Table	of	Contents

# 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,	2008

# 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		x		No		¨

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		¨		No		x

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		x		No		¨

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.		¨

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):

				Large	accelerated	filer		x

Accelerated	filer		¨

	 Non-accelerated	filer		¨

Smaller	reporting	company		¨

(Do	not	check	if	a	smaller	reporting	company)

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		¨		No		x

The	aggregate	market	value	of	the	voting	and	non-voting	common	equity	held	by	non-affiliates	computed	by	reference	to	the	per	share	price	($63.99)	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	30,	2008)	was	approximately	$27.55 billion.

The	number	of	shares	of	the	registrant's	Common	Stock	outstanding	as	of	January	31,	2009	was	431,965,675.

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	2009	Annual	Meeting	of	Shareholders	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2009 (Part	III).

|  | Description | Page	Number |
| :--- | :--- | :--- |
| PART\tI |  |  |
| Item\t1 | Business | 1 |
| Item\t1A | Risk\tFactors | 5 |
| Item\t1B | Unresolved\tStaff\tComments | 26 |
| Item\t2 | Properties | 26 |
| Item\t3 | Legal\tProceedings | 26 |
| Item\t4 | Submission\tof\tMatters\tto\ta\tVote\tof\tSecurity\tHolders | 27 |
| Item\t4A | Executive\tOfficers\tof\tthe\tRegistrant | 27 |
| PART\tII |  |  |
| Item\t5 | Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 28 |
| Item\t6 | Selected\tFinancial\tData | 31 |
| Item\t7 | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 32 |
| Item\t7A | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 79 |
| Item\t8 | Financial\tStatements\tand\tSupplementary\tData | 80 |
| Item\t9 | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 141 |
| Item\t9A | Controls\tand\tProcedures | 141 |
| Item\t9B | Other\tInformation | 143 |
| PART\tIII |  |  |
| Item\t10 | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 143 |
| Item\t11 | Executive\tCompensation | 143 |
| Item\t12 | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 143 |
| Item\t13 | Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 145 |
| Item\t14 | Principal\tAccounting\tFees\tand\tServices | 145 |
| PART\tIV |  |  |
| Item\t15 | Exhibits\tand\tFinancial\tStatement\tSchedules | 146 |
|  | Signatures | 147 |
|  | Exhibit\tIndex | 148 |

# PART	I

# ITEM	1. BUSINESS

State	Street	Corporation	is	a	financial	holding	company,	organized	in	1969	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,	2008,	we	had	consolidated	total	assets	of	$173.63	billion,	consolidated	total deposits	of	$112.23	billion,	consolidated	total	shareholders'	equity	of	$12.77	billion	and	employed	28,475.	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,	or	SEC,	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	in	this	report	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 $12.04	trillion	of	assets	under	custody	and	$1.44	trillion	of	assets	under	management	at	year-end	2008,	we	are	a	leading	specialist	in	meeting	the	needs	of	institutional investors	worldwide.	Our	customers	include	mutual	funds,	collective	investment	funds	and	other	investment	pools,	corporate	and	public	retirement	plans,	insurance companies,	foundations,	endowments	and	investment	managers.	Including	the	United	States,	we	operate	in	27	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	acquisitions	and	divestitures,	income	taxes and	non-U.S.	activities	is	included	in	notes	2,	22	and	25	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	24	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,	as	a	bank	holding	company	pursuant	to the	Bank	Holding	Company	Act	of	1956.	The	Bank	Holding	Company	Act,	with	certain	exceptions,	limits	the	activities	in	which	we	and	our	non-banking	subsidiaries may	engage,	to	those	that	the	Federal	Reserve	considers	to	be	closely	related	to	banking	or	managing	or	controlling	banks.	These	limits	also	apply	to	non-banking entities	of	which	we	own	or	control	more	than	5%	of	a	class	of	voting	shares.	The	Federal	Reserve	may	order	a	bank	holding	company	to	terminate	any	activity	or	its ownership	or	control	of	a	non-banking	subsidiary	if	the	Federal	Reserve	finds	that	the	activity,	ownership	or	control	constitutes	a	serious	risk	to	the	financial	safety, soundness	or	stability	of	a	banking	subsidiary	or	is	inconsistent	with	sound	banking	principles	or	statutory	purposes.	The	Bank	Holding	Company	Act	also	requires	a bank	holding	company	to	obtain	prior	approval	of	the	Federal	Reserve	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'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	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	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	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	these	standards	may	ultimately	permit	the	Federal	Reserve	to	take	enforcement	actions	against	the	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	minimum	risk-based	capital	and	leverage	ratio	guidelines.	As	noted	above,	our	status	as	a financial	holding	company	also	requires	that	we	maintain	specified	capital	ratio	levels.	State	Street	Bank	is	subject	to	similar	risk-based	capital	and	leverage	ratio guidelines.	As	of	December	31,	2008,	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	16	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8,	of	this	Form	10-K.

# Subsidiaries

The	Federal	Reserve	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,	as	well	as	by	the	Massachusetts Commissioner	of	Banks,	the	FDIC,	and	the	regulatory	authorities	of	those	states	and	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.	banking	subsidiaries	are	subject	to	regulation	by	the	regulatory authorities	of	the	countries	in	which	they	are	located.	As	of	December	31,	2008,	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-banking	subsidiaries	are	affiliates	of	State	Street	Bank	under	federal	banking	laws,	which	impose	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-banking	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	collateral	requirements.	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.	State	Street	Bank	is	also	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.	The	Federal	Reserve	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	advisor	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	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,	rather	than	our	shareholders.	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	our	activities	in	the	United	Kingdom;	the	Deutsche	Borse	AG	and	the	Federal	Financial Supervisory	Authority	regulate	our	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	our	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	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.

In	addition	to	our	non-U.S.	operations	conducted	pursuant	to	Regulation	K,	we	make	new	investments	abroad	directly	(through	the	parent	company	or	through non-banking	subsidiaries	of	the	parent	company)	pursuant	to	Federal	Reserve	Regulation	Y,	or	through	international	bank	branch	expansion,	which	are	not	subject	to	the 20%	investment	limitation	for	Edge	Act	corporation	subsidiaries.

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	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	guidelines,	a	bank	holding	company	is	required	to	act	as	a	source	of	financial	and	managerial	strength	to	its	banking	subsidiaries.	Under these	guidelines,	the	parent	company	is	expected	to	commit	resources	to	State	Street	Bank	and	any	other	banking	subsidiary	in	circumstances	in	which	it	might	not	do	so absent	such	guidelines.	In	the	event	of	bankruptcy,	any	commitment	by	the	parent	company	to	a	federal	bank	regulatory	agency	to	maintain	the	capital	of	a	banking 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	directly affects	the	level	of	interest	rates,	which	may	impact	overall	credit	conditions	of	the	economy.	Monetary	policy	is	applied	by	the	Federal	Reserve	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,	if	any,	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	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,"	including	statements	about	industry	trends,	management's	future	expectations	and

other	matters	that	do	not	relate	strictly	to	historical	facts,	are	based	on	assumptions	by	management,	and	are	often	identified	by	such	forward-looking	terminology	as "expect,"	"look,"	"believe,"	"anticipate,"	"estimate,"	"seek,"	"may,"	"will,"	"trend,"	"target"	and	"goal,"	or	similar	statements	or	variations	of	such	terms.	Forward- looking	statements	may	include,	among	other	things,	statements	about	State	Street's	confidence	in	its	strategies	and	its	expectations	about	its	financial	performance, market	growth,	acquisitions	and	divestitures,	new	technologies,	services	and	opportunities	and	earnings.

Forward-looking	statements	are	subject	to	various	risks	and	uncertainties,	which	change	over	time,	are	based	on	management's	expectations	and	assumptions	at the	time	the	statements	are	made,	and	are	not	guarantees	of	future	results.	Management's	expectations	and	assumptions,	and	the	continued	validity	of	the	forward- looking	statements,	are	subject	to	change	due	to	a	broad	range	of	factors	affecting	the	national	and	global	economies,	the	equity,	debt,	currency	and	other	financial markets,	as	well	as	factors	specific	to	State	Street	and	its	subsidiaries,	including	State	Street	Bank.	Factors	that	could	cause	changes	in	the	expectations	or	assumptions on	which	forward-looking	statements	are	based	include,	but	are	not	limited	to:

•global	financial	market	disruptions	and	the	current	worldwide	economic	recession,	and	monetary	and	other	governmental	actions	designed	to	address	such disruptions	and	recession	in	the	U.S.	and	internationally;

•the	financial	strength	of	the	counterparties	with	which	we	or	our	clients	do	business	and	with	which	we	have	investment	or	financial	exposure;

•the	liquidity	of	the	U.S.	and	international	securities	markets,	particularly	the	markets	for	fixed-income	securities,	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;

•the	maintenance	of	credit	agency	ratings	for	our	debt	obligations	as	well	as	the	level	of	credibility	of	credit	agency	ratings;

•the	possibility	that	changes	to	accounting	rules	or	in	market	conditions	or	asset	performance	(including	the	financial	condition	of	any	guarantor	of	any	assets) may	require	any	off-balance	sheet	activities,	including	the	unconsolidated	asset-backed	commercial	paper	conduits	we	administer,	to	be	consolidated	into	our financial	statements,	requiring	the	recognition	of	associated	losses;

•the	possibility	of	our	customers	incurring	substantial	losses	in	investment	pools	where	we	act	as	agent,	and	the	possibility	of	further	general	reductions	in	the valuation	of	assets;

•our	ability	to	attract	deposits	and	other	low-cost,	short-term	funding;

•potential	changes	to	the	competitive	environment,	including	changes	due	to	the	effects	of	consolidation,	extensive	and	changing	government	regulation	and perceptions	of	State	Street	as	a	suitable	service	provider	or	counterparty;

•the	level	and	volatility	of	interest	rates	and	the	performance	and	volatility	of	securities,	credit,	currency	and	other	markets	in	the	U.S.	and	internationally;

•our	ability	to	measure	the	fair	value	of	securities	in	our	investment	securities	portfolio	and	in	the	unconsolidated	asset-backed	commercial	paper	conduits	we administer;

•the	results	of	litigation	and	similar	disputes	and,	in	particular,	the	effect	of	current	or	potential	litigation	concerning	SSgA's	active	fixed-income	strategies,	and 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;

•adverse	publicity	or	other	reputational	harm;

•our	ability	to	pursue	acquisitions,	strategic	alliances	and	divestures,	finance	future	business	acquisitions	and	obtain	regulatory	approvals	and	consents	for acquisitions;

•the	performance	and	demand	for	the	products	and	services	we	offer,	including	the	level	and	timing	of	withdrawals	from	our	collective	investment	products;

•our	ability	to	continue	to	grow	revenue,	attract	highly	skilled	people,	control	expenses	and	attract	the	capital	necessary	to	achieve	our	business	goals	and comply	with	regulatory	requirements;

•our	ability	to	control	operating	risks,	information	technology	systems	risks	and	outsourcing	risks,	the	possibility	of	errors	in	the	quantitative	models	we	use	to manage	our	business	and	the	possibility	that	our	controls	will	fail	or	be	circumvented;

•the	potential	for	new	products	and	services	to	impose	additional	costs	on	us	and	expose	us	to	increased	operational	risk,	and	our	ability	to	protect	our intellectual	property	rights;

•our	ability	to	obtain	quality	and	timely	services	from	third	parties	with	which	we	contract;

•changes	in	accounting	standards	and	practices,	including	changes	in	the	interpretation	of	existing	standards,	that	impact	our	consolidated	financial	statements; and

•changes	in	tax	legislation	and	in	the	interpretation	of	existing	tax	laws	by	U.S.	and	non-U.S.	tax	authorities	that	impact	the	amount	of	taxes	due.

Therefore,	actual	outcomes	and	results	may	differ	materially	from	what	is	expressed	in	our	forward-looking	statements	and	from	our	historical	financial	results due	to	the	factors	discussed	in	this	section	and	elsewhere	in	this	Form	10-K	or	disclosed	in	our	other	SEC	filings.	Forward-looking	statements	should	not	be	relied	upon as	representing	our	expectations	or	beliefs	as	of	any	date	subsequent	to	the	date	this	Form	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	are	not	intended	to	be	a complete	summary	of	all	risks	and	uncertainties	that	may	affect	our	businesses.	We	cannot	anticipate	all	potential	economic,	operational	and	financial	developments	that may	adversely	impact	our	operations	and	our	financial	results.

Forward-looking	statements	should	not	be	viewed	as	predictions,	and	should	not	be	the	primary	basis	upon	which	investors	evaluate	State	Street.	Any	investor	in State	Street	should	consider	all	risks	and	uncertainties	disclosed	in	our	SEC	filings,	including	our	filings	under	the	Securities	Exchange	Act	of	1934,	in	particular	our reports	on	Form	10-K,	Form	10-Q	and	Form	8-K,	or	registration	statements	filed	under	the	Securities	Act	of	1933,	all	of	which	are	accessible	on	the	SEC's	website	at www.sec.gov	or	on	our	website	at	www.statestreet.com.

The	following	is	a	discussion	of	risk	factors	applicable	to	State	Street.

# Global	financial	market	disruptions	during	2007	and	2008	have	increased	the	uncertainty	and	unpredictability	we	face	in	managing	our	business,	and	continued	or additional	disruptions	in	2009	could	have	an	adverse	effect	on	our	business,	our	results	of	operations	and	our	financial	condition.

Since	mid-2007,	global	credit	and	other	financial	markets	have	suffered	substantial	volatility,	illiquidity	and	disruption.	In	the	second	half	of	2008,	these	factors resulted	in	the	bankruptcy	or	acquisition	of,	or	significant	government	assistance	to,	a	number	of	major	domestic	and	international	financial	institutions,	some	of	which were	significant	counterparties	with	us.	These	events,	and	the	potential	for	increased	and	continuing	disruptions,	have	significantly	diminished	overall	confidence	in	the financial	markets	and	in	financial	institutions,	have	further	exacerbated	liquidity	and	pricing	issues	within	the	fixed-income	markets,	have	increased	the	uncertainty	and unpredictability	we	face	in	managing	our	business	and	have	had	an	adverse	effect	on	our	business,	our	results	of	operations	and	our	financial	condition.	The continuation	of	current	disruptions	or	the	occurrence	of	additional	disruptions	in	the	global	markets	could	have	an	adverse	effect	on	our	business,	our	results	of operations	and	our	financial	condition.

# The	current	worldwide	economic	recession	is	likely	to	adversely	affect	our	business	and	our	results	of	operations.

Our	business	is	affected	by	global	economic	conditions,	including	regional	and	international	rates	of	economic	growth	and	the	impact	that	such	economic conditions	have	on	the	financial	markets.	Recent	downturns	in	the	U.S.	and	global	economy	have	led	to	an	increased	level	of	commercial	and	consumer	delinquencies, lack	of	consumer	confidence,	decreased	market	valuations	and	liquidity,	increased	market	volatility	and	a	widespread	reduction	of	business	activity	generally.	The resulting	economic	pressure	and	lack	of	confidence	in	the	financial	markets	may	adversely	affect	our	business,	our	financial	condition	and	our	results	of	operations,	as well	as	the	business	of	our	customers.	A	worsening	of	economic	conditions	in	the	U.S.	or	globally	would	likely	exacerbate	the	adverse	effects	of	these	difficult conditions	on	us	and	on	the	financial	services	industry	in	general.

# The	failure	or	instability	of	any	of	our	significant	counterparties,	many	of	whom	are	financial	institutions,	could	expose	us	to	loss.

The	financial	markets	are	characterized	by	extensive	interconnections	among	financial	institutions,	including	banks,	broker/dealers,	collective	investment	funds and	insurance	companies.	As	a	result	of	these	interconnections,	we	and	many	of	our	customers	have	concentrated	counterparty	exposure	to	other	financial	institutions. This	concentration	presents	significant	risks	to	us	and	to	our	customers	because	the	failure	or	perceived	weakness	of	any	of	our	counterparties	(or	in	some	cases	of	our customers'	counterparties)	has	the	potential	to	expose	us	to	risk	of	loss.	The	current	instability	of	the	financial	markets	has	resulted	in	many	financial	institutions becoming	significantly	less	creditworthy,	and	as	a	result	we	are	exposed	to	increased	counterparty	risks,	both	as	principal	and	in	our	capacity	as	agent	for	our	customers. Changes	in	market	perception	of	the	financial	strength	of	particular	financial	institutions	can	occur	rapidly,	is	often	based	upon	a	variety	of	factors	and	is	difficult	to predict.	In	addition,	as	U.S.	and	non-U.S.	governments	have	addressed	the	financial	crisis	in	an	evolving	manner,	the	criteria	for	and	manner	of	governmental	support	of financial	institutions	and	other	economically	important	sectors	remain	uncertain.	If	a	significant	individual	counterparty	defaults	on	an	obligation	to	us,	we	could	incur financial	losses	that	materially	adversely	affect	our	business,	our	financial	condition	and	our	results	of	operations.

Although	our	entire	business	is	subject	to	these	interconnections,	several	of	our	lines	of	business	are	particularly	sensitive	to	them,	including	our	Treasury operations,	currency	and	other	trading,	securities	lending	and	investment	management.	Given	the	limited	number	of	strong	counterparties	in	the	current	market,	we	are not	able	to	mitigate	all	of	our	and	our	customers'	counterparty	credit	risk.	The	current	consolidation	of	financial	service	firms	that	began	in	2008,	and	which	we	believe is	likely	to	continue	in	2009,	and	the	failures	of	other	financial	institutions	have	increased	the	concentration	of	our	counterparty	risk.

# In	the	normal	course	of	business	we	assume	significant	credit	and	counterparty	risk,	and	even	when	we	hold	collateral	against	this	risk,	we	may	incur	a	loss	in	the event	of	a	default.

Our	focus	on	large	institutional	investors	and	their	businesses	requires	that	we	assume	secured	and	unsecured	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	or	redemption-related	extensions	of	credit.	The degree	of	the	demand	for	such	overdraft	credit	tends	to	increase	during	periods	of	market	turbulence.	For	example,	investors	in	collective	investment	vehicles	for	which we	act	as	custodian	may	engage	in	significant	redemption	activity	due	to	adverse	market	or	economic	news	that	was	not	anticipated	by	the	fund's	manager.	Our relationship	with	our	customers,	the	nature	of	the	settlement	process	and	our	systems	may	limit	our	ability	to	decline	to	extend	short-term	credit	in	such	circumstances. For	some	types	of	customers,	we	provide	credit	to	allow	them	to	leverage	their	portfolios,	which	increases	our	potential	loss	if	the	customer	experiences	credit difficulties.	From	time	to	time,	we	may	assume	concentrated	credit	risk	at	the	individual	obligor,	counterparty	or	guarantor	level.	In	addition,	we	may	from	time	to	time be	exposed	to	concentrated	credit	risk	at	the	industry	or	country	level,	potentially	exposing	us	to	a	single	market	or	political	event	or	a	correlated	set	of	events.

We	are	also	generally	not	able	to	net	exposures	across	counterparties	that	are	affiliated	entities	and	may	not	be	able	in	all	circumstances	to	net	exposures	across multiple	products	to	the	same	legal	entity.	As	a	consequence,

we	may	incur	a	loss	in	relation	to	one	entity	or	product	even	though	our	exposure	to	one	of	its	affiliates	or	across	product	types	is	over-collateralized.	Moreover,	not	all of	our	counterparty	exposure	is	secured,	and	when	our	exposure	is	secured,	the	realizable	market	value	of	the	collateral	may	be	less	at	the	time	we	exercise	rights	against that	collateral	than	the	value	of	the	secured	obligations.	This	risk	may	be	particularly	acute	if	we	are	required	to	sell	the	collateral	into	an	illiquid	or	temporarily	impaired market.	See,	for	example,	"—We	are	exposed	to	the	risk	of	losses	as	a	result	of	certain	customer	relationships	with	Lehman	Brothers."	In	some	cases,	we	have indemnified	customers	against	a	shortfall	in	the	value	of	collateral	that	secures	certain	repurchase	obligations	of	third	parties	to	such	customers.

In	addition,	our	customers	often	purchase	securities	or	other	financial	instruments	from	a	broker/dealer	under	repurchase	arrangements,	frequently	as	a	method	of reinvesting	the	cash	collateral	they	receive	from	lending	their	securities.	Under	these	arrangements,	the	broker/dealer	is	obligated	to	repurchase	these	securities	or financial	instruments	from	the	customer	at	the	same	price	at	some	point	in	the	future.	The	anticipated	value	of	the	collateral	is	intended	to	exceed	the	broker/dealer's repayment	obligation.	In	certain	cases,	we	agree	to	indemnify	our	customers	from	any	loss	that	would	arise	upon	a	default	by	the	counterparty	if	the	proceeds	from	the disposition	of	the	securities	or	other	financial	assets	is	less	than	the	amount	of	the	repayment	obligation	by	the	customer's	counterparty.	In	those	instances,	we,	rather than	our	customer,	are	exposed	to	the	risks	associated	with	counterparty	default	and	collateral	value.

# We	are	exposed	to	the	risk	of	losses	as	a	result	of	certain	customer	relationships	with	Lehman	Brothers.

We	had	indemnification	obligations	with	respect	to	customer	repurchase	agreements	with	Lehman.	In	the	case	of	some	of	our	customers	that	entered	into repurchase	agreements	with	a	U.S.-based	Lehman	affiliate,	we	indemnified	obligations	totaling	$1	billion	and,	following	the	bankruptcy	of	Lehman,	paid	this	amount	to our	customers.	Upon	such	payments,	we	took	possession	of	the	collateral,	consisting	of	commercial	real	estate	obligations,	that	was	subject	to	our	customers'	repurchase agreements	with	Lehman.	Based	upon	our	assessment	of	the	likely	proceeds	to	be	received	from	the	disposition	or	maturity	of	this	collateral	in	light	of	the	then	current market	environment,	during	the	third	quarter	of	2008,	we	established	a	reserve	of	$200	million	to	cover	the	difference	between	the	estimated	fair	value	of	the	collateral at	the	time	and	the	payment	we	made	to	our	customers.	As	we	do	with	our	investment	portfolio,	we	continue	to	evaluate	the	value	of	the	collateral.	Upon	further evaluation	or	changes	in	market	conditions,	we	may	incur	additional	charges	if	the	value	of	the	collateral	deteriorates.	In	addition,	upon	disposition	or	maturity	of	the collateral,	the	loss	incurred	may	be	greater	than	$200	million.

In	addition	to	the	foregoing	repurchase	agreements,	certain	customers	had	entered	into	repurchase	agreements	with	Lehman's	U.K.	affiliate.	We	have	repaid	those customers	and	taken	possession	of	the	related	collateral;	however,	we	believe	that	the	proceeds	from	the	disposition	or	maturity	of	the	collateral	will	be	at	least	equal	to the	amount	we	paid	to	such	customers	and,	consequently,	have	not	established	a	reserve	related	to	those	agreements.	It	is	possible	that	we	will	incur	losses	relating	to these	agreements	in	the	future.

We	appointed	Lehman	as	sub-custodian	or	prime	broker	for	some	of	our	custody	customers	and	some	investment	funds	managed	by	SSgA.	For	custody customers,	we	made	this	appointment	at	their	direction.	In	the	case	of	investment	funds	managed	by	SSgA,	we	appointed	Lehman	in	our	capacity	as	manager	of	those funds.	As	of	September	15,	2008,	the	date	Lehman	was	placed	in	administration,	our	custody	customers	had	claims	against	Lehman	of	approximately	$325	million,	and our	investment	funds	had	claims	against	Lehman	of	approximately	$312	million,	both	in	connection	with	Lehman's	role	as	a	sub-custodian	or	prime	broker.	Estimating the	actual	amount	or	timing	of	any	recovery	on	our	clients'	and	funds'	claims	against	Lehman	is	currently	not	possible.	While	we	believe	that	we	acted	appropriately	in appointing	Lehman	as	a	sub-custodian	and	a	prime-broker,	some	customers	have	requested	that	we	compensate	them	for	their	losses.	Any	agreement	to	compensate	any of	these	customers	could	adversely	affect	our	financial	condition	and	results	of	operations.

# If	all	or	a	significant	portion	of	the	unrealized	losses	in	our	portfolio	of	investment	securities	were	determined	to	be	other-than-temporarily	impaired,	we	would recognize	a	material	charge	to	our	earnings	and	our	capital	ratios	would	be	adversely	impacted.

As	of	December	31,	2008,	there	were	$5.45	billion	of	after-tax	net	unrealized	losses	associated	with	our	portfolio	of	investment	securities	available	for	sale	and held	to	maturity	that	were	recorded	in	other	comprehensive	income	in	consolidated	shareholders'	equity.	In	addition	to	these	unrealized	losses,	there	were	$870	million of	after-tax	unrealized	losses	associated	with	securities	held	to	maturity	that	were	not	required	under	GAAP	to	be	recorded	in	other	comprehensive	income.	Generally, the	fair	value	of	such	securities	is	based	upon	information	supplied	by	third-party	sources.	Market	values	for	the	securities	in	our	portfolio	declined	significantly	during 2008	as	liquidity	and	pricing	generally	in	the	capital	markets	was	disrupted.	When	the	fair	value	of	a	security	declines,	management	must	assess	whether	that	decline	is "other-than-temporary."	See	"—We	must	apply	significant	judgment	to	assign	fair	values	to	our	assets,	and	we	may	not	be	able	to	obtain	these	values,	or	any	value,	if these	assets	were	sold."	When	management	reviews	whether	a	decline	in	fair	value	is	other	than	temporary,	it	considers	numerous	factors,	many	of	which	involve significant	judgment.	As	2008	progressed,	rating	agencies	imposed	an	increasing	number	of	downgrades	and	credit	watches	on	the	securities	in	our	investment	portfolio, which	contributed	to	the	decline	in	market	values.	Any	continued	increase	in	downgrades	and	credit	watches	may	contribute	to	a	further	decline	in	market	values.	More generally,	market	conditions	continue	to	be	volatile,	and	we	can	provide	no	assurance	that	the	amount	of	the	unrealized	losses	will	not	increase.

To	the	extent	that	any	portion	of	the	unrealized	losses	in	our	portfolio	of	investment	securities	is	determined	to	be	other-than-temporarily	impaired,	we	will recognize	a	charge	to	our	earnings	in	the	quarter	during	which	such	determination	is	made	and	our	capital	ratios	will	be	adversely	impacted.	If	any	such	charge	is significant,	a	rating	agency	might	downgrade	our	credit	rating	or	put	us	on	credit	watch.	A	downgrade	or	a	significant	reduction	in	our	capital	ratios	might	adversely impact	our	ability	to	access	the	capital	markets	or	might	increase	our	cost	of	capital.	Even	if	we	do	not	determine	that	the	unrealized	losses	associated	with	the investment	portfolio	require	an	impairment	charge,	increases	in	such	unrealized	losses	adversely	affect	our	tangible	common	equity	ratio,	which	may	adversely	affect credit	rating	agency	and	investor	sentiment	toward	us.	Such	negative	perception	also	may	adversely	affect	our	ability	to	access	the	capital	markets	or	might	increase	our cost	of	capital.

# Our	business	activities,	including	the	unconsolidated	asset-backed	commercial	paper	conduits	we	administer,	expose	us	to	liquidity	and	interest-rate	risk.

In	our	business	activities,	we	assume	liquidity	and	interest-rate	risk	in	our	investment	portfolio	of	longer-and	intermediate-term	assets,	which	is	funded	in	large part	by	our	customer	deposit	base.	We	may	be	exposed	to	liquidity	or	other	risks	in	managing	asset	pools	for	third	parties	that	are	funded	on	a	short-term	basis,	or	where the	customers	participating	in	these	products	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	that	we	administer,	as	well	as	securities	finance	collateral	pools	and	money	market	and	other	short-term investment	funds.

In	the	asset-backed	commercial	paper	conduits,	for	example,	pools	of	medium-and	long-term	financial	instruments,	principally	mortgage-	and	other	asset-backed securities,	are	financed	through	the	issuance	of	short-term	commercial	paper.	The	conduits	strive	to	maintain	a	positive	margin	between	the	rate	of	return	on	their	longer- term	assets	and	the	short-term	cost	of	funding.	This	mismatch	in	the	maturity	of	the	investment	pools	and	funding	creates	risk	if	disruptions	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	our	administration	of	the	asset-backed	commercial	paper	conduits,	we	provide	contractual	back-up	liquidity	to	the	conduits.	If	the	conduits cannot	issue	sufficient	commercial	paper	to	meet	their	ongoing	liquidity	needs,	we	are	required	by	contract	to,	among	other	things,	provide	liquidity	to	the	conduits	by purchasing	portfolio	assets	from	them.	If	required,	these	portfolio	assets	are	purchased	at	prices

determined	in	accordance	with	contractual	terms	of	the	applicable	liquidity	asset	purchase	agreement,	which	may	exceed	their	fair	value.	We	may	also	provide	liquidity to	the	conduits	by	purchasing	commercial	paper	from	them	or	by	providing	other	extensions	of	credit	to	the	conduits.

Our	asset-backed	commercial	paper	conduit	program	experienced	significantly	reduced	demand	for	its	commercial	paper	financing	beginning	in	the	third	quarter of	2007.	As	the	disruption	in	the	credit	markets	continued	through	2008,	our	liquidity	management	of	the	conduits	resulted	in	our	purchasing	historically	high	levels	of commercial	paper	from	the	conduits.	During	2008,	the	amount	of	commercial	paper	issued	by	the	conduits	held	on	our	consolidated	balance	sheet	increased	from approximately	$2	million	as	of	December	31,	2007	to	approximately	$292	million	as	of	March	31,	2008,	approximately	$212	million	as	of	June	30,	2008,	and approximately	$7.82	billion	as	of	September	30,	2008	(including	$1.63	billion	related	to	the	Federal	Reserve's	Asset-Backed	Commercial	Paper	Money	Market	Mutual Fund	Liquidity	Facility,	or	AMLF).	On	December	31,	2008,	we	held	$230	million	of	commercial	paper	issued	by	the	conduits	on	our	consolidated	balance	sheet	(which did	not	include	$5.70	billion	sold	by	the	conduits	to	the	Federal	Reserve's	Commercial	Paper	Funding	Facility,	or	CPFF,	as	of	December	31,	2008).	The	highest	total overnight	position	(including	AMLF)	in	the	conduits'	commercial	paper	held	by	State	Street	during	the	quarter	ended	December	31,	2008,	was	approximately	$8.89 billion	and	during	the	year	ended	December	31,	2008,	was	approximately	$9.22	billion.	The	average	total	overnight	position	(including	AMLF)	for	the	same	periods	was approximately	$5.43	billion	for	the	quarter	ended	December	31,	2008,	and	$2.27	billion	for	the	year	ended	December	31,	2008.	As	noted	above,	as	of	December	31, 2008,	the	conduits	had	utilized	the	Federal	Reserve's	CPFF	to	issue	$5.70	billion	of	commercial	paper.	The	CPFF	is	currently	scheduled	to	expire	for	new	issuances	on October	30,	2009.	We	may	be	required	to	provide	additional	back-up	liquidity	if	the	conduits	are	unable	to	place	their	commercial	paper	in	the	market	after	the	CPFF expires.

Our	contractual	arrangements	with	the	conduits	also	require	us	to	purchase	conduit	portfolio	assets	under	other	circumstances,	such	as	a	downgrade	of	the	credit rating	of	securities	held	by	the	conduits.	Purchase	of	the	assets	of	the	conduits	pursuant	to	the	contractual	agreements	described	above	could	affect	the	size	of	our	balance sheet	and	related	funding	requirements,	our	capital	ratios,	and,	if	the	conduit	assets	include	unrealized	losses,	could	require	us	to	recognize	those	losses.	As	of December	31,	2008,	there	were	$3.56	billion	of	after-tax	net	unrealized	losses	associated	with	portfolio	holdings	of	the	conduits.	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.

# If	for	any	reason	we	were	to	consolidate	the	unconsolidated	asset-backed	commercial	paper	conduits	that	we	administer	onto	our	balance	sheet,	our	funding requirements	and	capital	ratios	would	be	adversely	affected	and	we	may	record	significant	unrealized	losses.

The	unconsolidated	asset-backed	commercial	paper	conduits	we	administer	are	not	recorded	in	our	consolidated	financial	statements.	If	circumstances	change,	we may	be	required	under	existing	accounting	standards	to	consolidate	some	or	all	of	the	otherwise	unconsolidated	conduits	onto	our	balance	sheet.	One	factor	taken	into consideration	in	evaluating	whether	we	are	required	to	consolidate	the	conduits	under	existing	accounting	standards	is	whether	we	or	third	parties	are	exposed	to	the majority	of	the	"expected	losses"	(as	defined	in	the	accounting	literature)	associated	with	certain	risks	in	the	conduits'	business.	Investors	not	affiliated	with	us	have purchased	from	the	conduits	notes	commonly	referred	to	as	"first-loss	notes"	that	bear	loss,	up	to	the	principal	amount	of	the	notes,	before	any	loss	would	be	allocated	to us.	We	use	financial	models	to	determine	whether	the	expected	losses	from	the	conduits	are	greater	or	less	than	the	principal	amount	of	the	first-loss	notes.	If	changes	in market	conditions	require	us	to	update	the	assumptions	in	our	expected	loss	model,	such	that	we	conclude	that	we	absorb	greater	than	50%	of	the	expected	losses,	we may	be	required	to	consolidate	one	or	more	of	the	conduits	unless	the	amount	of	first-loss	notes	is	increased.	As	of	December	31,	2008,	these	conduits	had	an	aggregate of	$67	million	of	first-loss	notes	outstanding	compared	to	$32	million	at	December	31,	2007.

In	various	circumstances,	including	if	the	conduits	are	not	able	to	issue	additional	first-loss	notes,	we	may	be	deemed	to	be	the	primary	beneficiary	of	the conduits,	and	we	would	be	required	to	consolidate	the	conduits'	assets	and	liabilities	onto	our	balance	sheet.	Moreover,	current	market	conditions	have	increased	the difficulty	we

face	in	predicting	any	such	future	losses.	For	example,	certain	assets	of	the	conduits	are	entitled	to	the	benefit	of	guarantees	from	monoline	insurance	companies.	Our loss	analysis	depends	on	our	ability	to	judge	whether	these	insurance	companies	will	continue	to	perform	their	guarantee	obligations.	The	aggregate	amortized	cost	of securities	with	underlying	guarantees	was	approximately	$2.49	billion	at	December	31,	2008	and	$3.51	billion	at	December	31,	2007.	Certain	of	these	securities,	which totaled	approximately	$730	million	at	December	31,	2008,	are	currently	drawing	on	the	underlying	guarantees	in	order	to	make	contractual	principal	and	interest payments	to	the	conduits.	In	these	cases,	the	performance	of	the	underlying	security	is	highly	dependent	on	the	performance	of	the	guarantor.	During	2008,	many	of these	guarantors	experienced	ratings	downgrades.	The	credit	ratings	of	the	guarantors	ranged	from	"AAA"	to	"CCC"	as	of	December	31,	2008.	None	of	these	securities are	in	default.

It	is	also	possible	that	changes	to	existing	accounting	standards	will	be	adopted	that	will	require	us	to	consolidate	the	conduits.	The	Financial	Accounting Standards	Board	is	considering	changes	to	accounting	standards	related	to	off-balance	sheet	vehicles	such	as	the	conduits	and	industry-wide	revisions	are	under discussion	that,	if	adopted	in	the	form	currently	under	consideration,	would	require	us	to	consolidate,	on	January	1,	2010,	all	of	the	conduits	we	administer. Alternatively,	existing	accounting	standards	may	be	interpreted	differently	in	the	future	in	a	manner	that	increases	the	risk	of	consolidation	of	the	conduits.

Consolidation	would	adversely	affect	the	size	of	our	balance	sheet	and	related	funding	requirements,	adversely	affect	our	capital	ratios	and	require	us	to	recognize	the conduits'	unrealized	losses	in	the	conduit	assets	resulting	from	the	difference	between	the	book	value	and	the	market	value	of	the	conduits'	portfolios.	As	of December	31,	2008,	there	were	$3.56	billion	of	after-tax	net	unrealized	losses	associated	with	portfolio	holdings	of	the	conduits.

# We	must	apply	significant	judgment	to	assign	fair	values	to	our	assets,	and	we	may	not	be	able	to	realize	these	values,	or	any	value,	if	these	assets	were	sold.

As	of	December	31,	2008,	including	the	effect	of	master	netting	agreements,	approximately	39%	of	our	consolidated	total	assets	and	approximately	8%	of	our consolidated	total	liabilities	were	carried	at	fair	value	on	a	recurring	basis.	Current	accounting	standards	require	us	to	categorize	these	assets	and	liabilities	according	to	a fair	value	valuation	hierarchy.	On	the	same	basis,	approximately	33%	of	our	financial	assets	and	approximately	8%	of	our	financial	liabilities	were	categorized	in	level	2 of	the	valuation	hierarchy	(meaning	that	their	fair	value	was	determined	by	reference	to	quoted	prices	for	similar	assets	or	liabilities	or	other	observable	inputs)	or	level	3 (meaning	that	their	fair	value	was	determined	by	reference	to	inputs	that	are	unobservable	in	the	market	and	therefore	require	a	greater	degree	of	management	judgment). The	determination	of	fair	value	for	financial	assets	and	liabilities	categorized	in	level	2	or	3	involves	significant	judgment	due	to	the	complexity	of	factors	contributing to	the	valuation,	many	of	which	are	not	readily	observable	in	the	market.	The	current	market	disruptions	make	valuation	even	more	difficult	and	subjective.	In	addition, we	have	historically	placed	a	high	level	of	reliance	on	information	obtained	from	third-party	sources	to	measure	fair	values.	Third-party	sources	also	use	assumptions, judgments	and	estimates	in	determining	securities	values,	and	different	third	parties	use	different	methodologies	or	provide	different	prices	for	securities.

In	addition,	the	nature	of	the	market	participant	that	is	valuing	the	securities	at	any	given	time	could	impact	the	valuation	of	the	securities.	For	example, investment	banks,	such	as	the	underwriters	of	our	public	offerings,	may	value	our	securities	differently	than	securities	pricing	providers.	Moreover,	depending	upon, among	other	things,	the	measurement	date	of	the	security,	the	subsequent	sale	price	of	the	security	may	be	different	from	its	recorded	fair	value.	These	differences	may be	significant,	especially	if	the	security	is	sold	during	a	period	of	illiquidity	or	market	disruption	or	as	part	of	a	large	block	of	securities	under	a	forced	transaction.

# Adverse	conditions	in	the	economy	or	financial	markets	may	simultaneously	trigger	adverse	events	affecting	multiple	aspects	of	our	business.

Adverse	economic	or	financial	market	conditions	could	simultaneously	adversely	affect	several	aspects	of	our	business.	For	example,	conditions	in	the	financial markets	that	might	require	us	to	purchase	assets	from	the	conduits	pursuant	to	the	liquidity	asset	purchase	agreements	or	result	in	the	consolidation	of	the	conduits	and 12

recognition	of	the	conduits'	unrealized	losses	may	at	the	same	time	also	require	us	to	recognize	other-than-temporary	impairment	in	our	portfolio	of	investment securities.	If	multiple	aspects	of	our	business	are	simultaneously	impacted	by	economic	or	financial	market	conditions	or	other	events,	the	demands	on	our	liquidity	may exceed	our	resources.

# We	may	need	to	raise	additional	capital	in	the	future,	which	may	not	be	available	to	us	or	may	only	be	available	on	unfavorable	terms.

As	a	result	of	continued	disruption	in	the	financial	markets	or	other	developments	having	an	adverse	effect	on	our	capital	ratios,	we	may	need	to	raise	additional capital	in	order	to	maintain	our	credit	ratings	or	for	other	purposes.	However,	our	ability	to	access	the	capital	markets,	if	needed,	will	depend	on	a	number	of	factors, including	the	state	of	the	financial	markets.	Accordingly,	we	cannot	assure	you	of	our	ability	to	raise	additional	capital,	if	needed,	on	terms	acceptable	to	us.

# If	our	custody	customers	experience	high	levels	of	redemption	requests	from	their	investors,	or	if	high	volumes	in	the	securities	markets	disrupt	normal	settlements, we	may	provide	significant	and	unanticipated	overdraft	availability,	exposing	us	to	risk	of	loss.

We	provide	custody	and	related	services	for	mutual	funds	and	other	collective	investment	vehicles	managed	by	unaffiliated	managers.	Generally,	these	affiliated and	unaffiliated	collective	investment	pools	offer	investors	liquidity	on	a	daily	basis	or	with	notice	periods	of	a	month	or	less.	During	periods	of	disruption	in	the financial	markets,	failures	in	the	settlement	process	tend	to	increase,	and	investor	demand	for	liquidity	from	these	investment	pools	can	be	extremely	high	relative	to normal	cash	levels	maintained	by	those	funds.	In	such	circumstances,	we	may,	but	generally	are	not	required	to,	provide	short-term	extensions	of	credit.	For	example, during	the	second	half	of	2008,	we	funded	higher-than-normal	levels	of	overdrafts	by	unaffiliated	mutual	funds	and	other	collective	investment	vehicles,	with	particular liquidity	requirements	by	money	market	funds.	The	provision	of	such	overdraft	availability	may	affect	the	size	of	our	balance	sheet,	which,	in	the	absence	of	additional capital,	could	adversely	affect	our	capital	ratios.	In	addition,	if	these	overdrafts	are	substantial	relative	to	the	net	assets	of	the	investment	pool,	we	may	be	subject	to	the risk	that	the	investment	pool	is	unable	to	liquidate	assets	to	pay	down	the	overdraft	or	that	a	decline	in	the	value	of	the	investment	pool's	assets	may	result	in	the	fund	not having	sufficient	assets	to	satisfy	its	obligation	to	repay	the	overdrafts,	exposing	us	to	risk	of	loss.

# Our	reputation	and	business	prospects	may	be	damaged	if	our	customers	incur	substantial	losses	in	investment	pools	where	we	act	as	agent.

Our	management	of	collective	investment	pools	on	behalf	of	customers	exposes	us	to	reputational	risk.	The	incurrence	by	our	customers	of	substantial	losses	in these	pools,	particularly	in	money	market	funds	(where	there	is	a	general	market	expectation	that	net	asset	value	will	not	drop	below	$1.00	per	share),	in	situations	where we	make	distributions	in-kind	to	satisfy	redemption	requests	or	in	circumstances	where	one	of	our	investment	strategies	significantly	underperforms	the	market	or	our competitors'	products,	could	result	in	significant	harm	to	our	reputation	and	significantly	and	adversely	affect	the	prospects	of	our	associated	business	units.	Because	we often	implement	investment	and	operational	decisions	and	actions	over	multiple	investment	pools	to	achieve	scale,	we	face	increased	risk	that	losses,	even	small	losses, may	have	a	significant	effect	in	the	aggregate.

In	some	very	limited	circumstances,	and	consistent	with	applicable	regulatory	requirements,	we	may	compensate	investment	pools	for	all	or	a	portion	of	the pool's	losses	even	though	we	are	not	statutorily	or	contractually	obligated	to	do	so.	For	example,	during	the	first	and	fourth	quarters	of	2008,	we	elected	to	provide support	to	stable	value	accounts	managed	by	SSgA.	These	accounts,	offered	to	retirement	plans,	allow	participants	to	purchase	and	redeem	units	at	a	constant	net	asset value	regardless	of	volatility	in	the	underlying	value	of	the	assets	held	by	the	account.	The	accounts	enter	into	contractual	arrangements	with	third-party	financial institutions	that	agree	to	make	up	any	shortfall	in	the	account	if	all	the	units	are	redeemed	at	the	constant	net	asset	value.	These	financial	institutions	have	the	right, under	certain	circumstances,	to	terminate	this	guarantee	with	respect	to	future	investments	in	the	account.	During	2008,	the	liquidity	and	pricing	issues	in	the	fixed- income	markets	adversely	impacted	the	market	value	of	the	securities	in	these	accounts	to	the	point	that	the	third-party	guarantors	considered	terminating	their	financial guarantees	with	the	accounts.

During	the	first	quarter	of	2008,	although	we	were	not	statutorily	or	contractually	obligated	to	do	so,	we	contributed	$160	million	to	these	accounts.	In	addition, during	the	fourth	quarter	of	2008,	although	we	were	not	statutorily	or	contractually	obligated	to	do	so,	we	elected	to	purchase	approximately	$2.49	billion	of	debt securities	from	these	accounts	that	had	been	identified	as	presenting	increased	risk	in	the	current	market	environment,	and	to	contribute	an	aggregate	of	$450	million	to the	accounts,	to	improve	the	ratio	of	the	market	value	of	the	accounts'	portfolio	holdings	to	the	book	value	of	the	accounts.	This	election	resulted	in	a	fourth	quarter	2008 charge	of	$450	million.	Any	future	decision	by	us	to	provide	financial	support	to	our	investment	pools	would	potentially	result	in	the	recognition	of	significant	losses and	could	in	certain	situations	require	us	to	consolidate	the	investment	pools	onto	our	balance	sheet.	A	failure	or	inability	to	provide	such	support	could	damage	our reputation	among	current	and	prospective	customers.	Any	termination	by	a	third-party	guarantor	of	its	guarantee	could,	if	we	were	unable	to	replace	the	guarantee, adversely	affect	our	business	or	result	in	litigation.

We	may	be	exposed	to	customer	claims,	financial	loss,	reputational	damage	and	regulatory	scrutiny	as	a	result	of	transacting	purchases	and	redemptions	relating	to the	unregistered	cash	collateral	pools	underlying	our	securities	lending	program	at	a	net	asset	value	of	$1.00	per	unit	rather	than	a	lower	net	asset	value	based upon	market	value	of	the	underlying	portfolios.

A	portion	of	the	cash	collateral	received	by	customers	under	our	securities	lending	program	is	invested	in	cash	collateral	pools	that	we	manage.	Interests	in	these cash	collateral	pools	are	held	by	unaffiliated	customers	and	by	registered	and	unregistered	investment	funds	that	we	manage.	Our	cash	collateral	pools	that	are	money market	funds	registered	under	the	Investment	Company	Act	of	1940	are	required	to	maintain,	and	have	maintained,	a	constant	net	asset	value	of	$1.00	per	unit.	The remainder	of	our	cash	collateral	pools	are	bank	collective	investment	funds	that	are	not	required	to	be	registered	under	the	Investment	Company	Act.	These	unregistered cash	collateral	pools	seek,	but	are	not	required,	to	maintain,	and	transact	purchases	and	redemptions	at,	a	constant	net	asset	value	of	$1.00	per	unit.	At	December	31, 2008	and	December	31,	2007,	the	aggregate	net	asset	value	of	these	unregistered	cash	collateral	pools	(based	on	a	constant	net	asset	value	of	$1.00)	was	approximately $122	billion	and	$194	billion,	respectively.

Throughout	2008	and	currently,	these	unregistered	cash	collateral	pools	have	continued	to	transact	purchases	and	redemptions	at	a	constant	net	asset	value	of $1.00	per	unit	even	though	the	market	value	of	the	unregistered	cash	collateral	pools'	portfolio	holdings,	determined	using	pricing	from	third-party	pricing	sources,	has been	below	$1.00	per	unit.	At	December	31,	2008,	the	net	asset	value	based	upon	market	value	of	our	unregistered	cash	collateral	pools	ranged	from	$0.908	to	$1.00, with	the	weighted-average	net	asset	value	on	such	date	being	$0.939.	A	substantial	portion	of	the	decline	in	the	market	value	of	these	assets	occurred	in	the	fourth	quarter of	2008.	We	believe	that	our	practice	of	continuing	to	transact	at	$1.00	per	unit	at	the	unregistered	cash	collateral	pools,	notwithstanding	the	underlying	portfolios having	a	market	value	of	less	than	$1.00	per	unit,	is	consistent	with	the	practices	of	other	securities	lending	agents	and	in	compliance	with	the	terms	of	our	unregistered cash	collateral	pools.	We	have	continued	this	practice	for	a	number	of	reasons,	including	that	none	of	the	securities	in	the	cash	collateral	pools	is	currently	in	default	or considered	to	be	impaired,	and	that	there	are	restrictions	on	withdrawals	from	the	collective	investment	funds.	Moreover,	the	cash	collateral	pools	have	adequate	sources of	liquidity,	from	normal	lending	activity	under	the	securities	lending	program,	as	a	cash	collateral	pool	without	the	need	to	sell	securities	the	values	of	which	have	been adversely	impacted	by	the	lack	of	liquidity	in	the	fixed-income	markets.	If	we	continue	to	transact	purchases	and	redemptions	from	the	unregistered	cash	collateral	pools based	upon	a	constant	$1.00	per	unit	net	asset	value	and	the	liquid	assets	of	these	pools	turn	out	to	be	insufficient	to	support	redemption	activity	at	such	value	or	the pools	suffer	material	defaults	on	their	underlying	portfolio	holdings,	investors	in	the	unregistered	cash	collateral	pools	may	seek	to	hold	us	responsible	for	any	shortfall due	to	prior	redemptions	at	a	value	above	the	market	value	of	the	underlying	portfolio	or	as	a	result	of	any	such	portfolio	defaults.

Moreover,	a	broad	range	of	unregistered	collective	investment	pools	that	SSgA	manages,	referred	to	as	lending	funds,	participate	in	our	securities	lending	program and	as	a	result	hold	interests	in	the	unregistered	cash	collateral	pools	discussed	above.	As	a	participant	in	these	unregistered	cash	collateral	pools,	these	lending	funds may	have	the	same	claims	as	other	clients	discussed	above.	If	it	was	determined	that	the	historical	or	prospective

transaction	valuation	of	these	units	for	subscription	or	redemption	purposes	at	$1.00	was	not	appropriate,	or	if	investors	in	the	lending	funds	determine	for	their	own purposes	that	the	units	in	the	unregistered	cash	collateral	pools	held	by	the	lending	funds	should	be	valued	at	a	price	of	less	than	$1.00,	the	net	asset	value	of	the	lending funds	may	also	be	adversely	affected	and	the	lending	fund	investors	may	claim	that	they	overpaid	for	their	investment	and	seek	to	hold	us	responsible	for	their	related investment	loss.	If	we	continue	to	transact	purchases	and	redemptions	of	units	of	the	unregistered	cash	collateral	pools	at	a	net	asset	value	that	reflects	a	valuation	of $1.00	per	unit,	such	potential	exposure	would	likely	increase	over	time.	Since	the	percentage	of	a	lending	fund's	assets	on	loan	varies	based	on	the	fund's	investment focus	and	with	changes	in	market	demand,	the	impact	of	this	issue	on	the	net	asset	value	of	the	lending	fund	will	vary	significantly,	but	in	some	cases	may	be	material.	In such	circumstances,	our	reputation	as	an	asset	manager	and	the	marketability	of	these	lending	funds	may	be	adversely	affected	and	participants	in	our	lending	funds	may seek	to	be	compensated	for	any	loss	they	incurred	or	allege	to	have	incurred	resulting	from	either	a	change	in	the	reported	net	asset	value	of	the	collective	investment pool	or	previous	redemption	and	subscription	activity	in	the	collateral	pools	at	the	constant	net	asset	value	of	$1.00	per	unit.

Any	claims	asserted	by	investors	in	the	unregistered	cash	collateral	pools	or	our	lending	funds	may	be	substantial,	may	entail	litigation	and	may	result	in regulatory	scrutiny	of	our	securities	lending	program.

# Our	plan	to	reduce	operating	costs	and	support	long-term	growth	may	not	achieve	its	intended	objectives.

During	the	fourth	quarter	of	2008,	we	recorded	charges	of	$306	million	in	connection	with	a	restructuring	plan.	The	plan	is	intended	to	reduce	our	future operating	costs,	including	through	global	workforce	reductions	that	are	expected	to	be	substantially	completed	by	the	end	of	the	first	quarter	of	2009,	in	order	to	support our	long-term	growth	while	aligning	the	organization	to	meet	the	challenges	and	opportunities	presented	by	the	current	market	environment.	Risks	associated	with implementing	our	restructuring	plan	and	other	workforce	management	issues	may	impair	our	ability	to	achieve	anticipated	operating	cost	reductions	or	may	otherwise harm	our	business.	We	may	also	experience	delays	in	implementing	the	plan.	To	the	extent	we	make	changes	to	the	plan,	we	may	incur	additional	charges,	adjust	our accrual	or	re-evaluate	the	plan.

# If	we	are	unable	to	continuously	attract	deposits	and	other	short-term	funding,	our	consolidated	financial	condition,	including	our	capital	ratios,	our	results	of operations	and	our	business	prospects	could	be	harmed.

Liquidity	management	is	critical	to	the	management	of	our	consolidated	balance	sheet	and	to	our	ability	to	service	our	customer	base.	We	generally	use	our sources	of	funds	to:

•extend	credit	to	our	customers	in	connection	with	our	custody	business;

•	 meet	demands	for	return	of	funds	on	deposit	by	customers;	and

•	 manage	the	pool	of	intermediate-and	longer-term	assets	that	comprise	our	investment	portfolio.

Because	the	demand	for	credit	by	our	customers	is	difficult	to	forecast	and	control,	and	may	be	at	its	peak	at	times	of	disruption	in	the	securities	markets,	and	because the	average	maturity	of	our	investment	portfolio	is	significantly	longer	than	the	contractual	maturity	of	our	deposit	base,	we	need	to	continuously	attract,	and	are dependent	upon,	access	to	various	sources	of	short-term	funding.

In	managing	our	liquidity,	our	primary	source	of	short-term	funding	is	customer	deposits,	which	are	predominantly	transaction-based	deposits	by	institutional investors.	Our	ability	to	continue	to	attract	these	deposits,	and	other	short-term	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,	the	relative	interest	rates	that	we	are	prepared	to	pay	for	these liabilities	and	the	perception	of	safety	of	those	deposits	or	short-term	obligations	relative	to	alternative	short-term	investments	available	to	our	customers,	including	in the	capital	markets.	For	example,	the	disruption	in	the	global	fixed-income	securities	markets,	which	began	in	the	third	quarter	of	2007	and	continued	throughout	2008, had	a	substantially	greater	impact	upon	liquidity	and	valuations	in	those	markets	than	has	historically	been	experienced.	In	addition,	liquidity	in	the	inter-bank	market,	as well	as	the	markets	for	commercial	paper,	certificates	of	deposit	and	other	short-term	instruments,	significantly	contracted	during	2008.

The	availability	and	cost	of	credit	in	short-term	markets	is	highly	dependent	upon	the	markets'	perception	of	our	liquidity	and	creditworthiness.	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	event-driven reductions	in	liquidity.	In	such	events,	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	consequences,	including	adverse accounting	consequences.

# If	we	are	unable	to	successfully	invest	customer	deposits	our	business	may	be	adversely	affected.

During	the	recent	market	disruptions,	we	experienced	substantial	inflows	of	liquid	assets,	particularly	customer	deposits,	as	short-term	deposits	with	us	became more	attractive	relative	to	other	short-term	investment	options.	However,	the	contraction	in	the	number	of	counterparties	for	which	we	had	a	favorable	credit	assessment made	it	difficult	to	invest,	even	on	an	overnight	basis,	all	of	our	available	liquidity,	which	adversely	impacted	the	rate	of	return	that	we	earned	on	these	assets.	As	a result	of	this	contraction	of	counterparties	during	the	recent	market	disruptions,	we	have	frequently	placed	deposits	with	government	central	banks,	resulting	in	a minimal	rate	of	return.	If	we	continue	to	face	difficulty	investing	these	assets,	our	ability	to	attract	customer	deposits	may	be	harmed,	which	would	in	turn	harm	our business	and	our	results	of	operations.

# Any	downgrades	in	our	credit	ratings	could	adversely	affect	our	borrowing	costs,	capital	costs	and	liquidity	and	cause	reputational	harm.

Various	independent	rating	agencies	publish	credit	ratings	for	our	debt	obligations	based	on	their	evaluation	of	a	number	of	factors,	some	of	which	relate	to	our performance	and	other	corporate	developments,	including	financings,	acquisitions	and	joint	ventures,	and	some	of	which	relate	to	general	industry	conditions.	We anticipate	that	the	rating	agencies	will	review	our	ratings	regularly	based	on	our	results	of	operations	and	developments	in	our	business.	We	cannot	assure	you	that	we will	continue	to	maintain	our	current	ratings.	The	current	market	environment	and	exposure	to	other	financial	institution	counterparties	increases	the	risk	that	we	may not	maintain	our	current	ratings.	Downgrades	in	our	credit	ratings	may	adversely	affect	our	borrowing	costs,	our	capital	costs	and	our	ability	to	raise	capital	and,	in	turn, our	liquidity.	A	failure	to	maintain	an	acceptable	credit	rating	may	also	preclude	us	from	being	competitive	in	certain	products,	may	be	negatively	perceived	by	our customers	or	counterparties	or	may	have	other	adverse	reputational	effects.

# An	actual	or	perceived	reduction	in	our	financial	strength	may	cause	others	to	reduce	or	cease	doing	business	with	us.

Our	counterparties,	as	well	as	our	customers,	rely	upon	our	financial	strength	and	stability	and	evaluate	the	risks	of	doing	business	with	us.	If	we	experience diminished	financial	strength	or	stability,	actual	or	perceived,	including	due	to	market	or	regulatory	developments,	our	announced	or	rumored	business	developments	or results	of	operations,	a	decline	in	our	stock	price	or	a	reduced	credit	rating,	our	counterparties	may	become	less	willing	to	enter	into	transactions,	secured	or	unsecured, with	us,	our	customers	may	reduce	or	place	limits	upon	the	level	of	services	we	provide	them	or	seek	other	service	providers	and	our	prospective	customers	may	select other	service	providers.	The	risk	that	we	may	be	perceived	as	less	creditworthy	relative	to	other	market	participants	is	increased	in	the	current	market	environment, where	the	consolidation	of	financial	institutions,	including	major	global	financial	institutions,	is	resulting	in	a	smaller	number	of	much	larger	counterparties	and competitors.	If	our	counterparties	perceive	us	to	be	a	less	viable	counterparty,	our	ability	to	enter	into	financial	transactions	on	terms	acceptable	to	us	or	our	customers, on	our	or	our	customers'	behalf,	will	be	materially	compromised.	If	our	customers	reduce	their	deposits	with	us	or	select	other	service	providers	for	all	or	a	portion	of the	services	we	provide	them,	our	net	interest	revenue	and	fee	revenue	will	decrease	accordingly.

# Our	businesses	may	be	negatively	affected	by	adverse	publicity	or	other	reputational	harm.

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	customer	expectations	and	other issues	could	materially	and	adversely	affect	our	reputation,	our	ability	to	attract	and	retain	customers	or	our

sources	of	funding.	Preserving	and	enhancing	our	reputation	also	depends	on	maintaining	systems	and	procedures	that	address	known	risks	and	regulatory	requirements, as	well	as	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	has	a	material	effect	on	our	reputation,	our	business	will	suffer.

# Governmental	responses	to	recent	market	disruptions	may	be	inadequate	and	may	have	unintended	consequences.

In	response	to	recent	market	disruptions,	legislators	and	financial	regulators	have	taken	a	number	of	steps	to	stabilize	the	financial	markets.	These	steps	included the	Emergency	Economic	Stabilization	Act	of	2008,	the	American	Recovery	and	Reinvestment	Act	of	2009,	the	provision	of	other	direct	and	indirect	assistance	to distressed	financial	institutions,	assistance	by	the	banking	authorities	in	arranging	acquisitions	of	weakened	banks	and	broker/dealers,	implementation	of	programs	by	the Federal	Reserve	to	provide	liquidity	to	the	commercial	paper	markets	and	temporary	prohibitions	on	short	sales	of	certain	financial	institution	securities.	Additional legislative	and	regulatory	measures	are	under	consideration,	including,	for	example,	measures	with	respect	to	modifications	of	residential	mortgages.	The	overall	effects of	these	and	other	legislative	and	regulatory	efforts	on	the	financial	markets	are	uncertain,	and	may	not	have	the	intended	stabilization	effects.	In	addition	to	these actions	in	the	U.S.,	other	governments	have	taken	regulatory	and	other	steps	to	support	financial	institutions,	to	guarantee	deposits	and	to	seek	to	stabilize	the	financial markets.	Should	these	or	other	legislative	or	regulatory	initiatives	fail	to	stabilize	the	financial	markets,	our	business,	financial	condition,	results	of	operations	and prospects	could	be	materially	and	adversely	affected.

In	addition,	while	these	measures	have	been	taken	to	support	the	markets,	they	may	have	unintended	consequences	on	the	global	financial	system	or	our businesses,	including	reducing	competition,	increasing	the	general	level	of	uncertainty	in	the	markets	or	favoring	or	disfavoring	certain	lines	of	business,	institutions	or depositors.	We	may	need	to	modify	our	strategies,	businesses	or	operations,	and	we	may	incur	increased	capital	requirements	and	constraints	or	additional	costs	in	order to	satisfy	new	regulatory	requirements	or	to	compete	in	a	changed	business	environment.

# Our	participation	in	the	U.S.	Treasury's	TARP	capital	purchase	program	restricts	our	ability	to	increase	dividends	on	our	common	stock,	undertake	stock repurchase	programs	and	compensate	our	employees.

In	October	2008,	the	U.S.	Treasury	invested	$2	billion	in	State	Street	pursuant	to	the	TARP	capital	purchase	program.	The	terms	of	the	TARP	capital	purchase program	require	us	to	pay	cumulative	preferred	dividends	to	Treasury	and	restrict	our	ability	to	increase	dividends	on	our	common	stock,	redeem	Treasury's	investment without	receiving	high-quality	replacement	capital,	undertake	common	stock	repurchase	programs	and	compensate	our	employees.	In	February	2009,	the	American Recovery	and	Reinvestment	Act,	among	other	things,	retroactively	imposed	additional	compensation	and	governance	restrictions	on	participants	in	the	program. Additional	restrictions	may	be	imposed	by	Treasury	or	Congress	on	us	at	a	later	date,	and	these	restrictions	may	also	apply	to	us	retroactively.	These	restrictions	may have	a	material	adverse	affect	on	our	operations,	revenue	and	financial	condition,	on	our	ability	to	pay	dividends	or	on	our	ability	to	attract	talented	executives	and	other employees.

# Government-imposed	limitations	on	short	sales	and	investor	decisions	to	reduce	short	selling	may	harm	our	securities	finance	revenues.

Government-imposed	prohibitions	and	restrictions	on	short	sales	of	securities,	designed	to	address	perceived	market	abuses,	negatively	impacted	the	value	of securities	on	loan	during	2008.	Although	many	of	these	restrictions	have	expired,	continued	reductions	in	the	overall	volume	of	short	sales	likely	would	decrease	our securities	finance	revenue.	In	addition,	media	and	regulatory	focus	on	short	selling,	and	losses	incurred	in	securities	finance	programs	sponsored	by	other	financial institutions,	have	caused	some	institutional	investors	to	reduce	or	eliminate	their	securities	finance	programs.	Continued	investor	avoidance	of	short	sales	or	renewed regulatory	prohibitions	on	short	sales	would	affect	our	business	model	and	the	demand	for	our	services,	and	both	our	revenue	from	securities	finance	operations	and	the liquidity	and	market	value	of	the	collateral	pools	in	which	our	customers	invest	may	be	adversely	affected.

# Because	our	fee	income	is	based	in	part	on	the	value	of	assets	under	custody	or	management,	our	business	could	be	adversely	affected	by	further	declines	in	asset values.

The	significant	declines	in	equity	and	other	financial	markets	globally	during	2008	have	adversely	affected	and	are	likely	to	continue	to	adversely	affect	our	fee revenue,	which	is	based	in	part	upon	the	value	of	assets	under	custody,	administration	or	management.	Further	deterioration	or	a	continuation	of	recent	market	conditions is	likely	to	lead	to	a	continued	decline	in	the	value	of	assets	under	custody,	administration	or	management,	which	would	reduce	our	asset-based	fee	revenue	and	may adversely	affect	other	transaction-based	revenue,	such	as	securities	finance	revenue,	and	the	volume	of	transactions	that	we	execute	for	our	customers.	Many	of	the	costs of	providing	our	services	are	relatively	fixed.	Therefore,	any	such	decline	in	revenue	would	have	a	disproportionate	effect	on	our	earnings.

# The	illiquidity	and	volatility	of	global	fixed-income	and	equity	markets	has	affected	our	ability	to	effectively	and	profitably	manage	our	investment	pools	and	may make	our	products	less	attractive	to	customers.

We	manage	assets	on	behalf	of	customers	in	several	forms,	including	in	collective	investment	pools,	including	money	market	funds,	securities	finance	collateral pools,	cash	collateral	and	other	cash	products	and	short-term	investment	funds.	In	addition	to	the	impact	on	the	market	value	of	customer	portfolios,	the	illiquidity	and volatility	of	both	the	global	fixed-income	and	equity	markets	have	negatively	affected	our	ability	to	manage	customer	inflows	and	outflows	from	our	pooled	investment vehicles.	Within	our	asset	management	business,	we	manage	investment	pools,	such	as	mutual	funds	and	collective	investment	funds,	that	generally	offer	our	customers the	ability	to	withdraw	their	investments	on	short	notice,	generally	daily	or	monthly.	This	feature	requires	that	we	manage	those	pools	in	a	manner	that	takes	into	account both	maximizing	the	long-term	return	on	the	investment	pool	and	retaining	sufficient	liquidity	to	meet	reasonably	anticipated	liquidity	requirements	of	our	customers.

During	the	2008	market	disruptions,	the	liquidity	in	many	asset	classes,	particularly	short-and	long-term	fixed-income	securities,	declined	dramatically,	and providing	liquidity	to	meet	all	customer	demands	in	these	investment	pools	without	adversely	impacting	the	return	to	non-withdrawing	customers	became	more	difficult. For	customers	that	invest	directly	or	indirectly	in	certain	of	the	collateral	pools	and	seek	to	terminate	participation	in	lending	programs,	we	have	required,	in	accordance with	the	applicable	customer	arrangements,	that	these	withdrawals	from	the	collateral	pools	take	the	form	of	partial	in-kind	distributions	of	securities.	Although	we	are entitled	to	make	distributions	in-kind,	customers	have	in	some	cases	sought,	and	may	in	the	future	seek,	reimbursement	for	any	loss	that	they	incur	in	connection	with	the disposition	of	such	securities.	If	these	higher	than	normal	demands	for	liquidity	from	our	customers	continue	or	increase,	it	could	become	more	difficult	to	manage	the liquidity	requirements	of	our	collective	investment	pools	and,	as	a	result,	we	may	elect	(or	in	some	situations	be	required)	to	support	the	liquidity	of	these	pools.	If	the liquidity	in	the	fixed-income	markets	were	to	deteriorate	further	or	remain	disrupted	for	a	prolonged	period,	our	relationship	with	our	customers	may	be	adversely affected,	levels	of	redemption	activity	could	increase	and	our	results	of	operations	and	business	prospects	could	be	adversely	impacted.

In	addition,	if	a	money	market	fund	that	we	manage	were	to	have	unexpected	liquidity	demands	from	investors	in	the	fund	that	exceeded	available	liquidity,	the fund	could	be	required	to	sell	assets	to	meet	those	redemption	requirements,	and	it	may	then	be	difficult	to	sell	the	assets	held	by	the	fund	at	a	reasonable	price,	if	at	all.

Alternatively,	although	we	have	no	such	arrangements	currently	in	place,	we	have	in	the	past,	and	may	in	the	future,	guaranteed	liquidity	to	investors	desiring	to make	withdrawals	from	a	fund,	and	a	significant	amount	of	such	guarantees	could	adversely	affect	our	own	liquidity	and	financial	condition.	Because	of	the	size	of	the investment	pools	that	we	manage,	we	may	not	have	the	financial	ability	or	regulatory	authority	to	support	the	liquidity	demands	of	our	customers.	The	extreme	volatility in	the	equity	markets	has	led	to	potential	for	the	return	on	passive	and	quantitative	products	deviating	from	their	target	return.	The	temporary	closures	of	securities exchanges	in	certain	markets,	such	as	occurred	in	Brazil	and	Russia	in	the	second	half	of	2008,	or	artificial	floors	such	as	the	one	implemented	in	Pakistan,	create	a	risk that	customer	redemptions	in	pooled	investment	vehicles	may	result	in	significant	tracking	error	and	underperformance	relative	to	stated	benchmarks.	Any	failure	of	the pools	to	meet	redemption	requests	or	to	underperform	relative	to	similar	products	offered	by	our	competitors	could	harm	our	business	and	our	reputation.

# We	are	subject	to	intense	competition	in	all	aspects	of	our	business,	which	could	negatively	affect	our	ability	to	maintain	or	increase	our	profitability.

The	markets	in	which	we	operate	across	all	facets	of	our	business	are	both	highly	competitive	and	global.	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.	Ongoing	consolidation	within the	financial	services	industry	could	pose	challenges	in	the	markets	we	serve,	including	potentially	increased	downward	pricing	pressure	across	our	businesses.	Many	of our	competitors,	including	our	competitors	in	core	services,	have	substantially	greater	capital	resources	than	we	do.	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.

# If	we	fail	to	attract	new	customers	and	cross-sell	additional	products	and	services	to	our	existing	customers,	our	prospects	for	growth	may	be	harmed.

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	meet	our	financial	goals.	In	addition,	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.

# Development	of	new	products	and	services	may	impose	additional	costs	on	us	and	may	expose	us	to	increased	operational	risk.

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	introduction	of	new	products	and	services	can	entail	significant time	and	resources.	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,	rapid	technological	change	in	the	industry,	our	ability	to	access	technical	and	other	information	from	our	customers	and the	significant	and	ongoing	investments	required	to	bring	new	products	and	services	to	market	in	a	timely	manner	at	competitive	prices.	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	manage	successfully	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.

# It	may	be	difficult	and	costly	to	protect	our	intellectual	property	rights,	and	we	may	not	be	able	to	ensure	their	protection.

We	may	be	unable	to	protect	our	intellectual	property	and	proprietary	technology	effectively,	which	may	allow	competitors	to	duplicate	our	technology	and products	and	may	adversely	affect	our	ability	to	compete	with	them.	To	the	extent	that	we	are	not	able	to	protect	our	intellectual	property	effectively	through	patents	or other	means,	employees	with	knowledge	of	our	intellectual	property	may	leave	and	seek	to	exploit	our	intellectual	property	for	their	own	or	others'	advantage.	In addition,	we	may	infringe	upon	claims	of	third-party	patents,	and	we	may	face	intellectual	property	challenges	from	other	parties.	We	may	not	be	successful	in defending	against	any	such	challenges	or	in	obtaining	licenses	to	avoid	or	resolve	any	intellectual	property	disputes.	The	intellectual	property	of	an	acquired	business, such	as	that	of	Currenex,	Inc.,	acquired	in	2007,	may	be	an

important	component	of	the	value	that	we	agree	to	pay	for	such	a	business.	However,	such	acquisitions	are	subject	to	the	risks	that	the	acquired	business	may	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.

# We	may	be	unable	to	increase	the	portion	of	our	management	fee	revenue	that	is	generated	from	enhanced	index	and	actively	managed	products,	and	the investment	performance	of	these	products	may	result	in	a	reduction	in	the	fees	that	we	earn.

Over	the	past	several	years,	we	have	sought	to	increase	the	portion	of	our	management	fee	revenue	generated	from	enhanced	index	and	actively	managed products,	with	respect	to	which	we	generally	receive	fees	at	higher	rates	compared	to	passive	products.	We	may	not	be	able	to	continue	to	increase	this	segment	of	our business	at	a	rate	that	is	consistent	with	our	business	and	financial	goals.	The	amount	of	assets	we	are	able	to	attract	and	retain	in	active	strategies	depends	on	the performance	of	such	products	relative	to	competitive	products	in	the	institutional	marketplace.	For	example,	our	active	fixed-income	business	continues	to	be	adversely impacted	by	underperformance	in	certain	fixed-income	strategies	that	occurred	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.	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.

# Our	business	is	subject	to	risks	from	foreign	exchange	movements.

The	degree	of	volatility	in	foreign	exchange	rates	can	affect	our	foreign	exchange	trading	revenue.	In	general,	increased	currency	volatility	may	increase	our market	risk,	and	our	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.

# Our	revenues	and	profits	are	sensitive	to	changes	in	interest	rates.

Our	financial	performance	could	be	negatively	affected	by	changes	in	interest	rates	as	they	impact	our	asset	and	liability	management	activities.	The	levels	of interest	rates	in	global	markets,	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	or	to	hedge	the	related	exposures	on	and	off	our	consolidated	balance	sheet	can	significantly	influence	the	success	of	our	asset	and	liability management	activities	and	the	resulting	level	of	our	net	interest	revenue.	The	impact	of	changes	in	interest	rates	will	depend	on	the	relative	durations	of	assets	and liabilities	in	accordance	with	their	relevant	currencies.	In	general,	sustained	lower	interest	rates,	a	flat	or	inverted	yield	curve	and	narrow	interest-rate	spreads	have	a constraining	effect	on	our	net	interest	revenue.

# Acquisitions,	strategic	alliances	and	divestiture	pose	risks	for	our	business.

Acquisitions	of	complementary	businesses	and	technologies,	development	of	strategic	alliances	and	divestiture	of	portions	of	our	business,	in	addition	to	fostering organic	growth	opportunities,	are	an	active	part	of	our	overall	business	strategy	to	remain	competitive.	The	integration	of	acquisitions	presents	risks	that	differ	from	the risks	associated	with	our	ongoing	operations.	Our	financial	results	would	be	significantly	harmed	by	an	inability	to	achieve	the	cost	savings	and	other	benefits	that	we anticipated	in	valuing	an	acquired	business.	We	may	not	be	able	to	effectively	assimilate	services,	technologies,	key	personnel	or	businesses	of	acquired	companies	into our	business	or	service	offerings,	alliances	may	not	be	successful,	and	we	may	not	achieve	related	revenue	growth	or	cost	savings.	We	also	face	the	risk	of	being	unable to	retain	the	customer	bases	of

acquired	companies	or	unable	to	cross-sell	our	products	and	services	to	its	customers.	Acquisitions	of	investment	servicing	businesses	entail	information	technology systems	conversions,	which	involve	operational	risks	and	may	result	in	customer	dissatisfaction	and	defection.	Customers	of	asset	servicing	businesses	that	we	have acquired	may	be	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	these	acquisitions.	In	addition,	we	may	not	be	able	to	successfully manage	the	divestiture	of	identified	businesses	on	satisfactory	terms,	if	at	all,	which	would	reduce	any	anticipated	benefits	to	earnings.

With	any	acquisition,	the	integration	of	the	operations	and	resources	of	the	businesses	could	result	in	the	loss	of	key	employees,	the	disruption	of	our	and	the acquired	company's	ongoing	businesses,	or	inconsistencies	in	standards,	controls,	procedures	and	policies	that	could	adversely	affect	our	ability	to	maintain relationships	with	customers	and	employees	or	to	achieve	the	anticipated	benefits	of	the	acquisition.	Integration	efforts	may	also	divert	management	attention	and resources.	The	acquisition	and	combination	of	a	business	with	our	operations	may	also	expose	us	to	risks	from	unknown	or	contingent	liabilities	with	respect	to	which we	may	have	no	recourse	against	the	seller.	Acquisition	transactions	are	often	competitive	auctions	in	which	we	have	limited	time	and	access	to	information	to	evaluate the	risks	inherent	in	the	business	being	acquired,	and	no	or	limited	recourse	against	the	seller	if	undisclosed	liabilities	are	discovered	after	we	enter	into	a	definitive agreement.

We	may	not	achieve	the	benefits	we	sought	in	an	acquisition,	or,	if	achieved,	those	benefits	may	be	achieved	later	than	we	anticipated.	Failure	to	achieve anticipated	benefits	from	an	acquisition	could	result	in	increased	costs	and	lower	revenues	than	expected	of	the	combined	company.	In	addition,	if	the	financial performance	associated	with	an	acquisition	falls	short	of	expectations,	impairment	charges	associated	with	the	goodwill	or	other	intangible	assets	recorded	as	part	of	the acquisition	may	result.

# Unavailability	of	financing	may	make	future	business	acquisitions	or	dispositions	difficult.

Our	ability	to	make	acquisitions	in	order	to	achieve	greater	economies	of	scale	or	to	expand	our	product	offering	is	dependent	upon	our	financial	resources	and our	ability	to	access	the	capital	markets.	In	addition,	our	ability	to	dispose	of	businesses	that	no	longer	fit	our	business	model	may	be	difficult	if	attractive	financing	is not	available	to	prospective	buyers.	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.

# We	face	significant	regulatory	hurdles	when	planning	business	acquisitions.

In	connection	with	most	acquisitions,	before	the	acquisition	can	be	completed,	we	must	obtain	various	regulatory	approvals	or	consents,	which	may	include approvals	of	the	Federal	Reserve,	the	Massachusetts	Commissioner	of	Banks	and	other	domestic	and	foreign	regulatory	authorities.	These	regulatory	authorities	may impose	conditions	on	the	completion	of	the	acquisition	or	require	changes	to	its	terms.	Any	such	conditions,	or	any	associated	regulatory	delays,	could	limit	the	benefits of	the	transaction.

# Competition	for	our	employees	is	intense,	and	we	may	not	be	able	to	attract	and	retain	the	highly	skilled	people	we	need	to	support	our	business.

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,	particularly	in	light	of	compensation	restrictions	applicable	to	us,	as	a	participant	in	the	TARP	capital purchase	program,	under	the	Emergency	Economic	Recovery	Act	of	2008,	as	amended	by	the	American	Recovery	and	Reinvestment	Act	of	2009.	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	employees,	either	individually	or as	a	group,	can	adversely	impact	customer	perception	of	our	ability	to	continue	to	manage	certain	types	of	investment	management	mandates.	In	some	of	our	businesses, we	have	experienced	significant	employee	turnover,	which	increases	costs,	requires	additional	training	and	increases	the	potential	for	operational	errors.

# Long-term	fixed-price	contracts	expose	us	to	pricing	and	performance	risk.

We	enter	into	long-term	fixed-price	contracts	to	provide	middle	office	or	investment	manager	and	hedge	fund	manager	operations	outsourcing	services	to customers,	including	services	related	but	not	limited	to	certain	trading	activities,	cash	reporting,	settlement	and	reconciliation	activities,	collateral	management	and information	technology	development.	The	long-term	contracts	for	these	relationships	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.	Our	estimate	of	the	profitability	of	these	arrangements	can be	adversely	impacted	by	declines	in	the	assets	under	the	customers'	management,	whether	due	to	general	declines	in	the	securities	markets	or	customer	specific	issues. In	addition,	the	profitability	of	these	arrangements	may	be	based	on	our	ability	to	cross	sell	additional	services	to	these	customers,	and	we	may	be	unable	to	do	so.

In	addition,	performance	risk	exists	in	each	contract,	given	our	dependence	on	successful	conversion	and	implementation	onto	our	own	operating	platforms	of	the service	activities	provided.	Our	failure	to	meet	specified	service	levels	may	also	adversely	affect	our	revenue	from	such	arrangements,	or	permit	early	termination	of	the contracts	by	the	customer.	If	the	current	decline	in	overall	market	securities	valuations	persists	or	our	customers	are	unable	to	grow	their	businesses,	these	relationships may	not	be	successful.	These	relationships	have	been	an	area	of	rapid	growth	in	our	business,	and	if	the	demand	for	these	types	of	services	were	to	decline,	we	could	see a	slowdown	in	the	growth	rate	of	our	revenue.

# We	face	significant	risks	developing	and	implementing	our	future	business	plans	and	strategies.

In	order	to	maintain	and	grow	our	business,	we	must	continuously	make	strategic	decisions	about	our	future	business	plans,	including	plans	for	entering	or	exiting business	lines	or	geographic	markets,	plans	for	acquiring	or	disposing	of	businesses	and	plans	to	build	new	systems	and	other	infrastructure.	Our	business,	our	results	of operations	and	our	financial	position	may	be	adversely	affected	by	incorrect	business	and	strategic	decisions	or	improper	implementation	of	our	decisions.	If	the business	decisions	that	we	make	prove	erroneous,	we	may	fail	to	be	responsive	to	industry	changes	or	customer	demands.	Moreover,	the	implementation	of	our decisions	may	involve	significant	capital	outlays,	often	far	in	advance	of	when	we	expect	to	derive	any	related	revenues,	and	therefore	it	may	be	difficult	to	alter	or abandon	plans	without	incurring	significant	loss.

# We	are	exposed	to	operational	risk,	which	could	adversely	affect	our	results	of	operations.

Operational	risk	is	inherent	in	all	of	our	activities.	Our	customers	have	a	broad	array	of	complex	and	specialized	servicing,	confidentiality	and	fiduciary requirements.	We	face	the	risk	that	the	policies,	procedures	and	systems	we	have	established	to	comply	with	our	operational	requirements	will	fail,	be	inadequate	or become	outdated.	We	also	face	the	potential	for	loss	resulting	from	inadequate	or	failed	internal	processes,	employee	supervisory	or	monitoring	mechanisms	or	other systems	or	controls,	which	could	materially	affect	our	future	results	of	operations.	Operational	errors	that	result	in	us	sending	funds	to	a	failing	or	bankrupt	entity	may be	irreversible,	and	may	subject	us	to	losses.	We	may	also	be	subject	to	disruptions	from	external	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.	When	we	record	balance	sheet	reserves	for	probable	loss	contingencies	from	operational	losses,	we	may	be	unable	to	accurately estimate	our	exposure,	and	any	reserves	we	establish	to	cover	operational	losses	may	not	be	sufficient	to	cover	our	actual	financial	exposure,	which	may	have	a	material impact	on	our	consolidated	financial	condition	or	results	of	operations.

# We	depend	on	information	technology,	and	any	failures	of	our	information	technology	systems	could	result	in	significant	costs	and	reputational	damage.

Our	businesses	depend	on	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	or	breakdowns	of	this	infrastructure	could	result	in	significant	costs	and	reputational damage.

# Cost	shifting	to	foreign	jurisdictions	may	expose	us	to	increased	operational	risk	and	reputational	harm	and	may	not	result	in	expected	cost	savings.

We	actively	strive	to	achieve	cost	savings	by	shifting	certain	business	processes	to	lower-cost	geographic	locations,	including	by	forming	joint	ventures	and	by establishing	operations	in	lower	cost	areas,	such	as	Poland,	India	and	China,	and	outsourcing	to	vendors	in	various	jurisdictions.	This	effort	exposes	us	to	the	risk	that	we may	not	maintain	service	quality,	control	or	effective	management	within	these	business	operations.	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	customer	concern	exist 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	may	offset	or	exceed	the expected	financial	benefits	of	the	lower-cost	locations.

# Any	theft,	loss	or	other	misappropriation	of	the	confidential	information	we	possess	could	have	an	adverse	impact	on	our	business	and	could	subject	us	to regulatory	actions,	litigation	and	other	adverse	effects.

Our	businesses	and	relationships	with	customers	are	dependent	upon	our	ability	to	maintain	the	confidentiality	of	our	and	our	customers'	trade	secrets	and confidential	information	(including	customer	transactional	data	and	personal	data	about	our	employees,	our	customers	and	our	customers'	customers).	Unauthorized access	to	such	information	may	occur,	resulting	in	theft,	loss	or	other	misappropriation.	Any	theft,	loss	or	other	misappropriation	of	confidential	information	could	have a	material	adverse	impact	on	our	competitive	positions,	our	relationships	with	our	customers	and	our	reputation	and	could	subject	us	to	regulatory	inquiries	and enforcement,	civil	litigation	and	possible	financial	liability	or	costs.

# Our	businesses	may	be	adversely	affected	by	litigation.

From	time	to	time,	our	customers	may	make	claims	and	take	legal	action	relating	to	our	performance	of	fiduciary	or	contractual	responsibilities.	We	may	also	face employment	lawsuits	or	other	legal	claims.	In	any	such	claims	or	actions,	demands	for	substantial	monetary	damages	may	be	asserted	against	us	and	may	result	in financial	liability	or	an	adverse	effect	on	our	reputation	among	investors	or	on	customer	demand	for	our	products	and	services.	We	may	be	unable	to	accurately	estimate our	exposure	to	litigation	risk	when	we	record	balance	sheet	reserves	for	probable	loss	contingencies.	As	a	result,	any	reserves	we	establish	to	cover	any	settlements	or judgments	may	not	be	sufficient	to	cover	our	actual	financial	exposure,	which	may	have	a	material	impact	on	our	consolidated	financial	condition	or	results	of operations.

In	the	ordinary	course	of	our	business,	we	are	also	subject	to	various	regulatory,	governmental	and	law	enforcement	inquiries,	investigations	and	subpoenas. These	may	be	directed	generally	to	participants	in	the	businesses	in	which	we	are	involved	or	may	be	specifically	directed	at	us.	In	regulatory	enforcement	matters, claims	for	disgorgement,	the	imposition	of	penalties	and	the	imposition	of	other	remedial	sanctions	are	possible.

In	view	of	the	inherent	difficulty	of	predicting	the	outcome	of	legal	actions	and	regulatory	matters,	we	cannot	provide	assurance	as	to	the	outcome	of	any	pending matter	or,	if	determined	adversely	to	us,	the	costs	associated	with	any	such	matter,	particularly	where	the	claimant	seeks	very	large	or	indeterminate	damages	or	where the	matter	presents	novel	legal	theories,	involves	a	large	number	of	parties	or	is	at	a	preliminary	stage.	The	resolution	of	certain	pending	legal	actions	or	regulatory matters,	if	unfavorable,	could	have	a	material	adverse	effect	on	our	consolidated	results	of	operations	for	the	quarter	in	which	such	actions	or	matters	are	resolved.

# We	face	litigation	risks	in	connection	with	SSgA's	active	fixed-income	strategies.

In	connection	with	certain	of	SSgA's	active	fixed-income	strategies,	during	the	fourth	quarter	of	2007,	we	established	a	reserve	of	approximately	$625	million	to address	legal	exposure	and	related	costs	in	connection	with	such	strategies.	Among	other	things,	the	portfolio	managers	for	certain	actively	managed	fixed-income strategies	materially	increased	the	exposure	of	these	strategies	to	securities	collateralized	by	sub-prime	mortgages	and	shifted	the	weighting	of	these	portfolios	to	more highly	rated	sub-prime	instruments.	During	the	third	quarter	of	2007,	as	the	liquidity	and	valuations	of	these	securities,	including	the	more	highly	rated	instruments, came	under	increased	pressure,	the	performance	of	these	strategies	was	adversely,	and	in	some	cases	significantly,	affected.	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	questioning	has	resulted	in	several	civil	suits,	including	putative	class	action	claims,	applicable	both	to	funds	registered	under	the	Investment Company	Act	of	1940	and	to	those	that	are	exempt	from	such	registration.	These	lawsuits	allege,	among	other	things,	that	we	failed	to	comply	with	applicable investment	limitations,	disclosure	obligations	and	our	requisite	standard	of	care	in	managing	these	active	funds,	including	those	where	we	act	as	a	fiduciary	under ERISA.	We	have	also	received,	and	are	in	the	process	of	responding	to,	inquiries	or	subpoenas	from	federal	and	state	regulatory	authorities	regarding	SSgA's	active fixed-income	strategies.	Given	our	desire	to	fully	respond	to	customer	concerns,	in	the	fourth	quarter	of	2007,	State	Street	undertook	a	further	review	of	all	the	actively managed	fixed-income	strategies	at	SSgA	that	were	exposed	to	sub-prime	investments.	Based	on	our	review	and	ongoing	discussions	with	customers	who	were	invested in	these	strategies,	we	established	a	reserve	to	address	our	estimated	legal	exposure.

The	reserve	was	established	based	upon	our	best	judgment	as	to	legal	exposures	and	related	costs	associated	with	certain	actively	managed	fixed-income investment	strategies.	As	of	December	31,	2008,	we	had	made	settlement	and	related	payments	totaling	approximately	$417	million.	The	amount	of	the	original	reserve was	based	on	certain	assumptions.	While	we	believe	the	reserve	represents	a	reasonable	estimate	of	our	legal	exposure	and	other	costs	associated	with	these	issues,	we do	not	believe	that	it	is	feasible	to	predict	or	determine	the	amount	of	such	exposure	with	certainty.	As	such,	it	is	possible	that	we	have	overestimated	or	underestimated our	exposure.	If	the	amount	of	our	actual	exposure	is	materially	different	from	our	reserve,	there	would	be	a	material	impact	on	our	consolidated	financial	condition	and results	of	operations.

# We	face	extensive	and	changing	government	regulation,	which	may	increase	our	costs	and	expose	us	to	risks	related	to	compliance.

Most	of	our	businesses	are	subject	to	extensive	regulation	by	multiple	regulatory	bodies,	and	many	of	the	customers	to	which	we	provide	services	are	themselves subject	to	a	broad	range	of	regulatory	requirements.	These	regulations	may	affect	the	manner	and	terms	of	delivery	of	our	services.	As	a	financial	institution	with substantial	international	operations,	we	are	subject	to	extensive	regulatory	and	supervisory	oversight,	both	in	the	U.S.	and	outside	the	U.S.	in	connection	with	our	global operations.	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	Basel	II	and	other	global regulatory	capital	frameworks,	short-selling	regulations	and	anti-money	laundering	regulations,	may	impose	significant	compliance	costs	on	us.	The	disruption	of	the financial	markets	in	2008	and	resulting	governmental	support	of,	and	loss	of	confidence	in,	financial	institutions	is	likely	to	result	in	demand	for	increased	and	more extensive	regulation	of	our	business	both	in	the	U.S	and	internationally.	Different	countries	may	respond	to	the	market	and	economic	environment	in	different	and potentially	conflicting	manner,	which	could	have	the	impact	of	increasing	the	cost	of	compliance	for	us.	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,	lawsuits	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.	In	addition,	adverse	publicity	and	damage	to	our	reputation	arising	from	the	failure	or 24

perceived	failure	to	comply	with	legal,	regulatory	or	contractual	requirements	could	affect	our	ability	to	attract	and	retain	customers.	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	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.

# Changes	in	accounting	standards	may	be	difficult	to	predict	and	may	adversely	affect	our	consolidated	financial	position	and	results	of	operations.

New	accounting	standards,	or	changes	in	the	interpretation	of	existing	accounting	standards,	by	the	Financial	Accounting	Standards	Board	or	the	SEC,	can potentially	affect	our	consolidated	financial	condition	and	results	of	operations.	These	changes	are	difficult	to	predict,	and	can	materially	impact	how	we	record	and report	our	consolidated	financial	condition	and	results	of	operations	and	other	financial	information.	In	some	cases,	we	could	be	required	to	apply	a	new	or	revised standard	retroactively,	resulting	in	the	revised	treatment	of	certain	transactions	or	activities,	and,	in	some	cases,	the	restatement	of	prior	period	financial	statements.

# Changes	in	tax	laws	or	regulations,	and	challenges	to	our	tax	positions	with	respect	to	historical	transactions,	may	adversely	affect	our	net	income,	effective	tax	rate and	our	overall	results	of	operations	and	financial	condition.

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.

Prior	to	2004,	we	entered	into	certain	leveraged	leases,	known	as	sale-in,	lease-out,	or	SILO,	transactions.	The	Internal	Revenue	Service,	or	IRS,	challenged	our tax	deductions	arising	from	those	transactions.	During	the	second	quarter	of	2008,	while	we	were	engaged	in	settlement	discussions	with	them,	the	IRS	won	a	court victory	in	a	SILO	case	involving	other	taxpayers.	Shortly	after	that	decision,	the	IRS	suspended	all	SILO	settlement	discussions	and,	on	August	5,	2008,	issued	a standard	SILO	settlement	offer	to	most	taxpayers	that	had	such	transactions.	After	reviewing	the	settlement	offer	carefully,	we	have	decided	not	to	accept	it	but	to continue	to	pursue	our	appeal	rights	within	the	IRS.

In	accordance	with	Statement	of	Financial	Accounting	Standards	No.	13,	Accounting	for	Leases,	we	originally	recorded	income	and	deferred	tax	liabilities	with respect	to	our	SILO	transactions	based	on	projected	pre-tax	and	tax	cash	flows.	In	consideration	of	the	terms	of	the	settlement	offer	and	the	context	in	which	it	was issued,	we	revised	our	projections	of	the	timing	and	amount	of	the	tax	cash	flows	and	reflected	those	revisions	in	our	leveraged	lease	accounting.	During	the	third quarter	of	2008	we	substantially	increased	our	reserve	for	tax-related	interest	expense	that	may	be	incurred	upon	resolution	of	this	matter.

If	we	were	to	further	revise	our	projection	of	the	timing	or	amount	of	the	tax	cash	flows	from	the	leases,	existing	accounting	standards	would	require	us	to	again recalculate	the	rate	of	return	and	the	recognition	of	income	from	the	leases	from	inception.	In	addition	to	the	recalculation,	it	is	possible	that	we	would	increase	our reserve	for	tax-related	interest	expense,	which	would	be	recorded	as	an	increase	to	income	tax	expense.

# The	quantitative	models	we	use	to	manage	our	business	may	contain	errors	that	result	in	imprecise	risk	assessments,	inaccurate	valuations	or	poor	business decisions.

We	use	quantitative	models	to	help	manage	many	different	aspects	of	our	business.	As	an	input	to	our	overall	assessment	of	capital	adequacy,	we	use	models	to measure	the	amount	of	credit	risk,	market	risk,	operational	risk	and	business	risk	we	face.	During	the	preparation	of	our	financial	statements,	we	sometimes	use	models to	value	positions	for	which	reliable	market	prices	are	not	available.	We	also	use	models	to	support	many	different	types	of	business	decisions	including	trading activities,	hedging,	asset	and	liability	management	and	whether	to	change	business	strategy.	In	all	of	these	uses,	errors	in	the	underlying	model	could	result	in unanticipated	and	adverse	consequences.	Because	of	our	widespread	usage	of	models,	potential	errors	in	models	pose	an	ongoing	risk	to	us.

# Our	controls	and	procedures	may	fail	or	be	circumvented,	and	our	risk	management	policies	and	procedures	may	be	inadequate.

We	may	fail	to	identify	and	manage	risks	related	to	a	variety	of	aspects	of	our	business,	including,	but	not	limited	to,	operational	risk,	interest-rate	risk,	trading risk,	fiduciary	risk,	legal	and	compliance	risk,	liquidity	risk	and	credit	risk.	We	have	adopted	various	controls,	procedures,	policies	and	systems	to	monitor	and	manage risk.	We	cannot	provide	assurance	that	those	controls,	procedures,	policies	and	systems	are	adequate	to	identify	and	manage	the	risks	inherent	in	our	various	businesses. 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	may	fail	to	accurately	quantify	the	magnitude	of	the	risks	we	face,	which	could	subject	us	to	losses.

We	may	fail	to	accurately	quantify	the	magnitude	of	the	risks	we	face.	Our	measurement	methodologies	rely	upon	many	assumptions	and	historical	analyses	and correlations.	These	assumptions	may	be	incorrect,	and	the	historical	correlations	we	rely	on	may	not	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

# None.

# ITEM	2. PROPERTIES

We	occupy	a	total	of	approximately	8.7	million	square	feet	of	office	space	and	related	facilities	around	the	world,	of	which	approximately	7.8	million	square	feet are	leased.	Of	the	total	leased	space,	approximately	3.9	million	square	feet	are	located	in	eastern	Massachusetts.	An	additional	1.6	million	square	feet	are	located elsewhere	throughout	the	U.S.	and	in	Canada.	We	lease	approximately	1.7	million	square	feet	in	the	U.K.	and	Europe,	and	approximately	600,000	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.	Various	divisions	of	our	lines of	business	occupy	space	in	this	building.	We	lease	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 three	buildings	located	in	Quincy,	Massachusetts,	one	of	which	we	own	and	the	others	we	lease.	The	buildings,	containing	a	total	of	approximately	1,057,000	square feet,	function	as	State	Street	Bank's	principal	operations	facilities.

We	believe	that	our	owned	and	leased	facilities	are	suitable	and	adequate	for	our	business	needs.	Additional	information	about	our	occupancy	costs,	including	our commitments	under	non-cancelable	leases,	is	in	note	20	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	regulatory,	governmental	and	law	enforcement	inquiries	and	subpoenas,	as	well	as	legal	proceedings	that	arise	in	the	normal	course	of business.	For	a	discussion	of	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	as	of	December	31,	2007	and	activity	in	this	reserve	during	2008,	refer	to	"Risk	Factors—We	face litigation	risks	in	connection	with	SSgA's	active	fixed-income	strategies"	included	under	Item	1A;	the	"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	11	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	and	based	on	the	information	currently	available,	these 26

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	27,	2009.

David	W.	Puth 52 Executive	Vice	President

Edward	J.	Resch 56 Executive	Vice	President	and	Chief	Financial	Officer

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	and	has	served	as	Chairman	and	Chief	Executive	Officer	since	2004.	Mr.	Logue	joined	State	Street	as	Senior	Vice President	and	head	of	investment	servicing	for	U.S.	mutual	funds	and	was	elected	Vice	Chairman	in	1999.	Mr.	Logue	served	as	President	from	2001	to	April	2008	and	as Chief	Operating	Officer	from	2000	to	April	2008.

Mr.	Hooley	joined	State	Street	in	1986	and	has	served	as	President	and	Chief	Operating	Officer	since	April	2008.	From	2002	to	April	2008,	Mr.	Hooley	served	as Executive	Vice	President	and	head	of	Investor	Services	and,	in	2006,	was	appointed	Vice	Chairman	and	Global	Head	of	Investment	Servicing	and	Investment	Research and	Trading.

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.	Carp	joined	State	Street	in	2006	as	Executive	Vice	President	and	Chief	Legal	Officer.	In	2006,	he	was	also	appointed	Secretary.	From	2004	to	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.	Malerba	joined	State	Street	in	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	2000	and	continued	in	that	role	after	the	merger	with	Bank	of	America	Corporation	in	2004.

Ms.	Miskovic	became	a	State	Street	executive	officer	in	2008	and	serves	as	Executive	Vice	President	and	Chief	Risk	Officer	responsible	for	leading	State	Street's risk	management	function	globally.	Before	being	appointed	to	this	role,	Ms.	Miskovic	served	on	State	Street's	Board	of	Directors	from	2006	until	April	2008,	and	was Chairman	of	Eurasia	Group,	a	global	political	risk	advisory	and	consulting	firm	based	in	New	York,	from	2005	until	November	2007,	also	serving	as	Chief	Operating Officer	of	Eurasia	from	2003	until	2005.

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	benefits	provider	and	retirement	plan	record	keeper.	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.	From	January	2008	until	May	2008,	he served	on	an	interim	basis	as	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.	Powers	joined	State	Street	in	May	2008	as	President	and	Chief	Executive	Officer	of	State	Street	Global	Advisors.	Prior	to	joining	State	Street,	Mr.	Powers served	as	Chief	Executive	Officer	of	Old	Mutual	US,	the	U.S.	operating	unit	of	London-based	Old	Mutual	plc,	an	international	savings	and	wealth	management company,	from	September	2001	through	April	2008.

Mr.	Puth	joined	State	Street	in	August	2008	as	Executive	Vice	President	and	head	of	State	Street's	Securities	Finance,	Global	Markets	and	Investment	Research businesses.	Prior	to	joining	State	Street,	Mr.	Puth	was	the	President	of	the	Eriska	Group,	a	risk	management	advisory	firm	that	he	founded	in	2007.	Prior	to	that	time, Mr.	Puth	was	with	JPMorgan	Chase	and	heritage	corporations	from	1988	where	he	was	a	Managing	Director	and	a	member	of	the	bank's	Executive	Committee.

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.

# 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	4,241	shareholders	of	record	at	December	31,	2008. 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	January	2008,	under	an	existing	authorization	by	our	Board	of	Directors,	we	repurchased	552,000	shares	of	our	common	stock	in	connection	with	a	$1	billion accelerated	share	repurchase	program	that	concluded	on	January	18,	2008.	As	of	December	31,	2008,	approximately	13,245,000	shares	remained	available	for	future purchase	under	the	Board	authorization.	We	generally	employ	third-party	broker/dealers	to	acquire	shares	on	the	open	market	in	connection	with	our	common	stock purchase	program.

As	a	result	of	our	participation	in	the	U.S.	Treasury's	capital	purchase	program,	we	are	not	currently	permitted	to	repurchase	our	common	stock	without Treasury's	consent.	Additional	information	about	this	restriction	is	provided	in	the	"Capital"	section	of	Management's	Discussion	and	Analysis	of	Financial	Condition and	Results	of	Operations,	and	in	note	13	of	the	Notes	to	Consolidated	Financial	Statements,	included	in	this	Form	10-K	under	Item	8.

Additional	information	about	our	common	stock	and	other	equity	securities	is	provided	in	the	"Capital—Regulatory	Capital"	section	of	Management's Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,	and	in	note	13	of	the	Notes	to	Consolidated	Financial	Statements,	included	in	this	Form	10-K under	Item	8.

# 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- banking	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	and	Massachusetts	state	law,	regulatory	approval	of	the	Federal	Reserve	and	the	Massachusetts	Division	of	Banks	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	its	retained	net	profits	for	the	preceding two	years,	less	any	required	transfers	to	surplus.	Information	about	dividends	from	our	subsidiary	banks	is	provided	in	note	16	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-banking	subsidiaries	cannot	be	determined	at	this time.

As	a	result	of	our	participation	in	the	U.S.	Treasury's	capital	purchase	program,	we	are	not	currently	permitted,	without	Treasury's	consent,	to	increase	the quarterly	dividend	per	share	on	our	common	stock	above	$0.24	per	share.	Additional	information	about	this	restriction	is	provided	in	the	"Capital"	section	of Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,	and	in	note	16	of	the	Notes	to	Consolidated	Financial	Statements,	included	in this	Form	10-K	under	Item	8.	In	February	2009,	in	light	of	the	impact	of	the	continued	disruption	in	the	global	capital	markets	experienced	since	the	middle	of	2007,	and as	part	of	a	plan	to	strengthen	our	tangible	common	equity,	we	announced	a	temporary	reduction	of	the	quarterly	dividend	on	our	common	stock	to	$0.01	per	share.

# 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,	2004	and	ended	December	31,	2008.	The	cumulative	total	shareholder	return	assumes the	investment	of	$100	in	State	Street	common	stock	and	in	each	index	on	December	31,	2003,	and	also	assumes	reinvestment	of	dividends.	The	S&P	Financial	Index	is a	publicly	available	measure	of	81	of	the	Standard	&	Poor's	500	companies,	representing	29	diversified	financial	services	companies,	16	banking	companies,	21 insurance	companies	and	15	real	estate	companies.

# Comparison	of	Five-Year	Cumulative	Total	Shareholder	Return

|  | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| State\tStreet\tCorporation | $100 | $96 | $109 | $135 | $164 | $81 |
| S&P\t500\tIndex | \t 100 | \t 111 | \t 116 | \t 135 | \t 142 | 90 |
| S&P\tFinancial\tIndex | \t 100 | \t 111 | \t 118 | \t 141 | \t 115 | 51 |

# ITEM	6. SELECTED	FINANCIAL	DATA

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

| FOR	THE	YEAR	ENDED	DECEMBER	31: | 2008 | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Total\tfee\trevenue | $7,747 | $6,633 | $5,186 | $4,553 | $4,050 |
| Net\tinterest\trevenue | 2,650 | 1,730 | 1,110 | 907 | 859 |
| Provision\tfor\tloan\tlosses | — | — | — | — | (18) |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 | (3) | 24 |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | 350 | — | — | — | — |
| Gain\ton\tsale\tof\tPrivate\tAsset\tManagement\tbusiness,\tnet\tof\texit\tand\tother\tassociated\tcosts | — | — | — | 16 | — |
| Total\trevenue | 10,693 | 8,336 | 6,311 | 5,473 | 4,951 |
| Expenses: |  |  |  |  |  |
| Expenses\tfrom\toperations | 6,780 | 5,768 | 4,540 | 4,041 | 3,676 |
| Provision\tfor\tlegal\texposure,\tnet(1) | — | 467 | — | — | — |
| Provision\tfor\tinvestment\taccount\tinfusion | 450 | — | — | — | — |
| Restructuring\tcharges | 306 | — | — | — | 21 |
| Provision\tfor\tindemnification\texposure | 200 | — | — | — | — |
| Merger,\tintegration\tand\tdivestiture\tcosts | 115 | 198 | — | — | 62 |
| Total\texpenses | 7,851 | 6,433 | 4,540 | 4,041 | 3,759 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 2,842 | 1,903 | 1,771 | 1,432 | 1,192 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 1,031 | 642 | 675 | 487 | 394 |
| Income\tfrom\tcontinuing\toperations | 1,811 | 1,261 | 1,096 | 945 | 798 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | — | — | 10 | (107) | — |
| Net\tincome | $1,811 | $1,261 | $1,106 | $838 | $798 |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $1,789 | $1,261 | $1,106 | $838 | $798 |
| PER\tCOMMON\tSHARE: |  |  |  |  |  |
| Basic\tearnings: |  |  |  |  |  |
| Continuing\toperations | $4.33 | $3.50 | $3.31 | $2.86 | $2.38 |
| Net\tincome | 4.33 | 3.50 | 3.34 | 2.53 | 2.38 |
| Diluted\tearnings: |  |  |  |  |  |
| Continuing\toperations | 4.30 | 3.45 | 3.26 | 2.82 | 2.35 |
| Net\tincome | 4.30 | 3.45 | 3.29 | 2.50 | 2.35 |
| Cash\tdividends\tdeclared | .95 | .88 | .80 | .72 | .64 |
| Closing\tmarket\tprice\t(at\tyear\tend) | 39.33 | 81.20 | 67.44 | 55.44 | 49.12 |
| AT\tYEAR\tEND: |  |  |  |  |  |
| Investment\tsecurities | $76,017 | $74,559 | $64,992 | $\t\t59,870 | $\t\t37,571 |
| Total\tassets | \t 173,631 | \t 142,543 | \t 107,353 | 97,968 | 94,040 |
| Deposits | \t 112,225 | 95,789 | 65,646 | 59,646 | 55,129 |
| Long-term\tdebt | 4,419 | 3,636 | 2,616 | 2,659 | 2,458 |
| Total\tshareholders'\tequity | 12,774 | 11,299 | 7,252 | 6,367 | 6,159 |
| Assets\tunder\tcustody\t(in\tbillions) | 12,041 | 15,299 | 11,854 | 10,121 | 9,497 |
| Assets\tunder\tmanagement\t(in\tbillions) | 1,444 | 1,979 | 1,749 | 1,441 | 1,354 |
| Number\tof\temployees | 28,475 | 27,110 | 21,700 | 20,965 | 19,668 |
| RATIOS: |  |  |  |  |  |
| Continuing\toperations: |  |  |  |  |  |
| Return\ton\tcommon\tshareholders'\tequity | 14.8% | 13.4% | 16.2% | 15.3% | 13.3% |
| Return\ton\taverage\tassets | 1.11 | 1.02 | 1.03 | .95 | .84 |
| Common\tdividend\tpayout | 22.4 | 25.2 | 24.2 | 25.3 | 26.9 |
| Net\tincome: |  |  |  |  |  |
| Return\ton\tcommon\tshareholders'\tequity | 14.8 | 13.4 | 16.4 | 13.6 | 13.3 |
| Return\ton\taverage\tassets | 1.11 | 1.02 | 1.04 | .84 | .84 |
| Common\tdividend\tpayout | 22.4 | 25.2 | 24.0 | 28.5 | 26.9 |
| Average\tcommon\tequity\tto\taverage\ttotal\tassets | 7.5 | 7.6 | 6.3 | 6.2 | 6.3 |
| Net\tinterest\tmargin,\tfully\ttaxable-equivalent\tbasis | 2.08 | 1.71 | 1.25 | 1.08 | 1.08 |
| Tier\t1\trisk-based\tcapital | 20.3 | 11.2 | 13.7 | 11.7 | 13.3 |
| Total\trisk-based\tcapital | 21.6 | 12.7 | 15.9 | 14.0 | 14.7 |
| Tier\t1\tleverage\tratio | 7.8 | 5.3 | 5.8 | 5.6 | 5.5 |
| Tangible\tcommon\tequity\tto\tadjusted\ttangible\tassets | 4.6 | 3.9 | 5.1 | 4.8 | 4.5 |

(1) Amount	was	composed	of	a	provision	for	legal	exposure	of	$600	million,	a	reduction	of	salaries	and	benefits	expense	of	$141	million,	and	other	expenses	of	$8	million;	refer	to	the	"Expenses"	section	of Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	included	in	this	Form	10-K	under	Item	8.

# 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	and	Analysis	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,	2008,	we	had	total	assets	of	$173.63	billion,	total	deposits	of	$112.23	billion, total	shareholders'	equity	of	$12.77	billion	and	employed	28,475.	With	$12.04	trillion	of	assets	under	custody	and	$1.44	trillion	of	assets	under	management	at	year-end 2008,	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,	collective	investment	funds	and	other	investment	pools,	corporate	and	public	retirement	plans,	insurance	companies, foundations,	endowments	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	24	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.

Certain	financial	information	provided	in	this	Management's	Discussion	and	Analysis	has	been	prepared	on	both	a	GAAP	basis	and	an	"operating"	basis. Management	measures	and	compares	certain	financial	information	on	an	operating	basis,	as	it	believes	that	this	presentation	supports	meaningful	comparisons	from period	to	period	and	the	analysis	of	comparable	financial	trends	with	respect	to	State	Street's	normal	ongoing	business	operations.	Management	believes	that	operating- basis	financial	information,	which	reports	revenue	from	non-taxable	sources	on	a	fully	taxable-equivalent	basis	and	excludes	the	impact	of	revenue	and	expenses	outside of	the	normal	course	of	our	business,	facilitates	an	investor's	understanding	and	analysis	of	State	Street's	underlying	financial	performance	and	trends	in	addition	to financial	information	prepared	in	accordance	with	GAAP.

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, | 2008(1) | 2007(2) | 2006 |
| :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |
| Total\tfee\trevenue | $7,747 | $6,633 | $5,186 |
| Net\tinterest\trevenue | 2,650 | 1,730 | 1,110 |
| Provision\tfor\tloan\tlosses | — | — | — |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 |
| Gain\ton\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | 350 | — | — |
| Total\trevenue | 10,693 | 8,336 | 6,311 |
| Expenses: |  |  |  |
| Expenses\tfrom\toperations | 6,780 | 5,768 | 4,540 |
| Provision\tfor\tlegal\texposure,\tnet(3) | — | 467 | — |
| Provision\tfor\tinvestment\taccount\tinfusion | 450 | — | — |
| Restructuring\tcharges | 306 | — | — |
| Provision\tfor\tindemnification\texposure | 200 | — | — |
| Merger\tand\tintegration\tcosts | 115 | 198 | — |
| Total\texpenses | 7,851 | 6,433 | 4,540 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 2,842 | 1,903 | 1,771 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 1,031 | 642 | 675 |
| Income\tfrom\tcontinuing\toperations | 1,811 | 1,261 | 1,096 |
| Income\tfrom\tdiscontinued\toperations | — | — | 10 |
| Net\tincome | $1,811 | $1,261 | $1,106 |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $1,789 | $1,261 | $1,106 |
| Earnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations: |  |  |  |
| Basic | $4.33 | $3.50 | $3.31 |
| Diluted | 4.30 | 3.45 | 3.26 |
| Earnings\tper\tcommon\tshare: |  |  |  |
| Basic | $4.33 | $3.50 | $3.34 |
| Diluted | 4.30 | 3.45 | 3.29 |
| Average\tcommon\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic | \t 413,182 | \t 360,675 | \t 331,350 |
| Diluted | \t 416,100 | \t 365,488 | \t 335,732 |
| Return\ton\tcommon\tshareholders'\tequity\tfrom\tcontinuing\toperations | 14.8% | 13.4% | 16.2% |
| Return\ton\tcommon\tshareholders'\tequity | 14.8 | 13.4 | 16.4 |

(1) Financial	results	for	the	year	ended	December	31,	2008	include	results	of	the	acquired	Investors	Financial	business.

(2) 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.

(3) Amount	was	composed	of	a	provision	for	legal	exposure	of	$600	million,	a	reduction	of	salaries	and	benefits	expense	of	$141	million,	and	other	expenses	of	$8 million;	refer	to	the	"Expenses"	section	of	this	Management's	Discussion	and	Analysis.

# Financial	Highlights

Total	revenue	for	2008	grew	28%	from	2007.	Total	fee	revenue,	which	grew	17%,	reflected	growth	in	servicing	fees	and	trading	services	revenue,	up	11%	and 27%,	respectively,	compared	to	2007,	and	securities	finance	revenue,	up	81%.	Generally,	servicing	fees	benefited	from	the	inclusion	of	the	acquired	Investors

Financial	business	for	the	full	year	and	net	new	business,	partly	offset	by	declines	in	equity	market	valuations.	Management	fees	declined	10%	from	2007,	primarily	as	a result	of	declines	in	equity	market	valuations	and	lower	performance	fees.	Trading	services	revenue	grew	primarily	as	a	result	of	higher	levels	of	volatility	and	the contribution	of	the	acquired	Investors	Financial	business	(with	respect	to	foreign	exchange	revenue),	and	the	inclusion	of	revenue	from	the	acquired	Currenex	business (with	respect	to	brokerage	and	other	fees),	both	for	a	full	year.	Securities	finance	revenue	benefited	primarily	from	wider	credit	spreads	across	all	lending	programs,	as well	as	revenue	contributed	by	the	acquired	Investors	Financial	business.	Processing	fees	and	other	revenue	were	flat	with	2007	levels.	The	growth	in	total	revenue	also reflected	a	$350	million	gain	from	the	sale	of	our	joint	venture	interest	in	CitiStreet	in	July	2008.

Net	interest	revenue	increased	53%	compared	to	2007,	or	54%	on	a	fully	taxable-equivalent	basis	($2,754	million	compared	to	$1,788	million,	reflecting	tax- equivalent	adjustments	of	$104	million	and	$58	million,	respectively),	with	a	related	increase	in	net	interest	margin	of	37	basis	points.	These	increases	were	primarily due	to	the	impact	of	Federal	Reserve	reductions	in	interest	rates	during	2008	and	increases	in	customer	deposits.

Total	expenses	of	$7.85	billion	increased	22%	from	2007,	partly	reflective	of	the	aggregate	$1.07	billion	of	the	following	items:	merger	and	integration	costs associated	with	the	Investors	Financial	acquisition	($115	million);	the	charge	associated	with	the	cash	infusion	into	the	SSgA	investment	management	accounts	($450 million);	the	restructuring	charges	associated	with	the	reduction	in	workforce	and	other	cost	initiatives	($306	million);	and	the	provision	for	estimated	net	exposure	on	an indemnification	obligation	associated	with	collateralized	repurchase	agreements	($200	million).	This	compares	to	the	aggregate	$665	million	of	the	following	items: merger	and	integration	costs	associated	with	Investors	Financial	($198	million),	and	a	net	charge	related	to	certain	active	fixed-income	strategies	managed	by	State Street	Global	Advisors,	or	SSgA	($467	million)	recorded	in	2007.	Expenses	from	operations	of	$6.78	billion	($7.85	billion	net	of	$1.07	billion)	increased	17.5% compared	to	2007	expenses	from	operations	of	$5.77	billion	($6.43	billion	net	of	$665	million).	The	increase	resulted	from	the	inclusion	of	expenses	of	the	acquired Investors	Financial	business	for	full-year	2008	compared	to	six	months	in	2007,	increases	in	salaries	and	benefits	expenses,	higher	levels	of	professional	fees	and securities	processing	costs,	and	new	fees	and	assessments	paid	to	banking	regulators.

For	2008,	our	non-U.S.	revenue	was	approximately	35%	of	our	total	revenue,	compared	to	41%	for	2007	and	43%	for	2006.	The	decrease	compared	to	2007	was primarily	the	result	of	the	inclusion	of	revenue	from	the	acquired	Investors	Financial	business	for	the	full	year,	compared	to	six	months	for	2007,	as	well	as	higher	levels of	domestic	revenue	growth.

Results	for	2008	included	the	following	significant	items	outside	of	the	ordinary	course	of	our	business.

•	 During	the	third	and	fourth	quarters	of	2008,	we	participated	in	the	Federal	Reserve's	AMLF,	and	earned	$68	million	of	pre-tax	net	interest	revenue	related	to this	program	(see	the	"Net	Interest	Revenue"	section	of	this	Management's	Discussion	and	Analysis	for	additional	information);

•	 During	the	third	quarter	of	2008,	the	IRS	issued	a	standard	settlement	offer	to	taxpayers	that	have	entered	into	SILO	leveraged	leases.	We	did	not	accept	the offer	and	continue	to	pursue	our	appeal	rights	within	the	IRS.	In	consideration	of	the	terms	of	the	offer	and	the	context	in	which	it	was	issued,	we	revised	our projection	of	the	timing	and	amount	of	tax	cash	flows	from	the	leases	and	recalculated	the	recognition	of	lease-related	revenue	over	the	leases'	terms	from	their inception.	This	recalculation	resulted	in	a	cumulative	reduction	of	net	interest	revenue	of	$98	million	and	the	accrual	of	income	tax	expense	of	$39	million during	2008	(see	the	"Net	Interest	Revenue"	section	of	this	Management's	Discussion	and	Analysis	for	additional	information);

•	 We	completed	the	sale	of	our	50%	joint	venture	interest	in	CitiStreet	in	July	2008,	and	recognized	a	$350	million	pre-tax	gain,	which	was	net	of	exit	and	other costs	associated	with	the	sale	(see	the	"Consolidated	Results	of	Operations—Total	Revenue"	section	of	this	Management's	Discussion	and	Analysis	for additional	information);

•In	October	2008,	in	connection	with	SSgA	investment	management	products	that	rely	upon	contractual	arrangements	with	wrap	providers,	we	provided	support to	these	accounts	by	purchasing	approximately	$2.49	billion	of	asset-backed	and	mortgage-backed	securities	from	them	at	then	current	market	prices	and

making	an	aggregate	cash	infusion	into	the	accounts	of	approximately	$450	million.	As	a	result	of	these	actions,	we	recorded	a	charge	of	$450	million	in	our consolidated	statement	of	income	(see	the	"Expenses"	section	of	this	Management's	Discussion	and	Analysis	for	additional	information);

•	 During	the	fourth	quarter	of	2008,	we	recorded	restructuring	charges	of	$306	million	associated	with	a	reduction	in	our	global	workforce	and	other	cost initiatives	(see	the	"Expenses"	section	of	this	Management's	Discussion	and	Analysis	for	additional	information);

•	 During	the	third	quarter	of	2008,	we	recorded	a	$200	million	provision	to	recognize	our	estimated	net	exposure	related	to	an	indemnification	obligation associated	with	collateralized	repurchase	agreements	with	an	affiliate	of	Lehman	Brothers	Holdings	Inc.	(see	the	"Expenses"	section	of	this	Management's Discussion	and	Analysis	for	additional	information);	and

•	 We	recorded	$115	million	of	merger	and	integration	costs	associated	with	our	July	2007	acquisition	of	Investors	Financial	(see	the	"Expenses"	section	of	this Management's	Discussion	and	Analysis	for	additional	information).

In	February	2009,	in	light	of	the	impact	of	the	continued	disruption	in	the	global	capital	markets	experienced	since	the	middle	of	2007,	which	is	described	in	more detail	in	the	following	section,	we	announced	a	series	of	actions	to	strengthen	our	tangible	common	equity,	or	TCE,	ratio.	We	define	the	TCE	ratio	as	the	relationship	of our	consolidated	common	shareholders'	equity	to	our	consolidated	total	assets,	with	both	amounts	reduced	by	goodwill	and	other	intangible	assets	net	of	related	deferred taxes.

For	2009,	our	plan	to	improve	our	TCE	ratio	includes	temporarily	reducing	our	quarterly	dividend	on	our	common	stock	to	$0.01	per	share,	the	reinvestment	of investment	securities	paying	down	and	maturing	during	2009	into	interest-bearing	deposits	with	U.S.	and	non-U.S.	central	banks,	and	a	resulting	reduction	in	the	size	of our	consolidated	balance	sheet.	We	expect	that	these	actions	will	produce	growth	in	organic	capital	but	will	reduce	our	net	interest	margin	for	2009	by	approximately 13%	to	18%	compared	to	2008.

# IMPACT	OF	SECURITIES	MARKETS	DISRUPTION	AND	GOVERNMENT	ACTIONS

Over	the	past	eighteen	months,	the	global	financial	markets	have	experienced	significant	disruption,	including	substantial	volatility,	limited	trading	activity	in some	markets	and	a	widespread	lack	of	liquidity.	These	events,	and	the	potential	for	increased	and	continuing	disruption,	have	significantly	diminished	overall confidence	in	the	financial	markets	and	in	financial	institutions,	and	have	further	worsened	liquidity	and	pricing	issues	within	the	fixed-income	securities	markets.	In	the second	half	of	2008,	these	conditions	resulted	in	the	bankruptcy	or	acquisition	of,	or	significant	government	assistance	to,	a	number	of	major	domestic	and	international financial	institutions.	Overall,	this	disruption	increased	the	uncertainty	and	unpredictability	we	face	in	our	business	and	affected	our	results	of	operations	and	our financial	condition.

The	significant	declines	in	equity	and	other	financial	markets	globally	during	2008	adversely	affected	our	servicing	and	management	fee	revenues,	which	are based,	in	part,	on	the	value	of	assets	under	custody	or	management.	Our	trading	services	revenue	benefitted	from	market	volatility	and	the	resulting	increases	in	the volumes	of	transactions	that	we	execute	for	our	customers.	Our	securities	finance	revenue	was	favorably	affected	by	wider	spreads,	although	this	business	experienced	a decline	in	lending	due	to	the	reduction	or	suspension	of	participation	by	some	institutional	investors	in	our	securities	lending	program.

During	the	third	and	fourth	quarters	of	2008,	in	response	to	the	above-described	market	conditions,	federal	government	and	bank	regulatory	agencies,	particularly the	U.S.	Department	of	the	Treasury,	the	Board	of	Governors	of	the	Federal	Reserve	System	and	the	FDIC,	working	in	cooperation	with	foreign	governments	and	other central	banks,	instituted	a	variety	of	programs	designed	to	restore	confidence	in	the	financial	markets,	strengthen	financial	institutions	and	encourage	the	flow	of	credit and	liquidity	in	support	of	the	U.S.	economy.	The	programs	in	which	State	Street	had	significant	participation	or	involvement	are	described	below.

# Asset-Backed	Commercial	Paper	Money	Market	Mutual	Fund	Liquidity	Facility

This	facility,	referred	to	as	the	AMLF,	was	instituted	by	the	Federal	Reserve	in	September	2008.	It	is	designed	to	restore	liquidity	in	the	asset-backed	commercial paper	markets	and	assist	money	market	mutual	funds	in	meeting

investor	redemption	requests.	The	Federal	Reserve	extends	non-recourse	loans	to	eligible	banking	organizations	to	finance	their	purchase	of	high-quality	asset-backed commercial	paper	from	eligible	money	market	funds	or	other	eligible	entities.	The	facility,	originally	intended	to	expire	on	January	30,	2009,	was	extended	to October	30,	2009.

We	began	our	participation	in	the	AMLF	in	September	2008,	and	were	one	of	the	first	institutions	to	be	fully	operational	for	mutual	fund	customers	desiring	to utilize	the	facility.	For	2008,	we	earned	net	interest	revenue	associated	with	this	facility	of	approximately	$68	million.	Additional	information	about	the	impact	of	our participation	in	the	AMLF	on	our	consolidated	financial	statements	is	provided	in	the	"Consolidated	Results	of	Operations—Net	Interest	Revenue"	section	of	this Management's	Discussion	and	Analysis	and	in	note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# Mortgage-Backed	Securities	Purchase	Program

The	program,	announced	by	the	U.S.	Treasury	in	September	2008,	is	designed	to	broaden	access	to	mortgage	funding	for	current	and	prospective	homeowners,	as well	as	to	promote	market	stability	through	the	Treasury's	purchase	of	new	mortgage-backed	securities	issued	by	Fannie	Mae	and	Freddie	Mac.	The	program	is	intended to	expire	on	December	31,	2009.	In	October	2008,	SSgA	was	one	of	two	asset	managers	appointed	as	an	agent	to	manage	assets	purchased	under	the	program.

# Temporary	Guarantee	Program	for	Money	Market	Funds

The	U.S.	Treasury	instituted	the	Temporary	Guarantee	Program	for	Money	Market	Funds	in	September	2008.	The	program	is	designed	to	address	temporary dislocations	in	credit	markets.	The	program	temporarily	guarantees	the	share	price	of	any	publicly-offered,	eligible	money	market	mutual	fund	that	applies	for	and	pays	a fee	to	participate	in	the	program.	The	program	provides	coverage	to	shareholders	up	to	amounts	that	they	held	in	participating	money	market	funds	as	of	the	close	of business	on	September	19,	2008.	The	program,	originally	intended	to	expire	on	December	29,	2008,	has	been	extended	through	April	30,	2009.	Three	of	SSgA's	money market	funds	are	participating	in	the	program.

# Commercial	Paper	Funding	Facility

The	facility,	referred	to	as	the	CPFF,	was	instituted	by	the	Federal	Reserve	and	became	operational	in	October	2008.	The	facility	is	designed	to	complement	the Federal	Reserve's	existing	credit	facilities	to	help	provide	liquidity	to	term	funding	markets.	It	provides	a	liquidity	back-stop	to	U.S.	issuers	of	commercial	paper through	a	special	purpose	vehicle	that	purchases	three-month	unsecured	and	asset-backed	commercial	paper	directly	from	eligible	issuers.	State	Street	was	appointed CPFF	custodian	and	administrator	in	October	2008.	During	the	fourth	quarter	of	2008,	we	paid	a	registration	fee	of	approximately	$23	million	to	the	Federal	Reserve	to participate	in	the	facility.	The	State	Street-administered	asset-backed	commercial	paper	conduits,	as	of	December	31,	2008,	had	sold	$5.70	billion	of	commercial	paper to	the	CPFF.	The	CPFF,	originally	intended	to	expire	on	April	30,	2009,	was	extended	to	October	30,	2009.

# Temporary	Liquidity	Guarantee	Program

The	program	was	announced	by	the	FDIC	in	October	2008,	and	final	rules	were	issued	in	November	and	December	2008.	The	program	is	designed	to	strengthen confidence	and	encourage	liquidity	in	the	U.S.	banking	system	(1)	by	guaranteeing	newly	issued	senior	unsecured	debt	of	banks,	thrifts	and	certain	holding	companies, and	(2)	by	providing	unlimited	insurance	protection	for	non-interest	bearing	deposit	transactions	accounts	at	FDIC-insured	institutions	through	December	31,	2009.	The program	provides	a	100%	guarantee	for	unsecured	senior	debt	issued	through	June	30,	2009	by	banks,	thrifts,	bank	holding	companies,	financial	holding	companies	and thrift	holding	companies.	The	guarantee	will	exist	for	three	years.	In	December	2008,	we	paid	aggregate	fees	of	approximately	$5	million	to	participate	in	both	features of	this	program.	Additional	information	about	the	FDIC's	guarantee	of	certain	of	our	senior	unsecured	debt	is	provided	in	the	"Liquidity"	section	of	Management's Discussion	and	Analysis	included	in	this	Form	10-K	under	Item	7.

# Money	Market	Investor	Funding	Facility

This	program,	instituted	by	the	Federal	Reserve,	became	operational	in	November	2008.	The	program	is	designed	to	provide	liquidity	to	eligible	U.S.	money market	investors.	The	Federal	Reserve	Bank	of	New	York	will	provide	up	to	$600	billion	of	senior	secured	funding	to	a	series	of	private-sector	special	purpose	vehicles to	finance	the	purchase	of	eligible	assets	from	eligible	investors.	The	special	purpose	vehicles	will	commence	a	wind-down	process	on	October	30,	2009	unless	the Federal	Reserve	further	extends	the	facility.	State	Street	facilitated	the	implementation	and	extension	of	this	program,	working	with	the	Federal	Reserve	and	the	program administrator.

# TARP	Capital	Purchase	Program

State	Street	was	selected	by	Treasury	as	one	of	the	nine	financial	institutions	to	participate	in	the	launch	of	this	program,	in	connection	with	actions	taken	by	the U.S.	government	designed	to	protect	the	U.S.	economy,	strengthen	public	confidence	in	financial	institutions	and	foster	the	strong	functioning	of	credit	markets.	In October	2008,	State	Street	agreed	to,	and	received,	a	$2	billion	investment	(based	on	a	percentage	of	its	consolidated	risk-weighted	assets)	through	the	issuance	of 20,000	shares	of	its	Series	B	preferred	stock	and	a	related	warrant	to	purchase	approximately	5.6	million	shares	of	its	common	stock	to	Treasury.	Information	about	the impact	of	our	participation	in	the	capital	purchase	program	on	our	consolidated	financial	statements	is	provided	in	the	"Capital"	section	of	this	Management's	Discussion and	Analysis	and	in	note	13	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# CONSOLIDATED	RESULTS	OF	OPERATIONS

This	section	discusses	our	consolidated	results	of	operations	for	2008	compared	to	2007,	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	2007	with	those	for	2006	is provided	in	the	"Comparison	of	2007	and	2006—Overview	of	Consolidated	Results	of	Operations"	section	of	this	Management's	Discussion	and	Analysis.

# TOTAL	REVENUE

| Years	ended	December	31, | 2008 | 2007 | 2006 | 2007-2008 |
| :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |
| Fee\trevenue: |  |  |  |  |
| Servicing\tfees | $3,745 | $3,388 | $2,723 | 11% |
| Management\tfees | 1,028 | \t 1,141 | 943 | (10) |
| Trading\tservices | 1,467 | \t 1,152 | 862 | 27 |
| Securities\tfinance | 1,230 | 681 | 386 | 81 |
| Processing\tfees\tand\tother | 277 | 271 | 272 | 2 |
| Total\tfee\trevenue | 7,747 | \t 6,633 | \t 5,186 | 17 |
| Net\tinterest\trevenue: |  |  |  |  |
| Interest\trevenue | 4,879 | \t 5,212 | \t 4,324 | (6) |
| Interest\texpense | 2,229 | \t 3,482 | \t 3,214 | (36) |
| Net\tinterest\trevenue | 2,650 | \t 1,730 | \t 1,110 | 53 |
| Provision\tfor\tloan\tlosses | — | — | — |  |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 2,650 | \t 1,730 | \t 1,110 | 53 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 |  |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | 350 | — | — |  |
| Total\trevenue | $10,693 | $8,336 | $6,311 | 28 |

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	collectively	comprised	approximately	62%	of	our	total	fee	revenue	for	2008	and	68%	for	2007.	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	affected,	in	part,	by	changes	in	daily	average	valuations	of	assets	under	custody,	while	management	fees	are	affected	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	effect	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	2%	of	management	fees	for	2008 compared	to	6%	for	2007.	Performance	fees	are	generated	when	the	performance	of	certain	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.	We	would	expect	the	above-described	relationships	to	exist	in	normalized	financial	markets.	These	relationships	were	not	experienced	in	2008	in	light	of	the significant	disruption	in	the	global	financial	markets.	Those	disrupted	conditions	adversely	affected	our	servicing	and	management	fee	revenues	for	2008,	which	are based,	in	part,	on	the	value	of	assets	under	custody	or	management	as	described	earlier	in	this	section.	However,	during	2008,	in	general,	our	trading	services	revenue benefited	from	volatility	in	the	markets	and	from	related	increases	in	customer	transaction	volume;	our	securities	finance	revenue	benefited	from	wider	spreads,	in	spite of	a	decline	in	securities	lending	volumes	caused	by	reduced	or	suspended	participation	by	some	institutional	investors	in	the	program;	and	our	net	interest	revenue	grew as	a	result	of	Federal	Reserve	rate	reductions	and	significant	increases	in	customer	deposits.	Collectively,	these	positive	trends	offset	a	portion	of	the	market-related impact	on	certain	of	our	revenue.	In	addition,	the	acquired	Investors	Financial	business	contributed	a	full	year	of	revenue	in	2008	compared	to	six	months	in	2007.

The	following	table	presents	selected	equity	market	indices.	Daily	averages	and	the	averages	of	month-end	indices	demonstrate	worldwide	equity	market valuation	changes	that	affect	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

| Years	ended	December	31, | 2008 | 2007 | 2006 | 2007-2008 |
| :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |
| Servicing\tfees | $3,745 | $3,388 | $2,723 | 11% |
| Management\tfees(1) | \t 1,028 | \t 1,141 | 943 | (10) |
| Trading\tservices | \t 1,467 | \t 1,152 | 862 | 27 |
| Securities\tfinance | \t 1,230 | 681 | 386 | 81 |
| Processing\tfees\tand\tother | 277 | 271 | 272 | 2 |
| Total\tfee\trevenue | $7,747 | $6,633 | $5,186 | 17 |

# 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	growth	in	servicing	fees	from	2007	primarily	resulted	from	the	inclusion	of	an	additional	$232	million	of	servicing	fee	revenue	from	the	acquired	Investors Financial	business,	an	increase	of	$87	million	from	the	impact	of	net	new	business	from	existing	and	new	customers	and	higher	transaction	volumes.	Net	new	business is	defined	as	new	business	net	of	lost	business.	The	aggregate	increase	in	servicing	fees	was	partially	offset	by	declines	in	daily	average	equity	market	valuations	and pricing	concessions.	During	2008,	the	portion	of	assets	under	custody	composed	of	equities,	which	generally	earn	higher	fees,	declined	to	42%	of	total	assets	under

custody	compared	to	57%	in	2007,	reflecting	the	impact	of	declines	in	equity	market	valuations.	For	2008	and	2007,	servicing	fees	generated	from	customers	outside	the U.S.	were	approximately	41%	of	total	servicing	fees.

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 38%	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 5,000	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	15%	of	retail	and	institutional	fund assets.	In	the	United	Kingdom,	we	provide	custody	services	for	15%	of	pension	fund	assets	and	provide	administration	services	to	more	than	27%	of	mutual	fund	assets. We	service	approximately	21%	of	the	hedge	fund	market	and	more	than	$500	billion	of	offshore	assets,	primarily	domiciled	in	Ireland,	Luxembourg	and	Toronto.	We have	more	than	$800	billion	in	assets	under	administration	in	the	Asia/Pacific	region,	and	are	the	largest	non-domestic	trust	bank	in	Japan.

At	year-end	2008,	our	total	assets	under	custody	were	$12.04	trillion,	compared	to	$15.30	trillion	a	year	earlier.	The	majority	of	the	decrease	compared	to	2007 was	the	result	of	declines	in	market	valuations.	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

# GEOGRAPHIC	MIX	OF	ASSETS	UNDER	CUSTODY(1)

| As	of	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tbillions) |  |  |  |
| United\tStates | $9,506 | $11,792 | $8,962 |
| Other\tAmericas | 498 | 698 | 607 |
| Europe/Middle\tEast/Africa | 1,524 | 2,163 | 1,815 |
| Asia/Pacific | 513 | 646 | 470 |
| Total | $12,041 | $15,299 | $ 11,854 |

(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	10%	decrease	in	management	fees	from	2007	primarily	resulted	from	declines	in	average	month-end	equity	market	valuations	and	lower	performance	fees. Average	month-end	equity	market	valuations,	individually	presented	in	the	above	"INDEX"	table,	were	down	an	average	of	18%	compared	to	2007.	The	decrease	in performance	fees	from	$72	million	in	2007	to	$21	million	in	2008	was	generally	the	result	of	reduced	levels	of	assets	under	management	subject	to	performance	fees, and	somewhat	lower	relative	performance	measured	against	specified	benchmarks	during	2008.	Management	fees	generated	from	customers	outside	the	United	States were	approximately	40%	of	total	management	fees	for	2008,	down	slightly	from	41%	for	2007.

At	year-end	2008,	assets	under	management	were	$1.44	trillion,	compared	to	$1.98	trillion	at	year-end	2007.	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.

The	overall	decrease	in	assets	under	management	at	December	31,	2008	compared	to	December	31,	2007	resulted	from	declines	in	market	valuations	and	from	a net	loss	of	business,	with	declines	in	market	valuations	representing	the	substantial	majority	of	the	decrease.	During	2008,	we	experienced	an	aggregate	net	loss	of business	of	approximately	$55	billion,	compared	to	net	new	business	of	approximately	$116	billion	during	2007.	Our	levels	of	assets	under	management	were	affected by	a	number	of	factors,	including	investor	issues	related	to	SSgA's	active	fixed-income	strategies	and	the	relative	under-performance	of	certain	of	our	passive	equity products.	The	net	loss	of	business	of	$55	billion	for	2008	did	not	reflect	new	business	awarded	to	us	during	2008	that	had	not	been	installed	prior	to	December	31,	2008. This	new	business	will	be	reflected	in	assets	under	management	in	future	periods	after	installation.

Assets	under	management	consisted	of	the	following	at	December	31:

# ASSETS	UNDER	MANAGEMENT

|  |  |  |  |  |  | 2007-2008 | Compound |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  |  | Annual | Annual |
|  |  |  |  |  |  | Growth | Growth |
| As\tof\tDecember\t31, | 2008 | 2007 | 2006 | 2005 | 2004 | Rate | Rate |
| (Dollars\tin\tbillions) |  |  |  |  |  |  |  |
| Equities: |  |  |  |  |  |  |  |
| Passive | $576 | $803 | $691 | $625 | $600 | (28)% | (1)% |
| Active\tand\tother | 91 | 206 | 181 | 147 | 122 | (56) | (7) |
| Company\tstock/ESOP | 39 | 79 | 85 | 76 | 77 | (51) | (16) |
| Total\tequities | 706 | \t 1,088 | 957 | 848 | 799 | (35) | (3) |
| Fixed-income: |  |  |  |  |  |  |  |
| Passive | 238 | 218 | 180 | 128 | 106 | 9 | 22 |
| Active | 32 | 41 | 34 | 28 | 35 | (22) | (2) |
| Cash\tand\tmoney\tmarket | 468 | 632 | 578 | 437 | 414 | (26) | 3 |
| Total\tfixed-income\tand\tcash/money\tmarket | 738 | 891 | 792 | 593 | 555 | (17) | 7 |
| Total | $1,444 | $1,979 | $1,749 | $1,441 | $1,354 | (27) | 2 |

# GEOGRAPHIC	MIX	OF	ASSETS	UNDER	MANAGEMENT(1)

| As	of	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tbillions) |  |  |  |
| United\tStates | $1,020 | $1,353 | $1,202 |
| Other\tAmericas | 24 | 36 | 30 |
| Europe/Middle\tEast/Africa | 272 | 427 | 384 |
| Asia/Pacific | 128 | 163 | 133 |
| Total | $1,444 | $1,979 | $1,749 |

(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:

| Years	Ended	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tbillions) |  |  |  |
| Balance\tat\tbeginning\tof\tyear | $1,979 | $1,749 | $1,441 |
| Net\tnew\tbusiness | (55) | 116 | 86 |
| Market\tappreciation\t(depreciation) | (480) | 114 | 222 |
| Balance\tat\tend\tof\tyear | $1,444 | $1,979 | $1,749 |

# 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	for	our	proprietary	research	and	to	execute	trades	in	any	time	zone. 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	2008,	foreign	exchange	trading	revenue	totaled	$1.08	billion	for	2008,	a	35%	increase	from	2007	revenue	of	$802	million,	and	benefited	from	the	continued disruption	in	the	global	securities	markets.	The	increase	was	mainly	driven	by	a	92%	increase	in	currency	volatility,	but	also	included	an	increase	of	$45	million	of foreign	exchange	revenue	attributable	to	the	inclusion	of	a	full	year	of	revenue	of	the	acquired	Investors	Financial	business	compared	to	two	quarters	for	2007. Aggregate	customer	volumes	were	relatively	flat	compared	to	2007.

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	of	$385	million	were	up	10%	compared	to	2007	revenue	of	$350	million.	The	increase	was	attributable	to	higher	electronic	trading	revenues	from	both the	acquired	Currenex	business	and	from	our	Global	Link	product,	as	well	as	an	increase	in	brokerage	revenue,	principally	transition	management	and	equity	trading. This	increase	was	partially	offset	by	a	decline	in	trading	profits.

# 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	or	managed	accounts.	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	on	loan	and	the	interest-rate	spreads	earned	on	the	underlying	collateral.	For	2008, securities	finance	revenue	increased	81%	from	a	year	earlier,	primarily	as	a	result	of	wider	credit	spreads	across	all	lending	programs,	partially	offset	by	a	decrease	in

lending	volumes.	Spreads	benefited	from	the	Federal	Reserve's	aggregate	400-basis-point	reduction	in	the	federal	funds	rate	during	2008,	as	well	as	continued disruption	of	the	global	fixed-income	securities	markets.

Beginning	in	the	third	quarter	of	2008,	a	number	of	institutional	investors	suspended	or	limited	their	participation	in	our	securities	lending	program,	resulting	in lower	lending	volumes.	The	decreased	lending	volumes	are	expected	to	continue	as	long	as	this	suspended	or	limited	participation	continues.	During	2008,	we experienced	significant	withdrawal	activity	from	the	underlying	collateral	pools,	primarily	to	allow	the	lending	programs	to	meet	mark-to-market	changes	in	collateral agreements	caused	by	declines	in	the	values	of	securities	on	loan	or	the	return	of	borrowed	securities,	with	a	net	reduction	of	the	value	of	securities	on	loan	from	June	30, 2008	to	December	31,	2008	of	approximately	41%.	We	were	able	to	manage	these	outflows	of	cash	collateral,	as	well	as	the	impact	of	the	disruptions	in	the	credit markets,	in	a	manner	that	substantially	reduced	the	risk	of	loss	to	our	customers.	However,	we	imposed	limitations	on	withdrawals	from	our	lending	programs	in	order	to manage	the	liquidity	in	the	cash	collateral	pools,	and	the	net	asset	value	of	our	cash	collateral	pools,	determined	using	market	valuations,	has	fallen	below	$1.00	per	unit. We	cannot	determine	how	long	these	limitations	will	remain	in	place,	nor	can	we	determine	how	long	market	illiquidity	will	continue	to	affect	the	valuation	of	the collateral	pools.	The	continuation	of	either	trend	could	materially	affect	the	longer-term	prospects	for	our	securities	lending	business.	We	continue	to	distinguish	our securities	lending	program	from	those	of	our	competitors	due	to	the	absence	to	date	of	realized	credit	losses	with	respect	to	our	program.

# 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,	equity	income	from	joint	venture	investments,	gains	and	losses	on	sales	of	leased	equipment	and	other	assets,	and	amortization	of investments	in	tax-advantaged	financings.	Processing	fees	and	other	revenue	were	relatively	flat	compared	to	2007,	with	the	benefit	of	two	additional	quarters	of	revenue from	the	acquired	Investors	Financial	business	for	2008	compared	to	2007,	offset	by	lower	levels	of	equity	income	from	joint	venture	investments.

# NET	INTEREST	REVENUE

| Years	ended	December	31, | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | 2006 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Average\nBalance | Interest\nRevenue/\nExpense | Rate | Average\nBalance | Interest\nRevenue/\nExpense | Rate | Average\nBalance | Interest\nRevenue/\nExpense | Rate |
| (Dollars\tin\tmillions;\tfully\ttaxable-equivalent\tbasis) |  |  |  |  |  |  |  |  |  |
| Federal\tfunds\tsold\tand\tsecurities\tpurchased\tunder\tresale |  |  |  |  |  |  |  |  |  |
| agreements | $12,895 | $339 | 2.63% | $14,402 | $756 | 5.25% | $ 12,820 | $663 | 5.17% |
| Investment\tsecurities | 72,227 | 3,163 | 4.38 | 70,990 | 3,649 | 5.14 | 61,579 | 2,956 | 4.80 |
| Investment\tsecurities\tpurchased\tunder\tAMLF(1) | 9,193 | 367 | 4.00 | — | — | — | — | — | — |
| Loans\tand\tleases(2) | 11,884 | 276 | 2.32 | 10,753 | 394 | 3.67 | 7,670 | 288 | 3.75 |
| Other | 26,426 | 838 | 3.17 | 8,405 | 471 | 5.60 | 10,596 | 462 | 4.36 |
| Total\tinterest-earning\tassets | $132,625 | $4,983 | 3.75 | $ 104,550 | $5,270 | 5.04 | $ 92,665 | $4,369 | 4.72 |
| Deposits | $79,507 | $1,326 | 1.67% | $68,220 | $2,298 | 3.37% | $ 55,635 | $1,891 | 3.40% |
| Short-term\tborrowings\tunder\tAMLF(1) | 9,170 | 299 | 3.26 | — | — | — | — | — | — |
| Other\tshort-term\tborrowings | 21,283 | 375 | 1.76 | 22,024 | 959 | 4.36 | 25,699 | 1,145 | 4.46 |
| Long-term\tdebt | 4,106 | 229 | 5.59 | 3,402 | 225 | 6.62 | 2,621 | 178 | 6.77 |
| Total\tinterest-bearing\tliabilities | $114,066 | $2,229 | 1.95 | $93,646 | $3,482 | 3.72 | $ 83,955 | $3,214 | 3.83 |
| Interest-rate\tspread\nNet\tinterest\trevenue\t-\tfully\ttaxable-equivalent\tbasis(3) |  | $2,754 | 1.80% |  | $1,788 | 1.32% |  | $1,155 | 0.89% |
| Net\tinterest\tmargin\t-\tfully\ttaxable-equivalent\tbasis\nNet\tinterest\trevenue—GAAP\tbasis |  | $2,650 | 2.08% |  | $1,730 | 1.71% |  | $1,110 | 1.25% |

(1) Amounts	represent	averages	of	asset-backed	commercial	paper	purchases	from	eligible	unaffiliated	money	market	mutual	funds	under	the	Federal	Reserve's AMLF,	and	associated	borrowings.	Additional	information	about	the	AMLF	is	provided	in	note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in this	Form	10-K	under	Item	8.

(2) Interest	revenue	for	loans	and	leases	for	the	year	ended	December	31,	2008	reflects	a	cumulative	reduction	of	$98	million	recorded	in	connection	with	our	SILO lease	transactions.	Additional	information	about	our	SILO	lease	transactions	is	provided	in	note	11	of	the	Notes	to	Consolidated	Financial	Statements	included	in this	Form	10-K	under	Item	8.

Net	interest	revenue	is	defined	as	the	total	of	interest	revenue	earned	on	interest-earning	assets	less	interest	expense	paid	on	interest-bearing	liabilities.	Interest- earning	assets,	which	consist	of	investment	securities,	loans	and	leases	and	other	liquid	assets,	are	financed	primarily	by	customer	deposits	and	short-term	borrowings. Net	interest	margin	represents	the	relationship	between	net	interest	revenue	and	average	interest-earning	assets.	Changes	in	the	components	of	interest-earning	assets	and interest-bearing	liabilities	are	discussed	in	more	detail	below.	Additional	detail	about	the	components	of	interest	revenue	and	interest	expense	is	in	note	18	of	the	Notes to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

For	2008,	on	a	fully	taxable-equivalent	basis,	net	interest	revenue	increased	54%	(53%	on	a	GAAP	basis)	compared	to	2007,	and	net	interest	margin	increased	to 2.08%	from	1.71%.	This	growth	was	generally	the	result	of	widening	spreads	on	fixed-rate	investment	securities	and	tax-exempt	investment	securities,	as	well	as	added interest-earning	assets	and	related	net	interest	revenue	from	the	acquired	Investors	Financial	business.	Average	transaction	deposit	volumes,	particularly	non-U.S. deposits,	increased	18%	for	2008	compared	to	2007,	primarily	the	result	of	customers'	accumulation	of	cash	balances	during	the	third	and	fourth	quarters	of	2008	to build	liquidity.

Average	federal	funds	sold	and	securities	purchased	under	resale	agreements	decreased	10%	or	$1.51	billion,	from	$14.40	billion	in	2007	to	$12.90	billion	for 2008.	The	decrease	was	mainly	due	to	a	re-allocation	of	liquidity	to	U.S.	Treasury	securities.

Our	average	investment	securities	portfolio	increased	from	approximately	$70.99	billion	for	2007	to	approximately	$72.23	billion	for	2008,	primarily	due	to	the acquisition	of	the	investment	securities	of	Investors	Financial	offset	by	limited	re-investment	and	net	run-off	in	the	aggregate	portfolio,	as	liquidity	was	increased	in response	to	the	dislocation	in	the	financial	markets,	and	by	lower	market	valuations	in	the	available-for-sale	portfolio.	On	average,	for	2008,	the	investment	portfolio included	a	lower	percentage	of	collateralized	mortgage	obligations	and	mortgage-	and	asset-backed	securities	compared	to	a	year	earlier,	and	a	higher	percentage	of	U.S. Treasury	securities.	We	continued	to	invest	conservatively	in	"AA"	and	"AAA"	rated	securities.	Securities	rated	"AA"	and	"AAA"	comprised	approximately	89%	of	the investment	securities	portfolio,	with	approximately	78%	"AAA"	rated,	at	December	31,	2008.

Loans	and	leases	averaged	$11.88	billion	for	2008,	up	11%	from	$10.75	billion	for	2007.	The	increase	was	related	to	higher	levels	of	customer	overdraft	activity, particularly	U.S.	overdrafts.	Approximately	67%	of	the	loan	and	lease	portfolio	was	composed	of	U.S.	and	non-U.S.	short-duration	advances	that	provide	liquidity	to customers	in	support	of	their	transaction	flows,	which	averaged	approximately	$8.00	billion	for	2008,	up	from	$7.53	billion	in	2007.

Average	other	interest-earning	assets	increased	$18.02	billion,	or	214%,	to	$26.43	billion	in	2008	compared	to	2007.	The	increase	was	primarily	due	to	an increase	in	interest-bearing	deposits	with	banks.	An	average	of	$6.4	billion	was	held	at	the	Federal	Reserve	Bank,	which	resulted	from	our	investment	of	excess	cash	in short-term	money	market	instruments	as	the	financial	markets	disruption	escalated	in	the	second	half	of	2008.

Our	average	interest-bearing	deposits	increased	$11.29	billion,	or	17%,	from	$68.22	billion	in	2007	to	$79.51	billion	for	2008.	The	increase	was	mainly attributable	to	the	acquisition	of	Investors	Financial	and	an	increase	in	non-U.S.	transaction	accounts.	The	growth	in	deposits	was	a	significant	contributor	to	the	overall increase	in	average	interest-earning	assets.

Average	other	short-term	borrowings	decreased	$741	million,	or	3%,	to	$21.28	billion	for	2008,	primarily	due	to	higher	customer	deposits.	Average	long-term debt	increased	$704	million,	or	21%,	to	$4.1	billion	for	2008	due	to	a	debt	issuance	in	mid-2007	and	an	additional	debt	issuance	in	the	first	quarter	of	2008	to	enhance our	regulatory	capital	position.	Additional	information	about	our	long-term	debt	is	provided	in	note	10	of	the	Notes	to	Consolidated	Financial	Statements	included	in this	Form	10-K	under	Item	8.

Several	factors	could	affect	future	levels	of	net	interest	revenue	and	margin,	including	the	mix	of	customer	liabilities,	actions	of	the	various	central	banks,	changes in	U.S.	and	non-U.S.	interest	rates,	and	the	shapes	of	the	various	yield	curves	around	the	world.	In	addition,	we	expect	that	our	actions	announced	in	February	2009	with respect	to	our	plan	to	improve	our	tangible	common	equity,	described	earlier	under	"Financial	Highlights,"	and	which	include	the	reinvestment	of	investment	securities paying	down	and	maturing	during	2009	into	interest-bearing	deposits	and	a	resulting	reduction	in	the	size	of	our	consolidated	balance	sheet,	will	reduce	net	interest revenue	and	margin	for	2009.

# Gains	(Losses)	Related	to	Investment	Securities,	Net

We	recorded	net	gains	of	$68	million	from	sales	of	available-for-sale	securities	for	2008,	compared	to	a	net	gain	of	$7	million	in	2007.	In	addition,	we	recorded other-than-temporary	impairment	of	$122	million	in	2008,	compared	to	$34	million	in	2007,	which	resulted	from	our	impairment	analysis	process.	Management regularly	reviews	the	investment	securities	portfolio	to	determine	whether	it	expects	any	loss	of	principal	or	interest,	in	light	of	current	market	and	economic	conditions, consideration	of	pertinent	information	and	related	expectations.	As	a	result	of	this	process,	management	identified	securities	that	it	believed	were	other-than-temporarily impaired.	Additional	information	about	available-for-sale	securities,	and	the	gross	gains	and	losses	that	compose	the	net	sale	gains,	is	in	the	"Financial	Condition" section	of	this	Management's	Discussion	and	Analysis	and	in	note	3	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# Gain	on	Sale	of	CitiStreet	Interest,	Net	of	Exit	and	Other	Associated	Costs

On	July	1,	2008,	we	completed	the	sale	of	our	50%	joint	venture	interest	in	CitiStreet,	a	benefits	servicing	business	that	provides	retirement	plan	recordkeeping and	administrative	services	and	at	that	date	had	approximately	$220	billion	in	assets	under	administration	on	behalf	of	corporate	and	government	entities,	employee unions	and	other	customers.	The	premium	received	in	connection	with	the	sale	was	$407	million,	and	we	recorded	a	resulting	pre-tax	gain	of	$350	million	in	our consolidated	statement	of	income	during	the	third	quarter	of	2008,	net	of	exit	and	other	associated	costs	incurred	in	connection	with	the	sale.	These	costs	totaled	$57 million,	and	consisted	of	incentive	compensation	of	$30	million,	professional	fees	of	$10	million,	and	other	related	costs	of	$17	million.

# EXPENSES

| Years	Ended	December	31, | 2008 | 2007 | 2006 | 2007-2008 |
| :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |  |
| Salaries\tand\temployee\tbenefits | $3,842 | $3,256 | $2,652 | 18% |
| Information\tsystems\tand\tcommunications | 633 | 546 | 501 | 16 |
| Transaction\tprocessing\tservices | 644 | 619 | 496 | 4 |
| Occupancy | 465 | 408 | 373 | 14 |
| Other: |  |  |  |  |
| Provision\tfor\tlegal\texposure | — | 600 | — |  |
| Provision\tfor\tinvestment\taccount\tinfusion | 450 | — | — |  |
| Restructuring\tcharges | 306 | — | — |  |
| Merger\tand\tintegration\tcosts | 115 | 198 | — | (42) |
| Professional\tservices | 360 | 236 | 157 | 53 |
| Amortization\tof\tother\tintangible\tassets | 144 | 92 | 43 | 57 |
| Customer\tindemnification\tobligation | 200 | — | — |  |
| Securities\tprocessing | 187 | 79 | 37 | 137 |
| Regulator\tfees\tand\tassessments | 45 | 3 | 2 |  |
| Other | 460 | 396 | 279 | 16 |
| Total\tother | 2,267 | 1,604 | 518 | 41 |
| Total\texpenses | $7,851 | $6,433 | $4,540 | 22 |
| Number\tof\temployees\tat\tyear-end | \t 28,475 | \t 27,110 | \t 21,700 |  |

The	increase	in	salaries	and	employee	benefits	for	2008	compared	to	2007	was	driven	primarily	by	an	increase	of	approximately	$172	million	of	salaries	and benefits	expense	of	the	acquired	Investors	Financial	business,	the	impact	of	higher	staffing	levels	to	support	new	business,	higher	average	salaries	and	benefits	expense and	increased	contract	services	spending.	These	increases	were	partly	offset	by	a	decline	in	incentive	compensation.

The	increase	in	information	systems	and	communications	expense	for	2008	included	an	additional	$40	million	in	expenses	from	the	acquired	Investors	Financial business	compared	to	2007,	as	well	as	an	increase	in	spending	on	telecommunications	hardware	and	software.

Transaction	processing	services	expenses	are	volume-related,	and	include	equity	trading	services	and	fees	related	to	securities	settlement,	sub-custodian	services and	external	contract	services.	The	increase	over	2007	resulted	primarily	from	higher	transaction	volumes	and	external	contract	services,	primarily	in	Europe.

Occupancy	expense	increased	from	2007,	primarily	due	to	additional	leased	space	acquired	to	support	growth	in	the	hedge	funds	servicing	and	investment manager	operations	outsourcing	businesses,	as	well	as	higher	occupancy	costs	in	support	of	growth	in	Europe,	including	our	new	facility	in	the	U.K.

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	(net	provision	of	$600	million);	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.	Information	with	respect	to	activity	in	the balance	sheet	reserve	during	2008	is	provided	in	note	11	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

During	the	fourth	quarter	of	2008,	we	elected	to	provide	support	to	certain	investment	accounts	managed	by	SSgA	through	the	purchase	of	asset-	and	mortgage- backed	securities	and	a	cash	infusion,	which	resulted	in	a	charge	of	$450	million.	These	accounts,	offered	to	retirement	plans,	allow	participants	to	purchase	and	redeem units	at	a	constant	net	asset	value	regardless	of	volatility	in	the	underlying	value	of	the	assets	held	by	the	account.	The	accounts	enter	into	contractual	arrangements	with independent	third-party	financial	institutions	that	agree	to	make	up	any	shortfall	in	the	account	if	all	the	units	are	redeemed	at	the	constant	net	asset	value.	The	financial institutions	have	the	right,	under	certain	circumstances,	to	terminate	this	guarantee	with	respect	to	future	investments	in	the	account.

During	2008,	the	liquidity	and	pricing	issues	in	the	fixed-income	markets	adversely	affected	the	market	value	of	the	securities	in	these	accounts	to	the	point	that the	third-party	guarantors	considered	terminating	their	financial	guarantees	with	the	accounts.	Although	we	were	not	statutorily	or	contractually	obligated	to	do	so,	we elected	to	purchase	approximately	$2.49	billion	of	asset-	and	mortgage-backed	securities	from	these	accounts	that	had	been	identified	as	presenting	increased	risk	in	the current	market	environment	and	to	contribute	an	aggregate	of	$450	million	to	the	accounts	to	improve	the	ratio	of	the	market	value	of	the	accounts'	portfolio	holdings	to the	book	value	of	the	accounts.	We	have	no	ongoing	commitment	or	intent	to	provide	support	to	these	accounts.	The	asset-	and	mortgage-backed	securities	are	carried	in investment	securities	available	for	sale	in	our	consolidated	statement	of	condition.

In	December	2008,	we	announced	a	plan	to	reduce	our	operating	costs	and	support	our	long-term	growth	while	aligning	the	organization	to	meet	the	challenges and	opportunities	presented	by	the	current	market	environment.	As	a	primary	component	of	this	plan,	we	initiated	a	reduction	of	approximately	7%	of	our	global workforce,	which	reduction	we	expect	to	be	substantially	completed	by	the	end	of	the	first	quarter	of	2009.	In	connection	with	this	plan,	during	the	fourth	quarter	of 2008,	we	recorded	aggregate	restructuring	charges	of	$306	million.	We	expect	that	this	plan	will	result	in	an	annualized	reduction	of	our	expenses	from	operations	of between	$375	million	and	$400	million.	Additional	information	with	respect	to	the	charges,	and	activity	during	2008	in	the	related	balance	sheet	reserve,	is	provided	in note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

During	2008,	in	connection	with	the	Investors	Financial	acquisition,	we	recorded	merger	and	integration	costs	of	$115	million	compared	to	$198	million	for	2007. These	costs	consisted	only	of	direct	and	incremental	costs	to	integrate	the	acquired	Investors	Financial	business	into	our	operations,	and	did	not	include	ongoing expenses	of	the	combined	organization.	The	costs	were	primarily	related	to	employee	retention	and	system	and	customer	integration.

During	the	third	quarter	of	2008,	we	recorded	a	$200	million	reserve	to	provide	for	our	estimated	net	exposure	on	an	indemnification	obligation	associated	with collateralized	repurchase	agreements	with	an	affiliate	of	Lehman	Brothers	Holdings	Inc.,	or	Lehman	Brothers.	In	September	and	October	2008,	Lehman	Brothers	and certain	of	its	affiliates	filed	for	bankruptcy	or	other	insolvency	proceedings.	While	we	had	no	unsecured	financial	exposure	to	Lehman	Brothers	or	its	affiliates,	we indemnified	certain	customers	in	connection	with	these	and	other	collateralized	repurchase	agreements	with	Lehman	Brothers	entities.	In	the	then	current	market environment,	the	market	value	of	the	underlying	collateral	had	declined.	To	the	extent	that	these	declines	resulted	in	collateral	value	falling	below	the	indemnification obligation,	we	recorded	a	reserve.	The	reserve	was	based	on	the	cost	of	satisfying	the	indemnification	obligation	net	of	the	fair	value	of	the	collateral.	We	purchased	the collateral,	composed	of	commercial	real	estate	loans,	during	the	fourth	quarter	of	2008	as	described	in	the	"Loans	and	Lease	Financing"	section	of	this	Managements' Discussion	and	Analysis.

We	had	other	customer	indemnification	obligations	under	a	collateralized	repurchase	agreement	with	another	Lehman	Brothers	entity.	In	these	cases,	the	fair value	of	the	collateral	at	the	time	we	committed	to	take	possession	of	it	was	equal	to	or	greater	than	the	associated	indemnification	obligation	and	therefore	no	related reserve	was	recorded.	We	will	continue	to	evaluate	these	assets	and	collateral	and	determine	whether	to	dispose	of	them	or	hold	them	to	maturity.	The	market	value	of these	assets	and	collateral	will	continue	to	fluctuate	and	ultimately	may	be	less	than	the	value	of	our	indemnification	obligations.

The	increase	in	aggregate	other	expenses	(professional	services,	securities	processing,	amortization	of	other	intangible	assets,	regulator	fees	and	assessments	and other)	from	$806	million	for	2007	to	$1.196	billion	for	2008	resulted	from	a	53%	increase	in	professional	services	spending,	primarily	legal	and	consulting	costs, amortization	of	other	intangible	assets	for	the	full	year	in	connection	with	the	acquisitions	of	Investors	Financial	and	Currenex,	higher	securities	processing	costs	and higher	regulatory	fees	and	assessments,	the	latter	mainly	fees	and	assessments	paid	in	connection	with	our	participation	in	certain	federal	government	and	banking regulatory	agency	programs	described	earlier	in	the	"Impact	of	Securities	Markets	Disruption	and	Government	Actions"	section.

# Income	Taxes

Income	tax	expense	totaled	$1.031	billion	for	2008,	compared	to	$642	million	from	continuing	operations	a	year	ago.	Our	overall	effective	tax	rate	for	2008	was 36.2%,	compared	to	33.7%	for	2007.	The	increase	in	income	tax	expense	was	generally	the	result	of	a	higher	level	of	pre-tax	earnings	for	2008,	partly	offset	by	a	net income	tax	benefit	related	to	the	aggregate	pre-tax	impact	of	the	significant	transactions	outside	of	the	ordinary	course	of	our	business	described	earlier	under	"Financial Highlights."

Information	about	income	tax	contingencies	related	to	our	leveraged	lease	portfolio	is	provided	in	note	11	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	24	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

The	following	is	a	summary	of	our	line	of	business	results.	The	amounts	in	the	"Divestitures"	columns	represent	the	operating	results	of	our	joint	venture	interest in	CitiStreet	prior	to	the	sale	in	July	2008.	The	amounts	presented	in	the	"Other"	column	for	2008	represent	the	net	interest	revenue	associated	with	our	participation	in the	AMLF;	the	gain	on	the	sale	of	our	joint	venture	interest	in	CitiStreet;	the	restructuring	charges	recorded	primarily	in	connection	with	our	plan	to	reduce	our	expenses from	operations;	the	provision	related	to	our	estimated	net	exposure	for	customer	indemnification	associated	with	collateralized	repurchase	agreements;	and	the	merger and	integration	costs	recorded	in	connection	with	our	acquisition	of	Investors	Financial.	The	2007	amount	represents	the	merger	and	acquisition	costs	recorded	in connection	with	the	acquisition	of	Investors	Financial.	The	amounts	in	the	"Divestitures"	and	"Other"	columns	were	not	allocated	to	State	Street's	business	lines.

| December	31, | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| except\twhere |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| otherwise\tnoted) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fee\trevenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Servicing\tfees | $3,745 | $3,388 | $2,723 |  |  |  |  |  |  |  |  |  | $3,745 | $3,388 | $2,723 |
| Management\tfees | — | — | — | $1,028 | $1,141 | $943 |  |  |  |  |  |  | 1,028 | \t 1,141 | 943 |
| Trading\tservices | \t 1,467 | \t 1,152 | 862 | — | — | — |  |  |  |  |  |  | 1,467 | \t 1,152 | 862 |
| Securities\tfinance | 900 | 518 | 292 | 330 | 163 | 94 |  |  |  |  |  |  | 1,230 | 681 | 386 |
| Processing\tfees\tand\tother | 200 | 196 | 208 | 85 | 73 | 56 | $(8) | $2 | $8 |  |  |  | 277 | 271 | 272 |
| Total\tfee\trevenue | \t 6,312 | \t 5,254 | \t 4,085 | \t 1,443 | \t 1,377 | \t 1,093 | (8) | 2 | 8 |  |  |  | 7,747 | \t 6,633 | \t 5,186 |
| Net\tinterest\trevenue | \t 2,472 | \t 1,573 | 986 | 104 | 135 | 104 | 6 | 22 | 20 | $68 |  |  | 2,650 | \t 1,730 | \t 1,110 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — | — | — | — | — |  |  | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | \t 2,472 | \t 1,573 | 986 | 104 | 135 | 104 | 6 | 22 | 20 | 68 |  |  | 2,650 | \t 1,730 | \t 1,110 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 | — | — | — | — | — | — | — |  |  | (54) | (27) | 15 |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| other\tassociated\tcosts | — | — | — | — | — | — | — | — | — | 350 |  |  | 350 | — | — |
| Total\trevenue | \t 8,730 | \t 6,800 | \t 5,086 | \t 1,547 | \t 1,512 | \t 1,197 | (2) | 24 | 28 | 418 |  |  | \t 10,693 | \t 8,336 | \t 6,311 |
| Expenses\tfrom\toperations | \t 5,642 | \t 4,787 | \t 3,742 | \t 1,133 | 974 | 791 | 5 | 7 | 7 | — |  |  | 6,780 | \t 5,768 | \t 4,540 |
| Provision\tfor\tlegal\texposure,\tnet | — | (47) | — | — | 514 | — | — | — | — | — |  |  | — | 467 | — |
| Provision\tfor\tinvestment\taccount\tinfusion | — | — | — | 450 | — | — | — | — | — | — |  |  | 450 | — | — |
| Restructuring\tcharges | — | — | — | — | — | — | — | — | — | 306 |  |  | 306 | — | — |
| Customer\tindemnification\tobligation | — | — | — | — | — | — | — | — | — | 200 |  |  | 200 | — | — |
| Merger\tand\tintegration\tcosts | — | — | — | — | — | — | — | — | — | 115 | $ 198 |  | 115 | 198 | — |
| Total\texpenses | \t 5,642 | \t 4,740 | \t 3,742 | \t 1,583 | \t 1,488 | 791 | 5 | 7 | 7 | 621 | 198 |  | 7,851 | \t 6,433 | \t 4,540 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\nincome\ttaxes | $3,088 | $2,060 | $1,344 | $(36) | $24 | $406 | $(7) | $17 | $21 | $(203) | $(198) |  | $2,842 | $1,903 | $1,771 |
| Pre-tax\tmargin | 35% | 30% | 26% | (2)% | 2% | 34% |  |  |  |  |  |  |  |  |  |
| Average\tassets\t(in\tbillions) | $157.9 | $120.0 | $103.4 | $3.3 | $3.0 | $2.5 | $ 0.5 | $ 0.5 | $ 0.5 |  |  |  | $161.7 | $123.5 | $106.4 |

# Investment	Servicing

Total	revenue	for	2008	increased	28%	primarily	due	to	increases	in	servicing	fees,	trading	services	and	securities	finance	revenue,	as	well	as	a	57%	increase	in	net interest	revenue.

Servicing	fees	increased	primarily	due	to	the	contribution	of	fees	from	the	acquired	Investors	Financial	business,	increases	from	net	new	business	from	existing and	new	customers	and	higher	customer	transaction	volumes.	The	increase	in	trading	services	revenue	reflected	an	increase	in	foreign	exchange	trading	revenue,	as	we benefited	from	the	continued	disruption	in	the	global	securities	markets	and	the	resulting	increase	in	currency	volatility,	as	well	as	increases	in	electronic	trading revenues	from	the	acquired	Currenex	business	and	from	our	Global	Link	product.	Securities	finance	revenue	increased	as	a	result	of	wider	credit	spreads	across	all lending	programs,	as	well	as	the	impact	of	the	acquired	Investors	Financial	business,	offset	by	a	decrease	in	lending	volumes.

Servicing	fees,	trading	services	revenue	and	gains	(losses)	related	to	investment	securities,	net	for	our	Investment	Servicing	business	line	are	identical	to	the respective	consolidated	results.	Refer	to	the	"Servicing	Fees,"	"Trading	Services"	and	"Gains	(Losses)	Related	to	Investment	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	57%	from	2007	due	to	wider	spreads	on	fixed-	and	floating-rate	investment	securities	and	tax-exempt	investment	securities,	as	well as	added	interest-earning	assets	and	related	net	interest	revenue	from	the	acquired	Investors	Financial	business.	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.

Expenses	from	operations	increased	from	2007,	primarily	attributable	to	increased	salaries	and	benefits	costs,	which	reflected	the	expenses	of	the	acquired Investors	Financial	business,	as	well	as	increase	in	staffing	levels	to	support	business	growth,	and	higher	levels	of	professional	services	spending.	Information	systems and	communications	expenses	increased	due	to	additional	expenses	from	the	acquired	Investors	Financial	business,	as	well	as	higher	spending	on	telecommunications and	higher	software	amortization	costs.	Other	expenses	increased	due	to	higher	levels	of	professional	services	spending,	increased	amortization	of	other	intangible	assets that	resulted	from	the	Investors	Financial	acquisition	and	regulatory	fees	and	assessments	associated	with	our	participation	in	certain	government	programs.

# Investment	Management

Total	revenue	for	2008	increased	2%	from	2007,	reflecting	a	102%	increase	in	securities	finance	revenue,	partly	offset	by	a	10%	decline	in	management	fees	and a	23%	decline	in	net	interest	revenue.	Management	fees	for	the	Investment	Management	business	line	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.	Increase	in	securities	finance revenue	benefited	primarily	from	wider	credit	spreads.

Expenses	from	operations	of	$1.13	billion	increased	16%	from	2007,	primarily	due	to	the	cost	of	increases	in	staffing	levels	to	support	growth	in	business,	higher occupancy	costs	and	related	increases	in	information	systems	and	communications	expenses.

During	the	fourth	quarter	of	2008,	we	elected	to	provide	support	to	certain	investment	accounts	managed	by	SSgA	through	the	purchase	of	asset-	and	mortgage- backed	securities	and	a	cash	infusion,	which	resulted	in	a	charge	of	$450	million.	These	accounts,	offered	to	retirement	plans,	enter	into	contractual	arrangements	with third-party	financial	institutions	that	agree	to	make	up	any	shortfall	in	the	account	if	all	the	units	are	redeemed	at	the	constant	net	asset	value.	The	financial	institutions have	the	right,	under	certain	circumstances,	to	terminate	this	guarantee	with	respect	to	future	investments	in	the	account.	During	2008,	the	liquidity	and	pricing	issues	in the	fixed-income	markets	adversely	impacted	the	market	value	of	the	securities	in	these	accounts	to	the	point	that	the	third-party	guarantors	considered	terminating	their financial	guarantees	with	the	accounts.	Although	we	were	not	statutorily	or	contractually	obligated	to	do	so,	we	elected	to	purchase	approximately	$2.49	billion	of

securities	from	these	accounts	that	had	been	identified	as	presenting	increased	risk	in	the	current	market	environment	and	to	contribute	an	aggregate	of	$450	million	to the	accounts	to	improve	the	ratio	of	the	market	value	of	the	accounts'	portfolio	holdings	to	the	book	value	of	the	accounts.	More	information	about	these	charges	are included	in	the	"Consolidated	Results	of	Operations—Expenses"	section	of	this	Management's	Discussion	and	Analysis.

In	2007,	the	net	pre-tax	charge	of	$514	million	($467	million	excluding	related	reduction	of	incentive	compensation	of	$47	million	allocated	to	Investment Servicing)	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	the	consolidated	net	pre-tax	charge	of	$467	million	is	included	in	the	"Consolidated	Results	of	Operations—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	(2)%	for	2008	compared	to 2%	for	2007	and	34%	for	2006.	The	significant	decreases	in	margin	were	the	result	of	the	impact	of	the	charges	described	above.	Without	the	charges,	Investment Management's	pre-tax	income	for	2008	and	2007	would	have	been	$414	million	($(36)	million	plus	$450	million)	and	$538	million	($24	million	plus	$514	million),	and its	pre-tax	margin	would	have	been	27%	for	2008	and	36%	for	2007.

# OVERVIEW	OF	CONSOLIDATED	RESULTS	OF	OPERATIONS

|  |  |  | % |
| :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2007 | 2006 | Change |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |
| Total\tfee\trevenue | $6,633 | $5,186 | 28% |
| Net\tinterest\trevenue | \t 1,730 | \t 1,110 | 56 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (27) | 15 |  |
| Total\trevenue | \t 8,336 | \t 6,311 | 32 |
| Total\texpenses | \t 6,433 | \t 4,540 | 42 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | \t 1,903 | \t 1,771 | 7 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 642 | 675 | (5) |
| Income\tfrom\tcontinuing\toperations | \t 1,261 | \t 1,096 | 15 |
| Income\tfrom\tdiscontinued\toperations | — | 10 | — |
| Net\tincome | $1,261 | $1,106 | 14 |
| Earnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations: |  |  |  |
| Basic | $3.50 | $3.31 | 6 |
| Diluted | 3.45 | 3.26 | 6 |
| Earnings\tper\tcommon\tshare: |  |  |  |
| Basic | $3.50 | $3.34 |  |
| Diluted | 3.45 | 3.29 |  |
| Return\ton\tcommon\tshareholders'\tequity\tfrom\tcontinuing\toperations | 13.4% | 16.2% |  |
| Return\ton\tcommon\tshareholders'\tequity | 13.4% | 16.4% |  |

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	previously	disclosed	divestiture	of	Bel	Air	Investment	Advisers	LLC.

|  |  |  | % |
| :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2007 | 2006 | Change |
| (Dollars\tin\tmillions) |  |  |  |
| Fee\trevenue: |  |  |  |
| Servicing\tfees | $3,388 | $2,723 | 24% |
| Management\tfees | \t 1,141 | 943 | 21 |
| Trading\tservices | \t 1,152 | 862 | 34 |
| Securities\tfinance | 681 | 386 | 76 |
| Processing\tfees\tand\tother | 271 | 272 | — |
| Total\tfee\trevenue | \t 6,633 | \t 5,186 | 28 |
| Net\tinterest\trevenue: |  |  |  |
| Interest\trevenue | \t 5,212 | \t 4,324 | 21 |
| Interest\texpense | \t 3,482 | \t 3,214 | 8 |
| Net\tinterest\trevenue | \t 1,730 | \t 1,110 | 56 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (27) | 15 |  |
| Total\trevenue | $8,336 | $6,311 | 32 |

The	increase	in	total	revenue	for	2007	compared	to	2006	primarily	reflected	growth	in	fee	revenue,	which	mainly	reflected	growth	in	servicing	and	management fees,	with	almost	60%	of	the	overall	growth	in	fee	revenue	generated	from	these	two	services.

The	increase	in	servicing	fees	was	the	result	of	the	inclusion	of	servicing	fee	revenue	from	the	acquired	Investors	Financial	business,	the	impact	of	net	new business	from	existing	and	new	customers,	higher	average	equity	market	valuations	and	higher	customer	transaction	volumes.	Approximately	41%	of	our	servicing	fees were	derived	from	non-U.S.	customers	in	2007,	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	predominately	in	the	U.S.	Assets	under	custody	increased	to	$15.30	trillion	at	December	31,	2007,	up	29% from	$11.85	trillion	a	year	earlier,	with	the	majority	of	the	increase	the	result	of	the	addition	of	assets	under	custody	of	the	acquired	Investors	Financial	business.

The	increase	in	management	fees	from	2006	primarily	resulted	from	the	impact	of	net	new	business	on	2007	revenue	and	higher	equity	market	valuations. Approximately	41%	of	management	fees	were	derived	from	customers	outside	the	U.S.	in	2007,	up	from	32%	for	2006.	Assets	under	management	increased	to $1.98	trillion	at	December	31,	2007,	up	$230	billion	from	$1.75	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	$191	million,	primarily	due	to	increased	customer	volumes,	but	also	the	result	of	the	inclusion	of	$43	million	of	foreign	exchange	revenue from	the	acquired	Investors	Financial	business.	Brokerage	and	other	fees	increased	from	$251	million	in	2006,	up	39%	to	$350	million	in	2007	due	to	the	contribution	of revenue	from	the	acquired	Currenex	business	and	an	increase	in	revenue	from	transition	management.

The	increase	in	securities	finance	revenue	reflected	the	effect	of	increased	loan	volumes	resulting	from	both	new	customer	demands	and	increased	demand	from existing	customers.	Spreads	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.

The	increase	in	net	interest	revenue	was	the	result	of	several	favorable	trends.	Transaction	deposit	volume	increased,	particularly	with	respect	to	non-U.S. deposits.	Volume	increases	resulted	from	net	new	business	in	non-U.S.	assets	under	custody,	and	spreads	increased	because	deposit	rates	lagged	rate	increases	by foreign	central	banks	during	2007.	The	acquired	Investors	Financial	business	added	interest-earning	assets	and	related	net	interest	revenue.	Finally,	as	fixed-rate investment	securities	matured,	they	were	replaced	by	higher	yielding	investments.

| Years	ended	December	31, | 2007 | 2006 | %	Change |
| :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) |  |  |  |
| Salaries\tand\temployee\tbenefits | $3,256 | $2,652 | 23% |
| Information\tsystems\tand\tcommunications | 546 | 501 | 9 |
| Transaction\tprocessing\tservices | 619 | 496 | 25 |
| Occupancy | 408 | 373 | 9 |
| Provision\tfor\tlegal\texposure | 600 | — |  |
| Merger\tand\tintegration\tcosts | 198 | — |  |
| Professional\tservices | 236 | 157 | 50 |
| Amortization\tof\tother\tintangible\tassets | 92 | 43 | 114 |
| Other | 478 | 318 | 50 |
| Total\texpenses | $6,433 | $4,540 | 42 |

The	increase	in	salaries	and	employee	benefits	was	driven	primarily	by	the	inclusion	of	salaries	and	benefits	expense	of	the	acquired	Investors	Financial	and Currenex	businesses,	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	and	the	impact	of	higher	staffing	levels	associated	with	the	growth	of	our	Investment	Servicing	business,	particularly	in	Europe,	and	in our	Investment	Management	business,	as	well	as	in	information	technology	and	risk	management.

Information	systems	and	communications	expense	increased	due	to	the	addition	of	expenses	of	the	acquired	Investors	Financial	business	as	well	as	increased spending	internationally	to	support	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	the	addition	of	approximately	$39	million	of	expenses	from	the	acquired	Investors	Financial business,	specifically	sub-custody	costs,	as	well	as	higher	transaction	volumes,	and	external	contract	services,	primarily	in	Europe.

Occupancy	expense	increased	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.

In	connection	with	the	Investors	Financial	acquisition,	we	recorded	merger	and	integration	costs	of	$198	million	in	the	second	half	of	2007.	These	costs	consisted only	of	direct	and	incremental	costs	to	integrate	the	acquired	Investors	Financial	business	into	our	operations,	and	did	not	include	ongoing	expenses	of	the	combined organization.

The	increase	in	other	expenses	was	primarily	due	to	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	acquisition	of	the	Investors	Financial	and	Currenex	businesses.

The	decrease	in	income	tax	expense	from	continuing	operations	for	2007	compared	to	2006	resulted	from	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.

# 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	affect	the	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	measurements;	accounting	for	special	purpose	entities;	and	accounting for	goodwill	and	other	intangible	assets.	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	Measurements

We	carry	certain	of	our	financial	assets	and	liabilities	at	fair	value	in	our	consolidated	financial	statements	on	a	recurring	basis,	including	trading	account	assets, investment	securities	available	for	sale	and	various	types	of	derivative	instruments.

As	discussed	in	further	detail	below,	changes	in	the	fair	value	of	these	financial	assets	and	liabilities	are	recorded	either	as	components	of	our	consolidated statement	of	income,	or	as	components	of	other	comprehensive	income	within	shareholders'	equity	in	our	consolidated	statement	of	condition.	In	addition	to	those financial	assets	and	liabilities	that	are	carried	at	fair	value	in	our	consolidated	financial	statements,	we	disclose	the	fair	value	in	the	notes	to	the	consolidated	financial statements	of	certain	other	of	our	financial	assets	and	liabilities	that	are	carried	at	amortized	cost	in	our	consolidated	statement	of	condition.	We	estimate	the	fair	value of	all	of	these	financial	assets	and	liabilities	using	the	definition	of	fair	value	described	below.

At	December	31,	2008,	approximately	$66.92	billion	of	our	assets	and	approximately	$12.36	billion	of	our	liabilities	were	carried	at	fair	value,	compared	to $75.43	billion	and	$4.57	billion,	respectively,	at	December	31,	2007.	The	amounts	at	December	31,	2008	represented	approximately	39%	of	our	consolidated	total assets	and	approximately	8%	of	our	consolidated	total	liabilities,	compared	to	53%	and	3%,	respectively,	at	December	31,	2007.	The	decrease	in	the	relative	percentages as	of	December	31,	2008,	compared	to	December	31,	2007,	resulted	primarily	from	a	significant	increase	in	our	consolidated	total	assets,	which	increase	was	mostly due	to	the	impact	of	higher	levels	of	customer	deposits	and	the	purchase	of	asset-backed	commercial	paper	under	the	previously-discussed	AMLF	during	2008,	neither of	which	is	carried	at	fair	value.

As	described	in	more	detail	in	note	14	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8,	we	adopted	the	provisions	of SFAS	No.	157,	Fair	Value	Measurements,	effective	January	1,	2008.	The	standard	does	not	require	the	measurement	of	our	financial	assets	and	liabilities	at	fair	value, but	provides	a	consistent	definition	of	fair	value	and	establishes	a	framework	for	measuring	fair	value	in	accordance	with	GAAP.	Effective	January	1,	2008,	we	adopted the	provisions	of	SFAS	No.	159,	The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities.	We	have	not	elected	the	fair	value	option	for	any	of	our	financial assets	or	financial	liabilities	since	our	adoption	of	the	standard,	although	we	may	do	so	in	the	future.

SFAS	No.	157	defines	fair	value	as	the	price	that	would	be	received	to	sell	an	asset	or	paid	to	transfer	a	liability	(an	"exit	price")	in	the	principal	or	most advantageous	market	for	an	asset	or	liability	in	an	orderly	transaction	between	market	participants	on	the	measurement	date.	When	we	measure	fair	value	for	our financial	assets	and	liabilities,	we	consider	the	principal	or	most	advantageous	market	in	which	we	would	transact,	and	we	consider	assumptions	that	market	participants would	use	when	pricing	the	asset	or	liability.	When	possible,	we	look	to	active	and	observable	markets	to	measure	the	fair	value	of	identical,	or	similar,	financial	assets or	liabilities.	When	identical	financial	assets	and	liabilities	are	not	traded	in	active	markets,	we	look	to	market-observable	data	for	similar	assets	and	liabilities.	In	some instances,	certain	assets	and	liabilities	are	not	actively	traded	in	observable	markets,	and	as	a	result	we	use	alternative	valuation	techniques	to	measure	their	fair	value.

In	accordance	with	the	standard,	we	categorize	the	financial	assets	and	liabilities	that	we	carry	at	fair	value	in	our	consolidated	statement	of	condition	based	upon the	standard's	three-level	valuation	hierarchy.	The	hierarchy	gives	the	highest	priority	to	quoted	prices	in	active	markets	for	identical	assets	or	liabilities	(level	1)	and	the lowest	priority	to	valuation	methods	using	significant	unobservable	inputs	(level	3).	We	categorized	approximately	15%	of	our	financial	assets	carried	at	fair	value	in level	1,	70%	in	level	2	and	15%	in	level	3	of	the	fair	value	hierarchy,	including	the	effect	of	master	netting	agreements.	We	categorized	approximately	93%	of	our financial	liabilities	carried	at	fair	value	in	level	2,	with	the	remaining	7%	in	level	3,	including	the	effect	of	master	netting	agreements.

The	fair	value	of	the	investment	securities	categorized	in	level	1	was	composed	of	U.S.	Treasury	securities,	specifically	Treasury	bills,	which	have	a	maturity	of one	year	or	less.	Fair	value	was	measured	by	management	using	unadjusted	quoted	prices	in	active	markets	for	identical	securities.

The	fair	value	of	the	investment	securities	categorized	in	level	2	was	measured	by	management	primarily	using	information	obtained	from	independent	third parties.	Information	obtained	from	third	parties	is	subject	to	review	by	management	as	part	of	a	continuous	validation	process.	Management	has	developed	a	process	to review	information	provided	by	third	parties,	including	an	understanding	of	underlying	assumptions	and	the	level	of	market	participant	information	used	to	support	those assumptions.	In	addition,	management	compares	significant	assumptions	used	by	third	parties	to	available	market	information.	Such	information	may	include	known trades	or,	to	the	extent	that	trading	activity	is	limited,	comparisons	to	market	research	information	pertaining	to	credit	expectations,	execution	prices	and	the	timing	of cash	flows.

The	fair	value	of	the	derivative	instruments	categorized	in	level	2	predominantly	represented	foreign	exchange	contracts	used	in	our	trading	activities,	for	which fair	value	was	measured	by	management	using	discounted	cash	flow	techniques	with	inputs	consisting	of	observable	spot	and	forward	points,	as	well	as	observable interest	rate	curves.	With	respect	to	derivative	instruments,	we	evaluated	the	impact	on	valuation	of	the	credit	risk	of	our	counterparties	and	our	own	credit.	We considered	factors	such	as	the	likelihood	of	default	by	us	and	our	counterparties,	our	net	exposures	and	remaining	maturities	in	determining	the	appropriate measurements	of	fair	value.	Valuation	adjustments	associated	with	these	factors	were	not	significant	for	2008.

While	the	substantial	majority	of	our	financial	assets	categorized	in	level	3	were	composed	of	asset-backed	securities	available	for	sale,	primarily	securities collateralized	by	student	loans,	level	3	also	included	trading	account	assets,	composed	of	corporate	debt	securities,	and	foreign	exchange	options.	The	categorization	of asset-backed	securities	in	level	3	as	of	December	31,	2008	was	significantly	influenced	by	current	conditions,	including	reduced	levels	of	liquidity,	in	the	fixed-income securities	markets.	Little	or	no	market	activity	for	these	securities	occurred	during	the	fourth	quarter	of	2008,	and	as	a	result	of	the	lack	of	price	transparency,	we measured	their	fair	value	using	unobservable	pricing	inputs,	such	as	spread	indices	and	non-binding	quotes	received	directly	from	third	parties.	These	inputs	were	subject to	management's	review	and	were	determined	to	be	appropriate	based	on	individual	facts	and	circumstances.	Generally,	we	obtain	non-binding	quotes	from	market specialists	for	each	individual	security	as	necessary.	Given	the	unique	nature	of	each	underlying	security	structure,	it	is	not	practical	or	useful	to	obtain	multiple	quotes for	individual	securities.

The	aggregate	fair	value	of	our	financial	assets	and	liabilities	categorized	in	level	3	as	of	December	31,	2008,	compared	to	January	1,	2008,	increased approximately	48%.	The	change	resulted	primarily	from	purchases	of	corporate	debt	securities	and	transfers	in	of	investment	securities	available	for	sale,	principally student	loan-backed	securities,	partly	offset	by	unrealized	losses	on	available-for-sale	securities	recorded	in	other	comprehensive	income	and	the	reclassification	of certain	classes	of	mortgage-backed	securities	and	collateralized	mortgage	obligations	to	level	2.

# Special	Purpose	Entities

In	the	normal	course	of	business,	we	utilize	three	types	of	special	purpose	entities,	referred	to	as	SPEs.	One	type	of	SPE	is	utilized	in	connection	with	our involvement	as	collateral	manager	with	respect	to	managed	investment	vehicles,	and	is	not	recorded	in	our	consolidated	financial	statements.	A	second	type	of	SPE	is utilized	in	connection	with	our	tax-exempt	investment	program,	and	is	recorded	in	our	consolidated	financial	statements,	since	we	treat	the	underlying	transactions	as secured	borrowings,	not	as	sales.	Additional	information	about	the	activities	of	these	SPEs	is	provided	in	notes	11	and	12	of	the	Notes	to	Consolidated	Financial Statements	included	in	this	Form	10-K	under	Item	8.	Additional	information	about	the	third	type	of	SPE,	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.	Detailed	information	about	the	conduits	and	their	business activities	is	provided	in	note	12	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

During	the	first	quarter	of	2008,	pursuant	to	the	contractual	terms	of	our	liquidity	asset	purchase	agreements	with	the	four	unconsolidated	asset-backed commercial	paper	conduits	that	we	administer,	we	were	required	to	purchase	$850	million	of	conduit	assets.	The	purchase	was	the	result	of	various	factors,	including	the continued	illiquidity	in	the	commercial	paper	markets.	The	securities	were	purchased	at	prices	determined	in	accordance	with	existing	contractual	terms	in	the	liquidity asset	purchase	agreements,	and	which	exceeded	their	fair	value.	Accordingly,	during	the	first	quarter	of	2008,	the	securities	were	written	down	to	fair	value	through	a $12	million	reduction	of	processing	fees	and	other	revenue	in	our	consolidated	statement	of	income,	and	are	carried	at	fair	value	in	securities	available	for	sale	in	our consolidated	statement	of	condition.	None	of	our	liquidity	asset	purchase	agreements	with	the	conduits	was	drawn	upon	during	the	remainder	of	2008,	and	no	draw- downs	on	the	standby	letters	of	credit	occurred	during	2008.

We	sometimes	purchase	commercial	paper	from	the	conduits	to	support	their	liquidity.	As	the	disruption	in	the	financial	markets	continued	through	2008,	our support	of	the	conduits'	liquidity	resulted	in	our	purchasing	historically	high	levels	of	commercial	paper	from	them.	On	December	31,	2008	and	2007,	we	held	$230 million	and	$2	million,	respectively,	of	commercial	paper	issued	by	the	conduits	in	trading	account	assets	in	our	consolidated	balance	sheet.	The	amount	held	at December	31,	2008	did	not	include	$5.70	billion	sold	by	the	conduits	to	the	Federal	Reserve's	CPFF.	The	highest	total	overnight	position	(including	AMLF)	in	the conduits'	commercial	paper	held	by	us	during	the	year	ended	December	31,	2008,	was	approximately	$9.22	billion.	The	average	total	overnight	position	(including AMLF)	for	the	same	period	was	approximately	$2.27	billion.	As	of	February	25,	2009,	we	held	$5.97	billion	of	the	conduits'	commercial	paper	and	$7.70	billion	had been	sold	by	the	conduits	to	the	Federal	Reserve's	CPFF.	The	CPFF	is	currently	scheduled	to	expire	for	new	issuances	on	October	30,	2009.	The	weighted-average maturity	of	the	conduits'	commercial	paper	in	the	aggregate	was	approximately	25	days	as	of	December	31,	2008,	compared	to	approximately	20	days	as	of December	31,	2007.

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	12.	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.	The conduits	also	have	a	modest	amount	of	basis	risk.	Basis	risk	arises	when	commercial	paper	funding	costs	change	at	a	different	rate	than	the	comparable	floating-rate asset	benchmark	rates	(generally	LIBOR).	This	risk	is	managed	through	the	use	of	derivative	instruments,	principally	basis	swaps,	which	mitigate	this	variability	for each	conduit.

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	or	other	providers	of	liquidity	or	credit	enhancement;	and	(3)	the	holders	of	the	conduits'	commercial	paper,	in	that	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	and	other	providers'	credit	facilities	have	been	exhausted.	We	have	developed	a	financial	model	to	estimate	and	allocate	each	conduit's	expected losses.	This	model	has	determined	that,	as	of	December	31,	2008,	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	$67	million	as	of	December	31,	2008.

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	credit	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	conduits'	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 periodically	reviewed	by	management.	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	on	each	conduit	individually,	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.

Certain	of	the	conduits	hold	asset-backed	securities	that	have	the	benefit	of	a	third-party	guarantee	from	a	financial	guaranty	insurance	company.	The	aggregate amortized	cost	of	securities	with	underlying	guarantees	was	approximately	$2.49	billion	at	December	31,	2008	and	$3.51	billion	at	December	31,	2007.	Certain	of	these securities,	which	totaled	approximately	$730	million	at	December	31,	2008,	are	currently	drawing	on	the	underlying	guarantees	in	order	to	make	contractual	principal and	interest	payments	to	the	conduits.	In	these	cases,	the	performance	of	the	underlying	security	is	highly	dependent	on	the	performance	of	the	guarantor.	In	calculating expected	losses,	these	securities	carry	the	higher	of	the	underlying	security	rating	or	the	rating	of	the	third-party	guarantor.	During	2008,	many	of	these	guarantors experienced	ratings	downgrades.	The	credit	ratings	of	the	guarantors	ranged	from	"AAA"	to	"CCC"	as	of	December	31,	2008.	None	of	these	securities	are	in	default.

In	the	future,	as	a	result	of	our	stress	tests,	if	the	determination	and	allocation	of	conduit	expected	losses	by	the	financial	model	indicates	that	the	then-existing level	of	first-loss	notes	would	be	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	on the	date	of	determination.

Under	existing	accounting	standards,	if	we	were	determined	to	be	the	primary	beneficiary	of	the	conduits	and	were	required	to	consolidate	the	conduits	into	our consolidated	financial	statements,	based	on	changes	in	assumptions	or	future	events,	the	conduits'	assets	and	liabilities	would	be	consolidated	at	their	respective	fair values.	We	would	recognize	a	loss	if	the	fair	value	of	the	conduits'	aggregate	liabilities	and	first-loss	notes	exceeded	the	fair	value	of	their	aggregate	assets.	Management believes	that	this	loss	would	be	recovered	in	future	periods;	as	with	our	investment	securities	portfolio,	we	expect	that	we	would	collect	substantially	all	principal	and interest	on	the	assets	according	to	their	underlying	contractual	terms.	The	fair	value	of	the	conduits'	aggregate	liabilities	and	first-loss	notes	exceeded	the	fair	value	of their	aggregate	assets	by	$3.56	billion	after-tax	at	December	31,	2008.

Based	on	the	difference	in	the	fair	value	of	the	conduits'	aggregate	liabilities	and	first-loss	notes	and	their	aggregate	assets	of	$3.56	billion	after-tax,	the consolidation	of	the	conduits'	assets	would	reduce	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.	For	illustrative	purposes,	assuming	estimated	fair	values	of	the	conduits'	assets	as	of	December	31,	2008,	if	all	of	the	conduits'	assets	and	liabilities	were consolidated	onto	our	consolidated	balance	sheet	on	December	31,	2008,	the	following	table	presents	the	estimated	impact	on	State	Street's	and	State	Street	Bank's regulatory	capital	ratios	as	of	that	date.

|  | State	Street | State	Street | State	Street	Bank | State	Street	Bank |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Adjusted\tfor |  | Adjusted\tfor |
|  |  | Conduit |  | Conduit |
|  |  | Consolidation |  | Consolidation |
|  | Reported\tas\tof | as\tof | Reported\tas\tof | as\tof |
|  | December\t31,\t2008 | December\t31,\t2008 | December\t31,\t2008 | December\t31,\t2008 |
| Tier\t1\tleverage\tratio | 7.8% | 5.5% | 7.6% | 5.3% |
| Tier\t1\trisk-based\tcapital\tratio | 20.3 | 14.4 | 19.8 | 13.9 |
| Total\trisk-based\tcapital\tratio | 21.6 | 15.8 | 21.3 | 15.5 |

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	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.	We	believe	the	fair	values	of	the conduits'	assets	are	affected	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.	The	aggregate	fair	value	of	the	conduits'	assets	at	December	31,	2008	and 2007	was	$17.75	billion	and	$27.95	billion,	respectively.

# Goodwill	and	Other	Intangible	Assets

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.	Other	acquired	identifiable	intangible	assets	are	recorded	at	their	estimated	fair	value.	Goodwill	is	not	amortized.	Other	intangible assets	are	amortized	over	their	estimated	useful	lives,	and	both	are	subject	to	impairment	adjustment	if	events	or	circumstances	indicate	the	potential	inability	to	realize the	carrying	amount.	We	evaluate	goodwill	and	other	intangible	assets	for	impairment	annually,	based	on	undiscounted	cash	flows.	Almost	all	of	the	goodwill	and	other intangible	assets	recorded	in	our	consolidated	statement	of	condition	have	resulted	from	business	acquisitions	of	our	Investment	Servicing	line	of	business.	The remainder	have	been	recorded	by	Investment	Management.

The	sustained	value	of	the	majority	of	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	goodwill	for	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	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	or	other	intangible assets	relate.	Additional	information	about	goodwill	and	other	intangible	assets,	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	evaluation	of	goodwill	and	other	intangible	assets	for	impairment	for	2008	indicated	that	none	of	our	goodwill	was	impaired.	For	2008,	we	recorded approximately	$27	million	of	impairment	associated	with	other	intangible	assets,	$23	million	of	which	was	recorded	as	a	component	of	the	restructuring	charges described	in	the	"Expenses"	section	of	this	Management's	Discussion	and	Analysis	and	in	note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.	Goodwill	recorded	in	our	consolidated	statement	of	condition	at	December	31,	2008	totaled	approximately	$4.53	billion.	Other	intangible assets	recorded	in	our	consolidated	statement	of	condition	at	December	31,	2008	totaled	approximately	$1.85	billion.

# FINANCIAL	CONDITION

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | Average | Average |
| Years\tended\tDecember\t31, | Balance | Balance |
| (In\tmillions) |  |  |
| Assets: |  |  |
| Interest-bearing\tdeposits\twith\tbanks | $24,003 | $7,433 |
| Securities\tpurchased\tunder\tresale\tagreements | 10,195 | 12,466 |
| Federal\tfunds\tsold | 2,700 | 1,936 |
| Trading\taccount\tassets | 2,423 | 972 |
| Investment\tsecurities | 72,227 | 70,990 |
| Investment\tsecurities\tpurchased\tunder\tAMLF(1) | 9,193 | — |
| Loans | 11,884 | 10,753 |
| Total\tinterest-earning\tassets | 132,625 | 104,550 |
| Cash\tand\tdue\tfrom\tbanks | 5,096 | 3,272 |
| Other\tassets | 23,976 | 15,660 |
| Total\tassets | $161,697 | $123,482 |
| Liabilities\tand\tshareholders'\tequity: |  |  |
| Interest-bearing\tdeposits: |  |  |
| U.S. | $11,216 | $7,557 |
| Non-U.S. | 68,291 | 60,663 |
| Total\tinterest-bearing\tdeposits | 79,507 | 68,220 |
| Securities\tsold\tunder\trepurchase\tagreements | 14,261 | 16,132 |
| Federal\tfunds\tpurchased | 1,026 | 1,667 |
| Short-term\tborrowings\tunder\tAMLF(1) | 9,170 | — |
| Other\tshort-term\tborrowings | 5,996 | 4,225 |
| Long-term\tdebt | 4,106 | 3,402 |
| Total\tinterest-bearing\tliabilities | 114,066 | 93,646 |
| Noninterest-bearing\tdeposits | 20,609 | 10,640 |
| Other\tliabilities | 14,614 | 9,769 |
| Shareholders'\tequity | 12,408 | 9,427 |
| Total\tliabilities\tand\tshareholders'\tequity | $161,697 | $123,482 |

(1) Amounts	represent	averages	of	asset-backed	commercial	paper	purchases	and	related	borrowings	in	connection	with	participation	in	the	AMLF.	Additional information	about	the	AMLF	is	provided	in	note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# 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	securities	held	in	our	available-for-sale	or	held-to-maturity	portfolios	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	conducted	within	specific	Board-approved policies	for	interest-rate	risk,	credit	risk	and	liquidity.

For	2008,	the	growth	in	average	interest-bearing	liabilities	of	$20.4	billion	was	primarily	composed	of	an	$11.3	billion	increase	in	customer	deposits,	$7.6	billion of	which	were	foreign,	partially	offset	by	a	decline	in	repurchase	agreements	of	$1.9	billion.	Average	interest-earning	assets	in	2008	increased	$28.1	billion	from	2007, primarily	the	result	of	higher	levels	of	interest-bearing	deposits	with	domestic	and	foreign	central	banks	related	to	the	investment	of	excess	cash	generated	from customers'	accumulation	of	liquidity,	as	well	as	our	purchase	of	asset-backed	commercial	paper	under	the	AMLF.	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:

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Available\tfor\tsale: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |
| Direct\tobligations | $11,579 | $8,181 | $7,612 |
| Mortgage-backed\tsecurities | 10,798 | 14,585 | 11,454 |
| Asset-backed\tsecurities | 19,424 | 25,069 | 25,634 |
| Collateralized\tmortgage\tobligations | 1,441 | 11,892 | 8,476 |
| State\tand\tpolitical\tsubdivisions | 5,712 | 5,813 | 3,749 |
| Other\tdebt\tinvestments | 4,723 | 4,041 | 3,027 |
| Money-market\tmutual\tfunds | 344 | 243 | 201 |
| Other\tequity\tsecurities | 142 | 502 | 292 |
| Total | $54,163 | $70,326 | $ 60,445 |
| Held\tto\tmaturity\tpurchased\tunder\tAMLF:\nAsset-backed\tcommercial\tpaper | $6,087 |  |  |
| Held\tto\tmaturity: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |
| Direct\tobligations | $501 | $757 | $846 |
| Mortgage-backed\tsecurities | 810 | 940 | 1,084 |
| Asset-backed\tsecurities | 3,986 | — | — |
| Collateralized\tmortgage\tobligations | 9,979 | 2,190 | 2,357 |
| State\tand\tpolitical\tsubdivisions | 382 | 180 | 183 |
| Other\tinvestments | 109 | 166 | 77 |
| Total | $15,767 | $4,233 | $4,547 |

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	89%	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,	excluding	securities	purchased	under	the	AMLF,	were	as follows	as	of	December	31:

| follows	as	of	December	31: |  |  |
| :--- | :--- | :--- |
|  | 2008 | 2007 |
| AAA(1) | 78% | 89% |
| AA | 11 | 6 |
| A | 5 | 3 |
| BBB | 4 | 1 |
| BB | 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	composed	of	mortgage-backed	and	asset-backed securities.	The	largely	floating-rate	asset-backed	portfolio	consists	of	home-equity	loan,	credit	card,	auto-	and	student	loan-backed	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,	2008,	the	asset-backed	securities	in	the	portfolio	included	$5.8	billion	collateralized	by	sub-prime	mortgages.	Of	this	total,	38%	were	"AAA"	rated and	32%	were	"AA"	rated.

We	had	$6.62	billion	of	net	pre-tax	unrealized	losses	on	available-for-sale	investment	securities	at	December	31,	2008,	or	$4.06	billion	after-tax.	This	unrealized loss	excludes	the	unrealized	loss	of	$2.27	billion,	or	$1.39	billion	after-tax,	related	to	securities	available	for	sale	that	were	reclassified	to	securities	held	to	maturity during	the	fourth	quarter	of	2008,	which	are	discussed	below.	Net	pre-tax	unrealized	losses	on	available-for-sale	securities	at	December	31,	2007	were	$1.105	billion,	or $678	million	after-tax.	Excluding	the	securities	for	which	$122	million	of	other-than-temporary	impairment	was	recorded	during	2008,	management	considers	the aggregate	decline	in	fair	value	of	the	remaining	securities	and	the	resulting	net	unrealized	losses	to	be	temporary	and	not	the	result	of	any	material	changes	in	the	credit characteristics	of	the	securities.	Management	continues	to	believe	that	it	is	probable	that	we	will	collect	all	principal	and	interest	according	to	underlying	contractual terms,	and	has	the	ability	and	the	intent	to	hold	the	securities	until	recovery	in	market	value.

During	the	fourth	quarter	of	2008,	management	reassessed	its	classification	of	certain	asset-	and	mortgage-backed	securities	carried	in	the	available-for-sale portfolio,	and	reclassified	securities	with	an	amortized	cost	of	$14.6	billion	and	a	fair	value	of	$12.3	billion	to	securities	held	to	maturity.	No	gain	or	loss	was	recognized at	the	time	of	reclassification.	The	related	pre-tax	unrealized	loss	of	$2.27	billion,	or	$1.39	billion	after-tax,	recorded	in	other	comprehensive	income,	or	OCI,	remained in	OCI	and	is	being	amortized	as	an	adjustment	of	the	yield	of	the	reclassified	securities	over	their	remaining	terms.	The	securities	were	reclassified	at	their	then	fair value	of	$12.3	billion,	and	this	fair	value	was	established	as	the	adjusted	amortized	cost	of	the	reclassified	securities.	The	resulting	discount	is	being	accreted	as	an adjustment	of	the	yield	of	the	reclassified	securities	over	their	remaining	terms.	As	a	result,	the	reclassification	will	have	no	ultimate	impact	on	our	consolidated	results of	operations.	Management	considers	the	held-to-maturity	classification	to	be	appropriate	because	it	has	the	ability	and	the	intent	to	hold	these	securities	to	their maturity.

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	13	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,	2008:

|  | Under	1	Year | Under	1	Year | 1	to	5	Years | 1	to	5	Years | 6	to	10	Years | 6	to	10	Years | Over	10	Years | Over	10	Years |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield |
| Available\tfor\tsale(1): |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $10,615 | 0.98% | $88 | 3.77% | $212 | 5.32% | $664 | 4.75% |
| Mortgage-backed\tsecurities | 129 | 4.17 | 2,755 | 4.42 | 2,314 | 5.16 | 5,600 | 4.13 |
| Asset-backed\tsecurities | 545 | 2.05 | 9,449 | 1.98 | 5,153 | 2.98 | 4,277 | 3.33 |
| Collateralized\tmortgage\tobligations | 1 | 4.75 | 577 | 5.64 | 94 | 5.83 | 769 | 5.75 |
| State\tand\tpolitical\tsubdivisions(2) | 289 | 5.08 | 2,322 | 5.20 | 1,624 | 5.35 | 1,477 | 5.96 |
| Other\tinvestments | 2,171 | 4.33 | 1,814 | 5.09 | 646 | 5.39 | 92 | 4.17 |
| Total | $13,750 |  | $17,005 |  | $10,043 |  | $12,879 |  |
| Held\tto\tmaturity\tpurchased\tunder\tAMLF:\nAsset-backed\tsecurities(3) | $6,087 | 3.02% | — | — | — | — | — | — |
| Held\tto\tmaturity(1): |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations |  |  | $501 | 4.38% |  |  |  |  |
| Mortgage-backed\tsecurities |  |  | — | — | $32 | 5.00% | $778 | 5.13% |
| Asset-backed\tsecurities | $269 | 0.84% | 3,061 | 2.93 | 5 | 0.97 | 651 | 4.94 |
| Collateralized\tmortgage\tobligations | 403 | 4.44 | 4,208 | 4.93 | 1,861 | 4.40 | 3,507 | 4.05 |
| State\tand\tpolitical\tsubdivisions(2) | 100 | 3.36 | 264 | 5.39 | 15 | 4.31 | 3 | 5.53 |
| Other\tinvestments | 105 | 0.50 | 4 | 3.06 | — | — | — | — |
| Total | $877 |  | $8,038 |  | $1,913 |  | $4,939 |  |

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

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

(3) Amounts	represent	asset-backed	commercial	paper	purchases	in	connection	with	participation	in	the	AMLF.	Additional	information	about	the	AMLF	is	provided in	note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

# Loans	and	Lease	Financing

U.S.	and	non-U.S.	loans	and	lease	financing,	and	average	loans	and	lease	financing,	were	as	follows	for	the	years	ended	December	31	(excluding	the	allowance for	losses):

| (In	millions) | 2008 | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| U.S.: |  |  |  |  |  |
| Commercial\tand\tfinancial | $6,397 | $9,402 | $3,480 | $2,298 | $1,826 |
| Lease\tfinancing | 407 | 396 | 415 | 404 | 373 |
| Total\tU.S. | 6,804 | 9,798 | \t 3,895 | \t 2,702 | 2,199 |
| Non-U.S.: |  |  |  |  |  |
| Commercial\tand\tfinancial | 890 | 4,420 | \t 3,137 | \t 1,854 | 526 |
| Lease\tfinancing | 1,437 | 1,584 | \t 1,914 | \t 1,926 | 1,904 |
| Total\tnon-U.S. | 2,327 | 6,004 | \t 5,051 | \t 3,780 | 2,430 |
| Total\tloans | $9,131 | $15,802 | $8,946 | $6,482 | $4,629 |
| Average\tloans\tand\tlease\tfinancing | $11,884 | $10,753 | $7,670 | $6,013 | $5,689 |

U.S.	commercial	and	financial	loans	at	December	31,	2008	included	approximately	$800	million	of	commercial	real	estate	loans	purchased	from	certain customers	pursuant	to	indemnified	repurchase	agreements	with	an	affiliate	of	Lehman	Brothers.	We	recorded	a	reserve	of	$200	million	associated	with	performance under	the	indemnification	agreement	during	the	third	quarter	of	2008,	representing	the	difference	between	our	indemnification	obligation	and	the	fair	value	of	the	loans acquired.	We	paid	$1.00	billion	to	settle	the	indemnification	obligations,	and	the	acquired	loans	had	an	estimated	fair	value	of	$800	million.	The	contractual	legal balance	of	the	acquired	loans	is	approximately	$1.24	billion.

The	loans,	which	are	primarily	collateralized	by	direct	and	indirect	interests	in	commercial	real	estate,	were	recorded	at	their	then	current	fair	value.	The accounting	for	substantially	all	of	these	loans	is	governed	by	AICPA	Statement	of	Position,	or	SOP,	No.	03-3,	Accounting	for	Certain	Loans	or	Debt	Securities	Acquired in	a	Transfer.	SOP	No.	03-3	applies	to	loans	with	evidence	of	credit	deterioration	since	origination	for	which	it	is	probable,	as	of	the	date	of	acquisition	of	the	loans,	that all	contractual	payments	will	not	be	collected.	Pursuant	to	SOP	No.	03-3,	management	will	periodically	reassess	these	cash	flow	assumptions,	and	the	impact	of	any changes	in	expectations	will	be	recognized	in	results	of	operations	through	an	adjustment	to	a	fair	value	allowance	and,	in	some	cases,	an	adjustment	to	the	yield	of	the loans.	Fair	value	represented	management's	expectation	with	respect	to	collection	of	principal	and	interest	using	appropriate	market	discount	rates	as	of	the	date	of acquisition.	No	additional	valuation	adjustments	or	provisions	for	loss	were	recorded	since	the	initial	acquisition	of	these	loans.

At	December	31,	2008,	approximately	5%	of	our	consolidated	total	assets	consisted	of	loans	and	lease	financing.	The	aggregate	decrease	in	loans	from	2007 reflected	a	decrease	in	overdrafts,	which	result	primarily	from	securities	settlement	activities	of	our	customers.	Overdrafts	included	in	loans	were	$4.64	billion	and $11.65	billion	at	December	31,	2008	and	December	31,	2007,	respectively.	Average	overdrafts	were	approximately	$8.00	billion	and	$7.53	billion	for	the	years	ended December	31,	2008	and	2007,	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.

As	of	December	31,	2008	and	2007,	unearned	income	included	in	lease	financing	was	$1.04	billion	and	$1.29	billion	for	non-U.S.	leases,	respectively,	and $199	million	and	$212	million	for	U.S.	leases,	respectively.

Maturities	for	loan	and	lease	financing	categories	were	as	follows	as	of	December	31,	2008:

| (In	millions) | Total | Under	1 | 1	to	5 | Over	5 |
| :--- | :--- | :--- | :--- | :--- |
| U.S.: |  |  |  |  |
| Commercial\tand\tfinancial | $6,397 | $6,357 | $ 21 | $19 |
| Lease\tfinancing | 407 | — | 7 | 400 |
| Total\tU.S. | \t 6,804 | \t 6,357 | 28 | 419 |
| Non-U.S.: |  |  |  |  |
| Commercial\tand\tfinancial | 890 | 890 | \t — | — |
| Lease\tfinancing | \t 1,437 | — | 19 | \t 1,418 |
| Total\tnon-U.S. | \t 2,327 | 890 | 19 | \t 1,418 |
| Total | $9,131 | $7,247 | $ 47 | $1,837 |

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,	2008:

| (In	millions) |  |
| :--- | :--- |
| Loans\tand\tleases\twith\tpredetermined\tinterest\trates | $1,844 |
| Loans\tand\tleases\twith\tfloating\tor\tadjustable\tinterest\trates | 40 |
| Total | $1,884 |

# 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,	loan	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:

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| United\tKingdom | $5,836 | $5,951 | $5,531 |
| Australia | 2,044 | 3,567 | 1,519 |
| Canada | — | 4,565 | — |
| Germany | — | 2,944 | 2,696 |
| Total\tcross-border\toutstandings | $7,880 | $17,027 | $9,746 |

The	total	cross-border	outstandings	presented	in	the	table	represented	5%,	12%	and	9%	of	our	consolidated	total	assets	as	of	December	31,	2008,	2007	and	2006, respectively.	Aggregate	cross-border	outstandings	to	countries	which	totaled	between	.75%	and	1%	of	our	consolidated	total	assets	at	December	31,	2008	amounted	to $3.45	billion	(Canada	and	Germany).	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).

# Capital

Regulatory	and	economic	capital	management	both	use	key	metrics	evaluated	by	management	to	assess	whether	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.	Our	Capital	Committee,	working	in	conjunction	with	our	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.	Both	State	Street	and	State	Street	Bank	are subject	to	the	minimum	capital	requirements	established	by	the	Federal	Reserve	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:

|  | REGULATORY<br>GUIDELINES | REGULATORY<br>GUIDELINES | STATE<br>STREET | STATE<br>STREET | STREET<br>BANK | STREET<br>BANK |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Well |  |  |  |  |
|  | Minimum | Capitalized | 2008(2) | 2007 | 2008(2) | 2007 |
| Regulatory\tcapital\tratios: |  |  |  |  |  |  |
| Tier\t1\trisk-based\tcapital | 4% | 6% | 20.3% | 11.2% | 19.8% | 11.2% |
| Total\trisk-based\tcapital | 8 | 10 | 21.6 | 12.7 | 21.3 | 12.7 |
| Tier\t1\tleverage\tratio(1) | 4 | 5 | 7.8 | 5.3 | 7.6 | 5.5 |

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

(2) Tier	1	and	total	risk-based	capital	and	tier	1	leverage	ratios	exclude	the	impact	of	the	asset-backed	commercial	paper	purchased	under	the	AMLF,	as	permitted	by the	AMLF's	terms	and	conditions.

At	December	31,	2008,	State	Street's	and	State	Street	Bank's	regulatory	capital	ratios	increased	compared	to	year-end	2007.	The	increases	for	State	Street resulted	primarily	from	the	issuance	of	capital-eligible	debt	securities	in	January	2008,	the	June	2008	public	offering	of	our	common	stock	and	our	participation	in	the U.S.	Treasury's	capital	purchase	program	in	October	2008	described	further	below,	as	well	as	2008	net	income.	With	respect	to	State	Street	Bank,	the	parent	company contributed	an	aggregate	of	approximately	$4.68	billion	to	State	Street	Bank	during	2008	to	enhance	its	equity	capital.	For	State	Street	and	State	Street	Bank,	these increases	in	capital	more	than	offset	increases	in	on-	and	off-balance	risk-weighted	assets	primarily	associated	with	the	impact	of	increases	in	customer	deposits	and higher	volumes	of	foreign	exchange	derivative	contracts.	All	ratios	for	State	Street	and	State	Street	Bank	exceeded	the	regulatory	minimum	and	well-capitalized thresholds.

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 1/100th,	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 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	1/100th,	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 trust	in	our	consolidated	financial	statements.	The	6.001%	junior	debentures	qualify	for	inclusion	in	tier	1	regulatory	capital.

# Capital	Purchase	Program

On	October	28,	2008,	in	connection	with	the	U.S.	Treasury's	capital	purchase	program,	we	issued	20,000	shares	of	our	Series	B	fixed-rate	cumulative	perpetual preferred	stock,	$100,000	liquidation	preference	per	share,	and	a	warrant	to	purchase	5,576,208	shares	of	our	common	stock	at	an	exercise	price	of	$53.80	per	share,	to Treasury,	and	received	aggregate	proceeds	of	$2	billion.

The	preferred	shares,	which	qualify	as	tier	1	regulatory	capital,	pay	cumulative	quarterly	dividends	at	a	rate	of	5%	per	year	for	the	first	five	years,	and	9%	per year	thereafter.	The	preferred	shares	are	non-voting,	other	than	class	voting	rights	on	certain	matters	that	could	adversely	affect	the	shares.	We	can	redeem	the	preferred shares	at	par	after	December	15,	2011.	Prior	to	this	date,	we	can	only	redeem	the	preferred	shares	at	par	in	an	amount	up	to	the	cash	proceeds	(minimum	$500	million) from	qualifying	equity	offerings	of	any	tier	1-eligible	perpetual	preferred	or	common	stock.	Any	redemption	is	subject	to	the	consent	of	the	Federal	Reserve.	Until October	28,	2011,	or	such	earlier	time	as	the	preferred	stock	has	been	redeemed	or	transferred	by	Treasury,	we	are	not	permitted,	without	Treasury's	consent,	to	increase the	quarterly	dividend	per	share	on	our	common	stock	above	$0.24	per	share,	or	to	repurchase	our	common	stock.

The	warrant	is	immediately	exercisable,	and	has	a	10-year	term.	The	exercise	price	of	$53.80	per	share	was	based	upon	the	average	of	the	closing	prices	of	our common	stock	during	the	20-trading	day	period	ended	October	10,	2008,	the	last	trading	day	prior	to	our	election	to	participate	in	the	program.	The	exercise	price	and number	of	common	shares	subject	to	the	warrant	are	both	subject	to	anti-dilution	adjustments.	If	we	receive	aggregate	gross	cash	proceeds	of	at	least	$2	billion	from	one or	more	qualifying	equity	offerings	of	tier	1-eligible	perpetual	preferred	or	common	stock	on	or	prior	to	December	31,	2009,	the	number	of	shares	of	common	stock underlying	the	warrant	then	held	by	Treasury	will	be	reduced	by	one-half	of	the	original	number	of	common	shares,	considering	all	adjustments,	underlying	the	warrant.

# Common	Stock

On	June	3,	2008,	we	completed	a	public	offering	of	approximately	40.5	million	shares	of	our	common	stock.	The	public	offering	price	was	$70	per	share,	and aggregate	proceeds	from	the	offering,	net	of	underwriting	commissions	and	related	offering	costs,	totaled	approximately	$2.75	billion.	Underwriting	commissions totaled	approximately	$85	million.	Of	the	total	shares	issued,	approximately	7.4	million	shares	were	issued	out	of	treasury	stock,	and	the	remaining	33.1	million	shares were	newly	issued.	We	executed	the	offering	pursuant	to	our	current	universal	shelf	registration	statement	filed	with	the	SEC.

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	$400	million	($0.95	per	share)	in	2008	(compared	to	$320	million	and	$0.88	per	share	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,	banking 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	provided	in	note	16	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K under	Item	8.

During	the	first	quarter	of	2009,	in	light	of	the	continued	disruption	in	the	global	capital	markets	experienced	since	the	middle	of	2007,	and	as	part	of	a	plan	to strengthen	our	tangible	common	equity,	we	announced	a	temporary	reduction	of	our	quarterly	dividend	on	our	common	stock	to	$0.01	per	share.

# Other

In	2004,	the	Committee	on	Banking	Supervision	released	the	final	version	of	its	capital	adequacy	framework,	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.

# Economic	Capital

We	define	economic	capital	as	the	capital	required	to	protect	holders	of	our	senior	debt,	and	obligations	higher	in	priority,	against	unexpected	economic	losses over	a	one-year	period	at	a	level	consistent	with	the	solvency	of	a	firm	with	our	target	"AA"	senior	debt	rating.	Our	Capital	Committee	is	responsible	for	overseeing	our economic	capital	process.	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	Corporate	Finance	groups	and	are	designed	to	be	generally	consistent	with	our	risk	management	principles	and	the new	Basel	II	regulatory	capital	rules.	This	framework	has	been	approved	by	senior	management	and	the	Executive	Committee	of	the	Board	of	Directors.	Due	to	the evolving	nature	of	quantification	techniques,	we	expect	to	periodically	refine	the	methodologies,	assumptions,	and	data	used	to	estimate	our	economic	capital requirements,	which	could	result	in	a	different	amount	of	capital	needed	to	support	our	business	activities.

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,	which	is	consistent	with	the	Basel	II definition;	and

•	 Business	risk:	the	risk	of	negative	earnings	resulting	from	adverse	changes	in	business	factors,	including	changes	in	the	competitive	environment,	changes	in the	operational	economics	of	our	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.	Significant	uses	of	liquidity, described	more	fully	below,	consist	primarily	of	meeting	deposit	withdrawals	and	funding	outstanding	commitments	to	extend	credit	or	to	purchase	securities	as	they	are drawn	upon.	Liquidity	is	provided	by	the	maintenance	of	broad	access	to	the	global	capital	markets	and	by	our	consolidated	balance	sheet	asset	structure.

Our	Global	Treasury	group	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	monitored	by	Global	Treasury	and	our	Enterprise	Risk	Management	group.	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	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	and	term	auction	facility.	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	for	borrowings	or	through outright	sales.	Each	of	these	sources	of	liquidity	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	the	following:	withdrawals	of	unsecured	customer	deposits;	draw-downs	on	unfunded	commitments	to	extend	credit	or	to	purchase securities,	generally	provided	through	lines	of	credit;	overdraft	facilities;	liquidity	asset	purchase	agreements	supporting	the	four	unconsolidated	asset-backed commercial	paper	conduits	that	we	administer,	and	purchases	by	us	of	commercial	paper	issued	by	the	conduits	to	support	their	liquidity.	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	deposits	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.	In	addition,	a	large	volume	of	unanticipated	funding	requirements,	such	as	under	liquidity	asset	purchase agreements	that	have	met	draw-down	conditions,	or	large	draw-downs	of	existing	lines	of	credit,	could	require	additional	liquidity.

Material	risks	to	sources	of	short-term	liquidity	could	include,	among	other	things,	adverse	changes	in	the	perception	in	the	financial	markets	of	our	financial condition	or	liquidity	needs,	and	downgrades	by	major	independent	credit	rating	agencies	of	our	deposits	and	our	debt	securities,	which	would	restrict	our	ability	to access	the	capital	markets	and	could	lead	to	withdrawals	of	unsecured	deposits	by	our	customers.

In	managing	our	liquidity,	we	have	issued	term	wholesale	certificates	of	deposit	and	invested	those	funds	in	short-term	money	market	assets	where	they	would	be available	to	meet	cash	needs.	This	portfolio	stood	at	$1.93	billion	at	December	31,	2008,	compared	to	$4.57	billion	at	December	31,	2007.	In	conjunction	with	our management	of	liquidity	where	we	seek	to	maintain	access	to	sources	of	back-up	liquidity	at	reasonable	costs,	we	have	participated	in	the	Federal	Reserve's	term	auction facility,	which	is	a	secured	lending	program	available	to	financial	institutions	that	was	established	in	December	2007.	As	of	December	31,	2008,	State	Street	Bank's borrowings	under	the	term	auction	facility	totaled	$5.0	billion,	which	represented	the	highest	level	of	State	Street	Bank's	borrowings	under	this	facility	for	2008.	The aggregate	certificate-of-deposit	and	term	auction	facility	balances	were	higher	at	December	31,	2008	compared	to	December	31,	2007,	as	State	Street	Bank	held	greater 68

liquidity	in	light	of	the	continued	disruption	in	the	financial	markets.	We	did	not	experience	any	net	deterioration	in	our	customer	deposit	base	during	2008.

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	cash	balances	at	central	banks	in	excess	of	regulatory	requirements	and	other	short-term liquid	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	generate	cash	quickly.	As	of	December	31,	2008,	the	cash	value	of	our	liquid	assets,	as	defined,	totaled	$85.81	billion,	compared	to	$55.14	billion	as	of December	31,	2007.	The	increase	was	mainly	the	result	of	a	significant	increase	in	customer	deposits	in	the	third	quarter	of	2008	as	the	credit	markets	worsened.	As customers	accumulated	liquidity,	they	placed	cash	with	us.	The	vast	majority	of	these	incremental	customer	deposits	remained	with	State	Street	Bank	at	year-end	2008.

Due	to	the	unusual	size	and	volatile	nature	of	these	incremental	customer	deposits,	we	chose	to	maintain	approximately	$48.64	billion	at	central	banks	as	of December	31,	2008,	in	excess	of	regulatory	required	minimums.	Securities	carried	at	$42.74	billion	as	of	December	31,	2008,	compared	to	$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,	unless	pledged	to	the	Federal	Reserve	Bank	of	Boston.	The	liquid	assets	and	pledged	securities	described	above	excluded	securities	purchased under	the	Federal	Reserve's	AMLF.	Liquid	assets	included	securities	pledged	to	the	Federal	Reserve	Bank	of	Boston	to	secure	our	ability	to	borrow	from	their	discount window	should	the	need	arise.	This	access	to	primary	credit	is	an	important	source	of	back-up	liquidity	for	State	Street	Bank.	As	of	December	31,	2008,	we	had	no outstanding	primary	credit	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,	including	our	ability	to	issue	debt	and equity	securities	under	our	current	universal	shelf	registration,	management	considers	overall	liquidity	at	December	31,	2008	to	be	sufficient	to	meet	State	Street's current	commitments	and	business	needs,	including	supporting	the	liquidity	of	the	commercial	paper	conduits	and	accommodating	the	transaction	and	cash	management needs	of	our	customers.

As	referenced	above,	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.

The	following	table	presents	information	about	State	Street's	and	State	Street	Bank's	credit	ratings	as	of	February	27,	2009.

|  | Standard	&amp;<br>Poor's | Investors<br>Service | Fitch | DBRS |
| :--- | :--- | :--- | :--- | :--- |
| State\tStreet\tCorporation: |  |  |  |  |
| Short-term\tcommercial\tpaper | A-1 | P-1 | F1+ | R-1(mid) |
| Senior\tdebt | A+ | A1 | A+ | AA\t(low) |
| Subordinated\tdebt | A | A2 | A | A\t(high) |
| Capital\tsecurities | BBB+ | A2 | BBB | A\t(high) |
| State\tStreet\tBank: |  |  |  |  |
| Short-term\tdeposits | A-1+ | P-1 | F1+ | R-1(high) |
| Long-term\tdeposits | AA– | Aa2 | AA– | AA |
| Senior\tdebt | AA– | Aa2 | A+ | AA |
| Subordinated\tdebt | A+ | Aa3 | A | AA\t(low) |
| Outlook | Negative | Negative | Stable | Negative |

We	maintain	an	effective	universal	shelf	registration	that	allows	for	the	public	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.	We	have,	as	discussed	previously,	issued	in	the	past,	and	we	may	issue	in	the	future,	securities	pursuant	to	the	shelf	registration.	The	issuance of	debt	or	equity	securities	will	depend	on	future	market	conditions,	funding	needs	and	other	factors.

We	currently	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,	2008,	we	had	$2.59	billion	of	commercial	paper	outstanding,	compared	to	$2.36	billion	at	December	31,	2007.	Additional	information	about	our commercial	paper	program	is	provided	in	note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item	8.

In	connection	with	our	participation	in	the	FDIC's	Temporary	Liquidity	Guarantee	Program,	in	which	we	elected	to	participate	in	December	2008,	we	can	issue up	to	$1.67	billion,	and	State	Street	Bank	can	issue	up	to	$2.48	billion,	of	unsecured	senior	debt	through	June	30,	2009,	which	will	be	backed	by	the	full	faith	and	credit of	the	United	States.	The	guarantee	of	this	unsecured	senior	debt	expires	on	the	earlier	of	the	maturity	date	of	the	debt	or	June	30,	2012.	No	debt	was	outstanding	under this	guarantee	program	as	of	December	31,	2008.	During	the	first	quarter	of	2009,	State	Street	issued	unsecured	senior	debt	totaling	$155	million,	composed	of commercial	paper	issued	under	our	program	described	in	the	preceding	paragraph,	which	is	backed	by	this	guarantee.

State	Street	Bank	currently	has	Board	authority	to	issue	bank	notes	up	to	an	aggregate	of	$5	billion,	including	up	to	$2.48	billion	of	senior	notes	under	the	above- described	FDIC	Temporary	Liquidity	Guarantee	Program	and	up	to	$1	billion	of	subordinated	bank	notes.	At	December	31,	2008,	no	notes	payable	were	outstanding and	all	$5	billion	was	available	for	issuance.

State	Street	Bank	currently	maintains	a	line	of	credit	with	a	financial	institution	of	CAD	$800	million,	or	approximately	USD	$657	million	as	of	December	31, 2008,	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.	As	of December	31,	2008,	no	balance	was	outstanding	on	this	line	of	credit.

# CONTRACTUAL	CASH	OBLIGATIONS

|  |  | PAYMENTS	DUE	BY	PERIOD | PAYMENTS	DUE	BY	PERIOD |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t31,\t2008 |  | Less\tthan\t1 | 1-3 | 4-5 | Over\t5 |
| (In\tmillions) | Total | year | years | years | years |
| Long-term\tdebt(1) | $7,473 | $189 | $653 | $570 | $6,061 |
| Operating\tleases | 1,651 | 232 | 412 | 393 | 614 |
| Capital\tlease\tobligations | 1,192 | 73 | 148 | 140 | 831 |
| Total\tcontractual\tcash\tobligations | $10,316 | $494 | $1,213 | $1,103 | $7,506 |

(1) Long-term	debt	above	excludes	capital	lease	obligations	(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,	2008.

The	obligations	presented	in	the	table	are	recorded	in	our	consolidated	statement	of	condition	at	December	31,	2008.	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	provided	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, 2008	related	to	derivatives	do	not	represent	the	amounts	that	may	ultimately	be	paid	under	the	contracts.	Additional	information	about	derivative	contracts	is	provided	in note	17	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	19	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	10	and	20	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 | TENURE	OF	COMMITMENT |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total |  |  |  |  |
| As\tof\tDecember\t31,\t2008 | amounts | Less\tthan | 1-3 | 4-5 | Over\t5 |
| (In\tmillions) | committed(1) | 1\tyear | years | years | years |
| Indemnified\tsecurities\tfinancing | $324,590 | $ 324,590 |  |  |  |
| Liquidity\tasset\tpurchase\tagreements | 28,408 | 24,259 | $1,813 | $ 1,668 | $668 |
| Unfunded\tcommitments\tto\textend\tcredit | 20,924 | 16,938 | 2,051 | 1,910 | 25 |
| Standby\tletters\tof\tcredit | 6,061 | 1,372 | 2,779 | 1,600 | 310 |
| Total\tcommercial\tcommitments | $379,983 | $ 367,159 | $6,643 | $ 5,178 | $1,003 |

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

Additional	information	about	the	commercial	commitments	disclosed	in	this	section	is	provided	in	note	11	of	the	Notes	to	Consolidated	Financial	Statements included	in	this	Form	10-K	under	Item	8.

# Risk	Management

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.	Our	Capital	Committee,	chaired	by	our	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	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	audits	to	assess	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	support	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.

# 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	factors	and prices.	State	Street	is	exposed	to	market	risk	in	both	its

trading	and	non-trading,	or	asset	and	liability	management,	activities.	The	market	risk	management	processes	related	to	these	activities,	discussed	in	further	detail	below, apply	to	both	on-balance	sheet	and	off-balance	sheet	exposures.

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.

# Trading	Activities

Market	risk	associated	with	foreign	exchange	and	other	trading	activities	is	managed	through	corporate	guidelines,	including	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	a	variety	of	risk	management tools	and	methodologies,	including	value-at-risk,	to	measure,	monitor	and	manage	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	our	customers'	needs,	conduct	trading	activities	and	manage	our	interest-rate	and	currency	risk. These	activities	are	designed	to	create	trading	revenue	and	to	hedge	potential	earnings	volatility.	In	addition,	we	provide	services	related	to	derivatives	in	our	role	as	both a	manager	and	a	servicer	of	financial	assets.

Our	customers	use	derivatives	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	investments	and	to	manage	the	currency	risk	in their	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 derivatives,	including	foreign	exchange	forward	contracts,	foreign	exchange	and	interest-rate	options	and	interest-rate	swaps.	As	of	December	31,	2008,	the	aggregate notional	amount	of	these	derivatives	was	$742.84	billion,	of	which	$688.81	billion	were	foreign	exchange	forward	and	spot	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.	Additional	information	about	trading	derivatives	is	provided	in	note	17	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this	Form	10-K	under	Item 8.

As	noted	above,	we	use	a	variety	of	risk	measurement	tools	and	methodologies,	including	value-at-risk,	or	VaR,	which	is	an	estimate	of	potential	loss	for	a	given period	within	a	stated	statistical	confidence	interval.	We	use	a	risk	measurement	system	to	estimate	VaR	daily.	We	have	adopted	standards	for	estimating	VaR,	and	we maintain	capital	for	market	risk	in	accordance	with	applicable	regulatory	guidelines.	VaR	is	estimated	for	a	99%	one-tail	confidence	interval	and	an	assumed	one-day holding	period	using	a	historical	observation	period	of	greater	than	two	years.	A	99%	one-tail	confidence	interval	implies	that	daily	trading	losses	should	not	exceed	the estimated	VaR	more	than	1%	of	the	time,	or	less	than	three	business	days	out	of	a	year.	The	methodology	uses	a	simulation	approach	based	on	historically	observed changes	in	foreign	exchange	rates,	interest	rates	(domestic	and	foreign)	and	foreign	exchange	implied	volatilities,	and	takes	into	account	the	resulting	diversification benefits	provided	from	the	mix	of	our	trading	positions.

Like	all	quantitative	risk	measures,	VaR	is	subject	to	limitations	and	assumptions	inherent	in	our	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	trading	positions	held at	the	end	of	each	business	day.	Therefore,	implicit	in	the	VaR	estimate	is	the	assumption	that	no	intraday	actions	are	taken	by	management	during	adverse	market movements.	As	a	result,	the	methodology	does	not	include	risk	associated	with	intraday	changes	in	positions	or	intraday	price	volatility.

The	following	table	presents	VaR	with	respect	to	our	trading	activities,	as	measured	by	our	VaR	methodology	for	the	periods	indicated:

# VALUE-AT-RISK

|  | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | Annual |  |  | Annual |  |  |
| (In\tmillions) | Average | Maximum | Minimum | Average | Maximum | Minimum |
| Foreign\texchange\tproducts | $1.8 | $4.7 | $.3 | $1.8 | $4.0 | $.7 |
| Interest-rate\tproducts | 1.1 | 2.4 | .6 | 1.4 | 3.7 | .1 |

We	back-test	the	estimated	one-day	VaR	on	a	daily	basis.	This	information	is	reviewed	and	used	to	confirm	that	all	relevant	trading	positions	are	properly modeled.	For	the	years	ended	December	31,	2008	and	2007,	we	did	not	experience	any	actual	trading	losses	in	excess	of	our	end-of-day	VaR	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	group	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	organized	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	17	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	exposures	to	changes	in	interest	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	predict	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,	2008	and	2007,	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

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Rate\tchange: |  |  |
| +100\tbps\tshock | $7 | $(98) |
| -100\tbps\tshock | (439) | 7 |
| +100\tbps\tramp | (29) | (44) |
| -100\tbps\tramp | (166) | 20 |

The	NIR-at-risk	exposure	to	an	immediate	100	bp	increase	in	market	interest	rates	changed	from	negative	at	December	31,	2007	to	slightly	positive	at December	31,	2008,	while	the	NIR-at-risk	exposure	to	a	100	bp	downward	shock	in	rates	changed	from	slightly	positive	to	significantly	negative.	These	changes	were the	result	of	two	factors.	First,	the	level	of	on-balance	sheet	liquid	assets	was	increased	during	2008	in	response	to	the

disruption	in	the	financial	markets,	resulting	in	NIR-at-risk	exposures	becoming	more	asset-sensitive	compared	to	2007.	Second,	with	market	interest	rates	and	liability yields	both	well	below	1.00%	at	December	31,	2008,	the	downward	100	bp	shock	produced	balance	sheet	spread	compression,	as	liability	yields	were	prevented	from repricing	lower	to	the	full	extent	of	the	rate	shock.	With	central	bank-administered	interest	rates	worldwide	already	at	historically	low	levels,	however,	we	are	positioned to	benefit	from	rising	interest	rates	going	forward.

The	year-over-year	changes	in	NIR-at-risk	exposure	to	+100	and	-100	bp	ramps	were	directionally	the	same	as	for	the	+/-	100	bp	shocks,	with	exposure	to	rising rates	becoming	less	negative,	and	exposure	to	declining	rates	changing	to	negative,	although	the	change	was	less	pronounced	due	to	the	gradual	shift	in	market	rates inherent	in	the	ramp	scenarios.

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.

The	following	table	presents	estimated	EVE	exposures,	calculated	as	of	December	31,	2008	and	December	31,	2007,	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

The	EVE	results	presented	above	indicate	exposure	to	rising	interest	rates	for	both	periods,	although	the	magnitude	of	the	exposure	as	of	December	31,	2008 increased	compared	to	December	31,	2007.	In	addition,	the	exposure	to	falling	interest	rates	became	negative	at	December	31,	2008.	Both	of	these	changes	reflect	the significantly	lower	market	interest	rates	at	December	31,	2008	compared	to	December	31,	2007.	The	December	31,	2008	rate	environment,	with	U.S.	interest	rates	near zero,	prevents	the	downward	200	bps	shock	from	fully	occurring,	as	market	rates	are	not	allowed	to	fall	below	zero,	and	reduces	the	benefit	of	lower	rates	on	market value	of	the	investment	portfolio.	The	increase	in	exposure	for	the	rising	rate	scenario	primarily	reflects	increased	duration	extension	on	mortgage-backed	securities	in	a rising	rate	environment	relative	to	the	base	scenario,	due	to	lower	absolute	levels	of	interest	rates	in	the	base	scenario	at	December	2008	compared	to	December	2007.

# Credit	Risk

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	a transaction	in	accordance	with	contractual	terms.	We	assume	credit	and	counterparty	risk	on	both	our	on-	and	off-balance	sheet	exposures.	The	extension	of	credit	and the	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.	We	maintain	comprehensive	guidelines	and	procedures	to	monitor	and	manage	all	aspects	of	credit	and	counterparty	risk	that	we undertake.	Counterparties	are	evaluated	on	an	individual	basis	at	least	annually,	while	significant	exposures	to	counterparties	are	reviewed	daily.	Processes	for	credit approval	and	monitoring	are	in	place	for	all	credit	extensions.	As	part	of	the	approval	and	renewal	process,	due	diligence	is	conducted	based	on	the	size	and	term	of	the exposure,	as	well	as	the	quality	of	the	counterparty.

We	provide,	on	a	limited	basis,	traditional	loan	products	and	services	to	key	customers	and	prospects	in	a	manner	that	is	intended	to	enhance	customer relationships,	increase	profitability	and	minimize	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	and	lease	portfolio	that	can	be	estimated,	and	is	reviewed	regularly	by management	for	adequacy.	An	internal	rating	system	is	used	to	assess	potential	risk	of	loss.	State	Street's	risk	rating	process	incorporates	the	use	of	risk	rating	tools informed	by	management's	judgment.	Qualitative	and	quantitative	inputs	are	captured	in	a	transparent	and	replicable	manner,	and	following	a	formal	review	and approval	process,	an	internal	credit	rating	based	on	State	Street's	credit	scale	is	assigned.	The	provision	for	loan	losses	is	a	charge	to	current	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	portfolio.	No	provision	for	loan	losses	was recorded	in	2008,	2007	or	2006.

At	December	31,	2008	and	2007,	the	allowance	for	loan	losses	was	$18	million.	Changes	in	the	allowance	for	loan	losses	were	as	follows	for	the	years	ended December	31:

| (In	millions) | 2008 | 2007 | 2006 | 2005 | 2004(1) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| U.S.: |  |  |  |  |  |
| Balance\tat\tbeginning\tof\tyear | $18 | $18 | $17 | $14 | $43 |
| Provision\tfor\tloan\tlosses | \t — | \t — | \t — | \t — | (15) |
| Loan\tcharge-offs—commercial\tand\tfinancial | \t — | \t — | \t — | \t — | — |
| Recoveries—commercial\tand\tfinancial | \t — | \t — | \t — | \t — | — |
| Reclassification | \t — | \t — | 1 | 3 | (14) |
| Balance\tat\tend\tof\tyear—U.S. | \t 18 | \t 18 | \t 18 | \t 17 | 14 |
| Non-U.S.: |  |  |  |  |  |
| Balance\tat\tbeginning\tof\tyear | \t — | \t — | 1 | 4 | 18 |
| Provision\tfor\tloan\tlosses | \t — | \t — | \t — | \t — | (3) |
| Reclassification | \t — | \t — | (1) | (3) | (11) |
| Balance\tat\tend\tof\tyear—Non-U.S. | \t — | \t — | \t — | 1 | 4 |
| Total\tbalance\tat\tend\tof\tyear | $18 | $18 | $18 | $18 | $18 |

(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	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.	An	aggregate	of approximately	$219	million	of	loans	were	past-due	as	of	December	31,	2008,	composed	of	commercial	real	estate	loans	purchased	from	certain	customers	pursuant	to indemnified	repurchase	agreements	with	an	affiliate	of	Lehman	Brothers.	These	loans	continued	to	accrue	interest,	and	no	additional	valuation	adjustments	or	provisions for	loss	were	recorded	since	their	initial	acquisition.	Additional	information	about	these	loans	is	provided	in	the	"Financial	Condition—Loans	and	Lease	Financing" section	of	this	Management's	Discussion	and	Analysis.	There	were	no	past-due	loans	as	of	December	31,	2007,	2006,	2005	and	2004.

We	generally	place	loans	on	non-accrual	status	once	principal	or	interest	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	2008,	2007,	2006,	2005	and	2004.

We	purchase	securities	under	agreements	to	resell.	Risk	is	managed	through	a	variety	of	processes,	including	establishing	the	acceptability	of	counterparties; limiting	purchases	largely	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	we	believe	that	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	annually.	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	collateralized,	the substantial	volume	of	these	activities	necessitates	detailed	credit-based	underwriting	and	monitoring	processes.	The	aggregate	amount	of	indemnified	securities	on	loan totaled	$324.59	billion	at	December	31,	2008,	and	$558.37	billion	at	December	31,	2007.	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.	Collateral	received	in	connection	with	our	securities	lending	services	is	held	by	us	as	agent	and	is	not recorded	in	our	consolidated	statement	of	condition.	The	securities	on	loan	and	the	collateral	are	revalued	daily	to	determine	if	additional	collateral	is	necessary.	We held,	as	agent,	cash	and	securities	totaling	$333.07	billion	and	$572.93	billion	as	collateral	for	indemnified	securities	on	loan	at	December	31,	2008	and	2007, respectively.

The	collateral	held	by	us	is	invested	on	behalf	of	our	customers.	In	certain	cases,	the	collateral	is	invested	in	third-party	repurchase	agreements,	for	which	we indemnify	the	customer	against	loss	of	the	principal	invested.	We	require	the	repurchase	agreement	counterparty	to	provide	collateral	in	an	amount	equal	to	or	in	excess of	100%	of	the	amount	of	the	repurchase	agreement.	The	indemnified	repurchase	agreements	and	the	related	collateral	are	not	recorded	in	our	consolidated	statement	of condition.	Of	the	collateral	of	$333.07	billion	at	December	31,	2008	and	$572.93	billion	at	December	31,	2007	referenced	above,	$68.37	billion	at	December	31,	2008 and	$106.13	billion	at	December	31,	2007	were	invested	in	indemnified	repurchase	agreements.	We	held,	as	agent,	$71.87	billion	and	$111.02	billion	as	collateral	for indemnified	investments	in	repurchase	agreements	at	December	31,	2008	and	December	31,	2007,	respectively.

Processes	for	credit	approval	and	monitoring	are	in	place	for	other	credit	extensions.	As	part	of	the	approval	and	renewal	process,	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.	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.

# Operational	Risk

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,	we	conduct	a	broad	array	of	complex	and	specialized	asset	servicing,	processing	and	fiduciary	activities	that	give rise	to	operational	risk.	Consequently,	active	management	of	operational	risk	is	an	integral	component	of	all	aspects	of	our	business.	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	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	a	consistent	manner	across	State	Street. Responsibility	for	the	management	of	operational	risk	lies	with	every	individual	at	State	Street.

We	maintain	an	operational	risk	governance	structure	designed	to	ensure	that	responsibilities	are	clearly	defined	and	to	provide	independent	oversight	of operational	risk	management.	The	Executive	Committee	of	the	Board	sets	operational	risk	policy	and	oversees	implementation	of	the	operational	risk	framework.	ERM develops	corporate	programs	to	manage	operational	risk	and	oversees	the	overall	operational	risk	program.	Businesses	own	operational	risk	and	periodically	review	the status	of	the	business	controls,	which	are	designed	to	provide	a	sound	operational	environment.	The	businesses	also	identify,	manage,	and	report	on	operational	risk.	The MRC	and	the	Operational	Risk	Committee	review	operational	risk	related	information	and	policies,	provide	oversight	designed	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.

Our	discipline	in	managing	operational	risk,	which	is	a	result	of	this	emphasis	on	policy,	guidelines,	oversight,	and	independent	review,	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.

Separating	the	effects	of	a	potential	material	adverse	event	into	operational	and	business	risk	is	sometimes	difficult.	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	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	utilize	three	types	of	special	purpose	entities,	referred	to	as	SPEs.	One	type	of	SPE	is	utilized	in	connection	with	our involvement	as	collateral	manager	with	respect	to	managed	investment	vehicles.	Since	we	have	determined	that	we	are	not	the	primary	beneficiary	of	these	managed investment	vehicles	under	existing	accounting	standards,	we	do	not	record	these	vehicles	in	our	consolidated	financial	statements.	A	second	type	of	SPE	is	utilized	in connection	with	our	tax-exempt	investment	program,	under	which	trusts	structure	and	sell	certificated	interests	in	pools	of	tax-exempt	investment-grade	assets	to	our mutual	fund	customers.	These	trusts	are	recorded	in	our	consolidated	financial	statements,	since	we	treat	the	underlying	transactions	as	secured	borrowings,	not	as	sales. A	third	type	of	SPE	is	utilized	in	connection	with	our	asset-backed	commercial	paper	program,	under	which	we	administer	four	third-party	asset-backed	commercial paper	conduits,	which	sell	commercial	paper	to	our	institutional	customers,	primarily	mutual	fund	customers,	as	short-term	investments.	Since	we	have	determined	that we	are	not	the	primary	beneficiary	of	these	conduits	under	existing	accounting	standards,	we	do	not	record	the	conduits	in	our	consolidated	financial	statements.

Additional	information	about	the	activities	of	the	above-described	SPEs	is	provided	in	note	12	of	the	Notes	to	Consolidated	Financial	Statements	included	in	this Form	10-K	under	Item	8.

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	provided	in	note	11	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	17	of	the	Notes	to	Consolidated	Financial	Statements	included	in this	Form	10-K	under	Item	8.

# RECENT	ACCOUNTING	DEVELOPMENTS

Information	with	respect	to	recent	accounting	developments	is	provided	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,	2008	and	2007,	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,	2008.	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,	2008	and	2007,	and	the	consolidated	results	of	its	operations	and	its	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2008,	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),	State	Street	Corporation's	internal control	over	financial	reporting	as	of	December	31,	2008,	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	26,	2009	expressed	an	unqualified	opinion	thereon.

# CONSOLIDATED	FINANCIAL	STATEMENTS

# Consolidated	Statement	of	Income

| Years	ended	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |
| Fee\trevenue: |  |  |  |
| Servicing\tfees | $3,745 | $3,388 | $2,723 |
| Management\tfees | 1,028 | 1,141 | 943 |
| Trading\tservices | 1,467 | 1,152 | 862 |
| Securities\tfinance | 1,230 | 681 | 386 |
| Processing\tfees\tand\tother | 277 | 271 | 272 |
| Total\tfee\trevenue | 7,747 | 6,633 | 5,186 |
| Net\tinterest\trevenue: |  |  |  |
| Interest\trevenue | 4,879 | 5,212 | 4,324 |
| Interest\texpense | 2,229 | 3,482 | 3,214 |
| Net\tinterest\trevenue | 2,650 | 1,730 | 1,110 |
| Provision\tfor\tloan\tlosses | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 2,650 | 1,730 | 1,110 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | 350 | — | — |
| Total\trevenue | 10,693 | 8,336 | 6,311 |
| Expenses: |  |  |  |
| Salaries\tand\temployee\tbenefits | 3,842 | 3,256 | 2,652 |
| Information\tsystems\tand\tcommunications | 633 | 546 | 501 |
| Transaction\tprocessing\tservices | 644 | 619 | 496 |
| Occupancy | 465 | 408 | 373 |
| Provision\tfor\tlegal\texposure | — | 600 | — |
| Provision\tfor\tinvestment\taccount\tinfusion | 450 | — | — |
| Restructuring\tcharges | 306 | — | — |
| Merger\tand\tintegration\tcosts | 115 | 198 | — |
| Professional\tservices | 360 | 236 | 157 |
| Amortization\tof\tother\tintangible\tassets | 144 | 92 | 43 |
| Other | 892 | 478 | 318 |
| Total\texpenses | 7,851 | 6,433 | 4,540 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttax\texpense | 2,842 | 1,903 | 1,771 |
| Income\ttax\texpense\tfrom\tcontinuing\toperations | 1,031 | 642 | 675 |
| Income\tfrom\tcontinuing\toperations | 1,811 | 1,261 | 1,096 |
| Income\tfrom\tdiscontinued\toperations\tbefore\tincome\ttax\texpense | — | — | 16 |
| Income\ttax\texpense\tfrom\tdiscontinued\toperations | — | — | 6 |
| Income\tfrom\tdiscontinued\toperations | — | — | 10 |
| Net\tincome | $1,811 | $1,261 | $1,106 |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $1,789 | $1,261 | $1,106 |
| Earnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations: |  |  |  |
| Basic | $4.33 | $3.50 | $3.31 |
| Diluted | 4.30 | 3.45 | 3.26 |
| Income\tper\tcommon\tshare\tfrom\tdiscontinued\toperations: |  |  |  |
| Basic | — | — | $.03 |
| Diluted | — | — | .03 |
| Earnings\tper\tcommon\tshare: |  |  |  |
| Basic | $4.33 | $3.50 | $3.34 |
| Diluted | 4.30 | 3.45 | 3.29 |
| Average\tcommon\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic | \t 413,182 | \t 360,675 | \t 331,350 |
| Diluted | \t 416,100 | \t 365,488 | \t 335,732 |

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

# Consolidated	Statement	of	Condition

| As	of	December	31, | 2008 | 2007 |
| :--- | :--- | :--- |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts) |  |  |
| Assets |  |  |
| Cash\tand\tdue\tfrom\tbanks | $3,181 | $4,041 |
| Interest-bearing\tdeposits\twith\tbanks | 55,733 | 6,271 |
| Securities\tpurchased\tunder\tresale\tagreements | 1,635 | 19,133 |
| Federal\tfunds\tsold | — | 4,540 |
| Trading\taccount\tassets | 815 | 589 |
| Investment\tsecurities\tavailable\tfor\tsale | 54,163 | 70,326 |
| Investment\tsecurities\theld\tto\tmaturity\tpurchased\tunder\tmoney\tmarket\tliquidity\tfacility\t(fair\tvalue\tof\t$6,100) | 6,087 | — |
| Investment\tsecurities\theld\tto\tmaturity\t(fair\tvalue\tof\t$14,311\tand\t$4,225) | 15,767 | 4,233 |
| Loans\tand\tleases\t(less\tallowance\tfor\tlosses\tof\t$18) | 9,113 | 15,784 |
| Premises\tand\tequipment\t(net\tof\taccumulated\tdepreciation\tof\t$2,758\tand\t$2,653) | 2,011 | 1,894 |
| Accrued\tincome\treceivable | 1,738 | 2,096 |
| Goodwill | 4,527 | 4,567 |
| Other\tintangible\tassets | 1,851 | 1,990 |
| Other\tassets | 17,010 | 7,079 |
| Total\tassets | $173,631 | $142,543 |
| Liabilities |  |  |
| Deposits: |  |  |
| Noninterest-bearing | $32,785 | $15,039 |
| Interest-bearing—U.S. | 4,558 | 14,790 |
| Interest-bearing—Non-U.S. | 74,882 | 65,960 |
| Total\tdeposits | \t 112,225 | 95,789 |
| Securities\tsold\tunder\trepurchase\tagreements | 11,154 | 14,646 |
| Federal\tfunds\tpurchased | 1,082 | 425 |
| Short-term\tborrowings\tunder\tmoney\tmarket\tliquidity\tfacility | 6,042 | — |
| Other\tshort-term\tborrowings | 11,555 | 5,557 |
| Accrued\ttaxes\tand\tother\texpenses | 408 | 4,392 |
| Other\tliabilities | 13,972 | 6,799 |
| Long-term\tdebt | 4,419 | 3,636 |
| Total\tliabilities | \t 160,857 | \t 131,244 |
| Commitments\tand\tcontingencies\t(note\t11) |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock,\tno\tpar:\t3,500,000\tshares\tauthorized;\t20,000\tshares\tissued\tand\toutstanding | 1,883 | — |
| Common\tstock,\t$1\tpar:\t750,000,000\tshares\tauthorized;\t431,976,032\tand\t398,366,326\tshares\tissued | 432 | 398 |
| Surplus | 6,992 | 4,630 |
| Retained\tearnings | 9,135 | 7,745 |
| Accumulated\tother\tcomprehensive\tloss | (5,650) | (575) |
| Treasury\tstock,\tat\tcost\t(418,354\tand\t12,081,863\tshares) | (18) | (899) |
| Total\tshareholders'\tequity | 12,774 | 11,299 |
| Total\tliabilities\tand\tshareholders'\tequity | $173,631 | $142,543 |

# Consolidated	Statement	of	Changes	in	Shareholders'	Equity

|  |  | COMMON | COMMON |  |  | Accumulated | TREASURY | TREASURY |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | STOCK | STOCK |  |  | Other | STOCK | STOCK |  |
| (Dollars\tin\tmillions,\texcept\tper\tshare\tamounts, | PREFERRED |  |  |  | Retained | Comprehensive |  |  |  |
| shares\tin\tthousands) | STOCK | Shares | Amount | Surplus | Earnings | (Loss)\tIncome | Shares | Amount | Total |
| 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\tsecurities,\tnet\tof\trelated\ttaxes\tof |  |  |  |  |  |  |  |  |  |
| $40\tand\treclassification\tadjustment |  |  |  |  |  | 58 |  |  | 58 |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$56 |  |  |  |  |  | 124 |  |  | 124 |
| of\trelated\ttaxes\tof\t$(10) |  |  |  |  |  | (18) |  |  | (18) |
| Change\tin\tminimum\tpension\tliability,\tnet\tof\trelated\ttaxes |  |  |  |  |  |  |  |  |  |
| of\t$2 |  |  |  |  |  | 4 |  |  | 4 |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof\trelated\ttaxes\tof\t$2 |  |  |  |  |  | 3 |  |  | 3 |
| Total\tcomprehensive\tincome |  |  |  |  | 1,106 | 171 |  |  | 1,277 |
|  |  |  |  |  |  | (164) |  |  | (164) |
| Cash\tdividends\tdeclared—$.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\tcommon\tstock\toptions\texercised,\tincluding\ttax\tbenefit\tof\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 |
|  |  |  |  |  | (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\tsecurities,\tnet\tof\trelated\ttaxes\tof |  |  |  |  |  |  |  |  |  |
| $(276)\tand\treclassification\tadjustment |  |  |  |  |  | (451) |  |  | (451) |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tfair\tvalue\thedges\tof\tavailable-for-sale\tsecurities, |  |  |  |  |  |  |  |  |  |
| net\tof\trelated\ttaxes\tof\t$(37) |  |  |  |  |  | (55) |  |  | (55) |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$62 |  |  |  |  |  | 134 |  |  | 134 |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof\trelated\ttaxes\tof\t$(7) |  |  |  |  |  | (11) |  |  | (11) |
| of\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\tcommon\tstock\toptions\texercised,\tincluding\ttax\tbenefit\tof\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) | \t 11,299 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  |  | 1,811 |  |  |  | 1,811 |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tavailable-for-sale\tsecurities,\tnet\tof\trelated\ttaxes\tof |  |  |  |  |  |  |  |  |  |
| $(2,866)\tand\treclassification\tadjustment |  |  |  |  |  | (4,527) |  |  | (4,527) |
| Change\tin\tnet\tunrealized\tgains/losses\ton\tfair\tvalue\thedges\tof\tavailable-for-sale\tsecurities, |  |  |  |  |  |  |  |  |  |
| net\tof\trelated\ttaxes\tof\t$(116) |  |  |  |  |  | (187) |  |  | (187) |
| Foreign\tcurrency\ttranslation,\tnet\tof\trelated\ttaxes\tof\t$(91) |  |  |  |  |  | (263) |  |  | (263) |
| Change\tin\tunrealized\tgains/losses\ton\tcash\tflow\thedges,\tnet\tof\trelated\ttaxes\tof\t$(10) |  |  |  |  |  | (16) |  |  | (16) |
| of\trelated\ttaxes |  |  |  |  |  | 1 |  |  | 1 |
| Change\tin\tminimum\tpension\tliability,\tnet\tof\trelated\ttaxes\tof\t$(48) |  |  |  |  |  | (83) |  |  | (83) |
| Total\tcomprehensive\tincome |  |  |  |  | 1,811 | (5,075) |  |  | (3,264) |
| Preferred\tstock\tand\tcommon\tstock\twarrant\tissued | 1,879 |  |  | 121 |  |  |  |  | 2,000 |
| Cash\tdividends: |  |  |  |  |  |  |  |  |  |
| Common\tstock—$.95\tper\tshare |  |  |  |  | (400) |  |  |  | (400) |
| Preferred\tstock |  |  |  |  | (18) |  |  |  | (18) |
| Accretion\tof\tpreferred\tstock\tdiscount | 4 |  |  |  | (4) |  |  |  | — |
| Common\tstock\tacquired |  |  |  |  |  |  | 552 |  | — |
| Common\tstock\tissued |  | 33,156 | 34 | 2,181 |  |  | (7,391) | 538 | 2,753 |
| Contract\tpayments\tto\tState\tStreet\tCapital\tTrust\tIII |  |  |  | (36) |  |  |  |  | (36) |
| Common\tstock\tawards\tand\tcommon\tstock\toptions\texercised,\tincluding\ttax\tbenefit\tof\t$52 |  | 454 |  | 96 | 1 |  | (4,825) | 343 | 440 |
| Balance\tat\tDecember\t31,\t2008 | $1,883 | 431,976 | $432 | $6,992 | $9,135 | $(5,650) | 418 | $(18) | $12,774 |

# Consolidated	Statement	of	Cash	Flows

| Years	ended	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Operating\tActivities: |  |  |  |
| Net\tincome | $1,811 | $1,261 | $1,106 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Non-cash\tadjustments\tfor\tdepreciation,\tamortization,\taccretion\tand\tdeferred\tincome\ttax\texpense\t(benefit) | (282) | 130 | 385 |
| Income\tfrom\tdiscontinued\toperations | — | — | (16) |
| (Gains)\tlosses\trelated\tto\tinvestment\tsecurities,\tnet | 54 | 27 | (15) |
| Change\tin\ttrading\taccount\tassets,\tnet | (689) | 195 | (179) |
| Other,\tnet | (2,850) | 1,326 | (300) |
| Net\tcash\t(used\tin)\tprovided\tby\toperating\tactivities | (1,956) | 2,939 | 981 |
| Investing\tActivities: |  |  |  |
| Net\t(increase)\tdecrease\tin\tinterest-bearing\tdeposits\twith\tbanks | (49,462) | (799) | 5,809 |
| Net\t(increase)\tdecrease\tin\tfederal\tfunds\tsold\tand\tsecurities\tpurchased\tunder\tresale\tagreements | 22,038 | (2,832) | (5,999) |
| Proceeds\tfrom\tsales\tof\tavailable-for-sale\tsecurities | 5,408 | 4,731 | 3,571 |
| Proceeds\tfrom\tmaturities\tof\tavailable-for-sale\tsecurities | 32,291 | 21,750 | 16,602 |
| Purchases\tof\tavailable-for-sale\tsecurities | (41,044) | (27,578) | (23,920) |
| Purchases\tunder\tmoney\tmarket\tliquidity\tfacility,\tnet | (5,818) | — | — |
| Proceeds\tfrom\tmaturities\tof\theld-to-maturity\tsecurities | 1,766 | 859 | 1,590 |
| Purchases\tof\theld-to-maturity\tsecurities | (1,062) | (539) | (1,246) |
| Net\t(increase)\tdecrease\tin\tloans | 6,532 | (6,226) | (2,464) |
| Proceeds\tfrom\tsale\tof\tjoint\tventure\tinvestment | 464 | — | — |
| Business\tacquisitions,\tnet\tof\tcash\tacquired | (38) | (647) | — |
| Purchases\tof\tequity\tinvestments\tand\tother\tlong-term\tassets | (242) | (192) | (168) |
| Purchases\tof\tpremises\tand\tequipment | (681) | (476) | (310) |
| Other,\tnet | 278 | 95 | 114 |
| Net\tcash\tused\tin\tinvesting\tactivities | (29,570) | (11,854) | (6,421) |
| Financing\tActivities: |  |  |  |
| Net\tincrease\t(decrease)\tin\ttime\tdeposits | (13,988) | 4,158 | (1,261) |
| Net\tincrease\tin\tall\tother\tdeposits | 30,416 | 14,617 | 7,258 |
| Net\tincrease\tin\tshort-term\tborrowings\tunder\tmoney\tmarket\tliquidity\tfacility | 6,139 | — | — |
| Net\tincrease\t(decrease)\tin\tshort-term\tborrowings | 3,163 | (7,794) | (653) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt,\tnet\tof\tissuance\tcosts | 493 | 1,488 | — |
| Payments\tfor\tlong-term\tdebt\tand\tobligations\tunder\tcapital\tleases | (44) | (533) | (16) |
| Proceeds\tfrom\tpublic\toffering\tof\tcommon\tstock,\tnet\tof\tissuance\tcosts | 2,251 | — | — |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock | 1,879 | — | — |
| Proceeds\tfrom\tissuance\tof\twarrant\tto\tpurchase\tcommon\tstock | 121 | — | — |
| Purchases\tof\tcommon\tstock | — | (1,002) | (368) |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock\tfor\tstock\tawards\tand\toptions\texercised | 12 | — | — |
| Proceeds\tfrom\tissuances\tof\ttreasury\tstock | 623 | 185 | 193 |
| Payments\tfor\tcash\tdividends | (399) | (301) | (259) |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 30,666 | 10,818 | 4,894 |
| Net\tincrease\t(decrease) | (860) | 1,903 | (546) |
| Cash\tand\tdue\tfrom\tbanks\tat\tbeginning\tof\tyear | 4,041 | 2,138 | 2,684 |
| Cash\tand\tdue\tfrom\tbanks\tat\tend\tof\tyear | $3,181 | $4,041 | $2,138 |
| Supplemental\tdisclosure: |  |  |  |
| Interest\tpaid | $2,302 | $3,403 | $3,177 |
| Income\ttaxes\tpaid | 1,118 | 593 | 533 |
| Non-cash\tinvestments\tin\tpremises\tand\tequipment\tand\tcapital\tleases | 48 | 194 | 109 |
| 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,	collective	investment	funds	and	other	investment	pools,	corporate	and	public	retirement	plans, insurance	companies,	foundations	and	endowments	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	and	cash	equivalents	are	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	held	by	us	are	classified	as	either	trading	account	assets,	investment	securities	available	for	sale	or	investment	securities	held	to	maturity	at the	time	of	purchase,	based	on	management's	intentions.

Trading	account	assets	are	debt	and	equity	securities	that	are	purchased	in	connection	with	our	trading	activities	and,	as	such,	are	expected	to	be	sold	in	the	near term.	Our	trading	activities	typically	involve	active	and	frequent	buying	and	selling	with	the	objective	of	generating	profits	on	short-term	movements	and	for	resale	to customers.	Securities	available	for	sale	are	those	that	we	intend	to	hold	for	an	indefinite	period	of	time.	Available-for-sale	securities	include	securities	utilized	as	part	of our	asset	and	liability	management	activities	that	may	be	sold	in	response	to	changes	in	interest	rates,	pre-payment	risk,	liquidity	needs	or	other	similar	factors.	Securities held	to	maturity	are	debt	securities	that	management	has	the	intent	and	the	ability	to	hold	to	maturity.

Trading	account	assets	are	carried	at	fair	value.	Both	realized	and	unrealized	gains	and	losses	on	trading	account	assets	are	recorded	in	trading	services	revenue	in our	consolidated	statement	of	income.	Debt	and	marketable	equity	securities	classified	as	available	for	sale	are	carried	at	fair	value,	and	after-tax	net	unrealized	gains	and losses	are	recorded	in	accumulated	other	comprehensive	income,	a	component	of	shareholders'	equity.	Gains	or	losses	realized	on	sales	of	available-for-sale	securities are	computed	using	the	specific	identification	method	and	are	recorded	in	gains	(losses)	related	to	investment	securities,	net,	in	our	consolidated	statement	of	income. Securities	held	to	maturity	are	carried	at	cost,	adjusted	for	amortization	of	premiums	and	accretion	of	discounts.

Management	reviews	the	fair	values	of	investment	securities	at	least	quarterly,	and	evaluates	individual	securities	for	declines	in	fair	value	that	may	be	deemed 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.	In	addition,	the	length	of	time	that	a	security's	cost	basis	has	exceeded	its	fair	value, as	well	as	management's	intent	and	ability	to	hold	the	security	until	recovery	in	market	value,	are	considered.	If	declines	in	fair	value	are	deemed	other	than	temporary, an	impairment	loss	is	recognized	in	results	of	operations	and	the	amortized	cost	basis	of	the	security	is	written	down	to	its	current	fair	value,	which	becomes	the	new	cost basis.	Other-than-temporary	impairment	write-downs	are	recorded	in	our	consolidated	statement	of	income	in	gains	(losses)	related	to	investment	securities,	net.

Loans	are	generally	recorded	at	their	principal	amount	outstanding,	net	of	the	allowance	for	loan	losses,	unearned	income,	and	any	net	unamortized	deferred	loan origination	fees.	Acquired	loans	are	recorded	at	fair	value,	based	on	management's	expectation	with	respect	to	principal	and	interest	collection	as	of	the	date	of acquisition.	The	carrying	value	of	the	loans	is	evaluated	periodically	using	a	discounted	cash	flow	model,	which	incorporates	expectations	of	principal	and	interest collection.	The	impact	of	any	changes	in	expectations	is	recognized	in	results	of	operations	through	a	fair	value	allowance	and,	in	some	cases,	an	adjustment	to	the	yield of	the	loans.

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	full	collection	of	principal	or	interest is	not	considered	probable.	Loans	60	days	past-due,	but	considered	both	well	secured	and	in	the	process	of	collection,	are	treated	as	exceptions	and	may	be	excluded 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,	if	any,	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	a	loan	or	a portion	of	a	loan	is	determined	to	be	uncollectible.	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	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	in	which	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	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.	Other	intangible	assets	related	to	customer	relationships	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	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	intangible	assets	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	these	reviews	determine	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	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	collectability	is	reasonably	assured.	Amounts	accrued	at	period-end	are	recorded	in	accrued	income	receivable	in	our	consolidated	statement	of condition.	Performance	fees	from	Investment	Management	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	are	recorded	based	on	the	effective	yield	of	the	related	financial instrument.

# Employee	Benefits	Expense:

Employee	benefits	expense	includes	costs	of	certain	pension	and	other	post-retirement	benefit	plans	related	to	prior	and	current	service,	which	are	accrued	on	a current	basis,	as	well	as	contributions	associated	with	defined	contribution	savings	plans,	unrestricted	cash	and	stock	awards	under	other	employee	incentive compensation	plans,	and	the	amortization	of	restricted	stock	awards.

# Equity-Based	Compensation:

We	record	compensation	expense	equal	to	the	estimated	fair	value	on	the	grant	date	of	common	stock	options	granted	to	employees	in	our	consolidated	statement of	income,	on	a	straight-line	basis	over	the	options'	vesting	period.	We	record	compensation	expense	for	equity-based	awards	other	than	stock	options	based	on	the timing	of	vesting.

We	use	a	Black-Scholes	option	pricing	model	to	determine	the	fair	value	of	the	options	granted.	The	fair	values	of	equity-based	awards	other	than	options,	such	as restricted	stock	and	deferred	stock,	are	based	on	the	price	of	our	common	stock	on	the	date	of	grant,	adjusted	if	appropriate	based	upon	the	award's	eligibility	to	receive dividends.	The	option	pricing	model	utilizes	weighted-average	assumptions	regarding	the	period	of	time	that	options	granted	are	expected	to	be	outstanding.	This	model is	based	primarily	on	the	historical	exercise	behavior	attributable	to	previous	option	grants,	the	estimated	yield	from	dividends	paid	on	our	common	stock	over	the expected	term	of	the	options,	the	expected	volatility	of	the	price	of	our	common	stock	over	a	period	equal	to	the	expected	term	of	the	options,	and	a	risk-free	interest	rate based	on	the	U.S.	Treasury	yield	curve	at	the	time	of	grant	for	a	period	equal	to	the	expected	term	of	the	options	granted.

Compensation	expense	for	equity-based	awards	with	terms	that	provide	for	a	graded	vesting	schedule,	for	which	portions	of	the	award	vest	in	increments	over	the required	service	period,	is	recognized	on	a	straight-line	basis	over	the	required	service	period	for	the	entire	award.	The	expense	is	adjusted	for	assumptions	with	respect to	the	estimated	amount	of	awards	that	will	be	forfeited	prior	to	vesting.	Dividend	equivalents	for	certain	equity-based	awards	are	paid	on	stock	units	on	a	current	basis prior	to	vesting	and	distribution.

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	effects	of	a tax	position	on	the	consolidated	financial	statements	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	carry	certain	of	our	financial	assets	and	liabilities	at	fair	value	on	a	recurring	basis.	These	financial	assets	and	liabilities	are	composed	of	trading	account assets,	investment	securities	available	for	sale	and	various	types	of	derivative	instruments.	In	addition,	we	measure	certain	assets,	such	as	goodwill	and	other	long-lived assets,	at	fair	value	on	a	non-recurring	basis	to	evaluate	those	assets	for	potential	impairment.	Fair	value	is	defined	as	the	price	that	would	be	received	to	sell	an	asset	or paid	to	transfer	a	liability	in	an	orderly	transaction	between	market	participants	at	the	measurement	date.

In	accordance	with	SFAS	No.	157,	Fair	Value	Measurements,	which	we	adopted	effective	January	1,	2008,	we	categorize	our	financial	assets	and	liabilities	into the	following	fair	value	hierarchy:

Level	1	–	Financial	assets	and	liabilities	with	values	based	on	unadjusted	quoted	prices	for	identical	assets	or	liabilities	in	an	active	market.	Examples	of	level	1 financial	instruments	include	active	exchange-traded	equity	securities	and	certain	U.S.	government	securities.

Level	2	–	Financial	assets	and	liabilities	with	values	based	on	quoted	prices	for	similar	assets	and	liabilities	in	active	markets,	and	inputs	that	are	observable	for the	asset	or	liability,	either	directly	or	indirectly,	for	substantially	the	full	term	of	the	asset	or	liability.	Examples	of	level	2	financial	instruments	include commercial	paper	purchased	from	the	State	Street-administered	asset-backed	commercial	paper	conduits,	various	types	of	interest-rate	and	foreign	exchange derivative	instruments,	and	various	types	of	fixed-income	investment	securities.	Pricing	models	are	utilized	to	estimate	fair	value	for	certain	financial	assets	and liabilities	categorized	in	level	2.

Level	3	–	Financial	assets	and	liabilities	with	values	based	on	prices	or	valuation	techniques	that	require	inputs	that	are	both	unobservable	in	the	market	and significant	to	the	overall	fair	value	measurement.	These	inputs	reflect	management's	judgment	about	the	assumptions	that	a	market	participant	would	use	in pricing	the	asset	or	liability,	and	are	based	on	the	best	available	information,	some	of	which	is	internally	developed.	Examples	of	level	3	financial	instruments include	certain	corporate	debt,	asset-	and	mortgage-backed	securities	and	certain	derivative	instruments	with	little	or	no	market	activity	and	a	resulting	lack	of price	transparency.

When	determining	the	fair	value	measurements	for	financial	assets	and	liabilities	carried	at	fair	value	on	a	recurring	basis,	we	consider	the	principal	or	most advantageous	market	in	which	we	would	transact	and	consider	assumptions	that	market	participants	would	use	when	pricing	the	asset	or	liability.	When	possible,	we look	to	active	and	observable	markets	to	price	identical	assets	or	liabilities.	When	identical	assets	and	liabilities	are	not	traded	in	active	markets,	we	look	to	market observable	data	for	similar	assets	and	liabilities.	Nevertheless,	certain	assets	and	liabilities	are	not	actively	traded	in	observable	markets,	and	we	use	alternative valuation	techniques	to	derive	fair	value	measurements.

We	are	involved	with	various	types	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	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	investment	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	independent	third	parties	and	fund	those	purchases	by	issuing	commercial	paper.	We	do	not	sell	our	own	assets	to	these	conduits,	and we	hold	no	direct	or	indirect	ownership	interest	in	them.	These	conduits	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.

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	periodically	re-assess our	determination	using	a	financial	model,	referred	to	as	an	expected	loss	model,	to	ensure	that	consolidation	is	not	required	pursuant	to	FIN	46(R).

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	by	the	CDO.	These	CDOs	typically	meet	the	definition	of	a	VIE	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,	either	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	January	2009,	the	FASB	issued	a	proposed	Staff	Position,	FAS	107-b	and	APB	28-a,	Interim	Disclosures	about	Fair	Value	of	Financial	Instruments.	This proposed	FSP	would	amend	SFAS	No.	107,	Disclosures	About	Fair	Value	of	Financial	Instruments,	and	Accounting	Principles	Board	Opinion	No.	28,	Interim	Financial Reporting,	to	require	disclosures	about	fair	value	of	financial	instruments	in	all	interim	financial	statements.	The	FSP's	disclosure	requirements	with	respect	to	fair	value of	financial	instruments	would	be	effective	as	of	March	31,	2009,	and	would	not	require	comparative	disclosures	for	earlier	periods	presented.

In	December	2008,	the	FASB	issued	FASB	Staff	Position	No.	FAS	132(R)-1,	Employer's	Disclosures	about	Postretirement	Benefit	Plan	Assets.	This	FSP amends	SFAS	No.	132	(Revised	2003),	Employers'	Disclosures	about	Pensions	and	Other	Postretirement	Benefits,	by	requiring	employer	disclosures	about	the	assets	of a	defined	benefit	pension	or	other	post-retirement	plan.	The	FSP's	disclosure	requirements	with	respect	to	plan	assets	will	be	effective	as	of	December	31,	2009.

In	September	2008,	the	FASB	issued,	for	comment,	revisions	to	FASB	Interpretation	No.	46,	as	revised,	Consolidation	of	Variable	Interest	Entities,	referred	to	as FIN	46(R).	The	proposed	revisions	include	the	removal	of	the	scope	exception	for	qualified	special	purpose	entities,	or	QSPEs;	a	revision	of	the	current	risks-and- rewards-based	consolidation	model	to	a	qualitative	model	based	on	control;	and	a	requirement	that	consolidation	of	VIEs	be	reevaluated	on	an	ongoing	basis.	Although the	proposed	revisions	have	not	yet	been	finalized,	these	changes	may	have	a	significant	impact	on	our	consolidated	financial	statements,	as	we	may	be	required	to consolidate	VIEs	that	are	not	currently	consolidated	under	FIN	46(R).	The	proposed	revisions	would	be	effective	beginning	January	1,	2010.

In	June	2008,	the	FASB	issued	FSP	EITF	03-6-1,	Determining	Whether	Instruments	Granted	in	Share-Based	Payment	Transactions	Are	Participating	Securities. The	FSP	addresses	whether	instruments	granted	in	share-based	payment	transactions	are	participating	securities	prior	to	vesting	and,	therefore,	need	to	be	included	in	the earnings	allocation	in	computing	basic	earnings	per	share	under	the	two-class	method	as	described	in

SFAS	No.	128,	Earnings	per	Share.	Under	the	guidance	in	the	FSP,	unvested	share-based	payment	awards	that	contain	non-forfeitable	rights	to	dividends	or	dividend equivalents	(whether	paid	or	unpaid)	are	participating	securities	and	shall	be	included	in	the	computation	of	basic	earnings	per	share	pursuant	to	the	two-class	method. The	FSP	is	effective	beginning	January	1,	2009,	and	for	interim	periods	within	each	year,	and	will	require	all	prior	period	basic	earnings	per	common	share	information presented	to	be	adjusted	retrospectively.	Our	adoption	of	the	FSP's	provisions	is	not	expected	to	materially	affect	our	reported	basic	earnings	per	common	share	for	any prior	period.

In	April	2008,	the	FASB	issued	FASB	Staff	Position	No.	FAS	142-3,	Determination	of	the	Useful	Life	of	Intangible	Assets.	This	FSP	eliminates	the	requirement of	SFAS	No.	142,	Goodwill	and	Other	Intangible	Assets,	that	an	entity	consider,	when	determining	the	useful	life	of	an	acquired	intangible	asset,	whether	the	intangible asset	can	be	renewed	without	substantial	cost	or	material	modifications	to	the	existing	terms	and	conditions	associated	with	the	intangible	asset.	Instead,	the	FSP	replaces the	above-described	useful	life	assessment	criteria	with	a	requirement	that	an	entity	consider	its	own	experience	in	renewing	similar	arrangements.	If	the	entity	has	no relevant	experience,	it	would	consider	market	participant	assumptions	regarding	renewal.	The	provisions	of	the	FSP	are	effective	beginning	January	1,	2009.	We	are currently	evaluating	the	potential	impact	of	application	of	the	FSP's	provisions	on	our	consolidated	financial	condition	and	results	of	operations.

In	March	2008,	the	FASB	issued	SFAS	No.	161,	Disclosures	about	Derivative	Instruments	and	Hedging	Activities.	The	new	standard	requires	specific	disclosures with	respect	to	the	classification	and	amounts	of	derivative	financial	instruments	in	a	company's	financial	statements;	the	accounting	treatment	for	derivative	instruments and	related	hedged	items;	and	the	impact	of	derivative	instruments	and	related	hedged	items	on	a	company's	financial	condition,	financial	performance	and	cash	flows. The	provisions	of	this	new	standard	are	effective	beginning	January	1,	2009.	Because	the	new	standard	impacts	our	disclosure	and	not	our	accounting	treatment	for derivative	instruments	and	related	hedged	items,	our	adoption	of	the	standard	for	the	first	quarter	of	2009	will	not	affect	our	consolidated	financial	condition	or	results	of operations.

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	condition	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.	Specifically,	contingent	consideration	and	acquired	contingencies,	if	they	can	be	reasonably	estimated,	must	be	recorded	at fair	value	on	the	acquisition	date,	with	subsequent	changes	in	fair	value	generally	recognized	in	current	earnings.	In	addition,	acquisition	costs	and	most	restructuring costs	will	be	expensed	as	incurred.	Finally,	changes	after	the	measurement	period	in	deferred	tax	asset	valuation	allowances	and	income	tax	uncertainties	recorded	in connection	with	an	acquisition	will	be	recorded	in	income	tax	expense.	The	provisions	of	SFAS	No.	141(R)	are	effective	prospectively	beginning	January	1,	2009	for business	combinations	completed	after	that	date,	and	our	adoption	of	the	standard	is	expected	to	have	a	significant	impact	on	goodwill	recorded	in	connection	with	future acquisitions	and	on	our	earnings	subsequent	to	an	acquisition.

# Note	2.				Acquisitions	and	Divestitures

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	at	that	date.	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	business	were included	in	our	consolidated	financial	statements	beginning	on	July	2,	2007.

The	aggregate	purchase	price	of	$4.4	billion	was	allocated	to	the	assets	acquired	and	the	liabilities	assumed	based	on	their	fair	values	as	of	the	acquisition	date. Goodwill	of	approximately	$2.71	billion	was	recorded	in	connection	with	the	allocation,	as	were	customer	relationship,	core	deposit	and	other	intangible	assets	of approximately	$1.43	billion.

During	2008,	in	connection	with	the	acquisition,	we	incurred	and	recorded	merger	and	integration	costs	of	approximately	$115	million	in	our	consolidated statement	of	income,	compared	to	approximately	$198	million	during	the	second	half	of	2007.	These	costs	consisted	only	of	direct	and	incremental	costs	to	integrate	the acquired	Investors	Financial	business	into	our	operations,	and	did	not	include	ongoing	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	as	additional	goodwill.	Payment	of	liabilities	associated	with	contract	terminations	and	severance	was	substantially	completed	by	the	end	of	2008.	The liability	related	to	lease	abandonments	will	be	amortized	over	the	terms	of	the	related	leases,	which	is	approximately	twelve	years.

The	following	table	presents	the	activity	related	to	these	liabilities	for	2007	and	2008.

|  | Contract |  | Lease |  |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | terminations | Severance | abandonments | Total |
| Balance\ton\tJuly\t2,\t2007 | $10 | $26 | $31 | $67 |
| Payments | — | (6) | — | (6) |
| Balance\tat\tDecember\t31,\t2007 | $10 | $20 | $31 | $61 |
| Payments | (10) | (6) | — | (16) |
| Other\tadjustments | — | (8) | 4 | (4) |
| Balance\tat\tDecember\t31,\t2008 | — | $6 | $35 | $41 |

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	the	acquired	business	were	included	in	our	consolidated	financial	statements	beginning	on	March	2,	2007.

# Note	3.				Investment	Securities

|  | 2008 | 2008 | 2008 | 2008 |  | 2007 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Gross\nUnrealized | Gross\nUnrealized |  |  | Gross\nUnrealized | Gross\nUnrealized |  |
|  | Amortized |  |  | Fair | Amortized |  |  | Fair |
| (In\tmillions) | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value |
| Available\tfor\tsale: |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $11,577 | $21 | $19 | $11,579 | $8,163 | $32 | $14 | $8,181 |
| Mortgage-backed\tsecurities | 10,775 | 129 | 106 | 10,798 | 14,631 | 54 | 100 | 14,585 |
| Asset-backed\tsecurities | 25,049 | 8 | 5,633 | 19,424 | 26,100 | 2 | 1,033 | 25,069 |
| Collateralized\tmortgage\tobligations | 1,837 | 7 | 403 | 1,441 | 12,018 | 41 | 167 | 11,892 |
| State\tand\tpolitical\tsubdivisions | 6,230 | 105 | 623 | 5,712 | 5,756 | 79 | 22 | 5,813 |
| Other\tdebt\tinvestments | 4,816 | 51 | 144 | 4,723 | 4,041 | 27 | 27 | 4,041 |
| Money-market\tmutual\tfunds | 344 | — | — | 344 | 243 | — | — | 243 |
| Other\tequity\tsecurities | 158 | 3 | 19 | 142 | 479 | 24 | 1 | 502 |
| Total | $60,786 | $324 | $6,947 | $54,163 | $71,431 | $259 | $1,364 | $70,326 |
| Held\tto\tmaturity\tpurchased\tunder\tAMLF:\nAsset-backed\tcommercial\tpaper(1) | $6,087 | $13 | — | $6,100 |  |  |  |  |
| Held\tto\tmaturity: |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |  |
| Direct\tobligations | $501 | $27 |  | $528 | $757 | $9 | $1 | $765 |
| Mortgage-backed\tsecurities | 810 | 17 |  | 827 | 940 | 7 | 6 | 941 |
| Asset-backed\tsecurities | 3,986 | 38 | $412 | 3,612 |  |  |  |  |
| Collateralized\tmortgage\tobligations | 9,979 | 29 | 1,159 | 8,849 | 2,190 | 5 | 24 | 2,171 |
| State\tand\tpolitical\tsubdivisions | 382 | 4 | — | 386 | 180 | 2 | — | 182 |
| Other\tinvestments | 109 | — | — | 109 | 166 | — | — | 166 |
| Total | $15,767 | $115 | $1,571 | $14,311 | $4,233 | $23 | $31 | $4,225 |

(1) See	note	8	for	a	description	of	the	accounting	for	asset-backed	commercial	paper	purchased	under	the	Asset-Backed	Commercial	Paper	Money	Market	Mutual Fund	Liquidity	Facility,	or	AMLF.

During	the	fourth	quarter	of	2008,	management	reassessed	its	classification	of	certain	asset-	and	mortgage-backed	securities	carried	in	the	available-for-sale portfolio,	and	reclassified	securities	available	for	sale	with	an	amortized	cost	of	$14.6	billion	and	a	fair	value	of	$12.3	billion	to	securities	held	to	maturity.	No	gain	or loss	was	recognized	at	the	time	of	reclassification.	The	related	pre-tax	unrealized	loss	of	$2.27	billion,	or	$1.39	billion	after-tax,	recorded	in	other	comprehensive income,	or	OCI,	remained	in	OCI	and	is	being	amortized	as	an	adjustment	of	the	yield	of	the	reclassified	securities	over	their	remaining	terms.	The	securities	were reclassified	at	their	then	fair	value	of	$12.3	billion,	and	this	fair	value	was	established	as	the	adjusted	amortized	cost	of	the	reclassified	securities.	The	resulting	discount is	being	accreted	as	an	adjustment	of	the	yield	of	the	reclassified	securities	over	their	remaining	terms.	As	a	result,	the	reclassification	will	have	no	ultimate	impact	on our	consolidated	results	of	operations.	Management	considers	the	held-to-maturity	classification	to	be	appropriate	because	it	has	the	ability	and	the	intent	to	hold	these securities	to	their	maturity.	Information	with	respect	to	the	after-tax	unrealized	loss	related	to	the	reclassified	securities	recorded	in	OCI	is	provided	in	note	13.

Aggregate	investment	securities	carried	at	$42.74	billion	and	$39.84	billion	at	December	31,	2008	and	2007,	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,	2008:

|  | Less	than	12<br>continuous	months | Less	than	12<br>continuous	months | 12	continuous<br>months	or	longer | 12	continuous<br>months	or	longer | Total | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Gross |  | Gross |  | Gross |
|  | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized |
| (In\tmillions) | Value | Losses | Value | Losses | Value | Losses |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |
| Direct\tobligations | $753 | $8 | $456 | $11 | $1,209 | $19 |
| Mortgage-backed\tsecurities | 1,395 | 30 | 1,479 | 76 | 2,874 | 106 |
| Asset-backed\tsecurities | 7,003 | 908 | 15,135 | 5,137 | 22,138 | 6,045 |
| Collateralized\tmortgage\tobligations | 4,648 | 878 | 3,622 | 684 | 8,270 | 1,562 |
| State\tand\tpolitical\tsubdivisions | 2,010 | 515 | 317 | 108 | 2,327 | 623 |
| Other\tdebt\tinvestments | 1,516 | 80 | 262 | 64 | 1,778 | 144 |
| Other\tequity\tsecurities | 132 | 17 | 11 | 2 | 143 | 19 |
| Total | $ 17,457 | $2,436 | $ 21,282 | $6,082 | $38,739 | $8,518 |

We	recorded	other-than-temporary	impairment	of	$122	million	for	2008,	compared	to	$34	million	for	2007,	which	resulted	from	our	impairment	analysis	process. As	described	in	note	1,	management	regularly	reviews	the	fair	values	of	investment	securities	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	and	the	length	of	time	that	a	security's	cost	basis has	exceeded	its	fair	value,	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,	and	excluding	the	securities	for	which	other-than-temporary	impairment	was	recorded	during	2008,	management	considers	the	aggregate	decline	in	fair	value	of the	remaining	securities	and	the	resulting	gross	unrealized	losses	of	$8.52	billion	related	to	3,106	securities	at	December	31,	2008	to	be	temporary	and	not	the	result	of any	material	changes	in	the	credit	characteristics	of	the	securities.	Management	continues	to	believe	that	it	is	probable	that	we	will	collect	all	principal	and	interest according	to	underlying	contractual	terms,	and	has	the	ability	and	the	intent	to	hold	the	securities	until	recovery	in	market	value.

Gains	and	losses	related	to	investment	securities	were	as	follows	for	the	years	indicated:

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Gross\tgains\tfrom\tsales\tof\tavailable-for-sale\tsecurities | $100 | $24 | $33 |
| Gross\tlosses\tfrom\tsales\tof\tavailable-for-sale\tsecurities | (32) | (17) | (18) |
| Other-than-temporary\timpairment\twrite-downs | (122) | (34) | \t — |
| Net\tgains\t(losses) | $(54) | $(27) | $15 |

Contractual	maturities	of	debt	investment	securities	were	as	follows	as	of	December	31,	2008:

|  | Under	1 | 1	to	5 | 6	to	10 | Over	10 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | Year | Years | Years | Years |
| Available\tfor\tsale: |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |
| Direct\tobligations | $10,615 | $88 | $212 | $664 |
| Mortgage-backed\tsecurities | 129 | 2,755 | 2,314 | 5,600 |
| Asset-backed\tsecurities | 545 | 9,449 | 5,153 | 4,277 |
| Collateralized\tmortgage\tobligations | 1 | 577 | 94 | 769 |
| State\tand\tpolitical\tsubdivisions | 289 | 2,322 | 1,624 | 1,477 |
| Other\tinvestments | 2,171 | 1,814 | 646 | 92 |
| Total | $13,750 | $17,005 | $10,043 | $ 12,879 |
| Held\tto\tmaturity\tpurchased\tunder\tAMLF:\nAsset-backed\tcommercial\tpaper | $6,087 | — | — | — |
| Held\tto\tmaturity: |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |
| Direct\tobligations |  | $501 |  |  |
| Mortgage-backed\tsecurities |  | — | $32 | $778 |
| Asset-backed\tsecurities | $269 | 3,061 | 5 | 651 |
| Collateralized\tmortgage\tobligations | 403 | 4,208 | 1,861 | 3,507 |
| State\tand\tpolitical\tsubdivisions | 100 | 264 | 15 | 3 |
| Other\tinvestments | 105 | 4 | — | — |
| Total | $877 | $8,038 | $1,913 | $4,939 |

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

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Commercial\tand\tfinancial: |  |  |
| U.S. | $6,397 | $9,402 |
| Non-U.S. | 890 | 4,420 |
| Lease\tfinancing: |  |  |
| U.S. | 407 | 396 |
| Non-U.S. | \t 1,437 | 1,584 |
| Total\tloans | \t 9,131 | \t 15,802 |
| Less\tallowance\tfor\tloan\tlosses | (18) | (18) |
| Net\tloans | $9,113 | $15,784 |

U.S.	commercial	and	financial	loans	at	December	31,	2008	included	approximately	$800	million	of	commercial	real	estate	loans	purchased	from	certain customers	pursuant	to	indemnified	repurchase	agreements	with	an	affiliate	of	Lehman	Brothers.	The	loans,	which	are	primarily	collateralized	by	direct	and	indirect interests	in	commercial	real	estate,	were	recorded	at	their	then	current	fair	value,	based	on	management's	expectation	with	respect	to	collection	of	principal	and	interest using	appropriate	market	discount	rates	as	of	the	date	of	acquisition.	No	additional	valuation	adjustments	or	provisions	for	loss	were	recorded	since	the	initial	acquisition of	these	loans.	An	aggregate	of	approximately	$219	million	of	these	loans	were	past-due	and	still	accruing	interest	as	of	December	31,	2008.

Aggregate	securities	settlement	advances	and	overdrafts	included	in	commercial	and	financial	loans	in	the	table	above	were	$4.64	billion	and	$11.65	billion	at December	31,	2008	and	2007,	respectively.	There	were	no	changes	in	the	allowance	for	loan	losses	for	any	of	the	years	ended	December	31,	2008,	2007	or	2006.

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

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Net\trental\tincome\treceivable | $2,929 | $3,264 |
| Estimated\tresidual\tvalues | 156 | 222 |
| Unearned\tincome | (1,241) | (1,506) |
| Investment\tin\tleveraged\tleases | 1,844 | 1,980 |
| Less\trelated\tdeferred\tincome\ttaxes | (535) | (1,177) |
| Net\tinvestment\tin\tleveraged\tleases | $1,309 | $803 |

# Note	5.				Goodwill	and	Other	Intangible	Assets

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

|  | Investment | Investment |  |
| :--- | :--- | :--- | :--- |
| (In\tmillions) | Servicing | Management | Total |
| Balance\tat\tDecember\t31,\t2006 | $1,376 | $8 | $1,384 |
| Acquisition\tof\tCurrenex | 437 | — | 437 |
| Acquisition\tof\tInvestors\tFinancial | 2,710 | — | \t 2,710 |
| Other\tacquisitions | 26 | — | 26 |
| Foreign\tcurrency\ttranslation\tadjustments | 10 | — | 10 |
| Balance\tat\tDecember\t31,\t2007 | $4,559 | $8 | $4,567 |
| Acquisitions | 59 | — | 59 |
| Adjustments\tof\tgoodwill\tpreviously\trecorded | (28) | — | (28) |
| Foreign\tcurrency\ttranslation\tand\tother\tadjustments,\tnet | (69) | (2) | (71) |
| Balance\tat\tDecember\t31,\t2008 | $4,521 | $6 | $4,527 |

The	2008	adjustments	of	goodwill	previously	recorded	resulted	primarily	from	changes	in	purchase	accounting	associated	with	the	acquisitions	of	Investors Financial	and	Currenex.

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

|  | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross |  | Net | Gross |  | Net |
|  | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying |
| (In\tmillions) | Amount | Amortization | Amount | Amount | Amortization | Amount |
| Customer\trelationships | $ 1,573 | $(277) | $ 1,296 | $ 1,695 | $(253) | $ 1,442 |
| Core\tdeposits | 500 | (34) | 466 | 500 | (11) | 489 |
| Other | 170 | (81) | 89 | 75 | (16) | 59 |
| Total | $ 2,243 | $(392) | $ 1,851 | $ 2,270 | $(280) | $ 1,990 |

# Note	6.				Other	Assets

Other	assets	consisted	of	the	following	as	of	December	31:

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Unrealized\tgains\ton\tderivative\tfinancial\tinstruments | $11,943 | $4,513 |
| Collateral\tdeposits | 2,709 | 25 |
| Equity\tinvestments\tin\tjoint\tventures\tand\tother\tunconsolidated\tentities | 412 | 398 |
| Other | 1,946 | 2,143 |
| Total | $17,010 | $7,079 |

At	December	31,	2008	and	2007,	we	had	$6.91	billion	and	$20.90	billion,	respectively,	of	time	deposits	outstanding.	Non-U.S.	time	deposits	were	$4.80	billion and	$3.71	billion	at	December	31,	2008	and	2007,	respectively.	Substantially	all	U.S.	and	non-U.S.	time	deposits	were	in	amounts	of	$100,000	or	more.	The	scheduled maturities	of	time	deposits	were	as	follows	at	December	31,	2008:

| (In	millions) |  |
| :--- | :--- |
| 2009 | $6,898 |
| 2010 | 7 |
| 2011 | — |
| 2012 | 3 |
| 2013 | — |
| After\t2013 | — |
| Total | $6,908 |
| (In\tmillions) |  |
| 3\tmonths\tor\tless | $1,425 |
| 4\tmonths\tto\ta\tyear | 682 |
| Over\tone\tyear | 3 |
| Total | $2,110 |

# Note	8.				Short-Term	Borrowings

Our	short-term	borrowings	include	securities	sold	under	repurchase	agreements,	federal	funds	purchased	and	other	short-term	borrowings,	including	non-recourse borrowings	associated	with	the	AMLF,	discussed	further	in	this	note,	borrowings	associated	with	our	tax-exempt	investment	program,	more	fully	discussed	in	note	12, commercial	paper	issued	by	us,	and	borrowings	under	the	Federal	Reserve's	term	auction	facility.	Collectively,	these	short-term	borrowings	had	weighted-average interest	rates	of	2.21%	and	4.36%	for	the	years	ended	December	31,	2008	and	2007,	respectively.

The	following	table	presents	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:

|  | Federal	Funds	Purchased | Federal	Funds	Purchased | Federal	Funds	Purchased | Repurchase	Agreements | Repurchase	Agreements | Repurchase	Agreements |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| Balance\tat\tDecember\t31 | $1,082 | $425 | $2,147 | $11,154 | $14,646 | $19,147 |
| Maximum\toutstanding\tat\tany\tmonth\tend | \t 4,853 | \t 5,007 | \t 8,040 | \t 17,274 | \t 20,108 | \t 23,024 |
| Average\toutstanding\tduring\tthe\tyear | \t 1,026 | \t 1,667 | \t 2,777 | \t 14,261 | \t 16,132 | \t 20,883 |
| Weighted\taverage\tinterest\trate\tat\tend\tof\tyear | .01% | 3.06% | 5.18% | .01% | 3.40% | 4.43% |
| Weighted\taverage\tinterest\trate\tduring\tthe\tyear | 1.77 | 5.15 | 5.04 | 1.24 | 4.35 | 4.38 |

|  | Investment	Program | Tax-Exempt |  | Commercial	Paper | Commercial	Paper | Commercial	Paper |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| Balance\tat\tDecember\t31 | $2,858 | $3,082 | $1,786 | $2,588 | $2,355 | $998 |
| Maximum\toutstanding\tat\tany\tmonth\tend | \t 3,068 | \t 3,129 | \t 1,786 | 2,588 | 2,355 | 1,366 |
| Average\toutstanding\tduring\tthe\tyear | \t 2,946 | \t 2,556 | 636 | 1,784 | 1,478 | 1,211 |
| Weighted\taverage\tinterest\trate\tat\tend\tof\tyear | 2.80% | 3.62% | 4.01% | .82% | 4.23% | 5.24% |
| Weighted\taverage\tinterest\trate\tduring\tthe\tyear | 3.73 | 3.46 | 3.38 | 2.78 | 5.12 | 5.00 |

| (In	millions) |  |
| :--- | :--- |
| Collateralized\twith\tsecurities\tpurchased\tunder\tresale\tagreements | $65 |
| Collateralized\twith\tinvestment\tsecurities | 11,089 |
| Total | $11,154 |

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 $11.38	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,	2008,	is	presented	in	the	following	table.	The	table	excludes	repurchase	agreements	collateralized	with securities	purchased	under	resale	agreements.

|  | U.S.	Government | U.S.	Government | Repurchase |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Securities\tSold | Securities\tSold | Agreements |  |
|  | Amortized |  | Amortized |  |
| (Dollars\tin\tmillions) | Cost | Fair\tValue | Cost | Rate |
| Overnight\tmaturity | $ 11,243 | $ 11,376 | $ 11,089 | .01% |

We	have	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	$17.52	billion	for	2008	and	$13.38	billion	for	2007.

In	September	2008,	the	Federal	Reserve	Bank	of	Boston	instituted	the	Asset-Backed	Commercial	Paper	Money	Market	Mutual	Fund	Liquidity	Facility,	or AMLF.	The	AMLF	is	designed	to	assist	in	restoring	liquidity	to	the	asset-backed	commercial	paper	markets	and	assist	registered	money	market	mutual	funds	in maintaining	adequate	liquidity	to	meet	investor	redemption	demand.	The	facility	is	authorized	by	federal	regulations	which	permit	the	Federal	Reserve,	in	unusual circumstances,	to	authorize	Reserve	Banks	to	extend	credit	to	certain	parties	that	are	unable	to	obtain	adequate	credit	accommodations.

The	AMLF,	which	was	originally	intended	to	expire	on	January	30,	2009,	but	was	extended	by	the	Federal	Reserve	to	April	30,	2009,	allows	a	depository institution	or	bank	holding	company	to	borrow	funds	on	a	non-recourse	basis	from	the	Federal	Reserve	Bank's	discount	window	in	order	to	fund	purchases	of	qualifying asset-backed	commercial	paper	from	an	eligible	money	market	mutual	fund	or	other	eligible	entity	under	certain	conditions.	Borrowings	under	the	facility	are	extended on	a	non-recourse	basis	at	fixed	interest	rates	equal	to	the	primary	credit	rate	in	effect	at	the	Federal	Reserve	Bank	of	Boston	at	the	time	of	the	borrowing.	The	terms	and conditions	of	the	AMLF	stipulate	that	the	term	of	the	borrowing	must	equal	the	maturity	of	the	eligible	asset-backed	commercial	paper	collateralizing	the	borrowing.

We	participated	in	the	AMLF	during	the	third	and	fourth	quarters	of	2008	to	provide	liquidity	to	certain	eligible	unaffiliated	money	market	mutual	funds.	As	of December	31,	2008,	we	carried	asset-backed	commercial	paper	of	$6.09	billion	purchased	under	this	facility	in	our	consolidated	statement	of	condition,	and	had corresponding	outstanding	borrowings	under	the	AMLF	totaling	$6.04	billion.	For	the	period	from	commencement	of	our	participation	in	the	AMLF	through December	31,	2008,	the	average	asset-backed	commercial	paper	purchased	and	corresponding	outstanding	borrowings	were	approximately	$33.31	billion	and	$33.23 billion,	respectively.	The	commercial	paper	is	purchased	at	the	fund's	cost,	and	an	adjustment	to	the	commercial	paper	purchased	for	the	difference	between	its	purchase price	and	its	fair	value	at	the	time	of	purchase	is	recorded	in	our	consolidated	statement	of	income,	with	an	offsetting	adjustment	to	the	corresponding	borrowing.	As	a result,	there	is	no	net	impact	on	our	results	of	operations.	Thereafter,	the	purchase	discount	or	premium	is	accreted	or	amortized	into	results	of	operations	over	the	term of	the	commercial	paper	as	a	yield	adjustment	to	the	carrying	value	of	the	asset.	The	commercial	paper	is	reported	separately	in	our	consolidated	statement	of	condition in	investment	securities	held	to	maturity.	The	corresponding	short-term	borrowings	are	also	reported	separately.

As	described	above,	the	borrowings	are	extended	on	a	non-recourse	basis.	As	such,	there	is	no	credit	or	market	risk	exposure	to	us	on	the	assets,	and	as	a	result	the terms	of	the	AMLF	permit	exclusion	of	the	assets	from	regulatory	leverage	and	risk-based	capital	calculations.	The	interest	rate	on	the	borrowings	is	set	by	the	Federal Reserve	Bank,	and	we	earn	net	interest	revenue	by	earning	a	spread	on	the	difference	between	the	yield	we	earn	on	the	assets	and	the	rate	we	pay	on	the	borrowings.	For 2008,	we	earned	net	interest	revenue	associated	with	this	facility	of	approximately	$68	million.

Separately,	we	currently	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,	2008	and	2007,	$2.59	billion	and	$2.36	billion,	respectively,	of	commercial	paper	were	outstanding.	In	addition,	State	Street	Bank	currently has	Board	authority	to	issue	bank	notes	up	to	an	aggregate	of	$5	billion,	including	up	to	$2.48	billion	of	senior	notes	under	the	FDIC's	Temporary	Liquidity	Guarantee Program,	instituted	by	the	FDIC	in	October	2008	for	qualified	senior	debt	issued	through	June	30,	2009,	and	up	to	$1	billion	of	subordinated	bank	notes	(see	note	10). At	December	31,	2008	and	2007,	no	notes	payable	were	outstanding,	and	at	December	31,	2008,	all	$5	billion	was	available	for	issuance.

State	Street	Bank	currently	maintains	a	line	of	credit	of	CAD	$800	million,	or	approximately	$657	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,	2008,	no	balance	was	due	on	this	line	of credit.

# Note	9.				Restructuring	Charges

In	December	2008,	we	implemented	a	plan	to	reduce	our	expenses	from	operations	and	support	our	long-term	growth.	In	connection	with	this	plan,	we	recorded aggregate	restructuring	charges	of	$306	million	in	our	consolidated	statement	of	income.	The	primary	component	of	the	plan	was	an	involuntary	reduction	of approximately	7%	of	our	global	workforce,	which	reduction	we	expect	to	be	substantially	completed	by	the	end	of	the	first	quarter	of	2009.	Other	components	of	the plan	included	costs	related	to	lease	and	software	license	terminations,	restructuring	of	agreements	with	technology	providers	and	other	costs.

Of	the	aggregate	restructuring	charges	of	$306	million,	$243	million	related	to	severance,	a	portion	of	which	will	be	paid	in	a	lump	sum	or	over	a	defined	period, and	a	portion	of	which	will	provide	related	benefits	and	outplacement	services	for	approximately	2,100	employees	identified	for	involuntary	termination	in	connection with	the	plan;	$49	million	related	to	future	lease	obligations	and	write-offs	of	capitalized	assets,	including	$23	million	for	impairment	of	other	intangible	assets;	$10 million	of	costs	associated	with	information	technology	and	$4	million	of	other	restructuring	costs.	The	severance	component	included	$47	million	related	to	accelerated vesting	of	equity-based	compensation.	In	December	2008,	approximately	620	employees	were	involuntarily	terminated	and	left	State	Street.

The	following	table	presents	the	activity	in	the	related	balance	sheet	reserve	for	2008.

|  |  | Write- | Information |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | Severance | Offs | Technology | Other | Total |
| Initial\taccrual | $250 | $42 | $10 | $\t\t4 | $306 |
| Payments\tand\tadjustments | (20) | (25) | (10) | (1) | (56) |
| Balance\tat\tDecember\t31,\t2008 | $230 | $17 | — | $3 | $250 |

| (Dollars	in	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Statutory\tbusiness\ttrusts: |  |  |
| 8.25%\tfixed-to-floating-rate\tsubordinated\tnotes\tdue\tto\tState\tStreet\tCapital\tTrust\tIII\tin\t2042 | $500 |  |
| Floating-rate\tsubordinated\tnotes\tdue\tto\tState\tStreet\tCapital\tTrust\tIV\tin\t2067 | 800 | $800 |
| Floating-rate\tsubordinated\tnotes\tdue\tto\tState\tStreet\tCapital\tTrust\tI\tin\t2028(2) | 155 | 155 |
|  | — | 25 |
| Parent\tcompany\tand\tnon-banking\tsubsidiary\tissuances: |  |  |
| Long-term\tcapital\tleases | 746 | 486 |
| 5.375%\tnotes\tdue\t2017 | 450 | 450 |
| 7.65%\tsubordinated\tnotes\tdue\t2010(1) | 313 | 304 |
| Floating-rate\tnotes\tdue\t2012 | 250 | 250 |
| 7.35%\tnotes\tdue\t2026 | 150 | 150 |
| 9.50%\tmortgage\tnote\tdue\t2009 | 1 | 3 |
| State\tStreet\tBank\tissuances: |  |  |
| 5.25%\tsubordinated\tnotes\tdue\t2018(1) | 455 | 413 |
| 5.30%\tsubordinated\tnotes\tdue\t2016 | 399 | 400 |
| Floating-rate\tsubordinated\tnotes\tdue\t2015(2) | 200 | 200 |
| Total\tlong-term\tdebt | $4,419 | $3,636 |

(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,	2008	and	2007,	we	recorded	an	increase	of	$70	million	and	$19	million,	respectively,	in	the carrying	value	of	long-term	debt.

(2) We	have	entered	into	interest-rate	swap	contracts,	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	17	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,	2008,	we	had	three	statutory	business	trusts,	State	Street	Capital	Trusts	I,	III	and	IV,	which	as	of	December	31,	2008,	collectively	had	issued $1.45	billion	of	trust	preferred	capital	securities.

Proceeds	received	by	each	of	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.	Each	of	the	trusts	is	wholly-owned	by	us;	however,	we	do	not	record	the	trusts	in our	consolidated	financial	statements	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	provided	in	note	16.

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	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 1/100th,	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 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	1/100th,	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 trust	in	our	consolidated	financial	statements.	The	junior	subordinated	debentures	qualify	for	inclusion	in	tier	1	regulatory	capital.

# Parent	Company	and	Non-Banking	Subsidiary	Issuances:

At	December	31,	2008	and	2007,	$470	million	and	$486	million,	respectively,	were	included	in	long-term	debt	related	to	the	capital	leases	for	One	Lincoln	Street and	the	One	Lincoln	Street	parking	garage.	In	addition,	at	December	31,	2008,	long-term	debt	included	$263	million	related	to	an	office	facility	in	the	U.K.	See	note	20 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,	which	is	fully	collateralized	by	property,	will	be	entirely	paid	off	in	2009.

# State	Street	Bank	Issuances:

State	Street	Bank	currently	has	Board	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,	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.	The	notes	qualify	for	inclusion	in	tier	2	regulatory	capital.

# Note	11.				Commitments	and	Contingencies

# Credit-Related	Commitments	and	Contingencies:

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

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

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Indemnified\tsecurities\tfinancing | $324,590 | $558,368 |
| Liquidity\tasset\tpurchase\tagreements | 28,800 | 35,339 |
| Unfunded\tcommitments\tto\textend\tcredit | 20,981 | 17,533 |
| Standby\tletters\tof\tcredit | 6,061 | 4,711 |

Approximately	81%	of	the	unfunded	commitments	to	extend	credit	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.

On	behalf	of	our	customers,	we	lend	their	securities	to	creditworthy	brokers	and	other	institutions.	We	generally	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	with	an	aggregate	fair	value	of	$333.07	billion	and	$572.93	billion	as	collateral	for	indemnified	securities	on	loan	at	December	31, 2008	and	2007,	respectively,	presented	in	the	table	above.

The	collateral	held	by	us	is	invested	on	behalf	of	our	customers.	In	certain	cases,	the	collateral	is	invested	in	third-party	repurchase	agreements,	for	which	we indemnify	the	customer	against	loss	of	the	principal	invested.	We	require	the	repurchase	agreement	counterparty	to	provide	collateral	in	an	amount	equal	to	or	in	excess of	100%	of	the	amount	of	the	repurchase	agreement.	The	indemnified	repurchase	agreements	and	the	related	collateral	are	not	recorded	in	our	consolidated	statement	of condition.	Of	the	collateral	of	$333.07	billion	at	December	31,	2008	and	$572.93	billion	at	December	31,	2007	referenced	above,	$68.37	billion	at	December	31,	2008 and	$106.13	billion	at	December	31,	2007	was	invested	in	indemnified	repurchase	agreements.	We	held,	as	agent,	cash	and	securities	with	an	aggregate	fair	value	of $71.87	billion	and	$111.02	billion	as	collateral	for	indemnified	investments	in	repurchase	agreements	at	December	31,	2008	and	December	31,	2007,	respectively.

# Asset-Backed	Commercial	Paper	Program:

In	the	normal	course	of	our	business,	we	provide	liquidity	and	credit	enhancement	to	an	asset-backed	commercial	paper	program	sponsored	and	administered	by us,	described	in	note	12.	The	commercial	paper	issuances	and	commitments	of	the	commercial	paper	conduits	to	provide	funding	are	supported	by	liquidity	asset purchase	agreements	and	back-up	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	$23.59	billion	at	December	31,	2008, and	are	included	in	the	preceding	table.	Our	commitments	under	standby	letters	of	credit	totaled	$1.00	billion	at	December	31,	2008,	and	are	also	included	in	the preceding	table.

# 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	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	aggregate	payments	of	$417	million for	settlement	agreements,	the	reserve	totaled	approximately	$208	million	at	December	31,	2008.

We	are	involved	in	various	regulatory,	governmental	and	law	enforcement	inquiries	and	subpoenas,	as	well	as	legal	proceedings,	that	arise	in	the	normal	course of	business.	In	the	opinion	of	management,	after	discussion	with	counsel	and	based	on	the	information	currently	available,	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	condition	or results	of	operations	in	future	periods.

# Tax	Contingencies:

In	the	normal	course	of	our	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	taxable	income	among	tax	jurisdictions.

The	IRS	has	completed	its	review	of	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	disallowed	tax	losses	resulting	from	these	leases.	During	the	second	quarter	of	2008, while	we	were	engaged	in	settlement	discussions	with	them,	the	IRS	won	a	court	victory	in	a	SILO	case	involving	other	taxpayers.	Shortly	after	that	decision,	the	IRS suspended	all	SILO	settlement	discussions	and,	during	the	third	quarter	of	2008,	issued	a	standard	SILO	settlement	offer	to	most	taxpayers	that	had	entered	into	such transactions.	After	reviewing	the	settlement	offer,	we	decided	not	to	accept	it	but	to	continue	to	pursue	our	appeal	rights	within	the	IRS.	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.

In	accordance	with	SFAS	No.	13,	Accounting	for	Leases,	we	originally	recorded	revenue	and	deferred	tax	liabilities	with	respect	to	our	SILO	transactions	based on	projected	pre-tax	and	tax	cash	flows.	In	consideration	of	the	terms	of	the	settlement	offer	and	the	context	in	which	it	was	issued,	during	the	third	quarter	of	2008,	we revised	our	projections	of	the	timing	and	amount	of	tax	cash	flows	and	reflected	those	revisions	in	our	leveraged	lease	accounting	under	FSP	FAS	No.	13-2,	A	Change or	Projected	Change	in	the	Timing	of	Cash	Flows	Relating	to	Income	Taxes	Generated	by	a	Leveraged	Lease	Transaction.	We	also	substantially	reserved	for	tax-related interest	expense	that	may	be	incurred	upon	resolution	of	this	matter.

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, 2008	for	tax	exposures,	including	exposures	related	to	SILO	transactions,	and	related	interest	expense.	If	management	revises	its	evaluation	of	this	tax	position	in	a future	period,	the	effect	of	the	revision	will	be	recorded	in	income	tax	expense	in	that	period.

# Other	Contingencies:

In	the	normal	course	of	our	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,	2008	and	2007,	the	notional	amount	of	these	guarantees	totaled $51.00	billion	and	$44.99	billion,	respectively.	As	of	December	31,	2008,	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	our	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,	2008,	that	would	have	had	a	material	adverse	effect	on	State	Street's	consolidated	financial	condition	or	results	of	operations.

# Note	12.				Securitizations	and	Variable	Interest	Entities

# Tax-Exempt	Investment	Program:

In	the	normal	course	of	our	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	investment	securities	available	for	sale and	other	short-term	borrowings.	We	may	also	provide	liquidity	and	re-marketing	services	to	the	trusts.	As	of	December	31,	2008	and	2007,	we	carried	investment securities	available	for	sale,	composed	of	securities	related	to	state	and	political	subdivisions,	with	a	fair	value	of	$3.05	billion	and	$3.52	billion,	respectively,	and	other short-term	borrowings	of	$2.86	billion	and	$3.08	billion,	respectively,	in	our	consolidated	statement	of	condition	in	connection	with	these	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	8.3	years	at	December	31,	2008,	compared	to	approximately	8.6	years	at	December	31,	2007.	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	the	issuer	or	credit	enhancement	provider,	the	imposition	of	taxability,	or	the	downgrade	of	an asset	held	by	the	trust	below	investment	grade.	Our	commitments	to	the	trusts	under	these	standby	bond	purchase	agreements	totaled	$2.98	billion	at	December	31,	2008, 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 condition	or	results	of	operations	is	expected	to	occur,	because	the	securities	are	already	recorded	at	fair	value	in	our	consolidated	statement	of	condition.

In	the	normal	course	of	our	business,	we	sponsor	and	administer	four	multi-seller	asset-backed	commercial	paper	programs,	or	conduits,	which	had	aggregate total	assets	of	approximately	$23.89	billion	at	December	31,	2008,	and	$28.76	billion	at	December	31,	2007.	The	conduits	obtain	funding	through	the	issuance	of commercial	paper	principally	to	independent	third	parties,	including	the	Federal	Reserve's	Commercial	Paper	Funding	Facility,	or	CPFF,	and	hold	diversified investments,	which	are	primarily	securities	purchased	from	independent	third	parties.	The	investments	are	collateralized	by	mortgages,	student	loans,	automobile	and equipment	loans	and	credit	card	receivables,	among	others.

We	provide	administrative	services	to	each	of	the	conduits,	for	which	we	earn	fees	that	generally	represent	the	residual	earnings	of	the	conduits	after	the	payment of	interest	on	outstanding	commercial	paper	and	other	fees	to	independent	third	parties.	We	earned	fee	revenue	of	approximately	$59	million	for	2008,	$63	million	for 2007	and	$62	million	for	2006,	which	we	recorded	in	processing	fees	and	other	revenue	in	our	consolidated	statement	of	income.

The	following	tables	present	additional	information	with	respect	to	the	composition	of	the	conduits'	asset	portfolios,	in	the	aggregate,	as	of	December	31,	2008 and	2007.	The	weighted-average	maturity	of	the	conduits'	assets	in	the	aggregate	was	approximately	four	years.

# CONDUIT	ASSETS	BY	COLLATERAL	TYPE

|  | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Percent |  | Percent |
|  |  | of\tTotal |  | of\tTotal |
|  |  | Conduit |  | Conduit |
| (Dollars\tin\tbillions) | Amount | Assets | Amount | Assets |
| Australian\tresidential\tmortgage-backed\tsecurities | $3.03 | 13% | $4.71 | 16% |
| European\tresidential\tmortgage-backed\tsecurities | 3.88 | 16 | 4.70 | 16 |
| U.S.\tresidential\tmortgage-backed\tsecurities | 3.49 | 15 | 4.17 | 15 |
| United\tKingdom\tresidential\tmortgage-backed\tsecurities | 1.57 | 7 | 2.26 | 8 |
| Student\tloans | 2.94 | 12 | 3.30 | 11 |
| Automobile\tand\tequipment\tloans | 2.72 | 11 | 2.80 | 10 |
| Credit\tcards | 1.96 | 8 | 2.02 | 7 |
| Other(1) | 4.30 | 18 | 4.80 | 17 |
| Total\tconduit\tassets | $23.89 | 100% | $28.76 | 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.

# CONDUIT	ASSETS	BY	CREDIT	RATING

|  | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Percent |  | Percent |
|  |  | of\tTotal |  | of\tTotal |
|  |  | Conduit |  | Conduit |
| (Dollars\tin\tbillions) | Amount | Assets | Amount | Assets |
| AAA/Aaa | $12.16 | 51% | $17.65 | 61% |
| AA/Aa | 4.36 | 18 | 4.51 | 16 |
| A/A | 2.10 | 9 | 2.26 | 8 |
| BBB/Baa | 2.05 | 9 | 1.51 | 5 |
| BB/Ba | 0.11 | 0 | 0.03 | 0 |
| B/B | 0.23 | 1 | — | 0 |
| CCC/Caa | 0.41 | 2 | — | 0 |
| Not\trated(2) | 2.47 | 10 | 2.80 | 10 |
| Total\tconduit\tassets | $23.89 | 100% | $28.76 | 100% |

(2) These	assets	reflect	structured	transactions.	The	transactions	have	been	reviewed	by	rating	agencies	and	have	been	structured	to	maintain	the	conduits'	P-1	or similar	rating.

# CONDUIT	ASSETS	BY	ASSET	ORIGIN

|  | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Percent |  | Percent |
|  |  | of\tTotal |  | of\tTotal |
|  |  | Conduit |  | Conduit |
| (Dollars\tin\tbillions) | Amount | Assets | Amount | Assets |
| United\tStates | $11.09 | 46% | $12.14 | 42% |
| Australia | 4.30 | 17 | 6.10 | 21 |
| Great\tBritain | 1.97 | 8 | 2.93 | 10 |
| Spain | 1.71 | 7 | 1.90 | 7 |
| Italy | 1.66 | 7 | 1.86 | 7 |
| Portugal | 0.62 | 3 | 0.70 | 2 |
| Germany | 0.57 | 3 | 0.70 | 2 |
| Netherlands | 0.40 | 2 | 0.55 | 2 |
| Belgium | 0.29 | 1 | 0.31 | 1 |
| Greece | 0.27 | 1 | 0.31 | 1 |
| Other | 1.01 | 5 | 1.26 | 5 |
| Total\tconduit\tassets | $23.89 | 100% | $28.76 | 100% |

The	conduits	meet	the	definition	of	a	VIE,	as	defined	by	FIN	46(R).	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	hold	no	direct	or	indirect	ownership	interest	in	the	conduits,	but	we	provide	subordinated financial	support	to	them	through	contractual	arrangements.	Standby	letters	of	credit	absorb	certain	actual	credit	losses	from	the	conduit	assets;	our	commitment	under these	letters	of	credit	totaled	$1.00	billion	and	$1.04	billion	at	December	31,	2008	and	2007,	respectively.	Liquidity	asset	purchase	agreements	provide	liquidity	to	the conduits	in	the	event	they	cannot	place	commercial	paper	in	the	ordinary	course	of	their	business;	these	facilities,	which	require	us	to	purchase	assets	from	the	conduits at	par,	would	provide	the	needed	liquidity	to	repay	maturing	commercial	paper	if	there	was	a	disruption	in	the	asset-backed	commercial	paper	market.	The	aggregate commitment	under	the	liquidity	asset	purchase	agreements	was	approximately	$23.59	billion	and	$28.37	billion	at	December	31,	2008	and	2007,	respectively.	We	did not	accrue	for	any	losses	associated	with	either	our	commitment	under	the	standby	letters	of	credit	or	the	liquidity	asset	purchase	agreements	in	our	consolidated statement	of	condition	at	December	31,	2008	or	2007.

During	the	first	quarter	of	2008,	pursuant	to	the	contractual	terms	of	our	liquidity	asset	purchase	agreements	with	the	conduits,	we	were	required	to	purchase	$850 million	of	conduit	assets.	The	purchase	was	the	result	of	various	factors,	including	the	continued	illiquidity	in	the	commercial	paper	markets.	The	securities	were purchased	at	prices	determined	in	accordance	with	existing	contractual	terms	in	the	liquidity	asset	purchase	agreements,	and	which	exceeded	their	fair	value.

Accordingly,	during	the	first	quarter	of	2008,	the	securities	were	written	down	to	their	fair	value	through	a	$12	million	reduction	of	processing	fees	and	other	revenue	in our	consolidated	statement	of	income,	and	are	carried	at	fair	value	in	securities	available	for	sale	in	our	consolidated	statement	of	condition.	None	of	our	liquidity	asset purchase	agreements	with	the	conduits	were	drawn	upon	during	the	remainder	of	2008,	and	no	draw-downs	on	the	standby	letters	of	credit	occurred	during	2008.

The	conduits	generally	sell	commercial	paper	to	independent	third-party	investors.	However,	we	sometimes	purchase	commercial	paper	from	the	conduits.	As	of December	31,	2008,	we	held	an	aggregate	of	approximately	$230	million	of	commercial	paper	issued	by	the	conduits,	and	$2	million	at	December	31,	2007.	In	addition, approximately	$5.70	billion	of	U.S.	conduit-issued	commercial	paper	had	been	sold	to	the	CPFF.	The	CPFF	is	scheduled	to	expire	on	October	31,	2009.	The	weighted- average	maturity	of	the	conduits'	commercial	paper	in	the	aggregate	was	approximately	25	days	as	of	December	31,	2008,	compared	to	approximately	20	days	as	of December	31,	2007.

Each	of	the	conduits	has	issued	first-loss	notes	to	independent	third	parties,	which	third	parties	absorb	first-dollar	losses	related	to	credit	risk.	Aggregate	first-loss notes	outstanding	at	December	31,	2008	for	the	four	conduits	totaled	$67	million,	compared	to	$32	million	at	December	31,	2007.	Actual	credit	losses	of	the	conduits

would	be	absorbed	by	(1)	the	first-loss	note	holders;	(2)	State	Street	or	other	providers	of	credit	enhancement,	pursuant	to	contractual	requirements;	and	(3)	the	holders of	the	conduits'	commercial	paper.

In	accordance	with	FIN	46(R),	expected	losses,	as	defined,	are	estimated	using	a	financial	model	which	develops	default	and	loss-given-default	scenarios associated	with	the	conduits'	assets.	Expected	losses	are	allocated	to	the	conduits'	variable	interest	holders	based	on	the	order	in	which	actual	losses	would	be	absorbed, as	described	previously.	The	financial	model	calculates	a	probability	of	default	based	on	specific	scenarios.	The	model	also	estimates	the	loss-given-default	for	the various	conduit	asset	classes.	The	probability-of-default	estimates,	coupled	with	the	loss-given-default	estimates,	form	the	basis	on	which	expected	losses	are	calculated. The	model	derives	the	probability-of-default	and	loss-given-default	factors	used	to	estimate	expected	losses	from	information	provided	by	independent	third-party	rating agencies.	Based	on	the	determination	and	allocation	of	expected	losses	at	December	31,	2008,	State	Street	does	not	absorb	a	majority	of	the	expected	losses	for	any	of the	conduits	and,	therefore,	does	not	consolidate	any	of	them.

The	probability-of-default	and	loss-given-default	estimates	vary	by	conduit	asset	class	and	the	credit	ratings	of	individual	conduit	assets,	and	are	not	necessarily affected	by	the	current	fair	value	of	these	assets,	which	also	reflect	liquidity	risk.	If	rating	downgrades	occur,	the	asset	composition	changes	significantly.	In	addition,	if defaults	occur	on	the	conduits'	assets,	the	current	level	of	first-loss	notes	may	be	insufficient	to	absorb	a	majority	of	the	conduits'	expected	losses.	Similarly,	if	a	conduit asset	would	experience	a	default	or	credit	rating	downgrade,	subject	to	certain	conditions,	the	liquidity	asset	purchase	agreements	could	be	invoked	by	the	conduit, requiring	State	Street	to	purchase	the	assets	from	the	conduits	at	prices	which	may	exceed	the	assets'	fair	values.	If	that	occurred,	we	would	be	required	to	recognize	a loss	upon	purchase	of	the	assets.	Any	loss	from	a	credit	default	would	first	be	offset	by	the	level	of	funding	provided	by	the	first-loss	note	holders.	The	aggregate	fair value	of	the	conduits'	assets	at	December	31,	2008	and	2007	was	$17.75	billion	and	$27.95	billion,	respectively.

We	have	entered	into	derivative	financial	instruments,	composed	of	interest-rate	contracts	and	foreign	exchange	forward	contracts,	with	certain	of	the	conduits. The	purpose	of	these	derivatives	is	generally	to	mitigate	basis	and	foreign	exchange	risk,	respectively,	for	the	conduits.	The	interest-rate	contracts,	which	are	primarily basis	swaps,	mitigate	the	differential	between	the	commercial	paper	funding	costs	and	comparable	floating-rate	asset	benchmark	rates	(generally	LIBOR),	and	the foreign	exchange	contracts	align	the	currencies	of	the	assets	and	their	corresponding	commercial	paper	funding.	The	total	notional	amounts	of	the	interest-rate	basis swap	and	foreign	exchange	contracts	totaled	$13.15	billion	and	$13.44	billion	at	December	31,	2008	and	$11.00	billion	and	$8.92	billion	at	December	31,	2007, respectively.	The	notional	amounts	of	these	derivatives	are	included	in	the	table	of	notional	amounts	of	derivative	financial	instruments	presented	in	note	17.

Under	existing	accounting	standards,	if	we	were	required	to	consolidate	the	conduits	into	our	consolidated	financial	statements,	based	on	changes	in	assumptions or	future	events,	the	conduits'	assets	and	liabilities	would	be	consolidated	at	their	respective	fair	values.	We	would	recognize	a	loss	if	the	fair	value	of	the	conduits' aggregate	liabilities	and	first-loss	notes	exceeded	the	fair	value	of	their	aggregate	assets.	Management	believes	that	this	loss	would	be	recovered	in	future	periods because	we	expect	that	we	would	collect	substantially	all	principal	and	interest	on	the	assets	according	to	their	underlying	contractual	terms.	The	fair	value	of	the conduits'	aggregate	liabilities	and	first-loss	notes	exceeded	the	fair	value	of	their	aggregate	assets	by	$3.56	billion	after-tax	and	$530	million	after-tax	at	December	31, 2008	and	2007,	respectively.

# 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,	2008	and	2007,	total	assets	in	these	CDOs	were	$2.00	billion	and	$6.73	billion,	respectively.	We	did not	acquire	or	transfer	any	investment	securities	to	a	CDO	during	2008	or	2007.

# Note	13.				Shareholders'	Equity

# Accumulated	Other	Comprehensive	Loss:

Accumulated	other	comprehensive	loss	included	the	following	components	as	of	December	31:

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Foreign\tcurrency\ttranslation | $68 | $331 | $197 |
|  | (14) | (15) | (7) |
| Unrealized\tloss\ton\tavailable-for-sale\tsecurities | (5,205) | (678) | (227) |
| Unrealized\tloss\ton\tfair\tvalue\thedges\tof\tavailable-for-sale\tsecurities | (242) | (55) | — |
| Minimum\tpension\tliability | (229) | (146) | (186) |
| Unrealized\tloss\ton\tcash\tflow\thedges | (28) | (12) | (1) |
| Total | $(5,650) | $(575) | $(224) |

The	unrealized	loss	on	available-for-sale	securities	as	of	December	31,	2008	included	$1.39	billion	of	unrealized	losses	related	to	securities	reclassified	during 2008	from	securities	available	for	sale	to	securities	held	to	maturity.	Additional	information	is	provided	in	note	3.

For	the	year	ended	December	31,	2008,	we	realized	net	gains	of	$68	million	on	sales	of	available-for-sale	securities.	Unrealized	gains	of	$71	million	were included	in	other	comprehensive	income	at	December	31,	2007,	net	of	deferred	taxes	of	$28	million,	related	to	these	sales.

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	$13	million,	related	to	these	sales.

# Preferred	Stock:

The	aggregate	proceeds	were	allocated	to	the	preferred	stock	and	the	warrant	based	on	their	relative	fair	values	on	the	date	of	issuance.	As	a	result,	approximately $1.88	billion	was	allocated	to	the	preferred	stock	and	approximately	$121	million	was	allocated	to	the	warrant.	The	difference	between	the	initial	value	of	$1.88	billion allocated	to	the	preferred	stock	and	the	liquidation	value	of	$2	billion	will	be	charged	to	retained	earnings	and	credited	to	the	preferred	stock	over	the	first	five	years	that the	preferred	stock	is	outstanding,	using	the	effective	yield	method.	This	charge	to	retained	earnings	will	reduce	net	income	available	to	common	shareholders	and	basic and	diluted	earnings	per	common	share	for	each	reported	period.	For	2008,	net	income	available	to	common	shareholders	was	reduced	by	a	charge	to	retained	earnings of	$4	million	in	calculating	earnings	per	common	share.	The	calculation	is	presented	in	note	23.

The	preferred	shares,	which	qualify	as	tier	1	regulatory	capital,	pay	cumulative	quarterly	dividends	at	a	rate	of	5%	per	year	for	the	first	five	years,	and	9%	per year	thereafter.	Dividends	accrued	on	the	preferred	shares	will	reduce	net	income	available	to	common	shareholders	and	basic	and	diluted	earnings	per	common	share for	each	reported	period.	For	2008,	net	income	available	to	common	shareholders	was	reduced	by	$18	million	in	calculating	earnings	per	common	share.	The	calculation is	presented	in	note	23.	The	preferred	shares	are	non-voting,	other	than	class	voting	rights	on	certain	matters	that	could	adversely	affect	the	shares.	We	can	redeem	the preferred	shares	at	par	after	December	15,	2011.	Prior	to	this	date,	we	can	only	redeem	the	preferred	shares	at	par	in	an	amount	up	to	the	cash	proceeds	(minimum	$500 million)	from	qualifying	equity	offerings	of	any	tier	1-eligible	perpetual	preferred	or	common	stock.	Any	redemption	is	subject	to	the	consent	of	the	Federal	Reserve.

In	January	2008,	under	an	existing	authorization	by	our	Board	of	Directors,	we	purchased	552,000	shares	of	our	common	stock	in	connection	with	a	$1	billion accelerated	share	repurchase	program	that	concluded	on	January	18,	2008.	As	of	December	31,	2008,	approximately	13,245,000	shares	remained	available	for	future purchase	under	the	Board	authorization.	During	2007,	under	the	then-existing	authorization	by	the	Board,	we	purchased	13.4	million	shares	of	our	common	stock	in connection	with	the	above-described	accelerated	share	repurchase	program.	We	generally	employ	third-party	broker/dealers	to	acquire	shares	on	the	open	market	in connection	with	our	common	stock	purchase	program.

During	2008,	2007	and	2006,	we	purchased	and	recorded	as	treasury	stock	a	total	of	552,000	shares,	13.4	million	shares	and	5.8	million	shares,	respectively,	at	an average	historical	cost	per	share	of	approximately	$75,	$75	and	$63,	respectively.

In	connection	with	our	participation	in	the	capital	purchase	program	described	under	"Preferred	Stock,"	until	October	28,	2011,	or	such	earlier	time	as	the preferred	stock	has	been	redeemed	or	transferred	by	Treasury,	we	are	not	permitted,	without	Treasury's	consent,	to	repurchase	our	common	stock.

Our	common	shares	may	be	acquired	for	other	deferred	compensation	plans,	held	by	an	external	trustee,	that	are	not	part	of	our	common	stock	purchase	program. As	of	December	31,	2008,	on	a	cumulative	basis,	approximately	418,354	shares	have	been	purchased	and	are	held	in	trust.	These	shares	are	recorded	as	treasury	stock	in our	consolidated	statement	of	condition.

Effective	January	1,	2008,	we	adopted	the	provisions	of	SFAS	No.	159,	The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities.	We	have	not elected	the	fair	value	option	for	any	of	our	financial	assets	or	financial	liabilities	since	adoption	of	the	standard,	although	we	may	do	so	in	the	future.

Effective	January	1,	2008,	we	adopted	the	provisions	of	SFAS	No.	157,	Fair	Value	Measurements.	This	standard	provides	a	consistent	definition	of	fair	value, establishes	a	framework	for	measuring	fair	value	in	accordance	with	GAAP	and	requires	expanded	disclosures	about	fair	value	measurements.	Prior	to	the	standard, definitions	of	fair	value	varied	and	guidance	for	applying	those	definitions	under	GAAP	was	limited.	In	addition,	the	guidance	was	dispersed	among	the	many accounting	pronouncements	that	require	fair	value	measurements.	We	did	not	apply	the	provisions	of	the	standard	to	our	non-financial	assets	and	liabilities,	pursuant	to FASB	Staff	Position	No.	157-2,	Effective	Date	of	FASB	Statement	No.	157.	This	FSP,	issued	in	February	2008,	deferred	the	effective	date	of	SFAS	No.	157	to January	1,	2009	for	non-financial	assets	and	liabilities,	except	for	those	recognized	or	reported	at	fair	value	on	a	recurring	basis.	This	deferral	affects	non-financial	assets, such	as	goodwill,	that	require	impairment	analysis	using	fair	value	measurements.	We	do	not	expect	the	application	of	this	FSP	to	have	a	material	impact	on	our consolidated	financial	condition	or	results	of	operations.

SFAS	No.	157	is	intended	to	increase	consistency	and	comparability	in,	and	disclosures	about,	fair	value	measurements,	by	providing	users	with	better information	about	the	extent	to	which	fair	value	is	used	to	measure	financial	assets	and	liabilities,	the	inputs	used	to	develop	those	measurements	and	the	effect	of	the measurements,	if	any,	on	financial	condition	and	results	of	operations.	The	standard	defines	fair	value	as	the	price	that	would	be	received	to	sell	an	asset	or	paid	to transfer	a	liability	(an	"exit	price")	in	the	principal	or	most	advantageous	market	for	an	asset	or	liability	in	an	orderly	transaction	between	market	participants	on	the measurement	date.	In	addition,	the	standard	establishes	a	hierarchy	for	measuring	fair	value.	The	fair	value	hierarchy	is	based	on	the	observability	of	inputs	to	the valuation	of	a	financial	asset	or	liability	as	of	the	measurement	date.	In	addition,	the	standard	requires	the	recognition	of	trading	gains	or	losses	related	to	certain derivative	transactions	whose	fair	value	has	been	determined	using	unobservable	market	inputs,	which	nullifies	the	guidance	in	Emerging	Issues	Task	Force	Issue, or	EITF,	No.	02-3,	Issues	Involved	in	Accounting	for	Derivative	Contracts	Held	for	Trading	Purposes	and	Contracts	Involved	in	Energy	Trading	and	Risk	Management Activities.	This	EITF	prohibited	the	recognition	of	trading	gains	or	losses	for	such	derivative	transactions	when	determining	the	fair	value	of	instruments	not	traded	in	an active	market.

Management	believes	that	its	valuation	techniques	and	underlying	assumptions	used	to	measure	fair	value	conform	to	the	provisions	of	the	standard.	We	have categorized	the	financial	assets	and	liabilities	that	we	carry	at	fair	value	in	our	consolidated	statement	of	condition	based	upon	the	standard's	three-level	valuation hierarchy.	The	hierarchy	gives	the	highest	priority	to	quoted	prices	in	active	markets	for	identical	assets	or	liabilities	(level	1)	and	the	lowest	priority	to	valuation methods	using	significant	unobservable	inputs	(level	3).	If	the	inputs	used	to	measure	a	financial	asset	or	liability	cross	different	levels	of	the	hierarchy,	categorization	is based	on	the	lowest	level	input	that	is	significant	to	the	fair	value	measurement.	Management's	assessment	of	the	significance	of	a	particular	input	to	the	overall	fair value	measurement	of	a	financial	asset	or	liability	requires	judgment,	and	considers	factors	specific	to	that	asset	or	liability.	The	three	levels	are	described	below:

Level	1.	Financial	assets	and	liabilities	with	values	based	on	unadjusted	quoted	prices	for	identical	assets	or	liabilities	in	an	active	market.	Examples	of	level	1 financial	instruments	include	active	exchange-traded	equity	securities	and	certain	U.S.	government	securities.	We	categorized	approximately	$10.12	billion	of	our financial	assets	in	level	1	at	December	31,	2008,	substantially	composed	of	U.S.	government	securities.

Level	2.	Financial	assets	and	liabilities	with	values	based	on	quoted	prices	for	similar	assets	and	liabilities	in	active	markets,	and	inputs	that	are	observable	for	the asset	or	liability,	either	directly	or	indirectly,	for	substantially	the	full	term	of	the	asset	or	liability.	Level	2	inputs	include	the	following:

a) Quoted	prices	for	similar	assets	or	liabilities	in	active	markets;

b) Quoted	prices	for	identical	or	similar	assets	or	liabilities	in	non-active	markets;

c) Pricing	models	whose	inputs	are	observable	for	substantially	the	full	term	of	the	asset	or	liability;	and

d) Pricing	models	whose	inputs	are	derived	principally	from	or	corroborated	by	observable	market	information	through	correlation	or	other	means	for	substantially the	full	term	of	the	asset	or	liability.

Our	level	2	financial	assets	predominately	included	commercial	paper	purchased	from	the	State	Street-administered	asset-backed	commercial	paper	conduits, various	types	of	interest-rate	and	foreign	exchange	derivative	instruments,	and	various	types	of	fixed-income	investment	securities.	We	categorized	approximately $53.37	billion	of	trading	account	assets,	investment	securities	available	for	sale	and	derivative	instruments,	and	approximately	$18.09	billion	of	derivative	instruments,	in level	2	financial	assets	and	liabilities,	respectively,	at	December	31,	2008.

Level	3.	Financial	assets	and	liabilities	with	values	based	on	prices	or	valuation	techniques	that	require	inputs	that	are	both	unobservable	in	the	market	and significant	to	the	overall	fair	value	measurement.	These	inputs	reflect	management's	judgment	about	the	assumptions	that	a	market	participant	would	use	in	pricing	the asset	or	liability,	and	are	based	on	the	best	available	information,	some	of	which	is	internally	developed.	The	following	provides	a	more	detailed	discussion	of	our financial	assets	and	liabilities	that	we	may	categorize	in	level	3	and	the	related	valuation	methodology.

•For	certain	corporate	debt	securities	carried	in	trading	account	assets,	fair	value	was	measured	using	information	obtained	from	independent	third	parties	or through	the	use	of	pricing	models.	Management	evaluated	its	methodologies	used	to	determine	fair	value,	but	considered	the	level	of	market-observable information	to	be	insufficient,	given	the	lack	of	trading	activity,	to	categorize	the	securities	in	level	2.

•For	certain	investment	securities	available	for	sale,	fair	value	was	measured	using	information	obtained	from	third-party	sources	or	through	the	use	of	pricing models.	Management	evaluated	its	methodologies	used	to	determine	fair	value,	but	considered	the	level	of	market-observable	information	to	be	insufficient	to categorize	the	securities	in	level	2.

•Foreign	exchange	contracts	carried	in	other	assets	and	other	liabilities	were	primarily	composed	of	forward	contracts	and	options.	The	fair	value	of	foreign exchange	forward	contracts	was	measured	using	discounted	cash	flow	techniques.	However,	in	certain	circumstances,	extrapolation	was	required	to	develop certain	forward	points,	which	were	not	observable.	The	fair	value	of	foreign	exchange	options	was	measured	using	an	option	pricing	model.	Because	of	a limited	number	of	observable	transactions,	certain	model	inputs	were	unobservable,	such	as	volatilities	which	were	based	on	historical	experience.

•The	fair	value	of	certain	interest-rate	caps	with	long-dated	maturities,	also	carried	in	other	assets	and	other	liabilities,	was	measured	using	a	matrix	pricing approach.	Observable	market	prices	were	not	available	for	these	derivatives,	so	extrapolation	was	necessary	to	value	these	instruments,	since	they	had	a	strike and/or	maturity	outside	of	the	matrix.

We	categorized	approximately	$10.01	billion	of	investment	securities	available	for	sale,	primarily	asset-backed	securities,	as	well	as	derivative	instruments,	and $857	million	of	derivative	instruments,	in	level	3	financial	assets	and	liabilities,	respectively,	at	December	31,	2008.

In	October	2008,	the	FASB	issued	FSP	No.	FAS	157-3,	Determining	Fair	Value	in	a	Market	That	Is	Not	Active,	to	help	entities	measure	fair	value	in	markets	that are	not	active.	The	FSP	provides	clarification	of	guidance	with	respect	to	the	determination	of	fair	value	pursuant	to	SFAS	No.	157	when	markets	are	inactive.	The	FSP reiterates	current	accounting	standards	that	require	us	to	carry	certain	of	our	investment	securities	at	fair	value	in	our	consolidated	statement	of	condition.	Fair	value continues	to	be	defined	as	the	price	at	which	a	transaction	would	occur	between	willing	market	participants	on	the	measurement	date.	Consistent	with	the	FSP,	we continue	to	assess	the	amount	and	quality	of	market	information	that	supports	our	estimate	of	the	fair	value	of	the	above-mentioned	investment	securities	in	our portfolio.	Given	current	market	illiquidity,	we	will	continue	to	assess	our	portfolio	valuations	to	determine	the	most	appropriate	method	for	estimating	fair	value.

The	following	table	presents	information	with	respect	to	our	financial	assets	and	liabilities	carried	at	fair	value	in	our	consolidated	statement	of	condition	as	of December	31,	2008.

|  |  |  |  |  | Total	Net |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Quoted\tMarket | Pricing\tMethods | Pricing\tMethods\twith |  | Carrying\tValue |
|  | Prices\tin\tActive | with\tSignificant | Significant |  | in\tConsolidated |
|  | Markets | Observable\tMarket | Unobservable\tMarket | Impact\tof | Statement\tof |
| (In\tmillions) | (Level\t1) | Inputs\t(Level\t2) | Inputs\t(Level\t3) | Netting(1) | Condition |
| Assets: |  |  |  |  |  |
| Trading\taccount\tassets | $28 | $421 | $366 |  | $815 |
| Investment\tsecurities\tavailable\tfor\tsale: |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |
| Direct\tobligations | 10,096 | 1,483 | — |  | 11,579 |
| Mortgage-backed\tsecurities | — | 10,796 | 2 |  | 10,798 |
| Asset-backed\tsecurities | — | 10,715 | 8,709 |  | 19,424 |
| Collateralized\tmortgage\tobligations | — | 1,437 | 4 |  | 1,441 |
| State\tand\tpolitical\tsubdivisions | — | 5,711 | 1 |  | 5,712 |
| Other\tinvestments | — | 5,038 | 171 |  | 5,209 |
| Total\tinvestment\tsecurities\tavailable |  |  |  |  |  |
| for\tsale | 10,096 | 35,180 | 8,887 |  | 54,163 |
| Other\tassets | — | 17,769 | 760 | $(6,586) | 11,943 |
| Total\tassets\tcarried\tat\tfair\tvalue | $10,124 | $53,370 | $10,013 | $(6,586) | $66,921 |
| Liabilities: |  |  |  |  |  |
| Other\tliabilities |  | $18,085 | $857 | $(6,586) | $12,356 |
| Total\tliabilities\tcarried\tat\tfair\tvalue | — | $18,085 | $857 | $(6,586) | $12,356 |

(1) Represents	counterparty	and	cash	collateral	netting	against	level	2	financial	assets	and	liabilities.	FASB	Interpretation	No.	39,	Offsetting	of	Amounts	Related	to Certain	Contracts—an	interpretation	of	APB	Opinion	No.	10	and	FASB	Statement	No.	105,	permits	netting	of	receivables	and	payables	when	a	legally enforceable	master	netting	agreement	exists	between	State	Street	and	the	counterparty.

The	following	tables	present	activity	related	to	our	financial	assets	and	liabilities	categorized	in	level	3	of	the	valuation	hierarchy	for	the	year	ended	December	31,

|  |  | Total	Realized	and |  |  |  |  | Change	in |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Unrealized\tGains\t(Losses) | Unrealized\tGains\t(Losses) |  |  |  | Unrealized |
|  |  |  |  |  |  |  | Gains\t(Losses) |
|  |  |  |  |  |  |  | Related\tto |
|  |  |  |  | Purchases, |  |  | Financial |
|  |  | Recorded\tin | Recorded\tin | Issuances | Transfers |  | Instruments |
|  | Fair\tValue\tat | Recorded | Other | and | Into\tand/ | Fair\tValue\tat | Held\tat |
|  | January\t1, | in | Comprehensive | Settlements, | or\tOut\tof | December\t31, | December\t31, |
| (In\tmillions) | 2008 | Revenue | Income | Net | Level\t3 | 2008 | 2008 |
| Assets: |  |  |  |  |  |  |  |
| Trading\taccount\tassets |  |  |  | $366 |  | $366 |  |
| Investment\tsecurities\tavailable\tfor\tsale: |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies: |  |  |  |  |  |  |  |
| Mortgage-backed\tsecurities | $327 |  |  | (1) | $(324) | 2 |  |
| Asset-backed\tsecurities | 5,721 | $120 | $(1,861) | 621 | 4,108 | 8,709 | $2 |
| Collateralized\tmortgage\tobligations | 459 | — | (1) | 5 | (459) | 4 | — |
| State\tand\tpolitical\tsubdivisions | — | — | — | — | 1 | 1 | — |
| Other\tinvestments | 53 | 32 | 18 | 64 | 4 | 171 | — |
| Total\tinvestment\tsecurities\tavailable |  |  |  |  |  |  |  |
| for\tsale: | 6,560 | 152 | (1,844) | 689 | 3,330 | 8,887 | 2 |
| Other\tassets | 374 | 524 | — | (132) | (6) | 760 | 385 |
| Total\tassets | $6,934 | $676 | $(1,844) | $923 | $3,324 | $10,013 | $387 |

# Fair	Value	Measurements	Using	Significant	Unobservable	Inputs

|  |  | Total	Realized	and |  |  |  |  | Change	in |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Unrealized\t(Gains)\tLosses | Unrealized\t(Gains)\tLosses |  |  |  | Unrealized |
|  |  |  |  |  |  |  | (Gains)\tLosses |
|  |  |  |  |  |  |  | Related\tto |
|  |  |  |  | Purchases, |  |  | Financial |
|  |  | Recorded\tin | Recorded\tin | Issuances | Transfers |  | Instruments |
|  | Fair\tValue\tat | Recorded | Other | and | Into\tand/ | Fair\tValue\tat | Held\tat |
|  | January\t1, | in | Comprehensive | Settlements, | or\tOut\tof | December\t31, | December\t31, |
| (In\tmillions) | 2008 | Revenue | Income | Net | Level\t3 | 2008 | 2008 |
| Liabilities: |  |  |  |  |  |  |  |
| Other\tliabilities | $399 | $567 | — | $(108) | $(1) | $857 | $431 |
| Total\tliabilities | $399 | $567 | — | $(108) | $(1) | $857 | $431 |

For	our	financial	assets	and	liabilities	categorized	in	level	3,	total	realized	and	unrealized	gains	and	losses	for	the	year	ended	December	31,	2008	were	recorded	in revenue	as	follows:

|  |  | Change	in |
| :--- | :--- | :--- |
|  |  | Unrealized\tGains |
|  | Total\tRealized\tand | (Losses)\tRelated\tto |
|  | Unrealized\tGains | Financial |
|  | (Losses)\tRecorded | Instruments\tHeld\tat |
| (In\tmillions) | in\tRevenue | December\t31,\t2008 |
| Fee\trevenue: |  |  |
| Trading\tservices | $(19) | $(22) |
| Processing\tfees\tand\tother | (32) | (24) |
| Total\tfee\trevenue | (51) | (46) |
| Net\tinterest\trevenue | 162 | — |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (2) | 2 |
| Total\trevenue | $109 | $(44) |

Transfers	out	of	level	3	during	the	year	ended	December	31,	2008	related	to	mortgage-backed	securities	and	collateralized	mortgage	obligations,	for	which	fair value	was	measured	using	prices	for	which	market-observable	information	became	available.	Transfers	into	level	3	during	the	year	ended	December	31,	2008 substantially	related	to	asset-backed	securities,	for	which	management	believed	that	market-observable	information	was	not	sufficient,	generally	as	a	result	of	market illiquidity.

# Fair	Values	of	Financial	Instruments:

Fair	value	estimates	for	financial	instruments,	as	defined	by	SFAS	No.	107,	Disclosures	about	Fair	Value	of	Financial	Instruments,	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	by	SFAS	No.	107	for	certain	items,	such	as	lease	financing,	equity	method	investments,	obligations	for	pension	and	other	post-retirement	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	information	obtained	from	third	parties,	or	by	discounting	the	expected	cash flow(s)	using	an	estimated	current	market	interest	rate	for	the	financial	instrument.

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	short-term	borrowings.	In	addition,	due	to	the	relatively	short-term	nature	of	our	net	loans	(excluding	leases),	the vast	majority	of	which	have	short	durations,	we	have	determined	that	their	fair	value	approximates	their	reported	value.	Loan	commitments	have	no	reported	value because	terms	are	at	prevailing	market	rates.

The	reported	fair	values	for	financial	instruments	defined	by	SFAS	No.	107,	excluding	the	above-described	short-term	financial	instruments	and	excluding financial	instruments	carried	at	fair	value	on	a	recurring	basis,	were	as	follows	as	of	December	31:

|  | Reported | Fair |
| :--- | :--- | :--- |
| (In\tmillions) | Value | Value |
| 2008: |  |  |
| Financial\tAssets: |  |  |
| Investment\tsecurities: |  |  |
| Purchased\tunder\tmoney\tmarket\tliquidity\tfacility | $6,087 | $6,101 |
| Held\tto\tmaturity | \t 15,767 | \t 14,311 |
| Net\tloans\t(excluding\tleases) | 7,269 | 7,269 |
| Financial\tLiabilities: |  |  |
| Long-term\tdebt | 4,419 | 3,510 |
| 2007: |  |  |
| Financial\tAssets: |  |  |
| Investment\tsecurities\theld\tto\tmaturity | $4,233 | $4,225 |
| Net\tloans\t(excluding\tleases) | \t 13,804 | \t 13,804 |
| Financial\tLiabilities: |  |  |
| Long-term\tdebt | 3,636 | 3,446 |

# Note	15.				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	to	issue	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.	As	of	December	31,	2008,	12,061,058	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	on	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	cash	or	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	periods.	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:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | 1.32% | 1.34% | 1.41% |
| Expected\tvolatility | 21.00 | 23.30 | 26.50 |
| Risk-free\tinterest\trate | 3.17 | 4.69 | 4.60 |
| 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	$321	million,	$272	million	and	$208	million	for	the	years ended	December	31,	2008,	2007	and	2006,	respectively.	The	2008	expense	excludes	$47	million	associated	with	accelerated	vesting	in	connection	with	the	restructuring plan	described	in	note	9.	The	aggregate	income	tax	benefit	recorded	in	our	consolidated	statement	of	income	related	to	the	above-described	compensation	expense	was $127	million,	$109	million	and	$83	million	for	2008,	2007	and	2006,	respectively.

|  | 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,\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 |  |  |
| Granted | 921 | 81.71 |  |  |
| Exercised | (2,926) | 44.99 |  |  |
| Forfeited\tor\texpired | (47) | 47.40 |  |  |
| Outstanding\tat\tDecember\t31,\t2008 | 14,316 | $51.86 | 4.62 | $1 |
| Exercisable\tat\tDecember\t31,\t2008 | 11,800 | $47.96 | 3.88 | $1 |

As	of	December	31,	2008,	total	unrecognized	compensation	cost,	net	of	estimated	forfeitures,	related	to	stock	options	and	stock	appreciation	rights	was	$16 million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	22	months.

Other	stock	awards	and	related	activity	consisted	of	the	following	for	the	years	ended	December	31,	2007	and	2008:

|  | Shares<br>(in	thousands) | Grant	Date	Fair<br>Value |
| :--- | :--- | :--- |
| Restricted\tStock\tAwards |  |  |
| 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 |
| Granted | 219 | 81.70 |
| Vested | (265) | 61.95 |
| Forfeited | (19) | 63.03 |
| Outstanding\tat\tDecember\t31,\t2008 | 489 | $73.95 |

The	weighted-average	grant	date	fair	value	of	restricted	stock	awards	granted	in	2006	was	$62.62	per	share.	The	total	fair	value	of	restricted	stock	awards	vested was	$16	million,	$11	million	and	$8	million	for	2008,	2007	and	2006,	respectively.	As	of	December	31,	2008,	total	unrecognized	compensation	cost,	net	of	estimated forfeitures,	related	to	restricted	stock	was	$13	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	12	months.

|  | Shares<br>(in	thousands) | Grant	Date	Fair<br>Value |
| :--- | :--- | :--- |
| Deferred\tStock\tAwards |  |  |
| 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 |
| Granted | 3,570 | 78.62 |
| Vested | (2,665) | 62.29 |
| Forfeited | (313) | 72.98 |
| Outstanding\tat\tDecember\t31,\t2008 | 6,464 | $71.59 |

The	weighted-average	grant	date	fair	value	of	deferred	stock	awards	granted	in	2006	was	$60.94	per	share.	The	total	fair	value	of	deferred	stock	awards	vested was	$166	million,	$120	million	and	$56	million	for	2008,	2007	and	2006,	respectively.	As	of	December	31,	2008,	total	unrecognized	compensation	cost,	net	of estimated	forfeitures,	related	to	deferred	stock	awards	was	$250	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	30	months.

|  | Shares<br>(in	thousands) | Grant	Date	Fair<br>Value |
| :--- | :--- | :--- |
| Performance\tAwards |  |  |
| 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 |
| Granted | 989 | 80.90 |
| Forfeited | (542) | 73.76 |
| Paid\tout | (425) | 61.02 |
| Outstanding\tat\tDecember\t31,\t2008 | 2,280 | $73.18 |

The	weighted-average	grant	date	fair	value	of	performance	awards	granted	in	2006	was	$59.87	per	share.	The	total	fair	value	of	performance	awards	paid	out	was $35	million,	$33	million	and	$9	million	for	2008,	2007	and	2006,	respectively.	As	of	December	31,	2008,	total	unrecognized	compensation	cost,	net	of	estimated forfeitures,	related	to	performance	awards	was	$39	million,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	16	months.

We	utilize	either	treasury	shares	or	authorized	but	unissued	shares	to	satisfy	the	issuance	of	common	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	stock	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	16.				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	specified	capital	requirements	that	involve	quantitative	measures	of	our	consolidated	assets,	liabilities	and	off- balance	sheet	exposures	calculated	in	accordance	with	regulatory	accounting	practices.	Our	capital	amounts	and	their	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,	2008	and	2007,	State	Street	and State	Street	Bank	met	all	capital	adequacy	requirements	to	which	they	were	subject.

As	of	December	31,	2008,	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,	2008	and	2007.	Management	believes	that	there	are	no	conditions	or	events	since	December	31,	2008	that	have	changed the	capital	category	of	State	Street	Bank.

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

|  | Guidelines(1) | Guidelines(1) | State	Street | State	Street | State	Street	Bank | State	Street	Bank |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Well |  |  |  |  |
| (Dollars\tin\tmillions) | Minimum | Capitalized | 2008 | 2007 | 2008 | 2007 |
| Risk-based\tratios(2)\t: |  |  |  |  |  |  |
| Tier\t1\tcapital | 4% | 6% | 20.3% | 11.2% | 19.8% | 11.2% |
| Total\tcapital | 8 | 10 | 21.6 | 12.7 | 21.3 | 12.7 |
| Tier\t1\tleverage\tratio(2) | 4 | 5 | 7.8 | 5.3 | 7.6 | 5.5 |
| Total\tshareholders'\tequity |  |  | $12,774 | $11,299 | $13,339 | $11,932 |
| Capital\ttrust\tsecurities |  |  | 1,450 | 975 | — | — |
| Unrealized\tloss\ton\tavailable-for-sale\tsecurities\tand\tcash\tflow |  |  |  |  |  |  |
| hedges |  |  | 5,458 | 744 | 5,453 | 750 |
| Deferred\ttax\tliability\tassociated\twith\tacquisitions |  |  | 560 | 526 | 560 | 526 |
| Recognition\tof\tpension\tplan\tfunded\tstatus |  |  | 227 | 145 | 227 | 145 |
| Less: |  |  |  |  |  |  |
| Goodwill |  |  | 4,527 | 4,567 | 4,370 | 4,480 |
| Other\tintangible\tassets |  |  | 1,851 | 1,990 | 1,787 | 1,958 |
| Other\tdeductions |  |  | 1 | 1 | — | — |
| Tier\t1\tcapital |  |  | 14,090 | 7,131 | 13,422 | 6,915 |
| Qualifying\tsubordinated\tdebt |  |  | 1,058 | 1,118 | 998 | 998 |
| Allowances\tfor\ton-\tand\toff-balance\tsheet\tcredit\texposures |  |  | 38 | 31 | 38 | 31 |
| Unrealized\tgain\ton\tavailable-for-sale\tequity\tsecurities |  |  | — | 3 | — | 2 |
| Tier\t2\tcapital |  |  | 1,096 | 1,152 | 1,036 | 1,031 |
| Deduction\tfor\tinvestments\tin\tfinance\tsubsidiaries |  |  | (156) | (212) | — | (68) |
| Total\tcapital |  |  | $15,030 | $8,071 | $14,458 | $7,878 |
| Adjusted\ttotal\trisk-weighted\tassets\tand\tmarket-risk\tequivalents: |  |  |  |  |  |  |
| On-balance\tsheet(2) |  |  | $45,855 | $42,968 | $44,212 | $41,283 |
| Off-balance\tsheet |  |  | 23,364 | 20,248 | 23,415 | 20,254 |
| Market-risk\tequivalents |  |  | 366 | 321 | 303 | 317 |
| Total |  |  | $69,585 | $63,537 | $67,930 | $61,854 |
| Adjusted\tquarterly\taverage\tassets(2) |  |  | $179,905 | $135,686 | $175,858 | $126,746 |

(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%.	The	"well	capitalized"	designation	requires	us	to	maintain	a	minimum	tier	1	risk-based	capital	ratio	of 6%	and	a	minimum	total	risk-based	capital	ratio	of	10%.

(2) 2008	tier	1	and	total	risk-based	and	tier	1	leverage	ratios,	as	well	as	on-balance	sheet	risk-weighted	assets	and	adjusted	quarterly	average	assets,	exclude	the impact	of	asset-backed	commercial	paper	purchased	under	the	AMLF,	as	permitted	by	the	AMLF's	terms	and	conditions.

# Cash,	Dividend,	Loan	and	Other	Restrictions:

During	2008,	our	banking	subsidiaries	were	required	by	the	Federal	Reserve	to	maintain	average	aggregate	cash	balances	of	$2.84	billion	to	satisfy	reserve requirements.	In	addition,	federal	and	state	banking	regulations	place	certain	restrictions	on	dividends	paid	by	banking	subsidiaries	to	a	parent	company.	For	2009, aggregate	dividends	by	State	Street	Bank	without	prior	regulatory	approval	are	limited	to	approximately	$2.99	billion	of	its	undistributed	earnings	at	December	31, 2008,	plus	an	additional	amount	equal	to	its	net	profits,	as	defined,	for	2009	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	State	Street	Bank's	capital	and	surplus	(as	defined),	and	that	extensions	of	credit	to	all such	affiliates	be	limited	to	20%	of	State	Street	Bank's	capital	and	surplus.

As	a	result	of	our	participation	in	the	U.S.	Treasury's	capital	purchase	program,	described	in	note	13,	we	are	not	currently	permitted,	without	Treasury's	consent, to	increase	the	quarterly	dividend	per	share	on	our	common	stock	above	$0.24	per	share.	In	February	2009,	in	light	of	the	impact	of	the	continued	disruption	in	the global	capital	markets	experienced	since	the	middle	of	2007,	and	as	part	of	a	plan	to	strengthen	our	tangible	common	equity,	we	announced	a	temporary	reduction	of	the quarterly	dividend	on	our	common	stock	to	$0.01	per	share.

At	December	31,	2008,	our	consolidated	retained	earnings	included	$337	million	representing	undistributed	earnings	of	unconsolidated	entities	that	are	accounted for	using	the	equity	method.

# Note	17.				Derivative	Financial	Instruments

We	use	derivative	financial	instruments	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.	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	presents	the	aggregate	contractual,	or	notional,	amounts	of	derivative	financial	instruments	held	or	issued	for	trading	and	asset	and	liability management	activities	as	of	December	31:

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	aggregate	notional	amounts	of	these	interest-rate	swap	agreements	and	the	related	assets	or	liabilities	being	hedged	are	presented	in	the following	table.	Hedge	ineffectiveness	for	2008,	2007	and	2006,	recorded	in	processing	fees	and	other	revenue,	was	not	material.

|  | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Fair | Cash |  | Fair | Cash |  |
|  | Value | Flow |  | Value | Flow |  |
| (In\tmillions) | Hedges | Hedges | Total | Hedges | Hedges | Total |
| Available-for-sale\tinvestment\tsecurities | $2,165 | $36 | $2,201 | $2,226 |  | $2,226 |
| Interest-bearing\ttime\tdeposits(1) | 118 | — | 118 | 118 |  | 118 |
| Long-term\tdebt(2)(3) | 500 | 200 | 700 | 700 | $450 | 1,150 |
| Total | $2,783 | $236 | $3,019 | $3,044 | $450 | $3,494 |

(1) For	the	years	ended	December	31,	2008	and	2007,	the	overall	weighted-average	interest	rate	for	interest-bearing	time	deposits	was	2.95%	and	5.42%,	respectively, on	a	contractual	basis,	and	3.45%	and	5.47%,	respectively,	including	the	effects	of	hedges.

(2) For	the	year	ended	December	31,	2008,	fair	value	hedges	of	long-term	debt	increased	the	carrying	value	of	long-term	debt	presented	in	our	consolidated	statement of	condition	by	$70	million,	and	for	the	year	ended	December	31,	2007,	increased	the	carrying	value	by	$19	million.

(3) For	the	years	ended	December	31,	2008	and	2007,	the	overall	weighted-average	interest	rate	for	long-term	debt	was	5.76%	and	6.55%,	respectively,	on	a contractual	basis,	and	5.59%	and	6.62%,	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.

During	the	third	quarter	of	2008,	we	closed	our	foreign	exchange	forward	position	with	an	aggregate	notional	amount	of	€100	million	(approximately $146	million).	In	connection	with	this	hedge,	we	recorded	a	net	after-tax	unrealized	gain	of	$1	million	and	a	net	after-tax	unrealized	loss	of	$8	million	in	other comprehensive	income	for	the	years	ended	December	31,	2008	and	2007,	respectively.

Foreign	exchange	trading	revenue	related	to	foreign	exchange	contracts	was	$1.08	billion,	$802	million	and	$611	million	for	the	years	ended	December	31,	2008, 2007	and	2006,	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	18.				Net	Interest	Revenue

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Interest\trevenue: |  |  |  |
| Deposits\twith\tbanks | $760 | $416 | $414 |
| Investment\tsecurities: |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 889 | \t 1,106 | \t 1,011 |
| State\tand\tpolitical\tsubdivisions | 246 | 205 | 88 |
| Other\tinvestments | \t 1,931 | \t 2,292 | \t 1,830 |
| Securities\tpurchased\tunder\tresale\tagreements\tand\tfederal\tfunds\tsold | 339 | 756 | 663 |
| Loans\tand\tleases(1) | 269 | 382 | 270 |
| Trading\taccount\tassets | 78 | 55 | 48 |
| Interest\trevenue\tassociated\twith\tAMLF | 367 | — | — |
| Total\tinterest\trevenue | \t 4,879 | \t 5,212 | \t 4,324 |
| Interest\texpense: |  |  |  |
| Deposits | \t 1,326 | \t 2,298 | \t 1,891 |
| Short-term\tborrowings | 375 | 959 | \t 1,145 |
| Long-term\tdebt | 229 | 225 | 178 |
| Interest\texpense\tassociated\twith\tAMLF | 299 | — | — |
| Total\tinterest\texpense | \t 2,229 | \t 3,482 | \t 3,214 |
| Net\tinterest\trevenue | $2,650 | $1,730 | $1,110 |

(1) Interest	revenue	for	loans	and	leases	for	the	year	ended	December	31,	2008	reflects	a	cumulative	reduction	of	$98	million	recorded	in	connection	with	our	SILO lease	transactions.	Additional	information	about	our	SILO	lease	transactions	is	provided	in	note	11.

# Note	19.				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,	and	employer	contribution	credits	to	the	plan	were	discontinued	as	of	that	date.	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:

|  | Defined<br>Benefit	Plans | Defined<br>Benefit	Plans | Post-Retirement<br>Plan | Post-Retirement<br>Plan |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | 2008 | 2007 | 2008 | 2007 |
| Benefit\tobligations: |  |  |  |  |
| Beginning\tof\tyear | $830 | $833 | $86 | $90 |
| Service\tcost | 18 | 62 | 4 | 4 |
| Interest\tcost | 47 | 44 | 5 | 5 |
| Employee\tcontributions | 1 | — | \t — | \t — |
| Plan\tamendments | 5 | — | \t — | (10) |
| Acquisitions\tand\ttransfers\tin | — | 18 | \t — | \t — |
| Actuarial\tlosses/(gains) | (34) | (42) | 6 | 4 |
| Benefits\tpaid | (33) | (44) | (7) | (7) |
| Expenses\tpaid | (3) | (3) | \t — | \t — |
| Curtailments | (22) | (47) | \t — | \t — |
| Foreign\tcurrency\ttranslation | (44) | 9 | \t — | \t — |
| End\tof\tyear | $765 | $830 | $94 | $86 |
| Plan\tassets\tat\tfair\tvalue: |  |  |  |  |
| Beginning\tof\tyear | $878 | $821 |  |  |
| Actual\treturn\ton\tplan\tassets | (144) | 60 |  |  |
| Employer\tcontributions | 54 | 18 | $7 | $7 |
| Acquisitions\tand\ttransfers\tin | — | 19 | \t — | \t — |
| Benefits\tpaid | (33) | (44) | (7) | (7) |
| Expenses\tpaid | (3) | (3) | \t — | \t — |
| Foreign\tcurrency\ttranslation | (60) | 7 | \t — | \t — |
| End\tof\tyear | $692 | $878 | $ — | $ — |
| Accrued\tbenefit\texpense: |  |  |  |  |
| Funded\tstatus\t(plan\tassets\tless\tbenefit\tobligations) | $(73) | $48 | $(94) | $(86) |
| Net\tprepaid\t(accrued)\tbenefit\texpense | $(73) | $48 | $(94) | $(86) |

|  | Primary	U.S.	and |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Non-U.S.\tDefined\nBenefit\tPlans | Non-U.S.\tDefined\nBenefit\tPlans | Post-Retirement\nPlan | Post-Retirement\nPlan |
| (In\tmillions) | 2008 | 2007 | 2008 | 2007 |
| Amounts\trecognized\tin\tthe\tconsolidated\tstatement\tof\tcondition\tas\tof\tDecember\t31: |  |  |  |  |
| Non-current\tassets | $40 | $93 |  |  |
| Current\tliabilities | (1) | — | $(7) | $(7) |
| Noncurrent\tliabilities | (112) | (45) | (87) | (79) |
| Net\tprepaid\t(accrued)\tamount\trecognized\tin\tstatement\tof\tcondition | $(73) | $48 | $(94) | $(86) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome: |  |  |  |  |
| Prior\tservice\tcredit | $(4) |  | $5 | $6 |
| Net\tloss | (254) | $(110) | (36) | (32) |
| Accumulated\tother\tcomprehensive\tloss | (258) | (110) | (31) | (26) |
| Cumulative\temployer\tcontributions\tin\texcess\tof\tnet\tperiodic\tbenefit\tcost | 185 | 158 | (63) | (60) |
| Net\tasset\t(obligation)\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $(73) | $48 | $(94) | $(86) |
| Accumulated\tbenefit\tobligation | $750 | $793 |  |  |
| Actuarial\tassumptions\t(U.S.\tPlans): |  |  |  |  |
| Used\tto\tdetermine\tbenefit\tobligations\tas\tof\tDecember\t31: |  |  |  |  |
| Discount\trate | 6.00% | 6.00% | 6.00% | 6.00% |
| 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% | 6.00% | 6.00% | 5.75% |
| Rate\tof\tincrease\tfor\tfuture\tcompensation | 4.50 | 4.50 | — | — |
| Expected\tlong-term\trate\tof\treturn\ton\tplan\tassets | 7.50 | 7.50 | — | — |
| Assumed\thealth\tcare\tcost\ttrend\trates\tas\tof\tDecember\t31: |  |  |  |  |
| Cost\ttrend\trate\tassumed\tfor\tnext\tyear | — | — | 9.0% | 9.5% |
| Rate\tto\twhich\tthe\tcost\ttrend\trate\tis\tassumed\tto\tdecline | — | — | 5.00 | 5.00 |
| Year\tthat\tthe\trate\treaches\tthe\tultimate\ttrend\trate | — | — | \t 2016 | \t 2015 |

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

|  | Primary	U.S. |  |  |
| :--- | :--- | :--- | :--- |
|  | and\tNon-U.S. | Non- | Post- |
|  | Defined\tBenefit | Qualified | Retirement |
| (In\tmillions) | Plans | SERPs | Plan |
| 2009 | $36 | $15 | $7 |
| 2010 | 35 | 15 | 8 |
| 2011 | 37 | 21 | 8 |
| 2012 | 31 | 20 | 7 |
| 2013 | 26 | 15 | 7 |
| 2014-2017 | 126 | 70 | 31 |

The	accumulated	benefit	obligation	for	all	of	our	U.S.	defined	benefit	pension	plans	was	$737	million	and	$696	million	at	December	31,	2008,	and	2007, 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,	2008.

For	the	tax-qualified	U.S.	defined	benefit	pension	plan,	the	asset	allocations	as	of	December	31,	2008	and	2007,	and	the	strategic	target	allocation	for	2009,	by asset	category,	were	as	follows:

# ASSET	CATEGORY

|  |  | Percentage	of |  |
| :--- | :--- | :--- | :--- |
|  |  | Plan |  |
|  | Strategic\tTarget\nAllocation | Assets\tat\nDecember\t31, | Assets\tat\nDecember\t31, |
|  | 2009 | 2008 | 2007 |
| Equity\tsecurities | 43% | 36% | 46% |
| Fixed-income\tsecurities | 46 | 56 | 45 |
| Other | 11 | 8 | 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,	2009	are	$12	million,	$15	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:

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Benefit\tobligations: |  |  |
| Beginning\tof\tyear | $211 | $142 |
| Service\tcost | 4 | 12 |
| Interest\tcost | 12 | 10 |
| Acquisitions\tand\ttransfers\tin | — | 9 |
| Actuarial\tloss | (11) | 85 |
| Benefits\tpaid | (7) | (6) |
| Curtailments | — | (41) |
| End\tof\tyear | $209 | $211 |
| Accrued\tbenefit\texpense: |  |  |
| Funded\tstatus\t(plan\tassets\tless\tbenefit\tobligations) | $(209) | $(211) |
| Net\taccrued\tbenefit\texpense | $(209) | $(211) |
| Amounts\trecognized\tin\tthe\tconsolidated\tstatement\tof\tcondition\tas\tof\tDecember\t31: |  |  |
| Current\tliabilities | $(15) | $(8) |
| Non-current\tliabilities | (194) | (203) |
| Net\taccrued\tamount\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $(209) | $(211) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome: |  |  |
| Net\tloss | $(83) | $(103) |
| Accumulated\tother\tcomprehensive\tloss | (83) | (103) |
| Cumulative\temployer\tcontributions\tin\texcess\tof\tnet\tperiodic\tbenefit\tcost | (126) | (108) |
| Net\tobligation\trecognized\tin\tconsolidated\tstatement\tof\tcondition | $(209) | $(211) |
| Accumulated\tbenefit\tobligation | $175 | $148 |
| 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 | \t 10.00% | \t 10.00% |

For	those	defined	benefit	plans	that	have	accumulated	benefit	obligations	in	excess	of	plan	assets	as	of	December	31,	2008	and	2007,	the	accumulated	benefit obligations	are	$787	million	and	$192	million,	respectively,	and	the	plan	assets	are	$513	million	and	$21	million,	respectively.

For	those	defined	benefit	plans	that	have	projected	benefit	obligations	in	excess	of	plan	assets	as	of	December	31,	2008	and	2007,	the	projected	benefit obligations	are	$843	million	and	$493	million,	respectively,	and	the	plan	assets	are	$521	million	and	$237	million,	respectively.

If	health	care	cost	trend	rates	were	increased	by	1%,	the	post-retirement	benefit	obligation	as	of	December	31,	2008,	would	have	increased	8%,	and	the	aggregate expense	for	service	and	interest	costs	for	2008	would	have	increased	9%.	Conversely,	if	health	care	cost	trend	rates	were	reduced	by	1%,	the	post-retirement	benefit obligation	as	of	December	31,	2008,	would	have	decreased	6%,	and	the	aggregate	expense	for	service	and	interest	costs	for	2008	would	have	decreased	7%.

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:

|  | Defined	Benefit	Plans | Primary	U.S.	and	Non-U.S. |  | Plan | Post-Retirement |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | \t\t\t\t2008 | \t\t\t\t2007 | \t\t\t\t2006 | 2008 | 2007 | 2006 |
| Components\tof\tnet\tperiodic\tbenefit\tcost: |  |  |  |  |  |  |
| Service\tcost | $18 | $62 | $59 | $4 | $3 | $4 |
| Interest\tcost | 47 | 44 | 39 | 5 | 5 | 5 |
| Assumed\treturn\ton\tplan\tassets | (59) | (55) | (53) | \t — | \t — | \t — |
| Amortization\tof\ttransition\tobligation | — | — | — | \t — | 1 | 1 |
| Amortization\tof\tprior\tservice\tcost | — | (2) | (2) | \t — | \t — | \t — |
| Amortization\tof\tnet\tloss | 4 | 12 | 17 | 1 | 1 | 2 |
| Net\tperiodic\tbenefit\tcost | 10 | 61 | 60 | \t 10 | \t 10 | \t 12 |
| Curtailments | — | (19) | — | \t — | \t — | \t — |
| Total\texpense | $10 | $42 | $60 | $10 | $10 | $12 |
| Estimated\tamounts\tthat\twill\tbe\tamortized\tfrom\taccumulated\tother\tcomprehensive\tincome\tover\tthe |  |  |  |  |  |  |
| next\tfiscal\tyear: |  |  |  |  |  |  |
| Initial\tnet\tasset |  |  |  |  |  | $(1) |
| Prior\tservice\tcredit |  |  | $2 |  | $1 | \t — |
| Net\tloss | $(6) | $(4) | (14) | $(1) | (1) | (1) |
| Estimated\tamortization | $(6) | $(4) | $(12) | $(1) | \t — | $(2) |

|  | Non-Qualified	SERPs | Non-Qualified	SERPs |  |
| :--- | :--- | :--- | :--- |
| (In\tmillions) | 2008 | 2007 | 2006 |
| Components\tof\tnet\tperiodic\tbenefit\tcost: |  |  |  |
| Service\tcost | $4 | $12 | $6 |
| Interest\tcost | \t 12 | \t 10 | 7 |
| Amortization\tof\tprior\tservice\tcost | \t — | 2 | 2 |
| Amortization\tof\tnet\tloss | 8 | 5 | 4 |
| Net\tperiodic\tbenefit\tcost | \t 24 | \t 29 | \t 19 |
| Curtailments | \t — | \t 13 | \t — |
| Total\texpense | $24 | $42 | $19 |
| Estimated\tamounts\tthat\twill\tbe\tamortized\tfrom\taccumulated\tother\tcomprehensive\tincome\tover\tthe\tnext\tfiscal\tyear: |  |  |  |
| Prior\tservice\tcost |  |  | $(2) |
| Net\tloss | $(7) | $(9) | (4) |
| Estimated\tamortization | $(7) | $(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	$87	million	for	2008,	$25	million	for	2007	and	$20	million	for 2006.	In	addition,	employees	in	certain	non-U.S.	offices	participate	in	other	local	plans.	Expenses	related	to	these	plans	were	$55	million,	$33	million	and	$32	million for	2008,	2007	and	2006,	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	common	stock	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	common	share.

# Note	20.				Occupancy	Expense	and	Information	Systems	and	Communications	Expense

Occupancy	expense	and	information	systems	and	communications	expense	include	expense	for	depreciation	of	buildings,	leasehold	improvements,	computers, equipment	and	furniture	and	fixtures.	Total	depreciation	expense	for	the	years	ended	December	31,	2008,	2007	and	2006	was	$365	million,	$319	million	and $309	million,	respectively.

We	lease	approximately	872,000	square	feet	at	One	Lincoln	Street,	our	headquarters	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.	In	addition,	we	lease	approximately	359,000	square	feet	at	20 Churchill	Place,	an	office	building	located	in	the	U.K.,	under	a	20-year	capital	lease	expiring	in	December	2028,	with	the	option	to	cancel	the	lease	after	15	years.	As	of December	31,	2008	and	2007,	an	aggregate	net	book	value	of	$675	million	and	$421	million,	respectively,	for	the	above-described	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,	2008	and	2007,	interest	expense	related	to	these	capital	lease	obligations,	recorded	in	net	interest	revenue,	was	$36	million	for	each	year.	As	of December	31,	2008	and	2007,	accumulated	amortization	of	assets	under	capital	leases	was	$139	million	and	$110	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.

Total	rental	expense,	net	of	sublease	revenue,	amounted	to	$241	million,	$199	million	and	$179	million	in	2008,	2007	and	2006,	respectively.	Rental	expense	has been	reduced	by	sublease	revenue	of	$11	million,	$15	million	and	$13	million	for	the	years	ended	December	31,	2008,	2007	and	2006,	respectively.

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.

The	following	is	a	summary	of	future	minimum	lease	payments	under	non-cancelable	capital	and	operating	leases	as	of	December	31,	2008.	Future	minimum rental	commitments	have	been	reduced	by	aggregate	sublease	rental	commitments	of	$71	million	for	capital	leases	and	$127	million	for	operating	leases.	The	increase	in future	lease	payments	compared	to	amounts	reported	in	prior	years	resulted	from	the	above-described	lease	for	an	office	building	in	the	U.K.,	which	was	executed	in December	2008.

|  | Capital | Operating |  |
| :--- | :--- | :--- | :--- |
| (In\tmillions) | Leases | Leases | Total |
| 2009 | $73 | $232 | $305 |
| 2010 | 74 | 219 | 293 |
| 2011 | 74 | 193 | 267 |
| 2012 | 70 | 216 | 286 |
| 2013 | 70 | 177 | 247 |
| Thereafter | 831 | 614 | \t 1,445 |
| Total\tminimum\tlease\tpayments | \t 1,192 | $1,651 | $2,843 |
| Less\tamount\trepresenting\tinterest\tpayments | (446) |  |  |
| Present\tvalue\tof\tminimum\tlease\tpayments | $746 |  |  |

During	the	fourth	quarter	of	2008,	we	elected	to	provide	support	to	certain	investment	accounts	managed	by	SSgA	through	the	purchase	of	asset-	and	mortgage- backed	securities	and	a	cash	infusion,	which	resulted	in	a	charge	of	$450	million.

SSgA	manages	certain	investment	accounts,	offered	to	retirement	plans,	that	allow	participants	to	purchase	and	redeem	units	at	a	constant	net	asset	value regardless	of	volatility	in	the	underlying	value	of	the	assets	held	by	the	account.	The	accounts	enter	into	contractual	arrangements	with	independent	third-party	financial institutions	that	agree	to	make	up	any	shortfall	in	the	account	if	all	the	units	are	redeemed	at	the	constant	net	asset	value.	The	financial	institutions	have	the	right,	under certain	circumstances,	to	terminate	this	guarantee	with	respect	to	future	investments	in	the	account.	During	2008,	the	liquidity	and	pricing	issues	in	the	fixed-income markets	adversely	affected	the	market	value	of	the	securities	in	these	accounts	to	the	point	that	the	third-party	guarantors	considered	terminating	their	financial guarantees	with	the	accounts.	Although	we	were	not	statutorily	or	contractually	obligated	to	do	so,	we	elected	to	purchase	approximately	$2.49	billion	of	asset-	and mortgage-backed	securities	from	these	accounts	that	had	been	identified	as	presenting	increased	risk	in	the	current	market	environment	and	to	contribute	an	aggregate	of $450	million	to	the	accounts	to	improve	the	ratio	of	the	market	value	of	the	accounts'	portfolio	holdings	to	the	book	value	of	the	accounts.	We	have	no	ongoing commitment	or	intent	to	provide	support	to	these	accounts.	The	securities	are	carried	in	investment	securities	available	for	sale	in	our	consolidated	statement	of condition.

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

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Customer\tindemnification\tobligation | $200 |  |  |
| Securities\tprocessing | \t 187 | $79 | $37 |
| Other | \t 505 | \t 399 | \t 281 |
| Total\tother\texpenses | $892 | $478 | $318 |

In	September	and	October	2008,	Lehman	Brothers	Holdings	Inc.,	or	Lehman	Brothers,	and	certain	of	its	affiliates	filed	for	bankruptcy	or	other	insolvency proceedings.	While	we	had	no	unsecured	financial	exposure	to	Lehman	Brothers	or	its	affiliates,	we	indemnified	certain	customers	in	connection	with	these	and	other collateralized	repurchase	agreements	with	Lehman	Brothers	entities.	In	the	then	current	market	environment,	the	market	value	of	the	underlying	collateral	had	declined. During	the	third	quarter	of	2008,	to	the	extent	these	declines	resulted	in	collateral	value	falling	below	the	indemnification	obligation,	we	recorded	a	reserve	to	provide for	our	estimated	net	exposure.	The	reserve,	which	totaled	$200	million,	was	based	on	the	cost	of	satisfying	the	indemnification	obligation	net	of	the	fair	value	of	the collateral,	which	we	purchased	during	the	fourth	quarter	of	2008.	The	collateral,	composed	of	commercial	real	estate	loans	which	are	discussed	in	note	5,	is	recorded	in loans	and	leases	in	our	consolidated	statement	of	condition.

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

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Current: |  |  |  |
| Federal | $1,065 | $424 | $328 |
| State | 299 | 133 | 82 |
| Non-U.S. | 309 | 338 | \t 265 |
| Total\tcurrent | \t 1,673 | 895 | \t 675 |
| Deferred: |  |  |  |
| Federal | (442) | (155) | 27 |
| State | (194) | (59) | (9) |
| Non-U.S. | (6) | (39) | (18) |
| Total\tdeferred\t(benefit) | (642) | (253) | — |
| Total\tincome\ttax\texpense\tfrom\tcontinuing\toperations | $1,031 | $642 | $675 |

The	income	tax	expense	related	to	net	gains	realized	from	sales	of	investment	securities	was	$27	million,	$3	million	and	$6	million	for	2008,	2007	and	2006, respectively.	Pre-tax	income	from	continuing	operations	attributable	to	operations	located	outside	the	U.S.	was	$1.11	billion,	$1.13	billion	and	$759	million	for	2008, 2007	and	2006,	respectively.

Pre-tax	earnings	of	non-U.S.	subsidiaries	are	subject	to	U.S.	tax	when	effectively	repatriated.	As	of	December	31,	2008,	State	Street	has	chosen	to	indefinitely reinvest	$773	million	of	retained	earnings	of	certain	foreign	subsidiaries.	No	provision	has	been	recorded	for	U.S.	income	tax	that	could	be	incurred	upon	repatriation, and	it	is	not	practicable	to	determine	the	tax	liability	that	could	be	incurred	upon	repatriation.

We	recorded	a	$4	million	decrease	in	deferred	tax	expense	associated	with	Massachusetts	legislation	entitled	"An	Act	Improving	Tax	Fairness	and	Business Competitiveness,"	which	was	signed	into	law	in	July	2008.

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

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Deferred\ttax\tliabilities: |  |  |
| Lease\tfinancing\ttransactions | $535 | $1,177 |
| Foreign\tcurrency\ttranslation | 63 | 152 |
| Fixed\tand\tintangible\tassets | 775 | 731 |
| Other | 51 | — |
| Total\tdeferred\ttax\tliabilities | 1,424 | \t 2,060 |
| Deferred\ttax\tassets: |  |  |
| Unrealized\tlosses\ton\tavailable-for-sale\tsecurities,\tnet | 3,522 | 486 |
| Deferred\tcompensation | 172 | 122 |
| Defined\tbenefit\tpension\tplan | 169 | 85 |
| Operating\texpenses | 272 | 402 |
| Real\testate | 44 | 56 |
| Other | 49 | 81 |
| Total\tdeferred\ttax\tassets | 4,228 | \t 1,232 |
| Valuation\tallowance\tfor\tdeferred\ttax\tassets | (6) | (2) |
| Net\tdeferred\ttax\tassets | 4,222 | \t 1,230 |
| Net\tdeferred\ttax\t(assets)\tliabilities | $(2,798) | $830 |

Management	considers	the	valuation	allowance	adequate	to	reduce	the	total	deferred	tax	asset	to	an	amount	that	will	more	likely	than	not	be	realized.	At December	31,	2008,	we	had	deferred	tax	assets	associated	with	non-U.S.	federal	and	state	loss	carryforwards	of	$6	million,	included	in	"other"	in	the	above	table.	Loss carryforwards	expire	beginning	in	2009.

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:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| U.S.\tfederal\tincome\ttax\trate | 35.0% | 35.0% | 35.0% |
| Changes\tfrom\tstatutory\trate: |  |  |  |
| State\ttaxes,\tnet\tof\tfederal\tbenefit | 3.4 | 2.2 | 2.9 |
| Tax-exempt\tincome | (2.0) | (1.7) | (1.1) |
| Tax\tcredits | (0.9) | (1.6) | (1.4) |
| Foreign\ttax\tdifferential | (1.4) | (2.2) | (1.2) |
| Provision\trelated\tto\tTIPRA | — | — | 1.8 |
| Provision\trelated\tto\tLILO\tand\tSILO\ttransactions | 2.4 | 2.0 | 2.6 |
| Other,\tnet | (0.3) | — | (0.5) |
| Effective\ttax\trate | 36.2% | 33.7% | 38.1% |

A	summary	of	activity	related	to	unrecognized	tax	benefits	for	2008	and	2007	follows:

| (In	millions) | 2008 | 2007 |
| :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tyear | $305 | $662 |
| Increase\trelated\tto\ttax\tpositions\ttaken\tduring\tprior\tyears | 41 | 150 |
| Settlements | (1) | (507) |
| Balance\tat\tend\tof\tyear | $345 | $305 |

Included	in	the	balances	in	the	preceding	table	above	are	$294	million	and	$285	million	of	tax	positions	for	which	the	ultimate	deductibility	is	highly	certain	but for	which	the	timing	of	such	deductibility	is	uncertain	at	December	31,	2008	and	2007,	respectively.	Settlements	for	2007	included	amounts	remitted	during	2007	and identified	amounts	remitted	in	2008.

We	are	presently	under	audit	by	a	number	of	tax	authorities.	It	is	reasonably	possible	that	unrecognized	tax	benefits	could	change	significantly	over	the	next	12 months.	We	do	not	expect	that	any	change	would	have	a	material	effect	on	our	effective	tax	rate.

We	record	interest	and	penalties	related	to	income	taxes	as	a	component	of	income	tax	expense.	Income	tax	expense	included	interest	expense	of	approximately $22	million	and	$38	million	for	the	years	ended	December	31,	2008	and	2007,	respectively.	We	had	approximately	$62	million	and	$83	million	accrued	at December	31,	2008	and	2007,	respectively,	for	the	payment	of	interest.	The	earliest	year	open	to	examination	in	our	major	jurisdictions	is	2000.

# Note	23.				Earnings	Per	Share

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

| (Dollars	in	millions,	except	per	share	amounts) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $1,811 | $1,261 | $1,106 |
| Preferred\tstock\tdividends | (18) | — | — |
| Accretion\tof\tpreferred\tstock\tdiscount | (4) | — | — |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $1,789 | $1,261 | $1,106 |
| Average\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic\taverage\tshares | \t 413,182 | \t 360,675 | \t 331,350 |
| Effect\tof\tdilutive\tsecurities: |  |  |  |
| Stock\toptions\tand\tstock\tawards | 2,910 | 4,788 | 4,349 |
| Equity-related\tfinancial\tinstruments | 8 | 25 | 33 |
| Diluted\taverage\tshares | \t 416,100 | \t 365,488 | \t 335,732 |
| Anti-dilutive\tsecurities\t(in\tthousands)(1) | 2,012 | 1,091 | 973 |
| Earnings\tper\tcommon\tshare: |  |  |  |
| Basic | $4.33 | $3.50 | $3.34 |
| Diluted | 4.30 | 3.45 | 3.29 |

(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	24.				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	and	other	investment	pools,	corporate	and	public	retirement	plans, insurance	companies,	foundations	and	endowments	worldwide.	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.

| December	31, | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| except\twhere |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| otherwise\tnoted) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fee\trevenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Servicing\tfees | $3,745 | $3,388 | $2,723 |  |  |  |  |  |  |  |  |  | $3,745 | $3,388 | $2,723 |
| Management\tfees | — | — | — | $1,028 | $1,141 | $943 |  |  |  |  |  |  | 1,028 | \t 1,141 | 943 |
| Trading\tservices | \t 1,467 | \t 1,152 | 862 | — | — | — |  |  |  |  |  |  | 1,467 | \t 1,152 | 862 |
| Securities\tfinance | 900 | 518 | 292 | 330 | 163 | 94 |  |  |  |  |  |  | 1,230 | 681 | 386 |
| Processing\tfees\tand\tother | 200 | 196 | 208 | 85 | 73 | 56 | $(8) | $2 | $8 |  |  |  | 277 | 271 | 272 |
| Total\tfee\trevenue | \t 6,312 | \t 5,254 | \t 4,085 | \t 1,443 | \t 1,377 | \t 1,093 | (8) | 2 | 8 |  |  |  | 7,747 | \t 6,633 | \t 5,186 |
| Net\tinterest\trevenue | \t 2,472 | \t 1,573 | 986 | 104 | 135 | 104 | 6 | 22 | 20 | $68 |  |  | 2,650 | \t 1,730 | \t 1,110 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — | — | — | — | — |  |  | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | \t 2,472 | \t 1,573 | 986 | 104 | 135 | 104 | 6 | 22 | 20 | 68 |  |  | 2,650 | \t 1,730 | \t 1,110 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (54) | (27) | 15 | — | — | — | — | — | — | — |  |  | (54) | (27) | 15 |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | — | — | — | — | — | — | — | — | — | 350 |  |  | 350 | — | — |
| Total\trevenue | \t 8,730 | \t 6,800 | \t 5,086 | \t 1,547 | \t 1,512 | \t 1,197 | (2) | 24 | 28 | 418 |  |  | \t 10,693 | \t 8,336 | \t 6,311 |
| Expenses\tfrom\toperations | \t 5,642 | \t 4,787 | \t 3,742 | \t 1,133 | 974 | 791 | 5 | 7 | 7 |  |  |  | 6,780 | \t 5,768 | \t 4,540 |
| Provision\tfor\tlegal\texposure,\tnet | — | (47) | — | — | 514 | — | — | — | — |  |  |  | — | 467 | — |
| Provision\tfor\tinvestment\taccount\tinfusion | — | — | — | 450 | — | — | — | — | — |  |  |  | 450 | — | — |
| Restructuring\tcharges | — | — | — | — | — | — | — | — | — | 306 |  |  | 306 | — | — |
| Customer\tindemnification\tobligation | — | — | — | — | — | — | — | — | — | 200 |  |  | 200 | — | — |
| Merger\tand\tintegration\tcosts | — | — | — | — | — | — | — | — | — | 115 | $ 198 |  | 115 | 198 | — |
| Total\texpenses | \t 5,642 | \t 4,740 | \t 3,742 | \t 1,583 | \t 1,488 | 791 | 5 | 7 | 7 | 621 | 198 |  | 7,851 | \t 6,433 | \t 4,540 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | $3,088 | $2,060 | $1,344 | $(36) | $24 | $406 | $(7) | $17 | $21 | $(203) | $(198) |  | $2,842 | $1,903 | $1,771 |
| Pre-tax\tmargin | 35% | 30% | 26% | (2)% | 2% | 34% |  |  |  |  |  |  |  |  |  |
| Average\tassets\t(in\tbillions) | $157.9 | $120.0 | $103.4 | $3.3 | $3.0 | $2.5 | $ 0.5 | $ 0.5 | $ 0.5 |  |  |  | $161.7 | $123.5 | $106.4 |

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:

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Results\tof\toperations: |  |  |  |
| Total\tfee\trevenue | $3,129 | $2,707 | $2,349 |
| Net\tinterest\trevenue | 632 | 713 | 392 |
| Total\trevenue | 3,761 | 3,420 | 2,741 |
| Expenses | 3,203 | 2,233 | 1,840 |
| Income\tbefore\tincome\ttaxes | 558 | 1,187 | 901 |
| Income\ttax\texpense | 215 | 415 | 346 |
| Net\tincome | $343 | $772 | $555 |
| Assets: |  |  |  |
| Interest-bearing\tdeposits\twith\tbanks | $15,534 | $4,776 | $5,193 |
| Other\tassets | 33,189 | 29,455 | 19,510 |
| Total\tassets | $48,723 | $34,231 | $ 24,703 |

# Note	26.				Parent	Company	Financial	Statements

The	following	tables	present	the	financial	statements	of	the	parent	company	without	consolidation	of	its	subsidiaries.

# STATEMENT	OF	INCOME

| Years	ended	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Interest\ton\tsecurities\tpurchased\tunder\tresale\tagreements | $105 | $446 | $559 |
| Cash\tdividends\tfrom\tconsolidated\tbanking\tsubsidiary | — | 70 | 415 |
| Cash\tdividends\tfrom\tconsolidated\tnon-banking\tsubsidiaries\tand\tunconsolidated\tentities | 52 | 120 | 177 |
| Other,\tnet | (8) | 74 | 34 |
| Total\trevenue | 149 | 710 | \t 1,185 |
| Interest\ton\tsecurities\tsold\tunder\trepurchase\tagreements | 64 | 360 | 463 |
| Other\tinterest\texpense | 211 | 208 | 146 |
| Other\texpenses | 77 | 86 | 36 |
| Total\texpenses | 352 | 654 | 645 |
| Income\ttax\tbenefit | (75) | (76) | (4) |
| Income\t(loss)\tbefore\tequity\tin\tundistributed\tincome\tof\tsubsidiaries\tand\tunconsolidated\tentities | (128) | 132 | 544 |
| Equity\tin\tundistributed\tincome\t(loss)\tof\tsubsidiaries\tand\tunconsolidated\tentities: |  |  |  |
| Consolidated\tbanking\tsubsidiary | \t 1,814 | \t 1,177 | 602 |
| Consolidated\tnon-banking\tsubsidiaries\tand\tunconsolidated\tentities | 125 | (48) | (40) |
| Net\tincome | $1,811 | $1,261 | $1,106 |

# STATEMENT	OF	CONDITION

| As	of	December	31, | 2008 | 2007 |
| :--- | :--- | :--- |
| (In\tmillions) |  |  |
| Assets: |  |  |
| Interest-bearing\tdeposits\twith\tbanking\tsubsidiary | $2,770 | $2,067 |
| Securities\tpurchased\tunder\tresale\tagreements\tfrom: |  |  |
| Third\tparties | — | 6,798 |
| Consolidated\tnon-banking\tsubsidiaries\tand\tunconsolidated\tentities | — | 3 |
| Investment\tsecurities\tavailable\tfor\tsale | 256 | 122 |
| Investment\tsecurities\theld\tto\tmaturity\tpurchased\tunder\tmoney\tmarket\tliquidity\tfacility\t(fair\tvalue\tof\t$3,099) | 3,089 | — |
| Investments\tin\tsubsidiaries: |  |  |
| Consolidated\tbanking\tsubsidiary | 13,339 | 11,932 |
| Consolidated\tnon-banking\tsubsidiaries | 1,158 | 876 |
| Unconsolidated\tentities | 252 | 184 |
| Notes\tand\tother\treceivables\tfrom: |  |  |
| Consolidated\tbanking\tsubsidiary | 422 | 205 |
| Consolidated\tnon-banking\tsubsidiaries\tand\tunconsolidated\tentities | 239 | 210 |
| Other\tassets | 229 | 149 |
| Total\tassets | $21,754 | $22,546 |
| Liabilities: |  |  |
| Securities\tsold\tunder\trepurchase\tagreements |  | $6,293 |
| Short-term\tborrowings\tunder\tmoney\tmarket\tliquidity\tfacility | $3,063 | — |
| Commercial\tpaper | 2,588 | 2,355 |
| Accrued\ttaxes,\texpenses\tand\tother\tliabilities\tdue\tto: |  |  |
| Consolidated\tbanking\tsubsidiary | 447 | 241 |
| Consolidated\tnon-banking\tsubsidiaries | 9 | 11 |
| Third\tparties | 255 | 213 |
| Long-term\tdebt | 2,618 | 2,134 |
| Total\tliabilities | 8,980 | 11,247 |
| Shareholders'\tequity | 12,774 | 11,299 |
| Total\tliabilities\tand\tshareholders'\tequity | $21,754 | $22,546 |

# STATEMENT	OF	CASH	FLOWS

| Years	ended	December	31, | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Net\tcash\tprovided\tby\toperating\tactivities | $144 | $170 | $497 |
| Investing\tActivities: |  |  |  |
| Net\tincrease\tin\tinterest-bearing\tdeposits\twith\tbanking\tsubsidiary | (703) | (1,226) | (291) |
| Net\t(increase)\tdecrease\tin\tsecurities\tpurchased\tunder\tresale\tagreements | 6,801 | 2,489 | (211) |
| Proceeds\tfrom\tmaturity\tof\tavailable-for-sale\tsecurity | 10 | 4 | — |
| Purchases\tof\tavailable-for-sale\tsecurities | (168) | (3) | (2) |
| Purchases\tunder\tmoney\tmarket\tliquidity\tfacility,\tnet | (3,089) | — | — |
| Investments\tin\tconsolidated\tbanking\tsubsidiary,\tnet | (4,572) | (300) | (5) |
| Investments\tin\tnon-banking\tsubsidiaries\tand\tunconsolidated\tentities | (214) | (13) | 22 |
| Net\t(increase)\tdecrease\tin\tnotes\treceivable\tfrom\tsubsidiaries | (146) | 18 | 1 |
| Other,\tnet | (21) | 129 | 141 |
| Net\tcash\t(used\tin)\tprovided\tby\tinvesting\tactivities | (2,102) | 1,098 | (345) |
| Financing\tActivities: |  |  |  |
| Net\tincrease\t(decrease)\tin\tsecurities\tsold\tunder\trepurchase\tagreements | (6,293) | (2,479) | 148 |
| Net\tincrease\tin\tshort-term\tborrowings\tunder\tmoney\tmarket\tliquidity\tfacility,\tnet | 3,063 | — | — |
| Net\tincrease\tin\tcommercial\tpaper | 233 | 1,357 | 134 |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt,\tnet\tof\tissuance\tcosts | 493 | 1,488 | — |
| Payments\tfor\tlong-term\tdebt | (25) | (516) | — |
| Proceeds\tfrom\tpublic\toffering\tof\tcommon\tstock,\tnet\tof\tissuance\tcosts | 2,251 | — | — |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock | 1,879 | — | — |
| Proceeds\tfrom\tissuance\tof\twarrant\tto\tpurchase\tcommon\tstock | 121 | — | — |
| Purchases\tof\tcommon\tstock | — | (1,002) | (368) |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock\tfor\tstock\tawards\tand\toptions\texercised | 12 | — | — |
| Proceeds\tfrom\tissuances\tof\ttreasury\tstock | 623 | 185 | 193 |
| Payments\tfor\tcash\tdividends | (399) | (301) | (259) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | 1,958 | (1,268) | (152) |
| 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.

| Years	ended	December	31, | 2008 | 2008 | 2008 |  | 2007 |  |  | 2006 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions;\tfully\ntaxable-equivalent\tbasis) | Average\nBalance | Interest | Average\nRate | Average\nBalance | Interest | Average\nRate | Average\nBalance | Interest | Average\nRate |
| Assets: |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits\twith\tnon-U.S.\tbanks | $17,645 | $725 | 4.11% | $7,420 | $415 | 5.60% | $9,581 | $412 | 4.30% |
| Interest-bearing\tdeposits\twith\tU.S.\tbanks | 6,358 | 35 | .56 | 13 | 1 | 7.19 | 40 | 2 | 5.00 |
| Securities\tpurchased\tunder\tresale\tagreements | 10,195 | 276 | 2.71 | 12,466 | 664 | 5.32 | 12,543 | 649 | 5.18 |
| Federal\tfunds\tsold | 2,700 | 63 | 2.33 | 1,936 | 92 | 4.77 | 277 | 14 | 4.91 |
| Trading\taccount\tassets | 2,423 | 78 | 3.22 | 972 | 55 | 5.60 | 975 | 48 | 4.91 |
| Investment\tsecurities: |  |  |  |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 23,434 | 889 | 3.79 | 21,705 | \t 1,106 | 5.10 | 21,160 | \t 1,011 | 4.78 |
| State\tand\tpolitical\tsubdivisions(2) | 6,138 | 343 | 5.59 | 5,268 | 251 | 4.79 | 2,616 | 115 | 4.45 |
| Other\tinvestments | 42,655 | \t 1,931 | 4.53 | 44,017 | \t 2,292 | 5.21 | 37,803 | \t 1,830 | 4.84 |
| Investment\tsecurities\tpurchased\tunder\tAMLF | 9,193 | 367 | 4.00 | — | — | — | — | — | — |
| Commercial\tand\tfinancial\tloans | 9,967 | 306 | 3.07 | 8,759 | 365 | 4.18 | 5,338 | 205 | 3.84 |
| Lease\tfinancing(2) | 1,917 | (30) | (1.57) | 1,994 | 29 | 1.45 | 2,332 | 83 | 3.59 |
| Total\tinterest-earning\tassets(2) | \t 132,625 | \t 4,983 | 3.75 | \t 104,550 | \t 5,270 | 5.04 | 92,665 | \t 4,369 | 4.72 |
| Cash\tand\tdue\tfrom\tbanks | 5,096 |  |  | 3,272 |  |  | 2,977 |  |  |
| Other\tassets | 23,976 |  |  | 15,660 |  |  | 10,802 |  |  |
| Total\tassets | $161,697 |  |  | $123,482 |  |  | $106,444 |  |  |
| Liabilities\tand\tshareholders'\tequity: |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits: |  |  |  |  |  |  |  |  |  |
| Time | $4,115 | 142 | 3.45 | $2,476 | 135 | 5.45 | $1,617 | 57 | 3.52 |
| Savings | 7,101 | 81 | 1.14 | 5,081 | 178 | 3.50 | 836 | 32 | 3.81 |
| Non-U.S. | 68,291 | \t 1,103 | 1.62 | 60,663 | \t 1,985 | 3.27 | 53,182 | \t 1,802 | 3.39 |
| Total\tinterest-bearing\tdeposits | 79,507 | \t 1,326 | 1.67 | 68,220 | \t 2,298 | 3.37 | 55,635 | \t 1,891 | 3.40 |
| Securities\tsold\tunder\trepurchase\tagreements | 14,261 | 177 | 1.24 | 16,132 | 701 | 4.35 | 20,883 | 914 | 4.38 |
| Federal\tfunds\tpurchased | 1,026 | 18 | 1.77 | 1,667 | 86 | 5.15 | 2,777 | 140 | 5.04 |
| Other\tshort-term\tborrowings | 5,996 | 180 | 2.99 | 4,225 | 172 | 4.09 | 2,039 | 91 | 4.46 |
| Short-term\tborrowings\tunder\tAMLF | 9,170 | 299 | 3.26 | — | — | — | — | — | — |
| Long-term\tdebt | 4,106 | 229 | 5.59 | 3,402 | 225 | 6.62 | 2,621 | 178 | 6.77 |
| Total\tinterest-bearing\tliabilities | \t 114,066 | \t 2,229 | 1.95 | 93,646 | \t 3,482 | 3.72 | 83,955 | \t 3,214 | 3.83 |
| Noninterest-bearing\tdeposits: |  |  |  |  |  |  |  |  |  |
| Special\ttime | 14,547 |  |  | 9,836 |  |  | 7,282 |  |  |
| Demand | 5,384 |  |  | 225 |  |  | 663 |  |  |
| Non-U.S.(3) | 678 |  |  | 579 |  |  | 329 |  |  |
| Other\tliabilities | 14,614 |  |  | 9,769 |  |  | 7,471 |  |  |
| Shareholders'\tequity | 12,408 |  |  | 9,427 |  |  | 6,744 |  |  |
| Total\tliabilities\tand\tshareholders'\tequity | $161,697 |  |  | $123,482 |  |  | $106,444 |  |  |
| Net\tinterest\trevenue |  | $2,754 |  |  | $1,788 |  |  | $1,155 |  |
| Excess\tof\trate\tearned\tover\trate\tpaid |  |  | 1.80% |  |  | 1.32% |  |  | .89% |
| Net\tinterest\tmargin(1) |  |  | 2.08 |  |  | 1.71 |  |  | 1.25 |

(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	$104	million,	$58	million	and	$45	million	for	the	years	ended	December	31,	2008,	2007	and	2006, 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.

| Years	ended	December	31, | 2008	Compared	to	2007 | 2008	Compared	to	2007 | 2008	Compared	to	2007 | 2007	Compared	to	2006 | 2007	Compared	to	2006 | 2007	Compared	to	2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin\tmillions;\tfully\ttaxable-equivalent\nbasis) | Change\tin\nVolume | Change\tin\nRate | Net\t(Decrease)\nIncrease | Change\tin\nVolume | Change\tin\nRate | Net\t(Decrease)\nIncrease |
| Interest\trevenue\trelated\tto: |  |  |  |  |  |  |
| Interest-bearing\tdeposits\twith\tnon-U.S.\tbanks | $573 | $(263) | $310 | $(93) | $96 | $3 |
| Interest-bearing\tdeposits\twith\tU.S.\tbanks | 34 | — | 34 | (1) | — | (1) |
| Securities\tpurchased\tunder\tresale\tagreements | (121) | (267) | (388) | (4) | 19 | 15 |
| Federal\tfunds\tsold | 37 | (66) | (29) | 81 | (3) | 78 |
| Trading\taccount\tassets | 81 | (58) | 23 | — | 7 | 7 |
| Investment\tsecurities: |  |  |  |  |  |  |
| U.S.\tTreasury\tand\tfederal\tagencies | 88 | (305) | (217) | 26 | 69 | 95 |
| State\tand\tpolitical\tsubdivisions | 42 | 50 | 92 | 118 | 18 | 136 |
| Other\tinvestments | (71) | (290) | (361) | 300 | 162 | 462 |
| Investment\tsecurities\tpurchased\tunder\tAMLF | 367 | — | 367 | — | — | — |
| Commercial\tand\tfinancial\tloans | 51 | (110) | (59) | 130 | 30 | 160 |
| Lease\tfinancing | (1) | (58) | (59) | (12) | (42) | (54) |
| Total\tinterest-earning\tassets | 1,080 | (1,367) | (287) | 545 | 356 | 901 |
| Interest\texpense\trelated\tto: |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Time | 89 | (82) | 7 | 30 | 48 | 78 |
| Savings | 71 | (168) | (97) | 162 | (16) | 146 |
| Non-U.S. | 250 | (1,132) | (882) | 254 | (71) | 183 |
| Securities\tsold\tunder\trepurchase\tagreements | (81) | (443) | (524) | (208) | (5) | (213) |
| Federal\tfunds\tpurchased | (33) | (35) | (68) | (56) | 2 | (54) |
| Other\tshort-term\tborrowings | 73 | (65) | 8 | 98 | (17) | 81 |
| Short-term\tborrowings\tunder\tAMLF | 299 | — | 299 | — | — | — |
| Long-term\tdebt | 47 | (43) | 4 | 53 | (6) | 47 |
| Total\tinterest-bearing\tliabilities | 715 | (1,968) | (1,253) | 333 | (65) | 268 |
| Net\tinterest\trevenue | $365 | $601 | $966 | $212 | $421 | $633 |

# Quarterly	Summarized	Financial	Information	(Unaudited)

| (Dollars	and	shares	in	millions, | 2008	Quarters | 2008	Quarters | 2008	Quarters | 2008	Quarters | 2007	Quarters | 2007	Quarters | 2007	Quarters | 2007	Quarters |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| except\tper\tshare\tamounts) | Fourth | Third | Second | First | Fourth | Third | Second | First |
| Total\tfee\trevenue | $1,881 | $1,899 | $2,006 | $1,961 | $1,927 | $1,799 | $1,537 | $1,370 |
| Interest\trevenue | 1,427 | 1,027 | 1,137 | 1,288 | 1,454 | 1,383 | 1,203 | 1,172 |
| Interest\texpense | 584 | 502 | 480 | 663 | 898 | 919 | 818 | 847 |
| Net\tinterest\trevenue | 843 | 525 | 657 | 625 | 556 | 464 | 385 | 325 |
| Provision\tfor\tloan\tlosses | — | — | — | — | — | — | — | — |
| Net\tinterest\trevenue\tafter\tprovision\tfor\tloan\tlosses | 843 | 525 | 657 | 625 | 556 | 464 | 385 | 325 |
| Gains\t(Losses)\trelated\tto\tinvestment\tsecurities,\tnet | (51) | (3) | 9 | (9) | (4) | (23) | (1) | 1 |
| Gain\ton\tsale\tof\tCitiStreet\tinterest,\tnet\tof\texit\tand\tother\tassociated\tcosts | — | 350 | — | — | — | — | — | — |
| Total\trevenue | 2,673 | 2,771 | 2,672 | 2,577 | 2,479 | 2,240 | 1,921 | 1,696 |
| Total\texpenses | 2,311 | 1,925 | 1,841 | 1,774 | 2,173 | 1,689 | 1,358 | 1,213 |
| Income\tbefore\tincome\ttax\texpense | 362 | 846 | 831 | 803 | 306 | 551 | 563 | 483 |
| Income\ttax\texpense | 106 | 369 | 283 | 273 | 83 | 193 | 197 | 169 |
| Net\tincome | $256 | $477 | $548 | $530 | $223 | $358 | $366 | $314 |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $234 | $477 | $548 | $530 | $223 | $358 | $366 | $314 |
| Earnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations: |  |  |  |  |  |  |  |  |
| Basic | $.55 | $1.11 | $1.36 | $1.37 | $.58 | $.92 | $1.09 | $.94 |
| Diluted | .54 | 1.09 | 1.35 | 1.35 | .57 | .91 | 1.07 | .93 |
| Earnings\tper\tcommon\tshare: |  |  |  |  |  |  |  |  |
| Basic | $.55 | $1.11 | $1.36 | $1.37 | $.58 | $.92 | $1.09 | $.94 |
| Diluted | .54 | 1.09 | 1.35 | 1.35 | .57 | .91 | 1.07 | .93 |
| Average\tcommon\tshares\toutstanding: |  |  |  |  |  |  |  |  |
| Basic | 431 | 431 | 402 | 388 | 385 | 387 | 336 | 334 |
| Diluted | 432 | 435 | 407 | 394 | 392 | 392 | 341 | 339 |
| Dividends\tper\tcommon\tshare | $.24 | $.24 | $.24 | $.23 | $.23 | $.22 | $.22 | $.21 |
| Common\tstock\tprice: |  |  |  |  |  |  |  |  |
| High | $58.05 | $74.85 | $85.31 | $86.55 | $82.53 | $73.76 | $70.58 | $72.82 |
| Low | 28.06 | 29.09 | 63.23 | 69.75 | 66.79 | 59.13 | 64.21 | 61.70 |
| Close | 39.33 | 56.88 | 63.99 | 79.00 | 81.20 | 68.16 | 68.40 | 64.75 |

# 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's 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,	2008,	State	Street's	management	carried	out	an	evaluation,	with	the	participation	of	the	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, 2008.

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,	2008,	no	change	occurred	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,	2008. 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,	2008, 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,	2008,	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,	2008,	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,	2008	and	2007,	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,	2008	of	State	Street	Corporation	and	our	report	dated	February	26,	2009	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	2009	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on or	before	April	30,	2009,	under	the	caption	"Election	of	Directors."	Such	information	is	incorporated	herein	by	reference.

Information	about	a	current	director	of	State	Street	who	will	be	retiring	as	director	at	the	2009	Annual	Meeting	of	Shareholders	is	as	follows:

Chairman,	President,	Chief	Executive	Officer	and	co-founder	of	Aptius	Education,	Inc.,	an	educational	publishing	company,	since	2007.	Mr.	Darehshori,	now	age 72,	was	Chairman,	director	and	co-founder	of	Cambium	Learning,	Inc.,	an	educational	publishing	company,	from	2004	to	2007.	He	was	Chairman,	President	and	Chief Executive	Officer	of	Houghton	Mifflin	Company,	a	publishing	company,	from	1990	to	2000.	Mr.	Darehshori	is	a	director	of	Aviva	USA	Corporation.	He	is	a	trustee	of Wellesley	College	and	the	Dana-Farber	Cancer	Institute,	and	a	director	of	the	Tanenbaum	Center	for	Interreligious	Understanding.	Mr.	Darehshori	received	a	B.A. degree	from	the	University	of	Wisconsin.

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	2009	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to Regulation	14A	on	or	before	April	30,	2009,	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	2009 Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2009,	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.				EXECUTIVECOMPENSATION

Information	in	response	to	this	item	will	appear	in	our	Proxy	Statement	for	the	2009	Annual	Meeting	of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or before	April	30,	2009,	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,	2009,	under	the	caption	"Beneficial	Ownership	of	Shares."	Such	information	is	incorporated herein	by	reference.

The	following	table	discloses	the	number	of	outstanding	common	stock	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,	2008.	The	table	provides	this	information separately	for	equity	compensation	plans	that	have	and	have	not	been	approved	by	shareholders.

|  | (a) |  | remaining	available	for |
| :--- | :--- | :--- | :--- |
|  | Number\tof\tsecurities | (b) | future\tissuance\tunder |
|  | to\tbe\tissued | Weighted-average | equity\tcompensation |
|  | upon\texercise\tof | exercise\tprice\tof | plans\t(excluding |
|  | outstanding\toptions, | outstanding\toptions, | securities\treflected |
| (Shares\tin\tthousands) | warrants\tand\trights | warrants\tand\trights | in\tcolumn\t(a)) |
| Plan\tcategory: |  |  |  |
| Equity\tcompensation\tplans\tapproved |  |  |  |
| by\tshareholders | 23,926 | $59.93 | 9,244 |
| Equity\tcompensation\tplans\tnot |  |  |  |
| approved\tby\tshareholders | 70 | — | — |
| Total | 23,996 | $59.93 | 9,244 |

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 employment	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,	2008,	there	were	no	outstanding	stock	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	187,258	shares	of	common	stock	were	outstanding	at	December	31,	2008;	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,	which	was	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	2009	Annual	Meeting of	Shareholders,	to	be	filed	pursuant	to	Regulation	14A	on	or	before	April	30,	2009,	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	2009	Annual	Meeting	of	Shareholders,	to	be	filed pursuant	to	Regulation	14A	on	or	before	April	30,	2009,	under	the	caption	"Relationship	with	Independent	Registered	Public	Accounting	Firm."	Such	information	is incorporated	herein	by	reference.

# PART	IV

# ITEM	15.				EXHIBITSAND	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,	2008,	2007	and	2006 Consolidated	Statement	of	Condition—As	of	December	31,	2008	and	2007 Consolidated	Statement	of	Changes	in	Shareholders'	Equity—Years	ended	December	31,	2008,	2007	and	2006 Consolidated	Statement	of	Cash	Flows—Years	ended	December	31,	2008,	2007	and	2006

# (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.

The	exhibits	listed	in	the	Exhibit	Index	beginning	on	page	148	of	this	Form	10-K	are	filed	herewith	or	are	incorporated	herein	by	reference	to	other	SEC	filings.

# 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	26,	2009,	thereunto	duly	authorized.

By /s/	EDWARD	J.	RESCH

EDWARD	J.	RESCH,

Executive	Vice	President	and

Chief	Financial	Officer

By /s/	JAMES	J.	MALERBA

JAMES	J.	MALERBA,

Corporate	Controller

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	on	February	26,	2009	by	the	following	persons	on	behalf of	the	registrant	and	in	the	capacities	indicated.

# OFFICERS:

/s/	RONALD	E.	LOGUE

RONALD	E.	LOGUE,

Chairman	and	Chief	Executive	Officer;	Director

/s/	EDWARD	J.	RESCH

/s/	JAMES	J.	MALERBA

JAMES	J.	MALERBA, Executive	Vice	President	and	Corporate	Controller

# DIRECTORS:

LINDA	A.	HILL

/s/	KENNETT	F.	BURNES /s/	CHARLES	R.	LAMANTIA KENNETT	F.	BURNES 	 CHARLES	R.	LAMANTIA /s/	PETER	COYM /s/	RICHARD	P.	SERGEL PETER	COYM 	 RICHARD	P.	SERGEL /s/	NADER	F.	DAREHSHORI /s/	RONALD	L.	SKATES NADER	F.	DAREHSHORI 	 RONALD	L.	SKATES /s/	AMELIA	C.	FAWCETT /s/	GREGORY	L.	SUMME AMELIA	C.	FAWCETT 	 GREGORY	L.	SUMME /s/	DAVID	P.	GRUBER /s/	ROBERT	E.	WEISSMAN

DAVID	P.	GRUBER

	 ROBERT	E.	WEISSMAN

# EXHIBIT	INDEX

(Note:	None	of	the	instruments	defining	the	rights	of	holders	of	State	Street's	outstanding	long-term	debt	are	in	respect	of	indebtedness	in	excess	of 10%	of	the	total	assets	of	State	Street	and	its	subsidiaries	on	a	consolidated	basis.	State	Street	hereby	agrees	to	furnish	to	the	Securities	and	Exchange Commission	upon	request	a	copy	of	any	other	instrument	with	respect	to	long-term	debt	of	State	Street	and	its	subsidiaries.)

10.1† State	Street's	Management	Supplemental	Retirement	Plan	Amended	and	Restated 10.2† State	Street's	Executive	Supplemental	Retirement	Plan	(formerly,	"State	Street	Supplemental	Defined	Benefit	Pension	Plan	for	Executive	Officers") Amended	and	Restated	(filed	as	Exhibit	10.1	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2008	filed	with	the Commission	on	November	4,	2008	and	incorporated	herein	by	reference)

10.3† Form	of	Employment	Agreement	with	each	of	Ronald	E.	Logue	and	Edward	J.	Resch,	Amended	and	Restated	Effective	as	of	January	1,	2008	(filed	as Exhibit	10.2	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2008	filed	with	the	Commission	on	November	4, 2008	and	incorporated	herein	by	reference)

James	S.	Phalen,	Amended	and	Restated	Effective	as	of	January	1,	2008	(filed	as	Exhibit	10.3	to	State	Street's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	September	30,	2008	filed	with	Commission	on	November	4,	2008	and	incorporated	herein	by	reference)

10.7† State	Street's	2006	Equity	Incentive	Plan	and	forms	of	award	agreements	thereunder	(filed	as	Exhibit	10.8	to	State	Street's	Annual	Report	on	Form	10- K	for	the	year	ended	December	31,	2007	filed	with	the	Commission	February	15,	2008;	filed	as	Exhibit	10.1	to	State	Street's	Quarterly	Report	on	Form 10-Q	for	the	quarter	ended	June	30,	2008	filed	with	the	Commission	August	1,	2008,	which	exhibits	are	incorporated	herein	by	reference)

10.8† State	Street's	2006	Senior	Executive	Annual	Incentive	Plan	(filed	as	Appendix	C	to	State	Street's	definitive	Proxy	Statement	filed	with	the	Commission on	March	13,	2006	and	incorporated	herein	by	reference)

10.9† State	Street's	Management	Supplemental	Savings	Plan,	Amended	and	Restated	(filed	as	Exhibit	10.2	to	State	Street's	Quarterly	Report	on	Form	10-Q for	the	quarter	ended	September	30,	2007	filed	with	the	Commission	on	November	2,	2007	and	incorporated	herein	by	reference)

10.10† Deferred	Compensation	Plan	for	Directors	of	State	Street	Corporation,	Restated

10.11† Amended	and	Restated	Deferred	Compensation	Plan	for	Directors	of	State	Street	Bank	and	Trust	Company	(filed	as	Exhibit	10.3	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	and	incorporated	herein	by reference)

10.13† Memorandum	of	agreement	of	employment	of	Edward	J.	Resch,	accepted	October	16,	2002

10.18C† Form	of	Indemnification	Agreement	between	State	Street	Bank	and	Trust	Company	and	each	of	its	directors	(filed	as	Exhibit	10.3	to	State	Street's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2007	filed	with	the	Commission	on	May	4,	2007	and	incorporated	herein	by reference)

10.18D† Form	of	Indemnification	Agreement	between	State	Street	Bank	and	Trust	Company	and	each	of	its	executive	officers	(filed	as	Exhibit	10.4	to	State Street's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2007	filed	with	the	Commission	on	May	4,	2007	and	incorporated	herein by	reference)



Question: what was the percent change in the aggregate net asset values of the direct lending collateral pools between 2007 and 2008?
Answer: -43%