8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  January 2, 2008

State Street Corporation

(Exact name of registrant as specified in its charter)

Massachusetts	001-07511	04-2456637
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

One Lincoln Street, Boston, Massachusetts	02111
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code:   (617) 786-3000

                Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Item 2.02.              Results of Operations and Financial Condition.

On January 3, 2008, State Street Corporation announced that it will record a charge in the fourth quarter of 2007 and updated its guidance for the 2007 fiscal year.  The press release issued by State Street in connection with the announcement is furnished as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.

The press release furnished with this current report on Form 8-K includes ranges and estimates for State Street’s expected 2007 full year earnings per share and return on equity, each stated on an operating basis, excluding the impact of the fourth quarter 2007 charge identified above, the impact of merger and integration costs relating to State Street’s acquisition of Investors Financial Services Corp. in 2007 and, for purposes of 2006 comparisons, tax-related adjustments in 2006 primarily associated with tax legislation and leveraged leases.  Operating-basis results, as defined by management, for 2007 exclude the impact of the fourth quarter 2007 charge identified above and the merger and integration costs relating to the Investors Financial acquisition and for 2006 exclude the impact of the 2006 tax-related adjustments.  Management measures State Street’s financial goals and related results on an operating basis to provide financial information that is comparable from period to period and to present comparable financial trends with respect to our ongoing business operations.  The fourth quarter 2007 charge identified above, the merger and integration costs related to the Investors Financial acquisition and the 2006 tax adjustments are not part of our normal ongoing business operations, and as a result, may limit a meaningful comparison of earnings per share and return on equity with that of other periods.  Management believes that operating-basis financial information, in addition to financial information prepared in accordance with generally accepted accounting principles, facilitates an investor’s understanding and analysis of State Street’s underlying performance and trends.

Item 5.02.Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)           On January 2, 2008, William W. Hunt, Vice Chairman of State Street Corporation and President and Chief Executive Officer of State Street Global Advisors, State Street’s investment management business, resigned from his positions with State Street and SSgA.

(e)           On January 2, Mr. Hunt and State Street entered into an agreement, setting forth the terms of Mr. Hunt’s separation from State Street.  Pursuant to the agreement and related State Street plans, Mr. Hunt is entitled to severance compensation and benefits in a mix of cash payments and resolution of outstanding equity awards with a value of approximately $14.1 million in the aggregate.  This value excludes the intrinsic value of Mr. Hunt’s stock options and stock appreciation rights that were already vested (approximately $4.1 million, based on the per share closing price of State Street common stock  on the New York Stock Exchange on January 2, 2008) and vested retirement benefits (approximately $900,000 as of December 31, 2006).  Mr. Hunt is not entitled to any bonus payment in respect of 2007 under the separation agreement, State Street’s Senior Executive Annual Incentive Plan or any other State Street annual incentive compensation plan.  The separation agreement will become effective on January 10, 2008, provided that Mr. Hunt does not revoke the release of claims against State Street set forth in the

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agreement.  As of the filing of this current report on Form 8-K, Mr. Hunt has not revoked the release.

In accordance with the terms of State Street’s severance plan, Mr. Hunt is entitled to cash severance compensation in an amount equal to his current annual base pay of $750,000 for each year during the two-year period following his separation.  In addition, pursuant to the separation agreement, Mr. Hunt is entitled to cash payments equal to $5.5 million in the aggregate in full satisfaction of all equity-based awards held by Mr. Hunt under State Street’s 1997 and 2006 equity incentive plans, other than the stock options, the stock appreciation rights, the 1997 equity incentive plan performance award and the SSgA performance-based equity award described below.  Due to the requirements of Section 409A of the Internal Revenue Code, the first six months of the cash severance compensation payments and the cash payments in satisfaction of these equity awards will not be paid to Mr. Hunt until six-months following his separation from State Street.

Mr. Hunt holds stock options and stock appreciation rights under State Street’s 1997 and 2006 equity incentive plans.  Pursuant to the terms of the equity plans and award agreements, Mr. Hunt will retain his vested stock options and vested stock appreciation rights, which will remain exercisable for three months following his separation from State Street.  Mr. Hunt’s unvested stock options and stock appreciation rights will continue to vest and be exercisable following his resignation to the extent so-provided under the terms of the equity incentive plans and award documentation, which may be for up to four years following his separation from State Street.  The approximate intrinsic value of Mr. Hunt’s unvested stock options and stock appreciation rights that are scheduled to vest following his separation from State Street, based on the per share closing price of State Street common stock on the New York Stock Exchange on January 2, 2008, is $1.3 million.  This amount is included in the $14.1 million aggregate value amount referenced above.  In addition, Mr. Hunt holds a performance award under the 1997 equity incentive plan that vested on December 31, 2007, pursuant to which Mr. Hunt is entitled to receive shares of State Street common stock on or about February 15, 2008.  The approximate value of this performance award is $770,000, based on the per share closing price of State Street common stock on the New York Stock Exchange on January 2, 2008.

Mr. Hunt also holds a performance-based equity award under the 2006 SSgA performance equity program covering the 2006-2008 period.  In accordance with the terms of this award, on February 15, 2009, Mr. Hunt is entitled to receive two-thirds of the number of shares of State Street common stock Mr. Hunt would have received under the award had he remained employed by State Street through that date.  However, pursuant to the separation agreement, if the aggregate value of those shares is greater than $5.0 million, Mr. Hunt will be entitled to only that number of shares with an aggregate value equal to $5.0 million, and the remainder of the shares underlying the award will be forfeited.  If the aggregate value of those shares is less than $5.0 million, pursuant to the separation agreement, Mr. Hunt is entitled to receive a cash payment in an amount equal to $5.0 million minus the value of the shares.  The value of shares delivered under this award will be determined based upon the per share closing price of State Street common stock on the New York Stock Exchange on February 15, 2009.

The separation agreement recognizes that Mr. Hunt is entitled to receive his accrued vested benefits under State Street’s tax-qualified and non-qualified retirement plans in

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accordance with their terms.  Mr. Hunt is not entitled to any benefits under State Street’s executive supplemental retirement plan, as he was not vested in his accrued benefit under that plan as of his separation from State Street.

Under the separation agreement, Mr. Hunt has agreed that he will not, during the 18-month period following his resignation, accept employment with or provide services to specified competitors of State Street, solicit any customer, prospective customer, investor, officer or principal of State Street or induce a client or customer of State Street with whom he or persons he supervised had significant personal contact to transfer its business from State Street.  However, Mr. Hunt may establish a hedge fund six months following his separation from State Street or join an independent hedge fund twelve months following that separation without violating his obligations under the agreement.  Mr. Hunt has also agreed not to disclose State Street confidential information or disparage State Street, its personnel or its customers, and State Street has agreed not to disparage Mr. Hunt.  Pursuant to the agreement, in the event that Mr. Hunt breaches any of these obligations, State Street is entitled, among other things, to immediately cease making any severance payments to Mr. Hunt, including the cash payments related to his equity awards, and to cancel any outstanding unexercised stock options or stock appreciation rights or unsettled stock awards.

As noted above, the separation agreement will be effective upon the effective date of a release of claims against State Street by Mr. Hunt.  Under the agreement, State Street has also released Mr. Hunt from certain types of claims, if any, arising prior to his separation.

Item 9.01.        Financial Statements and Exhibits.

(d) Exhibits.

99.1         Press release dated January 3, 2008.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

STATE STREET CORPORATION
By:	/s/ James J. Malerba
Name:	James J. Malerba
Title:	Senior Vice President and
	Corporate Controller

Date: January 2, 2008

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release dated January 3, 2008.

E-1

EX-99.1

Exhibit 99.1

Investors and Analysts:
Edward J. Resch +1 617/664-1110	Kelley MacDonald +1 617/664-2888
Media:
Hannah Grove +1 617/664-3377	Arlene Roberts +1 617/664-3933	Carolyn Cichon +1 617/664-8672

STATE STREET RECORDS NET AFTER-TAX CHARGE OF $279 MILLION, OR $0.71 PER SHARE,IN THE FOURTH QUARTER OF 2007

Establishes Reserve to Address Legal Exposure and Other Costs Relating to Active Fixed-Income
Strategies Exposed to Sub-Prime Mortgage Markets

James S. Phalen Named Interim CEO of State Street Global Advisors

2007 Revenues Expected to Grow in Excess of 30% Compared to 2006, Driven by StrongBusiness Growth

Boston — January 3, 2008 — State Street Corporation (NYSE:STT) announced today that it will record a net charge, after taxes, in the fourth quarter of 2007 of $279 million, or $0.71 per share.  The purpose of the charge is to establish a reserve to address legal exposure and other costs associated with the underperformance of certain active fixed-income strategies managed by State Street Global Advisors (SSgA), the company’s investment management arm, and customer concerns as to whether the execution of these strategies was consistent with the customers’ investment intent.  As a consequence of the unprecedented events in the credit markets over the past six months, these strategies were adversely impacted by exposure to, and the lack of liquidity in, sub-prime mortgage markets.  In aggregate, the reserve will be $618 million on a pre-tax basis.  The impact to earnings of the net charge, after taking into account the tax effect of the reserve and associated lower incentive compensation cost, will be $279 million.

State Street also announced that James S. Phalen, currently executive vice president and head of international operations for investment servicing and investment research and trading, is returning to SSgA as interim president and chief executive officer. Phalen, age 57, succeeds William W. Hunt who has resigned from State Street.  Phalen will report to Ronald E. Logue, chairman and chief executive officer of State Street. The company has initiated a global search for SSgA’s new CEO, which will focus on both internal and external candidates.

Logue said, “We have reviewed the actively managed fixed-income strategies at SSgA that contained investments backed by sub-prime mortgages.  Based on our review and discussions with certain customers who were invested in these strategies, we have established this reserve to address legal exposure and other costs relating to these strategies.”

Logue continued, “State Street values its reputation as a trusted fiduciary to institutions around the world and recognizes the critical importance of preserving this reputation with its customers.  Some of our customers that were invested in the active fixed-income strategies have raised concerns that we intend to address.  Nevertheless, we will continue to defend ourselves vigorously against inappropriate claims, including those that seek recovery of investment losses arising solely from changes in market conditions. With this reserve, SSgA can continue its focus on delivering the highest quality of service to its customers and on steadily expanding its business.”

Earnings per share for 2007 are expected to be between $3.42 and $3.45 per share, and return on equity is expected to be approximately 13%, all on a GAAP basis.

On an operating basis, which excludes the impact of the charge announced today, the merger and integration costs associated with State Street’s acquisition of Investors Financial in July 2007, and, for 2006, the effect of 2006 tax adjustments of $65 million, or $0.20 per share, 2007 earnings per share is expected to be between $4.54 and $4.57 per share and return on equity is expected to be approximately 17.5%.  Both operating earnings per share and return on equity for 2007 are expected to be above the ranges provided on October 15, 2007. This outlook for full-year earnings per share on an operating basis compares to 2006 results of $3.46 per share.  The company continues to expect to exceed the year-over-year revenue growth range of 20% to 22% provided on October 15, 2007.

“Our business continues to be very strong, with revenue growth expected to be in excess of 30 percent in 2007 compared to 2006. We also continue to expect to exceed our ranges for operating earnings per share and return on equity,” said Logue.  “We remain committed to the active investment management business and have made changes to the investment teams to address the underperformance experienced in the active fixed income strategies exposed to sub-prime mortgages.  We are very fortunate to have an experienced executive like Jim Phalen to step in and lead the business

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and work alongside SSgA’s strong management team.  His deep understanding of State Street’s customers will allow a seamless transition in his interim role.”

In his current role, Phalen is responsible for State Street’s investment services and investment research and trading operations outside of North America and is a member of State Street’s Operating Group, the company’s most senior strategy and policy-making team. He spent more than five years at SSgA as a member of its Executive Management Group managing significant portions of SSgA’s business.  In 2000, having overseen the combination of SSgA and Citigroup’s retirement business to form CitiStreet, he became CitiStreet’s CEO.

He returned to State Street in 2005 and was appointed head of State Street’s investment servicing business in North America before assuming his international role in 2007.

“I welcome this opportunity to return to SSgA and to work directly again with many of my longstanding colleagues,” said Phalen. “SSgA has an exceptional team of professionals, and I look forward to helping them continue to build on their track record of growth and industry innovation.”

INVESTOR CONFERENCE CALL

State Street will webcast an investor conference call to discuss this announcement today, January 3, 2008, at 8:30 a.m. EST, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/325-4829 (confirmation code 4642630). Recorded replays of the conference call will be available on the website, and by telephone at +1 719/457-0820 (passcode 4642630), beginning at 2:00 p.m. today. This press release is available on State Street’s website, at www.statestreet.com/stockholder, under “Investor News.”

About State Street Corporation

State Street Corporation (NYSE: STT) is the world’s leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $15.1 trillion in assets under custody and $2.0 trillion in assets under management at September 30, 2007, State Street operates in 26 countries and more than 100 geographic markets worldwide. For more information, visit State Street’s web site at www.statestreet.com.

About State Street Global Advisors

State Street Global Advisors, the investment management arm of State Street Corporation (NYSE: STT), delivers investment strategies and integrated solutions to clients worldwide across every asset class, investment approach and style. With $2.0 trillion in assets under management as of September 

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30, 2007, State Street Global Advisors has investment centers in Boston, Hong Kong, London, Milan, Montreal, Munich, Paris, Singapore, Sydney, Tokyo and Zurich, and offices in 25 cities worldwide. For more information, visit State Street Global Advisors at www.ssga.com.

FORWARD-LOOKING STATEMENTS

This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment, exposure to claims and the adequacy of our reserve. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing State Street’s expectations or beliefs as of any date subsequent to the date of this release.

Important factors that may affect future results and outcomes include:

· State Street’s ability to integrate and convert acquisitions into its business, including the acquisition of Investors Financial Services Corp.;

· the level and volatility of interest rates, particularly in the U.S. and Europe; the performance and volatility of securities, currency and other markets in the U.S. and internationally; and economic conditions and monetary and other governmental actions designed to address those conditions;

· the liquidity of the US and European securities markets, particularly the markets for fixed income securities, including asset-backed commercial paper; and the liquidity requirements of our customers;

· State Street’s ability to attract non-interest bearing deposits and other low-cost funds;

· the results of litigation and similar disputes and the effect that any such results may have on SSgA’s reputation and its ability to attract and retain customers;

· the possibility that the ultimate costs of the legal exposure associated with SSgA’s actively managed fixed income strategies may exceed or be below the reserve, in view of the uncertainties of the timing and outcome of litigation, and the amounts involved;

· the possibility of further developments of the nature giving rise to the legal exposure associated with SSgA’s actively managed fixed income and other investment strategies;

· the performance and demand for the investment products we offer;

· the competitive environment in which State Street operates;

· the enactment of legislation and changes in regulation and enforcement that impact State Street and its customers, as well as the effects of legal and regulatory proceedings, including litigation;

· State Street’s ability to continue to grow revenue, control expenses and attract the capital necessary to achieve its business goals and comply with regulatory requirements;

· State Street’s ability to control systemic and operating risks;

· trends in the globalization of investment activity and the growth on a worldwide basis in financial assets;

· trends in governmental and corporate pension plans and savings rates;

· changes in accounting standards and practices, including changes in the interpretation of existing standards, that impact State Street’s consolidated financial statements; and

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· 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.

Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in State Street’s 2006 Annual Report on Form 10-K and its subsequent SEC filings. State Street encourages investors to read its 10-K, particularly the section on Risk Factors, and its subsequent SEC filings for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, January 3, 2008, and State Street will not undertake efforts to revise those forward-looking statements to reflect events after this date.

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