CORRECTED PRESS RELEASE DATED JANUARY 13, 2004

EX-99.1 3 dex991.htm CORRECTED PRESS RELEASE DATED JANUARY 13, 2004 CORRECTED PRESS RELEASE DATED JANUARY 13, 2004

Exhibit 99.1

LOGO

225 Franklin Street

Boston, MA 02110-2804

United States of America

News Release

Contact: Edward J. Resch		Investors: Kelley MacDonald		Media: Hannah Grove
+1 617/664-1110		+1 617/664-3477		+1 617/664-3377

STATE STREET CORPORATION ANNOUNCES

FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS

Boston, MA ... January 13, 2004

State Street Corporation announced today fourth-quarter earnings per share of $1.33, equivalent to net income of $447 million on revenue of $1.5 billion. For the full-year 2003, earnings per share were $2.15 and net income was $722 million on revenue of $4.7 billion.

Results for the fourth quarter of 2003 include a gain on the sale of State Street’s Private Asset Management business of $285 million or $0.56 in diluted earnings per share, the gain on the settlement of the residual escrow from the 2002 sale of Corporate Trust business of $60 million or $0.12 diluted earnings per share and merger, integration and divestiture costs of $29 million or $0.06 in diluted earnings per share.

Results for the full year 2003 include the $345 million of gains from the sale of the Private Asset Management business and the Corporate Trust escrow settlement, or $0.68 in diluted earnings per share, restructuring costs related to an expense-reduction program of $296 million or $0.58 in diluted earnings per share, full year merger, integration and divestiture costs of $110 million, or $0.22 in diluted earnings per share, and the impact of a real estate loss and settlement of a state tax issue that combined for a $0.06 reduction in full year diluted earnings per share.

For the fourth quarter of 2002, earnings per share were $1.46 equivalent to net income of $477 million on revenue of $1.5 billion. For the full-year 2002, earnings per share were $3.10 and net income was $1.0 billion on revenue of $4.4 billion. Results for the fourth quarter of 2002 and the full year 2002 include a gain of $495 million or $0.90 in diluted earnings per share from the December 31, 2002 sale of the Corporate Trust business.

-MORE-

State Street Corporation

Fourth Quarter Earnings Release

January 13, 2004

Resch + 1 617/664-1110

Page 2

For 2003, return on stockholders equity was 13.9% compared to 24.1% for 2002.

In reporting its financial results, State Street has prepared information in four categories:

•

“Reported” results are in accordance with generally accepted accounting principles (GAAP).

•

“Operating” results are “reported” results excluding restructuring and merger-related charges and any gains from divested businesses. They are presented on a taxable-equivalent basis.

•

“GSS contribution” results are the revenue and expenses, including financing costs and amortization of intangibles and software, attributable to the GSS business acquired on January 31, 2003, as well as revenue and expenses from “out-of-scope” GSS business that are closely related to Deutsche Asset Management, but that were not part of the acquisition. Per-share amounts reflect the effect on outstanding shares due to the acquisition.

•

“Baseline” results are “operating” results excluding “GSS contribution” and are presented on a taxable-equivalent basis.

State Street believes that providing non-GAAP financial information assists investors and others by providing them with financial information in a format that provides comparable financial trends of ongoing business activities.

Baseline earnings per share were $0.69, up 28% compared to baseline earnings per share of $0.54 for the fourth quarter of 2002, and up 6% from $0.65 in the third quarter of 2003. Fourth quarter of 2002 baseline results exclude $10 million of pre-tax income, or $0.02 per share, attributable to the Corporate Trust business divested at the end of 2002. Baseline revenue of $1.0 billion for Q4 2003 was up 6% from the fourth quarter of 2002, primarily due to increases in servicing and management fees, processing and other fees, and foreign exchange, partially offset by a loss on the sale of securities and lower net interest revenue.

In the fourth quarter of 2003, the GSS business contributed $168 million in total revenue: $157 million of fee revenue, $9 million in “out-of-scope” fee revenue, and $7 million of interest revenue, offset by interest expense of $5 million attributable to the acquisition financing. Included in GSS revenue was $19 million in FX revenue due to a contract settlement negotiated with Deutsche Bank. The GSS business earned $0.02 in the fourth quarter on a per-share basis, including the “out-of-scope” results, the cost of financing and the impact of increased shares outstanding, but excluding merger and integration charges.

Operating earnings per share in the fourth quarter 2003, which exclude the merger and integration charges and the gains related to the sale of the divested businesses, was $0.71, up 31% from $0.54 a year ago, and up 8% from $0.66 in the third quarter of

-MORE-

State Street Corporation

Fourth Quarter Earnings Release

January 13, 2004

Resch + 1 617/664-1110

Page 3

2003. Operating revenue increased 23%, or $221 million, to $1.2 billion from the fourth quarter of 2002 and was up $34 million, or 3% from the third quarter of 2003. Return on stockholders’ equity on an operating basis was 17.2% for the quarter and 15.0% for the year. Operating earnings for the year 2003 were $2.33, compared to $2.16 in 2002.

The following table summarizes State Street’s baseline, GSS, operating, and reported results for the fourth quarters of 2002 and 2003. Detailed information is available in the Addendum Selected Financial Information tables included with this press release.

Dollars in millions except per share data; shares in millions

	Three months ended
	December 31, 2003								December 31, 2002
	Non-GAAP measures defined by State Street
	Baseline^(a)		GSS^(b)		Operating^(c)		Reported		Operating^(c)		Reported
Fee revenue	$	791	$	166	$	957	$	957	$	686	$	706

All other revenue		214		2		216		549		266		750

Total revenue		1,005		168		1,173		1,506		952		1,456

Total expenses		655		143		798		828		691		704

Taxes		127		9		136		231		87		275

Net income	$	223	$	16	$	239	$	447	$	174	$	477


Diluted eps	$	0.69	$	0.02	$	0.71	$	1.33	$	0.54	$	1.46

Diluted shares		325				339		339		326		326

^(a)

excludes GSS results; merger, integration and divesture costs; restructuring costs; and gains from the sales of divested businesses; presented on a taxable-equivalent basis

^(b)

revenue and expenses, including financing costs and amortization of intangibles and software, attributable to the GSS business acquired January 31, 2003, as well as revenue and expenses from “out-of-scope” business which was not part of the transaction, but excluding merger and integration costs. Per-share amounts reflect the effect on outstanding shares due to the acquisition

^(c)

excludes merger, integration and divestiture charges, restructuring charges and gains from the sales of divested businesses in 2003, and in 2002, the results of the divested Corporate Trust business; in 2002, baseline and operating results are identical; presented on a taxable-equivalent basis

David A. Spina, State Street’s chairman and chief executive officer, said, “2003 was a challenging yet very productive year for us. We won significant new business; we managed expenses aggressively; and we met or exceeded all the commitments we made for integration of the GSS business. We also continued to deliver superior service to our clients — which is always our number one goal.

-MORE-

State Street Corporation

Fourth Quarter Earnings Release

January 13, 2004

Resch + 1 617/664-1110

Page 4

“We expect 2004 to be another challenging year for our industry. Although economic conditions seem to be improving, the business environment is still extremely fragile and interest rates are at 50-year lows. Competition continues to be intense, especially in the pension markets, and sales cycles are longer than we’ve seen in the past. Costs related to compensation, technology, and occupancy will go up in 2004. Our goal is to balance our near-term profit objectives with strategic investments in State Street’s future.”

FOURTH-QUARTER RESULTS VS. THIRD QUARTER

On a reported basis, fourth quarter net income per share of $1.33 compares to a net income per share of $0.60 in the third quarter. Total revenue in the fourth quarter of $1.5 billion, which included $345 million in gains from the sales of divested businesses, is up 34% versus $1.1 billion in the third quarter.

On a baseline basis, fourth-quarter net income of $0.69 per diluted share is up 6% from $0.65 per share. Revenue rose 3%, from $976 million to $1.0 billion, while expenses increased 1%, to $655 million, in line with the previously stated expense reduction target.

FOURTH-QUARTER RESULTS VS. YEAR-AGO QUARTER

On a reported basis, the fourth-quarter diluted earnings per share was $1.33, reflecting net income of $447 million, and total revenue of $1.5 billion, including the gains from the divested businesses. In the fourth quarter of 2002, State Street earned $477 million, or $1.46 per share, on $1.5 billion in revenue, including the gain from the divested business.

On an operating basis, diluted earnings per share were $0.71. Net income was $239 million, and revenue was $1.2 billion. In the fourth quarter of 2002, net income was $174 million, or $0.54 per share, on revenue of $952 million.

On a baseline basis, fourth-quarter diluted earnings per share were $0.69, net income was $223 million, and revenue was $1.0 billion. In the fourth quarter of 2002, net income was $174 million, or $0.54 per share, on revenue of $952 million.

The following review of specific revenue and expense lines uses baseline results to provide consistent comparable data to the year-earlier period.

Servicing fees are derived from accounting, administration, custody, daily pricing, performance and analytics, compliance monitoring, and operations outsourcing for investment managers. Baseline servicing fees were up 16%, to $426 million from $369 million. The increase was attributable to higher equity market valuations and new business from existing and new clients. Daily average values for the S&P 500

-MORE-

State Street Corporation

Fourth Quarter Earnings Release

January 13, 2004

Resch + 1 617/664-1110

Page 5

Index were up 19% from the fourth quarter of 2002; daily average values for the MSCI^® EAFE Index^SM were up 27%. Total assets under custody were $9.4 trillion, including $2.1 trillion attributable to the GSS business.

Baseline investment management fees, generated by State Street Global Advisors, were $133 million, up 14% compared to $116 million a year ago. Management fees reflected continued new business success and an increase in average month-end equity valuations. Total assets under management were $1.1 trillion, compared to $763 billion the previous year.

Baseline foreign exchange trading revenue was $81 million for the quarter, compared to $62 million a year ago. The increase was attributable to improved volume and volatility, reflecting higher cross-border investment activities.

Baseline processing fees and other increased $18 million to $70 million due to the mark-to-market gain on SPACES^SM pursuant to FAS 150, improved performance of joint ventures and structured products’ business, offset by recognition of other-than-temporary impairment charges on asset-backed investment securities.

Baseline net interest revenue was $220 million, a decline of $16 million, or 6%, from a year ago. Lower yields on reinvested assets drove the decrease in net interest revenue. A loss of $6 million on sales of securities compared with a gain of $31 million from the year ago quarter.

Baseline operating expenses were $655 million, down $36 million, or 5%, from $691 million a year ago. Lower salaries and benefits expenses and direct controllable expenses were due to the previously announced cost-reduction plans, partly offset by an increase in information systems and communications and transaction processing services.

GSS ACQUISITION AND INTEGRATION UPDATE

After eleven months of operation, the GSS business, including “out-of-scope” results and excluding one-time costs, reported a profit of $0.01 per share, exceeding our expectation of $0.01 to $0.03 dilution per share.

With most GSS clients having selected STT as their service provider, we now expect to retain approximately 88% of the available client revenue acquired, which excludes “out-of-scope” revenue. To date, State Street has completed about 550 client conversions.

The pretax merger and restructuring costs associated with the acquisition in 2003 totaled $103 million, within STT’s estimated range $90-$110 million. Client conversion will continue and will be substantially complete by the end of 2004. The Company

-MORE-

State Street Corporation

Fourth Quarter Earnings Release

January 13, 2004

Resch + 1 617/664-1110

Page 6

expects pretax merger and integration costs related to these conversions to be about an additional $50 to $60 million in 2004.

INVESTOR CONFERENCE CALL

State Street will webcast an investor conference call today, Tuesday, January 13, 2004, at 9:30 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 498324). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230, beginning at 2:00 PM today. This press release and additional financial information is available on State Street’s website, at www.statestreet.com/stockholder, under “Financial Reports.”

State Street Corporation (NYSE: STT) is the world’s leading specialist in providing sophisticated global investors with investment servicing and investment management. With $9.4 trillion in assets under custody and $1.1 trillion in assets under management, State Street is headquartered in Boston, Massachusetts and operates in 24 countries and over 100 markets worldwide and employees 19,800 people worldwide. For more information, visit State Street’s web site at www.statestreet.com or call 877/639-7788 [NEWS STT] toll-free in the United States and Canada, or +1 202/266-3340 outside those countries.

This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment. Those statements are based on current expectations and involve a number of risks and uncertainties, including those related to the pace at which State Street adds new clients or at which existing clients use additional services, the value of global and regional financial markets, the pace of cross-border investment activity, changes in interest rates, the pace of worldwide economic growth and rates of inflation, the extent of volatility in currency markets, consolidations among clients and competitors, State Street’s business mix, the dynamics of markets State Street serves, and State Street’s success at integrating and converting acquisitions into its business. 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 2002 annual report and subsequent SEC filings. State Street encourages investors to read the Corporation’s annual report, particularly the section on factors that may affect financial results, 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 13, 2004, and the company will not undertake efforts to revise those forward-looking statements to reflect events after this date.

-MORE-

STATE STREET CORPORATION

Addendum Earnings Digest^(a)

(Dollars in millions, except per share data)

	Quarter ended December 31,
	2003	2002	% Change
Revenue	$1,506	$1,456	3

Earnings	447	477	(6	)

Diluted earnings per share	1.33	1.46	(9	)

	Year ended December 31,
	2003		2002		% Change
Revenue	$	4,734	$	4,396	8

Earnings		722		1,015	(29	)

Diluted earnings per share		2.15		3.10	(31	)

(a)	Information presented in accordance with accounting principles generally accepted in the United States

Addendum page 1

STATE STREET CORPORATION

Addendum Selected Financial Information

I. CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES

	Reported Results Quarter Ended December 31,						Reported Results Year Ended December 31,
(Dollars in millions, except per share data)	2003			2002			2003			2002
Fee Revenue:
Servicing fees	$	525		$	388		$	1,950		$	1,531
Management fees		137			116			533			485
Global securities lending		53			49			245			226
Foreign exchange trading		115			62			391			300
Brokerage fees		37			38			122			124
Processing fees and other		90			53			315			184

Total Fee Revenue		957			706			3,556			2,850
Net Interest Revenue:
Interest revenue		377			465			1,539			1,974
Interest expense		167			240			729			995

Net interest revenue		210			225			810			979
Provision for loan losses		—			1			—			4

Net interest revenue after provision for loan losses		210			224			810			975
Gains/(losses) on sales of available-for-sale investment securities, net		(6	)		31			23			76
Gain on sale of Corporate Trust business, net of associated costs		60			495			60			495
Gain on sale of Private Asset Management business, net of exit and other associated costs		285			—			285			—

Total Revenue		1,506			1,456			4,734			4,396

Operating Expenses:
Salaries and employee benefits		437			411			1,731			1,654
Information systems and communications		141			94			551			373
Transaction processing services		83			65			314			246
Occupancy		69			64			300			246
Merger, integration and divestiture costs	29			—			110			—
Restructuring costs		1			—			296			20
Other		68			70			320			302

Total operating expenses		828			704			3,622			2,841

Income before income taxes		678			752			1,112			1,555
Income taxes		231			275			390			540

Net Income	$	447		$	477		$	722		$	1,015


Earnings Per Share:
Basic	$	1.34		$	1.47		$	2.18		$	3.14
Diluted		1.33			1.46			2.15			3.10

Average Shares Outstanding (in thousands):
Basic		333,579			323,520			331,692			323,520
Diluted		338,895			326,469			335,326			327,477

Return on equity		15.6	%		42.4	%		13.9	%		24.1	%

Cash dividends declared per share	$	.15		$	.13		$	.56		$	.48

II. OTHER SELECTED FINANCIAL INFORMATION

	Quarter ended December 31,
(Dollars in millions, except per share data or where otherwise indicated)	2003		2002
Assets under custody (in billions)	$	9,370	$	6,171
Assets under management (in billions)		1,106		763

Total assets	$	87,534	$	85,794
Long-term debt		2,222		1,270
Stockholders’ equity		5,747		4,787

Closing price per share of common stock	$	52.08	$	39.00

Addendum Page 2

STATE STREET CORPORATION

Addendum Selected Financial Information

III.

SUPPLEMENTAL INCOME STATEMENT INFORMATION – RECONCILIATION OF FOURTH QUARTER 2003 NON-GAAP MEASURES TO REPORTED RESULTS

	Reconciliation of Financial Results
	(Dollars in millions)
	Quarter Ended December 31, 2003
	Non-GAAP measures defined by State Street ⁽¹⁾												Reported Results⁽²⁾
	Baseline Results			GSS Results^(a)			Operating Results			Other			Reported Results⁽²⁾
Fee Revenue:
Servicing fees	$	426		$	99		$	525					$	525
Management fees		133			4			137						137
Global securities lending		44			9			53						53
Foreign exchange trading		81			34			115						115
Brokerage fees		37			—			37						37
Processing fees and other		70			20			90						90

Total Fee Revenue		791			166			957						957
Net Interest Revenue		220			2	^(b)		222		$	(12	)^(e)		210
Provision for loan losses		—			—			—			—			—

Net interest revenue after provision for loan losses		220			2			222			(12	)		210
Gains/(losses) on sales of available-for-sale investment securities, net		(6	)		—			(6	)		—			(6	)
Gain on sale of Corporate Trust business, net of associated costs		—			—			—			60			60
Gain on sale of Private Asset Management business, net of exit and other associated costs		—			—			—			285			285

Total Revenue		1,005			168			1,173			333			1,506
Operating Expenses:
Salaries and employee benefits		373			64			437			—			437
Information systems and communications		100			41			141			—			141
Transaction processing services		65			18			83			—			83
Occupancy		59			10			69			—			69
Merger, integration and divestiture costs		—			—			—			29			29
Restructuring costs		—			—			—			1			1
Other		58			10			68			—			68

Total operating expenses		655			143	^(c)		798			30			828

Income before income taxes		350			25			375			303			678
Income taxes		115			9			124			107			231
Taxable-equivalent adjustment		12			—			12			(12	) ^(e)		—

Net Income	$	223		$	16		$	239		$	208		$	447

Earnings Per Share	$	.69		$	.02	^(d)	$	.71		$	.62		$	1.33
Average Diluted Shares (in thousands)		324,828			14,067			338,895			—			338,895
Return on equity		16.0	%					17.2	%					15.6	%

Notes:

(1)

In order to provide information on a comparable basis from period to period and to assist stockholders, analysts, other external parties and management in analyzing the financial results and trends of ongoing businesses and operations, State Street also presents supplemental financial information on an operating results basis. State Street believes that such non-GAAP financial information assists investors and others by providing them with financial information in a format that provides comparable financial trends of ongoing business activities.

(2)	Reported results agree with the Corporation’s Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States

(a)	Includes $9 million of revenue and $12 million of expenses related to out-of-scope client relationships

(b)	Includes $5 million of interests costs attributable to the GSS acquisition financing

(c)	Includes amortization of intangibles and software of $9 million

(d)	Includes ($.03) impact due to changes in shares outstanding attributable to the acquisition

(e)	Taxable-equivalent adjustment is not included in reported results

Addendum Page 3

STATE STREET CORPORATION

Addendum Selected Financial Information

IV.

SUPPLEMENTAL INCOME STATEMENT INFORMATION – RECONCILIATION OF 2003 NON-GAAP MEASURES TO REPORTED RESULTS

Reconciliation of Financial Results

(Dollars in millions)

Year Ended December 31, 2003

Non-GAAP measures

defined by State Street ⁽¹⁾

Baseline
Results

GSS
Results^(a)

Operating
Results

Other

Reported
Results(2)

Fee Revenue:

Servicing fees

1,596

354

1,950

Management fees

517

533

Global securities lending

194

245

Foreign exchange trading

330

391

Brokerage fees

122

—

122

Processing fees and other

230

328

(13

) ^(e)

315

Total Fee Revenue

2,989

580

3,569

(13

)

3,556

Net Interest Revenue

868

) ^(b)

861

(51

) ^(f)

810

Provision for loan losses

—

Net interest revenue after provision for loan losses

868

)

861

(51

)

810

Gains/(losses) on sales of available-for-sale investment securities, net

—

Gain on sale of Corporate Trust business, net of associated costs

—

Gain on sale of Private Asset Management business, net of exit and other associated costs

—

285

Total Revenue

3,880

573

4,453

281

4,734

Operating Expenses:

Salaries and employee benefits

1,526

205

1,731

—

1,731

Information systems and communications

394

157

551

—

551

Transaction processing services

259

314

—

314

Occupancy

262

300

—

300

Merger, integration and divestiture costs

—

110

Restructuring costs

—

296

Other

258

320

—

320

Total operating expenses

2,699

517

^(c)

3,216

406

3,622

Income before income taxes

1,181

1,237

(125

)

1,112

Income taxes

384

403

(13

) ^(g)

390

Taxable-equivalent adjustment

—

(51

) ^(f)

—

Net Income

746

783

(61

)

722

Earnings Per Share

2.32

.01

^(d)

2.33

(.18

)

2.15

Average Diluted Shares (in thousands)

321,259

14,067

335,326

—

335,326

Return on equity

14.3

15.0

13.9

Notes:

(1)

(2)	Reported results agree with the Corporation's Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States

(a)	Includes $24 million of revenue and $31 million of expenses related to out-of-scope client relationships

(b)	Includes $21 million of interests costs attributable to the GSS acquisition financing

(c)	Includes amortization of intangibles and software of $28 million

(d)	Includes ($.11) impact due to changes in shares outstanding attributable to the acquisition

(e)	Represents a valuation reserve on certain assets classified as available-for-sale

(f)	Taxable-equivalent adjustment is not included in reported results

(g)	Reflects the impact of a certain Massachusetts tax issue ($12 million tax expense) as well as the tax benefit applicable to the net of all other non-recurring gains and charges

Addendum Page 4

STATE STREET CORPORATION

Addendum Selected Financial Information

V.	SUPPLEMENTAL INCOME STATEMENT INFORMATION – BASELINE RESULTS YEAR OVER YEAR COMPARISON

Baseline results are a non-GAAP measure defined by State Street as reported results excluding GSS contribution, restructuring, merger, integration and divestiture costs, valuation reserves, state tax issue impact and results of a divested business and are presented on a taxable-equivalent basis.

	Baseline Results Quarter Ended December 31,							Baseline Results Year Ended December 31,
(Dollars in millions, except per share data)	2003			2002^(a)		% Change		2003		2002 ^(b)		% Change
Baseline Fee Revenue:
Servicing fees	$	426		$	369	16	%	$	1,596	$	1,454	10	%
Management fees		133			116	14			517		485	6
Global securities lending		44			49	(10	)		194		226	(14	)
Foreign exchange trading		81			62	29			330		300	10
Brokerage fees		37			38	(2	)		122		124	(1	)
Processing fees and other		70			52	34			230		180	28

Total Baseline Fee Revenue		791			686	15			2,989		2,769	8

Baseline Net Interest Revenue		220			236				868		1,027
Provision for loan losses		—			1				—		4

Baseline net interest revenue after provision for loan losses (taxable-equivalent basis)		220			235	(6	)		868		1,023	(15	)

Gains/(losses) on the sales of available-for-sale investment securities, net		(6	)		31				23		76	(69	)

Total Baseline Revenue		1,005			952	6			3,880		3,868

Baseline Operating Expenses:
Salaries and employee benefits		373			404	(8	)		1,526		1,622	(6	)
Information systems and communications		100			93	7			394		367	7
Transaction processing services		65			64	4			259		242	7
Occupancy		59			62	(4	)		262		240	10
Other		58			68	(15	)		258		293	(12	)

Total Baseline Operating Expenses		655			691	(5	)		2,699		2,764	(2	)

Baseline Income Before Income Taxes		350			261	34			1,181		1,104	7
Income taxes		115			72				384		335
Taxable-equivalent adjustment		12			15				51		61

Baseline Net Income	$	223		$	174	28		$	746	$	708	5


Diluted Baseline Earnings Per Share	$	.69		$	.54	28		$	2.32	$	2.16	7

(a)	Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities

(b)	Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities and the reclassification of certain restructuring costs now shown as a component of reported results rather than baseline results

Addendum Page 5

STATE STREET CORPORATION

Addendum Selected Financial Information

VI.

SUPPLEMENTAL INCOME STATEMENT INFORMATION – OPERATING RESULTS YEAR OVER YEAR COMPARISON

Operating results are a non-GAAP measure defined by State Street as reported results excluding restructuring, merger, divestiture and integration costs, valuation reserves, state tax issue impact and results of a divested business and are presented on a taxable-equivalent basis.

	Operating Results Quarter Ended December 31,							Operating Results Year Ended December 31,
(Dollars in millions, except per share data)	2003			2002 ^(a)		% Change		2003		2002 ^(b)		% Change
Operating Fee Revenue:
Servicing fees	$	525		$	369	42	%	$	1,950	$	1,454	34	%
Management fees		137			116	18			533		485	10
Global securities lending		53			49	8			245		226	8
Foreign exchange trading		115			62	84			391		300	30
Brokerage fees		37			38	(2	)		122		124	(1	)
Processing fees and other		90			52	71			328		180	82

Total Operating Fee Revenue		957			686	39			3,569		2,769	29

Operating Net Interest Revenue		222			236				861		1,027
Provision for loan losses		—			1				—		4

Operating net interest revenue after provision for loan losses (taxable-equivalent basis)		222			235	(5	)		861		1,023	(16	)

Gains/(losses) on the sales of available-for-sale investment securities, net		(6	)		31				23		76	(69	)

Total Operating Revenue		1,173			952	23			4,453		3,868	15

Expenses – Operating Results:
Salaries and employee benefits		437			404	8			1,731		1,622	7
Information systems and communications		141			93	51			551		367	50
Transaction processing services		83			64	32			314		242	30
Occupancy		69			62	10			300		240	25
Other		68			68				320		293	9

Total Expenses – Operating Results		798			691	16			3,216		2,764	16

Operating Income before income taxes		375			261	43			1,237		1,104	12
Income taxes		124			72				403		335
Taxable-equivalent adjustment		12			15				51		61

Net Operating Income	$	239		$	174	37		$	783	$	708	10


Diluted Operating Earnings Per Share	$	.71		$	.54	31		$	2.33	$	2.16	8

(a)	Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities

(b)	Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities and the reclassification of certain restructuring costs now shown as a component of reported results rather than operating results

Addendum Page 6

STATE STREET CORPORATION

Addendum Consolidated Statement of Condition

(Dollars in millions)	December 31, 2003			December 31, 2002

Assets
Cash and due from banks	$	3,376		$	1,361
Interest-bearing deposits with banks		21,738			28,143
Securities purchased under resale agreements and securities borrowed		9,447			17,215
Federal funds sold		104			—
Trading account assets		405			984
Investment securities		38,215			28,071
Loans (less allowance of $61 and $61)		4,960			4,113
Premises and equipment		1,212			887
Accrued income receivable		1,015			823
Goodwill		1,326			462
Other intangible assets		525			127
Other assets		5,211			3,608

Total Assets	$	87,534		$	85,794


Liabilities
Deposits:
Noninterest-bearing	$	7,893		$	7,279
Interest-bearing—U.S.		5,062			9,005
Interest-bearing—Non-U.S.		34,561			29,184

Total Deposits		47,516			45,468
Securities sold under repurchase agreements		22,806			21,963
Federal funds purchased		1,019			3,895
Other short-term borrowings		1,437			3,440
Accrued taxes and other expenses		2,424			1,967
Other liabilities		4,363			3,004
Long-term debt		2,222			1,270

Total Liabilities		81,787			81,007

Stockholders’ Equity
Preferred stock, no par: authorized 3,500,000; issued none
Common stock, $1 par: authorized 500,000,000; issued 337,132,000 and 329,992,000		337			330
Surplus		329			104
Retained earnings		5,007			4,472
Accumulated other comprehensive income		192			106
Treasury stock at cost (2,658,000 and 5,065,000 shares)		(118	)		(225	)

Total Stockholders’ Equity		5,747			4,787

Total Liabilities and Stockholders’ Equity	$	87,534		$	85,794

Addendum Page 7