\tdefault\tswap\tagreements | 238 | 155 |
| Equity\tderivative\tcontracts: |  |  |
| Swap\tagreements | 72 | — |
| Asset\tand\tliability\tmanagement: |  |  |
| Interest-rate\tcontracts: |  |  |
| Swap\tagreements | 3,494 | 2,770 |
| Foreign\texchange\tcontracts: |  |  |
| Forward | 146 | 132 |

								In	connection	with	our	asset	and	liability	management	activities,	we	have	executed	interest-rate	swap	agreements	designated	as	fair	value	and	cash	flow	hedges	to manage	interest-rate	risk.	The	notional	values	of	these	interest-rate	swap	agreements	and	the	related	assets	or	liabilities	being	hedged	are	presented	in	the	following	table. Hedge	ineffectiveness	for	2007,	2006	and	2005,	recorded	in	processing	fees	and	other	revenue,	was	not	material.

|  | Fair<br>Value<br>Hedges | Cash<br>Flow<br>Hedges | Total | Fair<br>Value<br>Hedges | Cash<br>Flow<br>Hedges | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |  |
| Available-for-sale\tinvestment\tsecurities | $2,226 |  | $2,226 | $1,452 |  | $1,452 |
| Interest-bearing\ttime\tdeposits(1) | 118 |  | 118 | 118 | $300 | 418 |
| Long-term\tdebt(2)(3) | 700 | $450 | 1,150 | 700 | 200 | 900 |
| Total | $3,044 | $450 | $3,494 | $2,270 | $500 | $2,770 |

(1) For	the	years	ended	December	31,	2007	and	2006,	the	overall	weighted-average	interest	rate	for	interest-bearing	time	deposits	was	5.42%	and	5.02%, respectively,	on	a	contractual	basis,	and	5.47%	and	3.52%,	respectively,	including	the	effects	of	hedges.

(2) For	the	year	ended	December	31,	2007,	fair	value	hedges	of	long-term	debt	increased	the	carrying	value	of	long-term	debt	presented	in	our	consolidated statement	of	condition	by	$19	million,	and	for	the	year	ended	December	31,	2006,	decreased	the	carrying	value	by	$9	million.

(3) For	the	years	ended	December	31,	2007	and	2006,	the	overall	weighted-average	interest	rate	for	long-term	debt	was	6.55%	and	6.72%,	respectively,	on	a contractual	basis,	and	6.62%	and	6.77%,	respectively,	including	the	effects	of	hedges.

								For	cash	flow	hedges,	any	changes	in	the	fair	value	of	the	derivative	financial	instruments	remain	in	accumulated	other	comprehensive	income	and	are	generally recorded	in	our	consolidated	statement	of	income	in	future	periods	when	earnings	are	affected	by	the	variability	of	the	hedged	cash	flow.

								We	have	entered	into	foreign	exchange	forward	contracts	with	an	aggregate	notional	amount	of	€100	million,	or	approximately	$146	million,	to	hedge	a	portion	of our	net	foreign	investment	in	non-U.S.	subsidiaries.	As	a	result,	approximately	$8	million	and	$18	million	of	after-tax	translation	losses	for	the	years	ended December	31,	2007	and	2006,	respectively,	on	the	hedge	contracts	were	recorded	in	accumulated	other	comprehensive	income.

								Foreign	exchange	trading	revenue	related	to	foreign	exchange	contracts	was	$802	million,	$611	million	and	$468	million	for	the	years	ended	December	31,	2007, 2006	and	2005,	respectively.	Future	cash	requirements,	if	any,	related	to	foreign	exchange	contracts	are	represented	by	the	gross	amount	of	currencies	to	be	exchanged under	each	contract	unless	we	and	the	counterparty	have	agreed	to	pay	or	receive	the	net	contractual	settlement	amount	on	the	settlement	date.

# Note	16.				Net	Interest	Revenue

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Interest\trevenue: |  |  |  |
| Deposits\twith\tbanks | $416 | $414 | $529 |
| Investment\tsecurities: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 1,106 | 1,011 | 866 |
| State\tand\tpolitical\tsubdivisions | 205 | 88 | 58 |
| Other\tinvestments | 2,292 | 1,830 | 873 |
| Securities\tpurchased\tunder\tresale\tagreements\tand\tfederal\tfunds\tsold | 756 | 663 | 412 |
| Loans\tand\tleases | 382 | 270 | 171 |
| Trading\taccount\tassets | 55 | 48 | 21 |
| Total\tinterest\trevenue | 5,212 | 4,324 | 2,930 |
| Interest\texpense: |  |  |  |
| Deposits | 2,298 | 1,891 | 1,132 |
| Other\tshort-term\tborrowings | 959 | 1,145 | 753 |
| Long-term\tdebt | 225 | 178 | 138 |
| Total\tinterest\texpense | 3,482 | 3,214 | 2,023 |
| Net\tinterest\trevenue | $1,730 | $1,110 | $907 |

# Note	17.				Employee	Benefits

								State	Street	Bank	and	certain	of	its	U.S.	subsidiaries	participate	in	a	non-contributory,	tax-qualified	defined	benefit	pension	plan.	Effective	January	1,	2008,	this plan	was	amended.	After	December	31,	2007,	there	will	be	no	further	employer	contribution	credits	to	the	defined	benefit	pension	plan.	Employee	account	balances	will continue	to	earn	annual	interest	credits	until	retirement.	In	addition	to	the	defined	benefit	pension	plan,	we	have	non-qualified	unfunded	supplemental	retirement	plans, referred	to	as	"SERPs,"	that	provide	certain	officers	with	defined	pension	benefits	in	excess	of	allowable	qualified	plan	limits.	Non-U.S.	employees	participate	in	local defined	benefit	plans.

								State	Street	Bank	and	certain	of	its	U.S.	subsidiaries	participate	in	a	post-retirement	plan	that	provides	health	care	and	insurance	benefits	for	retired	employees.

								Combined	information	for	the	U.S.	and	non-U.S.	defined	benefit	plans,	and	information	for	the	post-retirement	plan,	is	as	follows	as	of	the	December	31 measurement	date:

|  | 2007 | 2006 | 2007 | 2006 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |
| Benefit\tobligations: |  |  |  |  |
| Beginning\tof\tyear | $833 | $759 | $90 | $79 |
| Service\tcost | 62 | 59 | 4 | 4 |
| Interest\tcost | 44 | 39 | 5 | 5 |
| Employee\tcontributions | — | 1 | — | — |
| Plan\tamendments | — | — | (10) | — |
| Acquisitions\tand\ttransfers\tin | 18 | — | — | — |
| Actuarial\tlosses/(gains) | (42) | (4) | 4 | 9 |
| Benefits\tpaid | (44) | (47) | (7) | (7) |
| Expenses\tpaid | (3) | (1) | — | — |
| Curtailments | (47) | — | — | — |
| Foreign\tcurrency\ttranslation | 9 | 27 | — | — |
| End\tof\tyear | $830 | $833 | $86 | $90 |
| Plan\tassets\tat\tfair\tvalue: |  |  |  |  |
| Beginning\tof\tyear | $821 | $706 |  |  |
| Actual\treturn\ton\tplan\tassets | 60 | 84 |  |  |
| Employer\tcontributions | 18 | 57 | $7 | $6 |
| Acquisitions\tand\ttransfers\tin | 19 | — | — | — |
| Benefits\tpaid | (44) | (47) | (7) | (6) |
| Expenses\tpaid | (3) | (1) | — | — |
| Foreign\tcurrency\ttranslation | 7 | 22 | — | — |
| End\tof\tyear | $878 | $821 | $— | $— |
| Accrued\tbenefit\texpense:\nFunded\tstatus\t(plan\tassets\tless\tbenefit\tobligations) | $48 | $(12) | $(86) | $(90) |
| Net\tprepaid\t(accrued)\tbenefit\texpense | $48 | $(12) | $(86) | $(90) |

|  | 2007 | 2006 | 2007 | 2006 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |
| Amounts\trecognized\tin\tthe\tconsolidated\tstatement\tof\tcondition |  |  |  |  |
| as\tof\tDecember\t31: |  |  |  |  |
| Non-current\tassets | $93 | $53 |  |  |
| Current\tliabilities | — | — | $(7) | $(8) |
| Noncurrent\tliabilities | (45) | (65) | (79) | (82) |
| Net\tprepaid\t(accrued)\tamount\trecognized\tin\tstatement\tof\tcondition | $48 | $(12) | $(86) | $(90) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome: |  |  |  |  |
| Initial\tnet\tobligation |  |  |  | $(5) |
| Prior\tservice\tcredit |  | $20 | $6 | — |
| Net\tloss | $(110) | (217) | (32) | (29) |
| Accumulated\tother\tcomprehensive\tloss | (110) | (197) | (26) | (34) |
| Cumulative\temployer\tcontributions\tin\texcess\tof\tnet\tperiodic\tbenefit\tcost | 158 | 185 | (60) | (56) |
| Net\tasset\t(obligation)\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $48 | $(12) | $(86) | $(90) |
| Determination\tof\tadjustment\trelated\tto\tadoption\tof\tSFAS\tNo.\t158: |  |  |  |  |
| Liability\tbefore\tadoption\tof\tthe\tfunded\tstatus\tprovisions\tof\tSFAS\tNo.\t158 |  | $31 |  |  |
| Accumulated\tother\tcomprehensive\tloss\tbefore\tadoption\tof\tfunded\tstatus\trecognition |  |  |  |  |
| provisions\tof\tSFAS\tNo.\t158 |  | 31 |  |  |
|  |  | — |  | $5 |
| Prior\tservice\tcost |  | (20) |  | — |
| Net\tloss |  | 217 |  | 29 |
| Accumulated\tother\tcomprehensive\tloss\tafter\tadoption\tof\tfunded\tstatus\trecognition\nprovisions\tof\tSFAS\tNo.\t158 |  | $197 |  | $34 |
| Increase\tin\taccumulated\tother\tcomprehensive\tloss,\tbefore\ttaxes,\tto\treflect\tthe\tadoption\nof\tSFAS\tNo.\t158 |  | $166 |  | $34 |
| Accumulated\tbenefit\tobligation | $793 | $751 |  |  |
| Actuarial\tassumptions\t(U.S.\tPlans): |  |  |  |  |
| Used\tto\tdetermine\tbenefit\tobligations\tas\tof\tDecember\t31: |  |  |  |  |
| Discount\trate | 6.00% | 5.75% | 6.00% | 5.75% |
| Rate\tof\tincrease\tfor\tfuture\tcompensation | 4.50 | 4.50 | — | — |
| Used\tto\tdetermine\tperiodic\tbenefit\tcost\tfor\tthe\tyears\tended\tDecember\t31: |  |  |  |  |
| Discount\trate | 6.00% | 5.50% | 5.75% | 5.50% |
| Rate\tof\tincrease\tfor\tfuture\tcompensation | 4.50 | 4.50 | — | — |
| Expected\tlong-term\trate\tof\treturn\ton\tplan\tassets | 7.50 | 8.00 | — | — |
| Assumed\thealth\tcare\tcost\ttrend\trates\tas\tof\tDecember\t31: |  |  |  |  |
| Cost\ttrend\trate\tassumed\tfor\tnext\tyear | — | — | 9.5% | 10.00% |
| Rate\tto\twhich\tthe\tcost\ttrend\trate\tis\tassumed\tto\tdecline | — | — | 5.00 | 5.00 |
| Year\tthat\tthe\trate\treaches\tthe\tultimate\ttrend\trate | — | — | 2015 | 2013 |

								Expected	benefit	payments	for	the	next	ten	years	are	as	follows:

|  | Primary	U.S.<br>and	Non-U.S.<br>Defined	Benefit<br>Plans | Non-<br>Qualified<br>SERPs | Post-<br>Retirement<br>Plan |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| 2008 | $36 | $6 | $7 |
| 2009 | 35 | 8 | 7 |
| 2010 | 35 | 10 | 7 |
| 2011 | 31 | 21 | 7 |
| 2012 | 25 | 22 | 7 |
| 2013-2017 | 123 | 74 | 32 |

								The	accumulated	benefit	obligation	for	all	of	our	U.S.	defined	benefit	pension	plans	was	$696	million	and	$613	million	at	December	31,	2007,	and	2006, respectively.

								To	develop	the	assumption	of	the	expected	long-term	rate	of	return	on	plan	assets,	we	considered	the	historical	returns	and	the	future	expectations	for	returns	for each	asset	class,	as	well	as	the	target	asset	allocation	of	the	pension	portfolio.	This	analysis	resulted	in	the	determination	of	the	assumed	long-term	rate	of	return	on	plan assets	of	7.50%	for	the	year	ended	December	31,	2007.

								For	the	tax-qualified	U.S.	defined	benefit	pension	plan,	the	asset	allocations	as	of	December	31,	2007	and	2006,	and	the	strategic	target	allocation	for	2008,	by	asset category,	were	as	follows:

# ASSET	CATEGORY

| Equity	securities | 43% | 46% | 46% |
| :--- | :--- | :--- | :--- |
| Fixed-income\tsecurities | 46 | 45 | 45 |
| Other | 11 | 9 | 9 |
| Total | 100% | 100% | 100% |

								The	preceding	strategic	target	asset	allocation	was	last	amended	effective	July	31,	2006.	Consistent	with	that	target	allocation,	the	plan	should	generate	a	real	return above	inflation,	and	superior	to	that	of	a	benchmark	index	consisting	of	a	combination	of	appropriate	capital	market	indices	weighted	in	the	same	proportions	as	the plan's	strategic	target	asset	allocation.	Equities	included	domestic	and	international	publicly-traded	common,	preferred	and	convertible	securities.	Fixed-income securities	included	domestic	and	international	corporate	and	government	debt	securities,	as	well	as	asset-backed	securities	and	private	debt.	The	"other"	category included	real	estate,	alternative	investments	and	cash	and	cash	equivalents.	Derivative	financial	instruments	are	an	acceptable	alternative	to	investing	in	these	types	of securities,	but	may	not	be	used	to	leverage	the	plan's	portfolio.

								Expected	employer	contributions	to	the	tax-qualified	U.S.	and	Non-U.S.	defined	benefit	pension	plan,	SERPs	and	post-retirement	plan	for	the	year	ending December	31,	2008	are	$12	million,	$6	million	and	$7	million,	respectively.

								State	Street	has	unfunded	SERPs	that	provide	certain	officers	with	defined	pension	benefits	in	excess	of	qualified	plan	limits	imposed	by	U.S.	federal	tax	law.

Information	for	the	SERPs	was	as	follows	for	the	years	ended	December	31:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Benefit\tobligations: |  |  |
| Beginning\tof\tyear | $142 | $107 |
| Service\tcost | 12 | 6 |
| Interest\tcost | 10 | 7 |
| Acquisitions\tand\ttransfers\tin | 9 | — |
| Actuarial\tloss | 85 | 24 |
| Benefits\tpaid | (6) | (6) |
| Curtailments | (41) | — |
| Plan\tamendments | — | 4 |
| End\tof\tyear | $211 | $142 |
| Accrued\tbenefit\texpense:\nFunded\tstatus\t(plan\tassets\tless\tbenefit\tobligations) | $(211) | $(142) |
| Net\taccrued\tbenefit\texpense | $(211) | $(142) |
| Amounts\trecognized\tin\tthe\tconsolidated\tstatement\tof\tcondition\tas\tof\tDecember\t31: |  |  |
| Current\tliabilities | $(8) | $(7) |
| Non-current\tliabilities | (203) | (135) |
| Net\taccrued\tamount\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $(211) | $(142) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome: |  |  |
| Prior\tservice\tcost |  | $(19) |
| Net\tloss | $(103) | (59) |
| Accumulated\tother\tcomprehensive\tloss | (103) | (78) |
| Cumulative\temployer\tcontributions\tin\texcess\tof\tnet\tperiodic\tbenefit\tcost | (108) | (64) |
| Net\tobligation\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $(211) | $(142) |
| Determination\tof\tadjustment\trelated\tto\tadoption\tof\tSFAS\tNo.\t158: |  |  |
| Liability\tbefore\tadoption\tof\tfunded\tstatus\tprovisions\tof\tSFAS\tNo.\t158 |  | $32 |
| Actual\tintangible\tasset |  | 18 |
| Accumulated\tother\tcomprehensive\tloss\tbefore\tadoption\tof\tfunded\tstatus\tprovisions\tof\tSFAS\tNo.\t158 |  | 14 |
| Prior\tservice\tcost |  | 19 |
| Net\tloss |  | 59 |
| Accumulated\tother\tcomprehensive\tloss\tafter\tadoption\tof\tfunded\tstatus\tprovisions\tof\tSFAS\tNo.\t158 |  | $78 |
| Increase\tin\taccumulated\tother\tcomprehensive\tloss,\tbefore\ttaxes,\tto\treflect\tthe\tadoption\tof\tSFAS\tNo.\t158 |  | $64 |
| Accumulated\tbenefit\tobligation | $148 | $96 |
| Actuarial\tassumptions: |  |  |
| Assumptions\tused\tto\tdetermine\tbenefit\tobligations\tand\tperiodic\tbenefit\tcosts\tare\tconsistent\twith\tthose\tnoted\tfor\tthe\tpost- |  |  |
| retirement\tplan,\twith\tthe\tfollowing\texceptions: |  |  |
| Rate\tof\tincrease\tfor\tfuture\tcompensation—SERPs | 4.75% | 4.75% |
| Rate\tof\tincrease\tfor\tfuture\tcompensation—Executive\tSERPs | 10.00% |  |

								For	those	defined	benefit	plans	that	have	accumulated	benefit	obligations	in	excess	of	plan	assets	as	of	December	31,	2007	and	2006,	the	accumulated	benefit obligations	are	$44	million	and	$326	million,	respectively,	and	the	plan	assets	are	$21	million	and	$200	million,	respectively.

								For	those	defined	benefit	plans	that	have	projected	benefit	obligations	in	excess	of	plan	assets	as	of	December	31,	2007	and	2006,	the	projected	benefit	obligations are	$316	million	and	$411	million,	respectively,	and	the	plan	assets	are	$237	million	and	$204	million,	respectively.

								If	trend	rates	in	health	care	costs	were	increased	by	1%,	the	post-retirement	benefit	obligation	as	of	December	31,	2007,	would	have	increased	6%,	and	the aggregate	expense	for	service	and	interest	costs	for	2007	would	have	increased	9%.	Conversely,	if	trend	rates	in	health	care	costs	were	reduced	by	1%,	the	post- retirement	benefit	obligation	as	of	December	31,	2007,	would	have	decreased	6%,	and	the	aggregate	expense	for	service	and	interest	costs	for	2007	would	have decreased	8%.

								The	following	table	presents	the	actuarially	determined	expense	for	our	U.S.	and	non-U.S.	defined	benefit	plans,	post-retirement	plan	and	SERPs	for	the	years ended	December	31:

|  | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |  |  |  |
| Components\tof\tnet\tperiodic\tbenefit\tcost: |  |  |  |  |  |  |
| Service\tcost | $62 | $59 | $50 | $3 | $4 | $3 |
| Interest\tcost | 44 | 39 | 35 | 5 | 5 | 4 |
| Assumed\treturn\ton\tplan\tassets | (55) | (53) | (45) | — | — | — |
| Amortization\tof\ttransition\tobligation\t(asset) | — | — | — | 1 | 1 | 1 |
| Amortization\tof\tprior\tservice\tcost | (2) | (2) | (2) | — | — | — |
| Amortization\tof\tnet\tloss | 12 | 17 | 15 | 1 | 2 | 1 |
| Net\tperiodic\tbenefit\tcost | 61 | 60 | 53 | 10 | 12 | 9 |
| Special\tevents\taccounting\texpense: |  |  |  |  |  |  |
| Curtailments | (19) | — | — | — | — | — |
| Special\ttermination\tbenefits | — | — | 1 | — | — | — |
| Special\tevents\taccounting\texpense | (19) | — | 1 | — | — | — |
| Total\texpense | $42 | $60 | $54 | $10 | $12 | $9 |
| Estimated\tamounts\tthat\twill\tbe\tamortized\tfrom |  |  |  |  |  |  |
| \t\t\t\taccumulated\tother\tcomprehensive\tincome |  |  |  |  |  |  |
| \t\t\t\tover\tthe\tnext\tfiscal\tyear: |  |  |  |  |  |  |
| Initial\tnet\tasset |  |  |  |  | $(1) |  |
| Prior\tservice\tcredit |  | $2 |  | $1 | — |  |
| Net\tgain\t(loss) | $(4) | (14) |  | (1) | (1) |  |
| Estimated\tamortization | $(4) | $(12) |  | $— | $(2) |  |

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Components\tof\tnet\tperiodic\tbenefit\tcost: |  |  |  |
| Service\tcost | $12 | $6 | $4 |
| Interest\tcost | 10 | 7 | 5 |
| Amortization\tof\tprior\tservice\tcost | 2 | 2 | 2 |
| Amortization\tof\tnet\tloss | 5 | 4 | 2 |
| Net\tperiodic\tbenefit\tcost | 29 | 19 | 13 |
| Special\tevents\taccounting\texpense: |  |  |  |
| Settlements | — | — | 2 |
| Curtailments | 13 | — | — |
| Special\tevents\taccounting\texpense | 13 | — | 2 |
| Total\texpense | $42 | $19 | $15 |
| Estimated\tamounts\tthat\twill\tbe\tamortized\tfrom\taccumulated\tother\tcomprehensive\tincome\tover\tthe\tnext\tfiscal |  |  |  |
| year: |  |  |  |
| Prior\tservice\tcost |  | $(2) |  |
| Net\tloss | $(9) | (4) |  |
| Estimated\tamortization | $(9) | $(6) |  |

								Certain	of	our	U.S.	employees	are	eligible	to	contribute	a	portion	of	their	pre-tax	salary	to	a	401(k)	savings	plan	and	an	Employee	Stock	Ownership	Plan,	referred to	as	an	"ESOP."	Our	matching	portion	of	these	contributions	is	paid	in	cash,	and	the	related	expense	was	$25	million	for	2007,	$20	million	for	2006	and	$21	million	for 2005.	In	addition,	employees	in	certain	non-U.S.	offices	participate	in	other	local	plans.	Expenses	related	to	these	plans	were	$33	million,	$32	million	and	$39	million for	2007,	2006	and	2005,	respectively.

								The	ESOP	is	a	non-leveraged	plan.	Compensation	cost	is	equal	to	the	contribution	called	for	by	the	plan	formula	and	is	equal	to	the	cash	contributed	for	the purchase	of	shares	on	the	open	market	or	the	fair	value	of	the	shares	contributed	from	treasury	stock.	Dividends	on	shares	held	by	the	ESOP	are	charged	to	retained earnings,	and	shares	are	treated	as	outstanding	for	purposes	of	calculating	earnings	per	share.

# Note	18.				Occupancy	Expense	and	Information	Systems	and	Communications	Expense

								Occupancy	expense	and	information	systems	and	communications	expense	includes	expense	for	depreciation	of	buildings,	leasehold	improvements,	computers, equipment	and	furniture	and	fixtures.	Total	depreciation	expense	for	the	years	ended	December	31,	2007,	2006	and	2005	was	$319	million,	$309	million	and $315	million,	respectively.

								We	lease	approximately	865,000	square	feet	at	One	Lincoln	Street,	an	office	building	located	in	Boston,	Massachusetts,	and	a	related	366,000	square-foot underground	parking	garage,	under	20-year,	non-cancelable	capital	leases	expiring	in	September	2023.	As	of	December	31,	2007	and	2006,	an	aggregate	net	book	value of	$421	million	and	$447	million,	respectively,	for	the	capital	leases	was	recorded	in	premises	and	equipment	in	our	consolidated	statement	of	condition,	and	the	related liability	was	recorded	in	long-term	debt.	Capital	lease	asset	amortization	is	recorded	in	occupancy	expense	over	the	lease	terms.	Lease	payments	are	recorded	as	a reduction	of	the	liability,	with	a	portion	recorded	as	imputed	interest	expense.	For	the	years	ended	December	31,	2007	and	2006,	interest	expense	related	to	these	capital lease	obligations,	recorded	in	net	interest	revenue,	was	$36	million	and	$37	million,	respectively.	As	of	December	31,	2007	and	2006,	accumulated	amortization	of assets	under	capital	leases	was	$110	million	and	$84	million,	respectively.

								We	have	entered	into	non-cancelable	operating	leases	for	premises	and	equipment.	Nearly	all	leases	include	renewal	options.	Costs	related	to	operating	leases	for office	space	are	recorded	in	occupancy	expense.	Costs	related	to	operating	leases	for	computers	and	equipment	are	recorded	in	information	systems	and	communications expense.

								During	2007,	we	terminated	an	operating	lease	related	to	one	of	our	office	buildings	in	Boston.	The	lease	was	terminated	in	connection	with	an	overall	evaluation	of our	requirements	for	office	space	as	a	result	of	our	acquisition	of	Investors	Financial.	The	termination	of	the	lease	resulted	in	the	recognition	of	a	charge	of approximately	$91	million,	which	was	included	in	the	merger	and	integration	costs	recorded	in	connection	with	the	acquisition.	During	2005,	we	entered	into	sub-lease agreements	for	our	headquarters	building	and	other	office	space	in	Boston.	These	sub-lease	agreements	resulted	in	the	recognition	of	charges	to	occupancy	expense	of $26	million	for	the	year	ended	December	31,	2005.

								The	following	is	a	summary	of	future	minimum	lease	payments	under	non-cancelable	capital	and	operating	leases	as	of	December	31,	2007.	Future	minimum	rental commitments	have	been	reduced	by	aggregate	sublease	rental	commitments	of	$77	million	for	capital	leases	and	$138	million	for	operating	leases.	The	increase	in	future lease	payments	compared	to	amounts	reported	in	prior	years	resulted	from	the	addition	of	approximately	1	million	square	feet	of	office	space	in	connection	with	our acquisition	of	Investors	Financial.

|  | Capital	Leases | Operating	Leases | Total |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| 2008 | $52 | $225 | $277 |
| 2009 | 52 | 219 | 271 |
| 2010 | 52 | 199 | 251 |
| 2011 | 52 | 164 | 216 |
| 2012 | 52 | 160 | 212 |
| Thereafter | 563 | 913 | 1,476 |
| Total\tminimum\tlease\tpayments | 823 | $1,880 | $2,703 |
| Less\tamount\trepresenting\tinterest\tpayments | (337) |  |  |
| Present\tvalue\tof\tminimum\tlease\tpayments | $486 |  |  |

# Note	19.				Other	Operating	Expenses

								The	components	of	other	operating	expenses	were	as	follows	for	the	years	ended	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Professional\tservices | $236 | $157 | $184 |
| Amortization\tof\tintangible\tassets | 92 | 43 | 43 |
| Other | 478 | 318 | 257 |
| Total\tother\toperating\texpenses | $806 | $518 | $484 |

								The	components	of	income	tax	expense	from	continuing	operations	consisted	of	the	following	for	the	years	ended	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Current: |  |  |  |
| Federal | $424 | $328 | $185 |
| State | 133 | 82 | 46 |
| Non-U.S. | 338 | 265 | 139 |
| Total\tcurrent | 895 | 675 | 370 |
| Deferred: |  |  |  |
| Federal | (155) | 27 | 83 |
| State | (59) | (9) | 14 |
| Non-U.S. | (39) | (18) | 20 |
| Total\tdeferred | (253) | — | 117 |
| Total\tincome\ttax\texpense\tfrom\tcontinuing\toperations | $642 | $675 | $487 |

								The	income	tax	expense	(benefit)	related	to	net	realized	securities	gains	or	losses	was	$3	million,	$6	million	and	$(1)	million	for	2007,	2006	and	2005,	respectively. Pre-tax	income	from	continuing	operations	attributable	to	operations	located	outside	the	U.S.	was	$1.13	billion,	$759	million	and	$494	million	for	2007,	2006	and	2005, respectively.

								For	those	foreign	subsidiaries	for	which	accumulated	earnings	of	the	subsidiary	are	considered	to	be	permanently	invested,	no	provision	for	deferred	U.S.	income taxes	is	recorded.	The	total	undistributed	retained	earnings	of	these	subsidiaries	was	$561	million	at	December	31,	2007.	If	the	accumulated	earnings	in	these subsidiaries	had	been	temporarily	invested,	a	deferred	U.S.	tax	liability	of	$107	million	would	have	been	recorded.

								Income	tax	expense	from	continuing	operations	for	2006	included	an	additional	provision	of	$35	million	primarily	related	to	the	impact	of	the	Tax	Increase Prevention	and	Reconciliation	Act	on	income	generated	from	certain	of	our	leveraged	leases,	more	fully	described	below,	and	$46	million	related	to	the	potential resolution	of	issues	with	the	IRS	concerning	our	LILO	and	SILO	transactions.	Additional	information	about	contingencies	related	to	LILO	and	SILO	transactions	is	in note	10.

								During	2006,	TIPRA	repealed	the	federal	income	tax	exclusion,	effective	on	January	1,	2007,	which	was	previously	allowed	for	a	portion	of	the	income	generated from	certain	leveraged	leases	of	aircraft.	As	a	result	of	this	legislation,	and	in	accordance	with	existing	lease	accounting	standards,	we	recalculated	the	allocation	of	the components	of	leasing-related	income	over	the	terms	of	the	affected	leases	and	recorded	a	non-cash	charge	to	income	tax	expense	of	approximately	$35	million primarily	related	to	the	impact	of	this	legislation.

								Significant	components	of	deferred	tax	liabilities	and	assets	were	as	follows	at	December	31:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Deferred\ttax\tliabilities: |  |  |
| Lease\tfinancing\ttransactions | $1,177 | $1,779 |
| Foreign\tcurrency\ttranslation | 152 | 90 |
| Fixed\tand\tintangible\tassets | 731 | 112 |
| Total\tdeferred\ttax\tliabilities | 2,060 | 1,981 |
| Deferred\ttax\tassets: |  |  |
| Unrealized\tlosses\ton\tavailable-for-sale\tsecurities,\tnet | 486 | 153 |
| Deferred\tcompensation | 122 | 108 |
| Pension | 85 | 81 |
| Operating\texpenses | 402 | 61 |
| Real\testate | 56 | 26 |
| Other | 79 | 38 |
| Total\tdeferred\ttax\tassets | 1,230 | 467 |
| Net\tdeferred\ttax\tliabilities | $830 | $1,514 |

								A	reconciliation	of	the	U.S.	statutory	income	tax	rate	to	the	effective	tax	rate	based	on	income	from	continuing	operations	before	income	taxes	was	as	follows	for the	years	ended	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| U.S.\tfederal\tincome\ttax\trate | 35.0% | 35.0% | 35.0% |
| Changes\tfrom\tstatutory\trate: |  |  |  |
| State\ttaxes,\tnet\tof\tfederal\tbenefit | 2.2 | 2.9 | 3.3 |
| Tax-exempt\tincome | (1.7) | (1.1) | (1.5) |
| Tax\tcredits | (1.6) | (1.4) | (1.3) |
| Foreign\ttax\tdifferential | (2.2) | (1.2) | (1.0) |
| Provision\trelated\tto\tTIPRA | — | 1.8 | — |
| Provision\trelated\tto\tLILO\tand\tSILO\ttransactions | 2.0 | 2.6 | — |
| Other,\tnet | — | (.5) | (.5) |
| Effective\ttax\trate | 33.7% | 38.1% | 34.0% |

								As	discussed	in	note	1,	we	applied	the	provisions	of	FASB	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes—an	interpretation	of	FASB Statement	No.	109,	on	January	1,	2007.	The	application	of	the	Interpretation's	provisions	did	not	change	our	liability	for	unrecognized	tax	benefits.

								An	analysis	of	activity	related	to	unrecognized	tax	benefits	follows:

|  | 2007 |
| :--- | :--- |
| (In\tmillions) |  |
| Balance\tat\tbeginning\tof\tyear | $662 |
| Additions\tfor\ttax\tpositions\tof\tprior\tyears | 150 |
| Settlements | (507) |
| Balance\tat\tend\tof\tyear | $305 |

								Included	in	the	balance	at	December	31,	2007	is	$285	million	of	tax	positions	for	which	the	ultimate	deductibility	is	highly	certain	but	for	which	there	is	uncertainty about	the	timing	of	such	deductibility.	Because	of	the	impact	of	deferred	tax	accounting,	the	disallowance	of	the	shorter	deductibility	period	would	not	affect	the	annual effective	tax	rate	but	would	accelerate	the	payment	of	cash	to	the	taxing	authority	to	an	earlier	period.	Settlements	include	amounts	remitted	during	2007	and	identified amounts	to	be	remitted	in	2008.

								We	record	interest	and	penalties	related	to	income	taxes	as	a	component	of	income	tax	expense.	We	recognized	interest	expense	of	approximately	$38	million	and $46	million	for	the	years	ended	December	31,	2007	and	2006,	respectively.	We	had	approximately	$83	million	and	$95	million	accrued	at	December	31,	2007	and	2006, respectively,	for	the	payment	of	interest.	The	earliest	year	open	to	examination	in	our	major	jurisdictions	is	2000.

# Note	21.				Earnings	Per	Share

								The	following	table	presents	the	computation	of	basic	and	diluted	earnings	per	share	for	the	years	ended	December	31:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |
| Net\tincome | $1,261 | $1,106 | $838 |
| Average\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic\taverage\tshares | 360,675 | 331,350 | 330,361 |
| Effect\tof\tdilutive\tsecurities: |  |  |  |
| Stock\toptions\tand\tstock\tawards | 4,788 | 4,349 | 2,762 |
| Equity-related\tfinancial\tinstruments | 25 | 33 | 1,513 |
| Diluted\taverage\tshares | 365,488 | 335,732 | 334,636 |
| Anti-dilutive\tsecurities\t(in\tthousands)(1) | 1,091 | 973 | 8,791 |
| Earnings\tper\tShare |  |  |  |
| Basic | $3.50 | $3.34 | $2.53 |
| Diluted | 3.45 | 3.29 | 2.50 |

(1) Represents	stock	options	outstanding	but	not	included	in	the	computation	of	diluted	average	shares	because	the	exercise	prices	of	the	instruments	were	greater than	the	average	fair	value	of	our	common	stock	during	the	periods.

# Note	22.				Line	of	Business	Information

								We	report	two	lines	of	business:	Investment	Servicing	and	Investment	Management.	Given	our	services	and	management	organization,	the	results	of	operations	for these	lines	of	business	are	not	necessarily	comparable	with	those	of	other	companies,	including	companies	in	the	financial	services	industry.

								Investment	Servicing	provides	services	for	U.S.	mutual	funds,	collective	investment	funds	worldwide,	corporate	and	public	retirement	plans,	insurance	companies, foundations,	endowments,	and	other	investment	pools.	Products	include	custody,	accounting,	daily	pricing	and	administration;	master	trust	and	master	custody; recordkeeping;	foreign	exchange,	brokerage	and	other	trading	services;	securities	finance;	deposit	and	short-term	investment	facilities;	loans	and	lease	financing; investment	manager	and	hedge	fund	manager	operations	outsourcing;	and	performance,	risk	and	compliance	analytics	to	support	institutional	investors.	We	provide shareholder	services,	which	include	mutual	fund	and	collective	investment	fund	shareholder	accounting,	through	50%-owned	affiliates,	Boston	Financial	Data Services,	Inc.	and	the	International	Financial	Data	Services	group	of	companies.

								Investment	Management	offers	a	broad	array	of	services	for	managing	financial	assets,	including	investment	management	and	investment	research,	primarily	for institutional	investors	worldwide.	These	services	include	passive	and	active	U.S.	and	non-U.S.	equity	and	fixed-income	investment	management	strategies,	and	other related	services,	such	as	securities	finance.

								Revenue	and	expenses	are	directly	charged	or	allocated	to	the	lines	of	business	through	management	information	systems.	We	price	our	products	and	services	on the	basis	of	overall	customer	relationships	and	other	factors;	therefore,	revenue	may	not	necessarily	reflect	market	pricing	on	products	within	the	business	lines	in	the same	way	it	would	for	independent	business	entities.	Assets

and	liabilities	are	allocated	according	to	rules	that	support	management's	strategic	and	tactical	goals.	Capital	is	allocated	based	on	risk-weighted	assets	employed	and management's	judgment.	Capital	allocations	may	not	be	representative	of	the	capital	that	might	be	required	if	these	lines	of	business	were	independent	business	entities.

								The	following	is	a	summary	of	line	of	business	results.	Results	presented	exclude	the	income	(loss)	from	discontinued	operations	related	to	our	divestiture	of	Bel Air,	which	is	discussed	in	note	2.	The	amount	presented	in	the	"Other/One-Time"	column	for	2007	represents	merger	and	integration	costs	recorded	in	connection	with our	acquisition	of	Investors	Financial.	The	amount	presented	in	the	same	column	for	2005	represents	additional	gain	from	our	sale	of	the	Private	Asset	Management business.	The	amount	presented	in	the	net	charge	line	items	are	associated	with	the	underperformance	of	certain	active	fixed-income	strategies	managed	by	SSgA, discussed	in	note	10.

|  | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (Dollars\tin\tmillions,\texcept |  |  |  |  |  |  |  |  |  |  |  |  |
| where\totherwise\tnoted) |  |  |  |  |  |  |  |  |  |  |  |  |
| Fee\trevenue: |  |  |  |  |  |  |  |  |  |  |  |  |
| Servicing\tfees | $3,388 | $2,723 | $2,474 |  |  |  |  |  |  | $3,388 | $2,723 | $2,474 |
| Management\tfees | — | — | — | $1,141 | $943 | $751 |  |  |  | 1,141 | 943 | 751 |
| Trading\tservices | 1,152 | 862 | 694 | — | — | — |  |  |  | 1,152 | 862 | 694 |
| Securities\tfinance | 518 | 292 | 260 | 163 | 94 | 70 |  |  |  | 681 | 386 | 330 |
| Processing\tfees\tand |  |  |  |  |  |  |  |  |  |  |  |  |
| other | 162 | 208 | 221 | 75 | 64 | 81 |  |  |  | 237 | 272 | 302 |
| Total\tfee\trevenue | 5,220 | 4,085 | 3,649 | 1,379 | 1,101 | 902 |  |  |  | 6,599 | 5,186 | 4,551 |
| Net\tinterest\trevenue | 1,573 | 986 | 826 | 157 | 124 | 81 |  |  |  | 1,730 | 1,110 | 907 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — |  |  |  | — | — | — |
| Net\tinterest\trevenue |  |  |  |  |  |  |  |  |  |  |  |  |
| after\tprovision\tfor\tloan |  |  |  |  |  |  |  |  |  |  |  |  |
| losses | 1,573 | 986 | 826 | 157 | 124 | 81 |  |  |  | 1,730 | 1,110 | 907 |
| Gains\t(Losses)\ton\tsales |  |  |  |  |  |  |  |  |  |  |  |  |
| of\tavailable-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |
| investment\tsecurities, |  |  |  |  |  |  |  |  |  |  |  |  |
| net | 7 | 15 | (1) | — | — | — |  |  |  | 7 | 15 | (1) |
| Gain\ton\tsale\tof\tdivested |  |  |  |  |  |  |  |  |  |  |  |  |
| business | — | — | — | — | — | — |  |  | $16 | — | — | 16 |
| Total\trevenue | 6,800 | 5,086 | 4,474 | 1,536 | 1,225 | 983 |  |  | 16 | 8,336 | 6,311 | 5,473 |
| Operating\texpenses | 4,787 | 3,742 | 3,363 | 981 | 798 | 678 |  |  |  | 5,768 | 4,540 | 4,041 |
| Net\tcharge(1): |  |  |  |  |  |  |  |  |  |  |  |  |
| Provision\tfor\tlegal |  |  |  |  |  |  |  |  |  |  |  |  |
| exposure | — | — | — | 600 | — | — |  |  |  | 600 | — | — |
| Reduction\tof\tincentive |  |  |  |  |  |  |  |  |  |  |  |  |
| compensation | (47) | — | — | (109) | — | — |  |  |  | (156) | — | — |
| Severance\tand |  |  |  |  |  |  |  |  |  |  |  |  |
| professional\tfees | — | — | — | 23 | — | — |  |  |  | 23 | — | — |
| Total\tnet\tcharge | (47) | — | — | 514 | — | — |  |  |  | 467 | — | — |
| Merger\tand\tintegration |  |  |  |  |  |  |  |  |  |  |  |  |
| costs | — | — | — | — | — | — | $198 |  |  | 198 | — | — |
| Total\toperating\nexpenses | 4,740 | 3,742 | 3,363 | 1,495 | 798 | 678 | 198 |  | — | 6,433 | 4,540 | 4,041 |
| Income\tfrom\tcontinuing |  |  |  |  |  |  |  |  |  |  |  |  |
| operations\tbefore |  |  |  |  |  |  |  |  |  |  |  |  |
| income\ttaxes | $2,060 | $1,344 | $1,111 | $41 | $427 | $305 | $(198) |  | $16 | $1,903 | $1,771 | $1,432 |
| Pre-tax\tmargin | 30% | 26% | 25% | 3% | 35% | 31% |  |  |  |  |  |  |
| Average\tassets\t(in |  |  |  |  |  |  |  |  |  |  |  |  |
| billions) | $120.0 | $103.4 | $96.9 | $3.5 | $3.0 | $2.9 |  |  |  | $123.5 | $106.4 | $99.8 |

								We	define	non-U.S.	activities	as	those	revenue-producing	assets	and	business	activities	that	arise	from	customers	domiciled	outside	the	United	States.	Due	to	the nature	of	our	business,	precise	segregation	of	U.S.	and	non-U.S.	activities	is	not	possible.	Subjective	judgments	have	been	applied	to	determine	operating	results	related to	non-U.S.	activities,	including	the	application	of	transfer	pricing	and	asset	and	liability	management	policies.	Interest	expense	allocations	are	based	on	the	average	cost of	short-term	borrowed	funds.

								The	following	table	summarizes	our	non-U.S.	operating	results	for	the	years	ended	December	31,	and	assets	as	of	December	31,	based	on	the	domicile	location	of our	customers:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Results\tof\toperations: |  |  |  |
| Total\tfee\trevenue | $2,707 | $2,349 | $1,881 |
| Net\tinterest\trevenue | 713 | 392 | 249 |
| Total\trevenue | 3,420 | 2,741 | 2,130 |
| Operating\texpenses | 2,233 | 1,840 | 1,589 |
| Income\tbefore\tincome\ttaxes | 1,187 | 901 | 541 |
| Income\ttax\texpense | 415 | 346 | 205 |
| Net\tincome | $772 | $555 | $336 |
| Assets: |  |  |  |
| Interest-bearing\tdeposits\twith\tbanks | $5,574 | $5,193 | $11,235 |
| Other\tassets | 28,657 | 19,510 | 8,800 |
| Total\tassets | $34,231 | $24,703 | $20,035 |

# Note	24.				Fair	Values	of	Financial	Instruments

								Fair	value	estimates	are	generally	subjective	in	nature,	and	are	made	as	of	a	specific	point	in	time	based	on	the	characteristics	of	the	financial	instruments	and relevant	market	information.	Disclosure	of	fair	values	is	not	required	for	certain	items,	such	as	lease	financing,	equity	method	investments,	obligations	for	pension	and other	postretirement	plans,	premises	and	equipment,	other	intangible	assets	and	income	tax	assets	and	liabilities.	Accordingly,	aggregate	fair	value	amounts	presented	do not	purport	to	represent,	and	should	not	be	considered	representative	of,	our	underlying	"market"	or	franchise	value.	In	addition,	because	of	potential	differences	in methodologies	and	assumptions	used	to	estimate	fair	values,	our	fair	values	should	not	be	compared	to	those	of	other	financial	institutions.

								We	use	the	following	methods	to	estimate	the	fair	value	of	financial	instruments:

•For	financial	instruments	that	have	quoted	market	prices,	those	quoted	prices	are	used	to	determine	fair	value.

•Financial	instruments	that	have	no	defined	maturity,	have	a	remaining	maturity	of	180	days	or	less,	or	reprice	frequently	to	a	market	rate	are	assumed	to have	a	fair	value	that	approximates	reported	value,	after	taking	into	consideration	any	applicable	credit	risk.

•If	no	quoted	market	prices	are	available,	financial	instruments	are	valued	using	third-party	pricing	services,	or	by	discounting	the	expected	cash	flow(s) using	an	estimated	current	market	interest	rate	for	the	financial	instrument.

•For	derivative	financial	instruments,	fair	value	is	estimated	as	the	amount	at	which	an	asset	or	liability	could	be	bought	or	sold	in	a	current	transaction between	willing	parties,	other	than	in	a	forced	liquidation	or	sale.

								The	short	duration	of	our	assets	and	liabilities	results	in	a	significant	number	of	financial	instruments	for	which	fair	value	equals	or	closely	approximates	the	value reported	in	our	consolidated	statement	of	condition.	These	financial	instruments	are	reported	in	the	following	captions	in	our	consolidated	statement	of	condition:	cash and	due	from	banks;	interest-bearing	deposits	with	banks;	securities	purchased	under	resale	agreements;	accrued	income	receivable;	deposits;	securities	sold	under repurchase	agreements;	federal	funds	purchased;	and	other	short-term	borrowings.	The	fair	value	of	trading	account	assets	equals	their	reported	value.	In	addition,	due	to the	relatively	short-term	nature	of	our	net	loans	(excluding	leases),	substantially	all	of	which	are	due	within	one	year,	we	have	determined	that	their	fair	value approximates	the	reported	value.	Loan	commitments	have	no	reported	value	because	terms	are	at	prevailing	market	rates.

								The	reported	value	and	fair	value	for	other	captions	in	the	consolidated	statement	of	condition	were	as	follows	as	of	December	31:

|  | Reported	Value | Fair	Value |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| 2007: |  |  |
| Financial\tAssets: |  |  |
| Investment\tsecurities: |  |  |
| Available\tfor\tsale | $70,326 | $70,326 |
| Held\tto\tmaturity | 4,233 | 4,225 |
| Net\tloans\t(excluding\tleases) | 13,804 | 13,804 |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments—trading | 4,450 | 4,450 |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments—asset\tand\tliability\tmanagement | 63 | 63 |
| Financial\tLiabilities: |  |  |
| Long-term\tdebt | 3,636 | 3,446 |
| Unrealized\tlosses\ton\tderivative\tfinancial\tinstruments—trading | 4,410 | 4,410 |
| Unrealized\tlosses\ton\tderivative\tfinancial\tinstruments—asset\tand\tliability\tmanagement | 164 | 164 |
| 2006: |  |  |
| Financial\tAssets: |  |  |
| Investment\tsecurities: |  |  |
| Available\tfor\tsale | $60,445 | $60,445 |
| Held\tto\tmaturity | 4,457 | 4,484 |
| Net\tloans\t(excluding\tleases) | 6,599 | 6,599 |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments—trading | 3,006 | 3,006 |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments—asset\tand\tliability\tmanagement | 54 | 54 |
| Financial\tLiabilities: |  |  |
| Long-term\tdebt | 2,616 | 2,695 |
| Unrealized\tlosses\ton\tderivative\tfinancial\tinstruments—trading | 3,026 | 3,026 |
| Unrealized\tlosses\ton\tderivative\tfinancial\tinstruments—asset\tand\tliability\tmanagement | 31 | 31 |

# Note	25.				Parent	Company	Financial	Statements

# STATEMENT	OF	INCOME

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, |  |  |  |
| (In\tmillions) |  |  |  |
| Interest\ton\tsecurities\tpurchased\tunder\tresale\tagreements | $446 | $559 | $332 |
| Cash\tdividends\tfrom\tconsolidated\tbank\tsubsidiary | 70 | 415 | 570 |
| Cash\tdividends\tfrom\tconsolidated\tnon-bank\tsubsidiaries\tand\tunconsolidated\taffiliates | 120 | 177 | 74 |
| Other,\tnet | 74 | 34 | 42 |
| Total\trevenue | 710 | 1,185 | 1,018 |
| Interest\ton\tsecurities\tsold\tunder\trepurchase\tagreements | 360 | 463 | 265 |
| Other\tinterest\texpense | 208 | 146 | 131 |
| Other\texpenses | 86 | 36 | 6 |
| Total\texpenses | 654 | 645 | 402 |
| Income\ttax\texpense\t(benefit) | (76) | (4) | 33 |
| Income\tbefore\tequity\tin\tundistributed\tincome\tof\tsubsidiaries\tand\taffiliates | 132 | 544 | 583 |
| Equity\tin\tundistributed\tincome\t(loss)\tof\tsubsidiaries\tand\taffiliates: |  |  |  |
| Consolidated\tbank\tsubsidiary | 1,177 | 602 | 165 |
| Consolidated\tnon-bank\tsubsidiaries\tand\tunconsolidated\taffiliates | (48) | (40) | 90 |
| Net\tincome | $1,261 | $1,106 | $838 |

# STATEMENT	OF	CONDITION

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| As\tof\tDecember\t31, |  |  |
| (In\tmillions) |  |  |
| Assets: |  |  |
| Interest-bearing\tdeposits\twith\tbank\tsubsidiary | $2,067 | $841 |
| Securities\tpurchased\tunder\tresale\tagreements\tfrom: |  |  |
| External\tparties | 6,798 | 9,269 |
| Consolidated\tnon-bank\tsubsidiary\tand\tunconsolidated\taffiliates | 3 | 21 |
| Investment\tsecurities\tavailable\tfor\tsale | 122 | 103 |
| Investments\tin\tsubsidiaries: |  |  |
| Consolidated\tbank\tsubsidiary | 11,932 | 6,768 |
| Consolidated\tnon-bank\tsubsidiaries | 876 | 940 |
| Unconsolidated\taffiliates | 184 | 166 |
| Notes\tand\tother\treceivables\tfrom: |  |  |
| Consolidated\tbank\tsubsidiary | 205 | 3 |
| Consolidated\tnon-bank\tsubsidiaries\tand\taffiliates | 210 | 120 |
| Other\tassets | 149 | 140 |
| Total\tassets | $22,546 | $18,371 |
| Liabilities: |  |  |
| Securities\tsold\tunder\trepurchase\tagreements | $6,293 | $8,772 |
| Commercial\tpaper | 2,355 | 998 |
| Accrued\ttaxes,\texpenses\tand\tother\tliabilities\tdue\tto: |  |  |
| Consolidated\tbank\tsubsidiary | 241 | 54 |
| Consolidated\tnon-bank\tsubsidiaries | 11 | 7 |
| External\tparties | 218 | 167 |
| Long-term\tdebt | 2,129 | 1,121 |
| Total\tliabilities | 11,247 | 11,119 |
| Shareholders'\tequity | 11,299 | 7,252 |
| Total\tliabilities\tand\tshareholders'\tequity | $22,546 | $18,371 |

# STATEMENT	OF	CASH	FLOWS

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, |  |  |  |
| (In\tmillions) |  |  |  |
| Net\tcash\tprovided\tby\toperating\tactivities | $170 | $497 | $512 |
| Investing\tActivities: |  |  |  |
| Net\t(increase)\tdecrease\tin\tinterest-bearing\tdeposits\twith\tbank\tsubsidiary | (1,226) | (291) | 580 |
| Net\t(increase)\tdecrease\tin\tsecurities\tpurchased\tunder\tresale\tagreements | 2,489 | (211) | (6,845) |
| Purchases\tof\tavailable-for-sale\tsecurities | (3) | (2) | (378) |
| Sales\tof\tavailable-for-sale\tsecurities | 4 | — | 385 |
| Investments\tin\tconsolidated\tbank\tsubsidiary | (300) | (5) | — |
| Investments\tin\tnon-bank\tsubsidiaries\tand\taffiliates | (13) | 22 | (20) |
| Net\tdecrease\tin\tnotes\treceivable\tfrom\tsubsidiaries | 18 | 1 | 15 |
| Other | 129 | 141 | 12 |
| Net\tcash\t(used\tin)\tprovided\tby\tinvesting\tactivities | 1,098 | (345) | (6,251) |
| Financing\tActivities: |  |  |  |
| Net\tincrease\t(decrease)\tin\tshort-term\tborrowings | (2,479) | 148 | 6,506 |
| Net\tincrease\t(decrease)\tin\tcommercial\tpaper | 1,357 | 134 | (102) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt,\tnet\tof\tissuance\tcosts | 1,488 | — | — |
| Payments\tfor\tlong-term\tdebt | (516) | — | (345) |
| Proceeds\tfrom\tSPACES,\tnet\tof\tissuance\tcosts | — | — | 345 |
| Purchases\tof\tcommon\tstock | (1,002) | (368) | (664) |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock\tfor\tstock\tawards\tand\toptions\texercised | 185 | 193 | 231 |
| Payments\tfor\tcash\tdividends | (301) | (259) | (232) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (1,268) | (152) | 5,739 |
| Net\tchange | — | — | — |
| Cash\tand\tdue\tfrom\tbanks\tat\tbeginning\tof\tyear | — | — | — |
| Cash\tand\tdue\tfrom\tbanks\tat\tend\tof\tyear | $— | $— | $— |

# Distribution	of	Average	Assets,	Liabilities	and	Shareholders'	Equity;	Interest	Rates	and	Interest	Differential	(Unaudited)

								Average	statements	of	condition	and	net	interest	revenue	analysis	for	the	years	indicated	are	presented	below.

|  | Average |  | Average | Average |  | Average | Average |  | Average |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions;\tfully\ttaxable-equivalent | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate |
| basis) |  |  |  |  |  |  |  |  |  |
| Assets: |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits\twith\tnon-U.S.\tbanks | $7,420 | $415 | 5.60%$ | 9,581 | $412 | 4.30%$ | 17,186 | $527 | 3.07% |
| Interest-bearing\tdeposits\twith\tU.S.\tbanks | 13 | 1 | 7.19 | 40 | 2 | 5.00 | 74 | 2 | 2.60 |
| Securities\tpurchased\tunder\tresale\tagreements | 12,466 | 664 | 5.32 | 12,543 | 649 | 5.18 | 12,579 | 403 | 3.21 |
| Federal\tfunds\tsold | 1,936 | 92 | 4.77 | 277 | 14 | 4.91 | 311 | 9 | 2.82 |
| Trading\taccount\tassets | 972 | 55 | 5.60 | 975 | 48 | 4.91 | 470 | 21 | 4.39 |
| Investment\tsecurities: |  |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 21,705 | 1,106 | 5.10 | 21,160 | 1,011 | 4.78 | 24,833 | 866 | 3.49 |
| State\tand\tpolitical\tsubdivisions(2) | 5,268 | 251 | 4.79 | 2,616 | 115 | 4.45 | 1,839 | 78 | 4.23 |
| Other\tinvestments | 44,017 | 2,292 | 5.21 | 37,803 | 1,830 | 4.84 | 24,481 | 873 | 3.56 |
| Commercial\tand\tfinancial\tloans | 8,759 | 365 | 4.18 | 5,338 | 205 | 3.84 | 3,718 | 106 | 2.85 |
| Lease\tfinancing(2) | 1,994 | 29 | 1.45 | 2,332 | 83 | 3.59 | 2,295 | 87 | 3.81 |
| Total\tinterest-earning\tassets(2) | 104,550 | 5,270 | 5.04 | 92,665 | 4,369 | 4.72 | 87,786 | 2,972 | 3.39 |
| Cash\tand\tdue\tfrom\tbanks | 3,272 |  |  | 2,977 |  |  | 2,598 |  |  |
| Other\tassets | 15,660 |  |  | 10,802 |  |  | 9,385 |  |  |
| Total\tassets | $123,482 |  |  | $106,444 |  |  | $99,769 |  |  |
| Liabilities\tand\tshareholders'\tequity: |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits: |  |  |  |  |  |  |  |  |  |
| Time | $2,476 | 135 | 5.45 | $1,617 | 57 | 3.52 | $2,058 | 66 | 3.19 |
| Savings | 5,081 | 178 | 3.50 | 836 | 32 | 3.81 | 934 | 21 | 2.28 |
| Non-U.S. | 60,663 | 1,985 | 3.27 | 53,182 | 1,802 | 3.39 | 46,711 | 1,045 | 2.24 |
| Total\tinterest-bearing\tdeposits | 68,220 | 2,298 | 3.37 | 55,635 | 1,891 | 3.40 | 49,703 | 1,132 | 2.28 |
| Securities\tsold\tunder\trepurchase\tagreements | 16,132 | 701 | 4.35 | 20,883 | 914 | 4.38 | 22,432 | 613 | 2.73 |
| Federal\tfunds\tpurchased | 1,667 | 86 | 5.15 | 2,777 | 140 | 5.04 | 2,306 | 75 | 3.23 |
| Other\tshort-term\tborrowings | 4,225 | 172 | 4.09 | 2,039 | 91 | 4.46 | 1,970 | 65 | 3.30 |
| Long-term\tdebt | 3,402 | 225 | 6.62 | 2,621 | 178 | 6.77 | 2,461 | 138 | 5.63 |
| Total\tinterest-bearing\tliabilities | 93,646 | 3,482 | 3.72 | 83,955 | 3,214 | 3.83 | 78,872 | 2,023 | 2.57 |
| Noninterest-bearing\tdeposits: |  |  |  |  |  |  |  |  |  |
| Special\ttime | 9,836 |  |  | 7,282 |  |  | 6,880 |  |  |
| Demand | 225 |  |  | 663 |  |  | 1,243 |  |  |
| Non-U.S.(3) | 579 |  |  | 329 |  |  | 170 |  |  |
| Other\tliabilities | 9,769 |  |  | 7,471 |  |  | 6,426 |  |  |
| Shareholders'\tequity | 9,427 |  |  | 6,744 |  |  | 6,178 |  |  |
| Total\tliabilities\tand\tshareholders'\tequity | $123,482 |  |  | $106,444 |  |  | $99,769 |  |  |
| Net\tinterest\trevenue |  | $1,788 |  |  | $1,155 |  |  | $949 |  |
| Excess\tof\trate\tearned\tover\trate\tpaid |  |  | 1.32% |  |  | .89% |  |  | .82% |
| Net\tinterest\tmargin(1) |  |  | 1.71 |  |  | 1.25 |  |  | 1.08 |

(1) Net	interest	margin	is	fully	taxable-equivalent	net	interest	revenue	divided	by	average	interest-earning	assets.

(2) Fully	taxable-equivalent	revenue	is	a	method	of	presentation	in	which	the	tax	savings	achieved	by	investing	in	tax-exempt	securities	are	included	in	interest	revenue	with	a	corresponding	charge	to	income	tax expense.	This	method	facilitates	the	comparison	of	the	performance	of	tax-exempt	and	taxable	securities.	The	adjustment	is	computed	using	a	federal	income	tax	rate	of	35%,	adjusted	for	applicable	state income	taxes,	net	of	the	related	federal-tax	benefit.	The	fully	taxable-equivalent	adjustments	included	in	interest	revenue	above	were	$58	million,	$45	million	and	$42	million	for	the	years	ended	December	31, 2007,	2006	and	2005,	respectively.

								The	table	below	summarizes	changes	in	fully	taxable-equivalent	interest	revenue	and	interest	expense	due	to	changes	in	volume	of	interest-earning	assets	and interest-bearing	liabilities,	and	due	to	changes	in	interest	rates.	Changes	attributed	to	both	volumes	and	rates	have	been	allocated	based	on	the	proportion	of	change	in each	category.

|  | Change	in | Change	in | Net	(Decrease) | Change	in | Change	in | Net	(Decrease) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions;\tfully\ttaxable-equivalent | Volume | Rate | Increase | Volume | Rate | Increase |
| basis) |  |  |  |  |  |  |
| Interest\trevenue\trelated\tto: |  |  |  |  |  |  |
| Interest-bearing\tdeposits\twith\tnon- |  |  |  |  |  |  |
| U.S.\tbanks | $(93) | $96 | $3 | $(233) $ | 118 | $(115) |
| Interest-bearing\tdeposits\twith\tU.S. |  |  |  |  |  |  |
| banks | (1) | — | (1) | (1) | 1 | — |
| Securities\tpurchased\tunder\tresale |  |  |  |  |  |  |
| agreements | (4) | 19 | 15 | (1) | 247 | 246 |
| Federal\tfunds\tsold | 81 | (3) | 78 | (1) | 6 | 5 |
| Trading\taccount\tassets | — | 7 | 7 | 22 | 5 | 27 |
| Investment\tsecurities: |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 26 | 69 | 95 | (128) | 273 | 145 |
| State\tand\tpolitical\tsubdivisions | 118 | 18 | 136 | 20 | 17 | 37 |
| Other\tinvestments | 300 | 162 | 462 | 488 | 469 | 957 |
| Commercial\tand\tfinancial\tloans | 130 | 30 | 160 | 46 | 53 | 99 |
| Lease\tfinancing | (12) | (42) | (54) | 1 | (5) | (4) |
| Total\tinterest-earning\tassets | 545 | 356 | 901 | 213 | 1,184 | 1,397 |
| Interest\texpense\trelated\tto: |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Time | 30 | 48 | 78 | (14) | 5 | (9) |
| Savings | 162 | (16) | 146 | (2) | 13 | 11 |
| Non-U.S. | 254 | (71) | 183 | 145 | 612 | 757 |
| Securities\tsold\tunder\trepurchase |  |  |  |  |  |  |
| agreements | (208) | (5) | (213) | (42) | 343 | 301 |
| Federal\tfunds\tpurchased | (56) | 2 | (54) | 15 | 50 | 65 |
| Other\tshort-term\tborrowings | 98 | (17) | 81 | 2 | 24 | 26 |
| Long-term\tdebt | 53 | (6) | 47 | 10 | 30 | 40 |
| Total\tinterest-bearing\tliabilities | 333 | (65) | 268 | 114 | 1,077 | 1,191 |
| Net\tinterest\trevenue | $212 | $421 | $633 | $99 | $107 | $206 |

# Quarterly	Summarized	Financial	Information	(Unaudited)

| (Dollars	and	shares	in	millions, | Fourth | Third | Second | First | Fourth | Third | Second | First |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| except\tper\tshare\tamounts) |  |  |  |  |  |  |  |  |
| Total\tfee\trevenue | $1,910 | $1,782 | $1,537 | $1,370 | $1,305 | $1,246 | $1,375 | $1,260 |
| Interest\trevenue | 1,454 | 1,383 | 1,203 | 1,172 | 1,226 | 1,103 | 1,034 | 961 |
| Interest\texpense | 898 | 919 | 818 | 847 | 910 | 837 | 772 | 695 |
| Net\tinterest\trevenue | 556 | 464 | 385 | 325 | 316 | 266 | 262 | 266 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 556 | 464 | 385 | 325 | 316 | 266 | 262 | 266 |
| Gains\t(Losses)\ton\tsales\tof\tavailable-for-sale |  |  |  |  |  |  |  |  |
| securities,\tnet | 13 | (6) | (1) | 1 | 1 | 3 | 14 | (3) |
| Total\trevenue | 2,479 | 2,240 | 1,921 | 1,696 | 1,622 | 1,515 | 1,651 | 1,523 |
| Total\toperating\texpenses | 2,173 | 1,689 | 1,358 | 1,213 | 1,178 | 1,090 | 1,176 | 1,096 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome |  |  |  |  |  |  |  |  |
| taxes | 306 | 551 | 563 | 483 | 444 | 425 | 475 | 427 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 83 | 193 | 197 | 169 | 135 | 147 | 248 | 145 |
| Income\tfrom\tcontinuing\toperations | 223 | 358 | 366 | 314 | 309 | 278 | 227 | 282 |
| Income\tfrom\tdiscontinued\toperations | — | — | — | — | — | — | — | 10 |
| Net\tincome | $223 | $358 | $366 | $314 | $309 | $278 | $227 | $292 |
| Earnings\tper\tshare\tfrom\tcontinuing\toperations: |  |  |  |  |  |  |  |  |
| Basic | $.58 | $.92 | $1.09 | $.94 | $.93 | $.84 | $.69 | $.85 |
| Diluted | .57 | .91 | 1.07 | .93 | .91 | .83 | .68 | .84 |
| Income\tper\tshare\tfrom\tdiscontinued\toperations: |  |  |  |  |  |  |  |  |
| Basic | $— | $— | $— | $— | $— | $— | $— | $.03 |
| Diluted | — | — | — | — | — | — | — | .03 |
| Earnings\tper\tshare: |  |  |  |  |  |  |  |  |
| Basic | $.58 | $.92 | $1.09 | $.94 | $.93 | $.84 | $.69 | $.88 |
| Diluted | .57 | .91 | 1.07 | .93 | .91 | .83 | .68 | .87 |
| Average\tshares\toutstanding: |  |  |  |  |  |  |  |  |
| Basic | 385 | 387 | 336 | 334 | 331 | 330 | 331 | 333 |
| Diluted | 392 | 392 | 341 | 339 | 337 | 336 | 336 | 337 |
| Dividends\tper\tshare | $.23 | $.22 | $.22 | $.21 | $.21 | $.20 | $.20 | $.19 |
| Stock\tprice: |  |  |  |  |  |  |  |  |
| High | $82.53 | $73.76 | $70.58 | $72.82 | $68.56 | $64.35 | $66.47 | $63.73 |
| Low | 66.79 | 59.13 | 64.21 | 61.70 | 60.96 | 54.39 | 56.27 | 55.42 |
| Close | 81.20 | 68.16 | 68.40 | 64.75 | 67.44 | 62.40 | 58.09 | 60.43 |

# ITEM	9.				CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# ITEM	9A.				CONTROLS	AND	PROCEDURES

# DISCLOSURE	CONTROLS	AND	PROCEDURES:	CHANGES	IN	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

								State	Street	has	established	and	maintains	disclosure	controls	and	procedures	that	are	designed	to	ensure	that	material	information	relating	to	State	Street	and	its subsidiaries	on	a	consolidated	basis	required	to	be	disclosed	in	its	reports	filed	or	submitted	under	the	Securities	Exchange	Act	of	1934	is	recorded,	processed, summarized,	and	reported	within	the	time	periods	specified	in	the	SEC's	rules	and	forms,	and	that	such	information	is	accumulated	and	communicated	to	State	Street management,	including	its	Chief	Executive	Officer	and	Chief	Financial	Officer,	as	appropriate,	to	allow	timely	decisions	regarding	required	disclosure.	For	the	fiscal quarter	ended	December	31,	2007,	State	Street	carried	out	an	evaluation,	under	the	supervision	and	with	the	participation	of	State	Street	management,	including	its	Chief Executive	Officer	and	Chief	Financial	Officer,	of	the	effectiveness	of	the	design	and	operation	of	State	Street's	disclosure	controls	and	procedures.	Based	on	the evaluation	of	these	disclosure	controls	and	procedures,	the	Chief	Executive	Officer	and	Chief	Financial	Officer	concluded	that	State	Street's	disclosure	controls	and procedures	were	effective	as	of	December	31,	2007.

								State	Street	has	also	established	and	maintains	internal	control	over	financial	reporting	as	a	process	designed	to	provide	reasonable	assurance	regarding	the reliability	of	financial	reporting	and	the	preparation	of	consolidated	financial	statements	for	external	purposes	in	accordance	with	accounting	principles	generally accepted	in	the	United	States.	In	the	ordinary	course	of	business,	State	Street	routinely	enhances	its	internal	controls	and	procedures	for	financial	reporting	by	either upgrading	its	current	systems	or	implementing	new	systems.	Changes	have	been	made	and	will	be	made	to	State	Street's	internal	controls	and	procedures	for	financial reporting	as	a	result	of	these	efforts.	During	the	fiscal	quarter	ended	December	31,	2007,	there	was	no	change	in	State	Street's	internal	control	over	financial	reporting that	has	materially	affected,	or	is	reasonably	likely	to	materially	affect,	State	Street's	internal	control	over	financial	reporting.

# INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

# Management's	Report	on	Internal	Control	Over	Financial	Reporting

								The	management	of	State	Street	is	responsible	for	the	preparation	and	fair	presentation	of	the	financial	statements	and	other	financial	information	contained	in	this Form	10-K.	Management	is	also	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting.	Management	has	designed	business processes	and	internal	controls	and	has	also	established	and	is	responsible	for	maintaining	a	business	culture	that	fosters	financial	integrity	and	accurate	reporting.	To these	ends,	management	maintains	a	comprehensive	system	of	internal	controls	intended	to	provide	reasonable	assurances	regarding	the	reliability	of	financial	reporting and	the	preparation	of	the	consolidated	financial	statements	of	State	Street	in	accordance	with	generally	accepted	accounting	principles.	State	Street's	accounting	policies and	internal	control	over	financial	reporting,	established	and	maintained	by	management,	are	under	the	general	oversight	of	State	Street's	Board	of	Directors,	including State	Street's	Examining	and	Audit	Committee.

								Management	has	made	a	comprehensive	review,	evaluation,	and	assessment	of	State	Street's	internal	control	over	financial	reporting	as	of	December	31,	2007.	The standard	measures	adopted	by	management	in	making	its	evaluation	are	the	measures	in	the	Integrated	Framework	published	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	(the	COSO	Framework).

								Based	upon	its	review	and	evaluation,	management	has	concluded	that	State	Street's	internal	control	over	financial	reporting	is	effective	at	December	31,	2007,	and that	there	were	no	material	weaknesses	in	State	Street's	internal	control	over	financial	reporting	as	of	that	date.

								Ernst	&	Young	LLP,	an	independent	registered	public	accounting	firm,	which	has	audited	and	reported	on	the	consolidated	financial	statements	contained	in	this Form	10-K,	has	issued	its	written	attestation	report	on	its	assessment	of	State	Street's	internal	control	over	financial	reporting	which	follows	this	report.

# Report	of	Independent	Registered	Public	Accounting	Firm	on	Internal	Control	Over	Financial	Reporting

# THE	SHAREHOLDERS	AND	BOARD	OF	DIRECTORS

								We	have	audited	State	Street	Corporation's	internal	control	over	financial	reporting	as	of	December	31,	2007,	based	on	criteria	established	in	Internal	Control— Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(the	COSO	criteria).	State	Street	Corporation's	management is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting included	in	the	accompanying	Management's	Report	on	Internal	Control	over	Financial	Reporting.	Our	responsibility	is	to	express	an	opinion	on	the	company's	internal control	over	financial	reporting	based	on	our	audit.

								We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audit included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	weakness	exists,	testing	and	evaluating	the	design	and	operating effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our audit	provides	a	reasonable	basis	for	our	opinion.

								A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

								Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

								In	our	opinion,	State	Street	Corporation	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2007,	based	on the	COSO	criteria.

								We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	statement	of condition	of	State	Street	Corporation	as	of	December	31,	2007	and	2006,	and	the	related	consolidated	statements	of	income,	changes	in	shareholders'	equity,	and	cash flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2007	of	State	Street	Corporation	and	our	report	dated	February	14,	2008	expressed	an	unqualified opinion	thereon.

# ITEM	9B.				OTHER	INFORMATION

# PART	III

# ITEM	10.				DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

								Information	concerning	our	directors	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or before	April	30,	2008,	under	the	caption	"Election	of	Directors."	Such	information	is	incorporated	herein	by	reference.

								Information	about	two	current	directors	of	State	Street	who	will	be	retiring	as	directors	at	the	2008	Annual	Meeting	of	Shareholders	is	as	follows:

Physician	and	surgeon.	Dr.	Albright,	age	72,	Director,	Collaborative	Initiatives	at	MIT,	is	Chairman	of	Western	Resources,	Inc.,	a	real	estate	holding	company. Dr.	Albright's	concentration	in	medicine	and	health	services	stems	from	her	specialty	of	general	surgery	over	23	years.	She	is	a	faculty	member	and	lecturer	in	surgery	at Harvard	Medical	School	and	an	honorary	member	of	New	England	Baptist	Hospital.	Dr.	Albright	is	consultant	to	and	formerly	chairman	of	the	Board	of	Regents	of	the National	Library	of	Medicine	at	the	National	Institutes	of	Health.	She	has	served	on	the	Board	of	the	Whitehead	Institute	for	Biomedical	Research,	was	recently	elected to	the	Board	of	Research!America,	and	is	a	member	of	the	corporation	of	Woods	Hole	Oceanographic	Institution.	Dr.	Albright	graduated	from	Harvard	Medical	School after	attending	Radcliffe	College,	and	has	received	eight	honorary	degrees.

ARTHUR	L.	GOLDSTEIN Director	since	1995

Retired	Chairman	and	Chief	Executive	Officer	of	Ionics,	Incorporated,	an	international	company	involved	in	the	purification	and	treatment	of	water.	He	was	Chief Executive	Officer	of	Ionics,	Incorporated	from	1971	to	2003	and	was	Chairman	from	1991	to	2004.	Mr.	Goldstein,	age	72,	is	a	director	of	Cabot	Corporation.	He	is	a member	of	the	National	Academy	of	Engineering.	He	is	a	trustee	of	the	California	Institute	of	Technology,	the	Massachusetts	General	Physicians'	Organization,	Inc.,	a trustee	and	treasurer	of	Partners	HealthCare	System,	where	he	serves	as	chairman	of	its	finance	committee	and	a	member	of	the	MIT	Energy	Initiative	External Advisory	Board.	Mr.	Goldstein	received	a	B.S.	degree	in	chemical	engineering	from	Rensselaer	Polytechnic	Institute,	an	M.S.	in	chemical	engineering	from	the University	of	Delaware,	and	an	M.B.A.	from	Harvard	Business	School.

								Information	concerning	our	executive	officers	appears	under	the	caption	"Executive	Officers	of	the	Registrant"	in	Item	4A	of	this	Form	10-K.

								Information	concerning	our	Examining	and	Audit	Committee	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant to	Regulation	14A	on	or	before	April	30,	2008,	under	the	caption	"Corporate	Governance	at	State	Street—Committees	of	the	Board	of	Directors."	Such	information	is incorporated	herein	by	reference.

								Information	concerning	compliance	with	Section	16(a)	of	the	Securities	Exchange	Act	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2008,	under	the	caption	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance."	Such information	is	incorporated	herein	by	reference.

								Our	Board	has	adopted	a	Code	of	Ethics	for	Senior	Financial	Officers	that	applies	to	our	Chief	Executive	Officer,	Chief	Financial	Officer	and	Corporate	Controller. The	code	of	ethics	has	been	posted	on	our	Internet	website	at	www.statestreet.com.	We	intend	to	satisfy	the	disclosure	requirements	under	Item	5.05	of	Form	8-K regarding	an	amendment	to,	or	waiver	from,	a	provision	of	the	code	of	ethics,	and	that	relates	to	a	substantive	amendment	or	material	departure	from	a	provision	of	the code	of	ethics,	by	posting	such	information	on	our	Internet	website	at	www.statestreet.com.	We	also	intend	to	satisfy	the	disclosure	requirements	of	the	NYSE	listing standards	regarding	waivers	of	the	Standard	of	Conduct	for	Directors,	and	waivers	for	executive	officers	of	the	Standard	of	Conduct	at	State	Street,	by	posting	such information	on	our	Internet	website	at	www.statestreet.com.

# ITEM	11.				EXECUTIVE	COMPENSATION

								Information	in	response	to	this	item	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or before	April	30,	2008,	under	the	caption	"Executive	Compensation."	Such	information	is	incorporated	herein	by	reference.

# ITEM	12.				SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

								Information	concerning	security	ownership	of	certain	beneficial	owners	and	management	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2008,	under	the	caption	"Beneficial	Ownership	of	Shares."	Such	information	is	incorporated herein	by	reference.

								The	following	table	discloses	the	number	of	outstanding	options,	warrants	and	rights	granted	by	State	Street	to	participants	in	equity	compensation	plans,	as	well	as the	number	of	securities	remaining	available	for	future	issuance	under	these	plans,	as	of	December	31,	2007.	The	table	provides	this	information	separately	for	equity compensation	plans	that	have	and	have	not	been	approved	by	shareholders.

|  | (a)<br>Number	of	securities<br>to	be	issued<br>upon	exercise	of<br>outstanding	options,<br>warrants	and	rights | (b)<br>Weighted-average<br>exercise	price	of<br>outstanding	options,<br>warrants	and	rights | remaining	available	for<br>future	issuance	under<br>equity	compensation<br>plans	(excluding<br>securities	reflected<br>in	column	(a)) |
| :--- | :--- | :--- | :--- |
| (Shares\tin\tthousands) |  |  |  |
| Plan\tcategory: |  |  |  |
| Equity\tcompensation\tplans\tapproved\tby\tshareholders | 25,168 | $53.92 | 14,936 |
| Equity\tcompensation\tplans\tnot\tapproved\tby |  |  |  |
| shareholders | 113 | 47.90 | — |
| Total | 25,281 | 53.89 | 14,936 |

								One	compensation	plan	under	which	equity	securities	of	State	Street	are	authorized	for	issuance	has	been	adopted	without	the	approval	of	shareholders.

								In	2001,	the	Board	adopted	the	State	Street	Corporation	Savings-Related	Stock	Plan,	or	"SAYE	Plan,"	for	employees	in	the	United	Kingdom.	Under	the	SAYE Plan,	employee-participants	could	commit	to	save	a	specified	amount	from	after-tax	pay	for	a	fixed	period	(either	three	or	five	years).	Savings	are	deducted automatically.	At	the	end	of	the	period	chosen,	a	tax-free	bonus	is	added	by	State	Street	to	the	savings	amount	(the	level	of	the	bonus	depends	on	the	length	of	the	fixed period	of

savings),	and	participants	have	the	option	to	receive	the	savings	and	bonus	amount	in	cash,	or	to	use	the	amount	to	purchase	common	stock	from	State	Street	at	an exercise	price	equal	to	the	market	price	of	the	stock	as	of	the	date	of	joining	the	SAYE	Plan	less	a	discount	fixed	by	State	Street	at	the	date	of	joining.	For	participants joining	the	SAYE	Plan	in	2001,	the	discount	was	15%.	There	was	no	discount	for	participants	joining	in	2002.	Options	granted	under	the	SAYE	Plan	are	non- transferable.	If	a	participant	withdraws	from	participation	before	the	end	of	the	fixed	period,	the	options	to	purchase	stock	are	forfeited.	If	a	participant	terminates	during the	period	due	to	retirement,	disability,	redundancy	or	sale	of	the	employer	from	State	Street's	group,	the	options	may	be	exercised	within	six	months	of	the	occurrence, or	one	year	if	by	reason	of	death.	Under	the	SAYE	Plan,	an	aggregate	of	170,000	shares	of	common	stock	was	authorized	for	issuance.	The	SAYE	Plan	has	been discontinued	and	no	new	participations	under	the	SAYE	Plan	are	permitted.	At	December	31,	2007,	a	total	of	1,777	shares	of	common	stock	are	eligible	to	be	purchased under	outstanding	options.

								In	addition,	individual	directors	who	are	not	our	employees	have	received	annual	awards	of	deferred	stock	for	a	number	of	shares	based	on	the	amount	of	their annual	retainer,	payable	after	the	director	leaves	the	Board	or	attains	a	specific	age.	The	number	of	deferred	shares	includes,	in	the	case	of	certain	directors,	additional deferred	share	amounts	in	respect	of	an	accrual	under	a	terminated	retirement	plan,	and	for	all	directors	is	increased	to	reflect	dividends	paid	on	the	common	stock.	Also, directors	who	are	not	our	employees	may	receive	their	annual	retainer	payable	at	their	option	either	in	shares	of	our	common	stock	or	cash,	and	may	further	elect	to defer	either	50%	or	100%	until	after	termination	of	their	services	as	a	director.	The	number	of	deferred	shares	is	increased	to	reflect	dividends	paid	on	the	common stock.	Deferred	stock	awards	totaling	229,149	shares	of	common	stock	were	outstanding	at	December	31,	2007;	awards	made	through	June	30,	2003	have	not	been approved	by	shareholders.	Awards	of	deferred	stock	made	or	non-deferred	retainer	shares	paid	to	individual	directors	after	June	30,	2003	have	been	or	will	be	made under	our	1997	or	2006	Equity	Incentive	Plan,	approved	by	shareholders.

# ITEM	13.				CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

								Information	concerning	certain	relationships	and	related	transactions	and	director	independence	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2008,	under	the	captions	"Related	Person	Transactions"	and	"Corporate	Governance	at	State Street."	Such	information	is	incorporated	herein	by	reference.

# ITEM	14.				PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

								Information	concerning	principal	accounting	fees	and	services	will	appear	in	our	Proxy	Statement	for	the	2008	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant to	Regulation	14A	on	or	before	April	30,	2008,	under	the	caption	"Relationship	with	Independent	Registered	Public	Accounting	Firm."	Such	information	is	incorporated herein	by	reference.

# PART	IV

# ITEM	15.				EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

# (A)(1)				FINANCIAL	STATEMENTS

The	following	consolidated	financial	statements	of	State	Street	are	included	in	Item	8	hereof:

Consolidated	Statement	of	Income—Years	ended	December	31,	2007,	2006	and	2005 Consolidated	Statement	of	Condition—As	of	December	31,	2007	and	2006 Consolidated	Statement	of	Changes	in	Shareholders'	Equity—Years	ended	December	31,	2007,	2006	and	2005 Consolidated	Statement	of	Cash	Flows—Years	ended	December	31,	2007,	2006	and	2005

# (A)(2)				FINANCIAL	STATEMENT	SCHEDULES

Certain	schedules	to	the	consolidated	financial	statements	have	been	omitted	if	they	were	not	required	by	Article	9	of	Regulation	S-X	or	if,	under	the	related instructions,	they	were	inapplicable,	or	the	information	was	contained	elsewhere	herein.

A	list	of	the	exhibits	filed	or	incorporated	herein	by	reference	is	as	follows:

10.7† State	Street's	1997	Equity	Incentive	Plan,	as	amended,	and	forms	of	awards	and	agreements	thereunder	(filed	as	Exhibit	10.22	to	State	Street's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	1997	filed	with	the	Commission	on	August	14,	1997;	Exhibit	10.17	to	State Street's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1997	filed	with	the	Commission	on	March	26,	1998;	Exhibit	10.1	to State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2000	filed	with	the	Commission	on	May	15,	2000;	Exhibit	10.2 to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2000	filed	with	the	Commission	on	August	11,	2000; Exhibit	12D	to	State	Street's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2001	filed	with	the	Commission	on	February	22, 2002;	Exhibit	10.1	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2004	filed	with	the	Commission	on November	5,	2004;	Exhibit	10.2	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2006	filed	with	the Commission	on	August	4,	2006;	Exhibit	10.2	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2004	filed with	the	Commission	on	November	5,	2004;	Exhibit	10.3	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30, 2004	filed	with	the	Commission	on	November	5,	2004;	Exhibit	10.4	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended September	30,	2004	filed	with	the	Commission	on	November	5,	2004;	Exhibit	10.5	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	September	30,	2004	filed	with	the	Commission	on	November	5,	2004;	Exhibit	10.6	to	State	Street's	Quarterly	Report	on Form	10-Q	for	the	quarter	ended	September	30,	2004	filed	with	the	Commission	on	November	5,	2004;	Exhibit	10.7	to	State	Street's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2004	filed	with	the	Commission	on	November	5,	2004;	Exhibit	10.12L	to State	Street's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2004	filed	with	the	Commission	on	February	18,	2005;	and Exhibit	10.1	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2006	filed	with	the	Commission	on	August	4, 2006,	which	exhibits	are	incorporated	herein	by	reference)

† Denotes	management	contract	or	compensatory	plan	or	arrangement

# SIGNATURES

								Pursuant	to	the	requirement	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the undersigned,	on	February	14,	2008,	thereunto	duly	authorized.

By /s/		EDWARD	J.	RESCH

# JAMES	J.	MALERBA,

Senior	Vice	President	and

Corporate	Controller

								Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	on	February	14,	2008	by	the	following	persons	on	behalf	of the	registrant	and	in	the	capacities	indicated.

# OFFICERS:

/s/		JAMES	J.	MALERBA

JAMES	J.	MALERBA, Senior	Vice	President	and	Corporate	Controller

# DIRECTORS:

/s/		TENLEY	E.	ALBRIGHT

TENLEY	E.	ALBRIGHT,	M.D. /s/		PETER	COYM

PETER	COYM /s/		AMELIA	C.	FAWCETT

AMELIA	C.	FAWCETT

/s/		DAVID	P.	GRUBER

DAVID	P.	GRUBER

/s/		KENNETT	F.	BURNES

KENNETT	F.	BURNES /s/		NADER	F.	DAREHSHORI NADER	F.	DAREHSHORI /s/		ARTHUR	L.	GOLDSTEIN

ARTHUR	L.	GOLDSTEIN

LINDA	A.	HILL

/s/		CHARLES	R.	LAMANTIA

/s/		RONALD	E.	LOGUE

# EXHIBIT	INDEX

# QuickLinks

# STATE	STREET	CORPORATION	Table	of	Contents

ITEM	1.	BUSINESS

ITEM	5.	MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY SECURITIES

ITEM	9.	CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE ITEM	9A.	CONTROLS	AND	PROCEDURES



Question: what is the percent change of the amount of collateral held for indemnified securities between 2006 and 2007?
Calculation: collateral_change = 572.93 - 527.37
collateral_total = 527.37
percent_change = collateral_change / collateral_total
answer = percent_change * 100
Answer: 8.6%