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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

STATE STREET CORPORATION

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Ronald E. Logue

Chairman and Chief Executive Officer

April 6, 2009

Dear Shareholder:

We cordially invite you to attend the 2009 annual meeting of shareholders of State Street Corporation. The meeting will be held at One Lincoln Street, 36^th Floor, Boston, Massachusetts, on Wednesday, May 20, 2009, at 10:00 a.m.

Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying notice of annual meeting and proxy statement.

Your vote is very important. Whether or not you plan to attend the meeting, please carefully review the enclosed proxy statement and then cast your vote. We urge you to vote regardless of the number of shares you hold. Please mark, sign, date and mail promptly the accompanying proxy card or, for shares held in street name, the voting instruction form, in the return envelope. Registered shareholders may also vote electronically by telephone or over the Internet by following the instructions included with your proxy card. If your shares are held in street name, as an alternative to returning the voting instruction form you receive, you will have the option to cast your vote by telephone or over the Internet if your voting instruction form includes instructions and a toll-free telephone number or Internet website to do so. In any event, to be sure that your vote will be received in time, please cast your vote by your choice of available means at your earliest convenience.

As with last year, we are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders over the Internet. We believe that this e-proxy process expedites shareholders’ receipt of proxy materials and lowers the costs and reduces the environmental impact of the annual meeting. Shareholders receiving e-proxy materials have been sent a notice containing instructions on how to access the proxy statement and annual report over the Internet and how to vote.

We look forward to seeing you at the annual meeting. Your continuing interest in State Street is very much appreciated.

Sincerely,

State Street Corporation

One Lincoln Street

Boston, MA 02111-2900

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NOTICE OF STATE STREET CORPORATION 2009 ANNUAL MEETING OF SHAREHOLDERS

April 6, 2009

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STATE STREET CORPORATION

One Lincoln Street, Boston, Massachusetts 02111

PROXY STATEMENT

GENERAL INFORMATION

Why am I receiving these materials?

You have received these proxy materials because State Street’s Board of Directors is soliciting your vote at the 2009 annual meeting of shareholders. This proxy statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission and that is designed to assist you in voting your shares.

As permitted by rules adopted by the SEC, we are making this proxy statement and our annual report, including consolidated financial statements for the year ended December 31, 2008, available to our shareholders electronically via the Internet. On April 6, 2009, we mailed to our U.S. shareholders as of the record date for the annual meeting, March 13, 2009, a notice containing instructions on how to access this proxy statement and our annual report online and to vote. Also on April 6, 2009, we began mailing printed copies of these proxy materials to shareholders that have requested printed copies and to shareholders outside the United States. If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the notice instructs you on how to access and review online all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet. If you received a notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the notice.

Can I access State Street’s proxy materials and annual report electronically?

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 20, 2009. The proxy statement and annual report are available at www.proxyvote.com.

To view this material, you must have available the 12-digit control number located on the notice mailed on April 6, 2009 or the proxy card or, if shares are held in the name of a broker, bank or other nominee, the voting instruction form.

How do I request a printed copy of the proxy materials for future shareholder meetings?

To request a printed copy of the proxy statement, annual report and form of proxy relating to our future shareholder meetings, visit www.proxyvote.com, telephone 1-800-579-1639 or send an email to sendmaterial@proxyvote.com. You must have available the 12-digit control number described above.

What are the directions to the meeting?

Directions to the meeting are as follows:

From the North:

Take Expressway (I-93) South to exit 20 (Purchase Street/South Station) and follow the signs for South Station. Follow exit ramp and cross Summer Street. Turn right onto Lincoln Street. Take first left onto Bedford Street. Take first left onto Kingston Street. Entrance to the garage is on the left.

From the South:

Take Expressway (I-93) North to exit 20 (South Station). Bear left at the ramp to South Station/Chinatown. You will see State Street Financial Center directly ahead. You will be on Lincoln Street. Follow Lincoln Street thru the major intersection at the lights (pass the entrance to the building). Take left onto Bedford Street. Take first left onto Kingston Street. Entrance to the garage is on the left.

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From the West:

Take Mass Turnpike (I-90) to exit 24A (South Station). Turn left on Kneeland Street towards Chinatown. Turn right onto Lincoln Street at the light. Follow Lincoln Street thru the major intersection at the lights (pass the entrance to the building). Take left onto Bedford Street. Take first left onto Kingston Street. Entrance to the garage is on the left.

Via Massachusetts Bay Transportation Authority:

Take the MBTA Red Line train to the South Station MBTA stop. Exit the train station and walk across Atlantic Avenue (towards Summer Street and Federal Street). Follow Summer Street to Lincoln Street.

What is the record date for the meeting?

Our Board of Directors has fixed the record date for the annual meeting as of the close of business on March 13, 2009.

How many votes can be cast by all shareholders?

As of the record date, 434,314,697 shares of our common stock were outstanding and entitled to be voted at the meeting. Each share of common stock is entitled to one vote on each matter. Also as of the record date, we had outstanding 20,000 shares of our series B fixed rate cumulative perpetual preferred stock. However, shares of our series B preferred stock are not entitled to be voted on the matters to be presented to our shareholders at the meeting.

How do I vote?

If your shares are registered in your name, you may vote in person at the annual meeting or by proxy without attending the meeting. Registered shareholders may also vote electronically by following the instructions included with your proxy card or the notice we mailed to you on April 6, 2009. In addition, if you received a printed proxy card, you may mark, sign, date, and mail the proxy card you received from management in the return envelope. If you vote by any of the available methods, your shares will be voted at the meeting in accordance with your instructions. If you sign and return the proxy card or vote electronically but do not give any instructions on some or all of the proposals, your shares will be voted by the persons named in the proxy card on all uninstructed proposals in accordance with the recommendations of the Board of Directors given below.

If your shares are held in the name of a broker, bank or other nominee, please mark, date, sign, and return the voting instruction form you received from your broker or other nominee with this proxy statement. As indicated on the form or other documentation provided by your broker, bank or other nominee, you may have the choice of voting your shares over the Internet or by telephone. To do so, follow the instructions on the form you received from your broker, bank or other nominee.

If your shares are held by a broker, bank or other nominee and you wish to vote in person at the meeting, you must obtain from the record holder and bring with you a proxy from the record holder issued in your name.

What are the Board’s recommendations on how to vote my shares?

The Board of Directors recommends a vote:

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Who pays the cost for soliciting proxies by State Street?

State Street will pay the cost for the solicitation of proxies by the Board. That solicitation of proxies will be made primarily by mail. State Street has retained Georgeson Inc. to aid in the solicitation of proxies for a fee of $18,500, plus expenses. Proxies may also be solicited by employees of State Street and its subsidiaries personally, or by mail, telephone, fax or e-mail, without any remuneration to such employees other than their regular compensation. State Street will reimburse brokers, banks, custodians, other nominees and fiduciaries for forwarding these materials to their principals to obtain authorization for the execution of proxies.

What is householding?

As stated above, on April 6, 2009, we began mailing printed copies of these proxy materials to shareholders that have requested printed copies and to shareholders outside of the United States. Some banks, brokers and other nominee record holders may be “householding” our proxy statements, annual reports and related materials. “Householding” means that only one copy of these documents may have been sent to multiple shareholders in one household. If you would like to receive your own set of State Street’s future proxy statements, annual reports and related materials, or if you share an address with another State Street shareholder and together both of you would like to receive only a single set of these documents, please contact your bank, broker or other nominee.

Can I change my vote?

If you are a registered shareholder, you may revoke or change your proxy at any time before it is voted by notifying the Secretary in writing, by returning a signed proxy with a later date or submitting an electronic proxy as of a later date or by attending the meeting and voting in person. If your shares are held in street name, you must contact your bank, broker or other nominee for instructions about changing your vote.

What vote is required to approve each item?

The 13 nominees for election as directors who receive a plurality of common shares voted for election of directors shall be elected directors (Item 1). Under our Corporate Governance Guidelines, in an uncontested election of directors, any director/nominee who receives a “withhold” vote from a majority of the common shares outstanding and entitled to vote in such election will be required to submit to the Board a letter of resignation for consideration by the Nominating and Corporate Governance Committee. After consideration, that committee would make a recommendation to the Board on action to be taken regarding the resignation. No such tendered resignation shall be deemed effective unless and until it is accepted by action of the Board.

The approval of amendments to our articles of organization and by-laws to require majority voting in uncontested elections of directors and to make other changes must be approved by the holders of two-thirds of all the common shares entitled to vote on the proposal. (Item 2).

The affirmative vote of a majority of all common shares present in person or represented by proxy at the meeting and entitled to vote is necessary to approve the amended and restated 2006 equity incentive plan (Item 3), to approve the non-binding advisory proposal on executive compensation (Item 4), to ratify the selection of Ernst & Young LLP as State Street’s independent registered public accounting firm for 2009 (Item 5) and to approve the shareholder proposal (Item 6). In addition, in order for the amended and restated 2006 equity incentive plan (Item 3) to be approved, the New York Stock Exchange listing standards require that a majority of the common shares issued, outstanding and entitled to vote at the meeting must actually vote on the proposal (with abstentions counting as votes and broker non-votes not counting as votes).

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How is the vote counted?

Votes cast by proxy or in person at the annual meeting will be counted by the persons appointed by State Street to act as tellers for the meeting. A majority of the shares entitled to vote at the annual meeting constitutes a quorum. The tellers will count shares represented by proxies that withhold authority to vote for a nominee for election as a director as shares that are present and entitled to vote for purposes of determining the presence of a quorum. None of the withheld votes will be counted as votes “for” a director but, except as described in the answer to the preceding question, a “withheld” vote on a director will not affect the outcome. Shares properly voted to “abstain” on Items 2 through 6 are both entitled to vote and are considered as shares that are present for the purpose of determining a quorum and thus will have the effect of having been voted “against” approval of Items 2 through 6.

If you hold shares through a broker, bank or other nominee, generally the nominee may vote the shares for you in accordance with your instructions. Stock exchange and FINRA rules permit a broker to vote shares held in a brokerage account on “routine” proposals if the broker does not receive voting instructions from you. Under these rules, a broker may vote in its discretion on Items 1, 4 and 5 in the absence of instructions from you, but may not vote in its discretion on Items 2, 3 and 6. So, without voting instructions, a broker non-vote will occur on Items 2, 3 and 6. Shares that are subject to a broker non-vote are counted for determining the quorum. However, shares that are subject to a broker non-vote are not considered as shares that are present and entitled to vote, and thus will not be counted for purposes of determining the outcome of Items 2 through 6.

Could other matters be decided at the meeting?

We do not know of any matters that may be properly presented for action at the meeting other than Items 1 through 6. Should any other business properly come before the meeting, the persons named on the enclosed proxy will have discretionary authority to vote the shares represented by such proxies in accordance with their best judgment. Under our by-laws, for nominations or other business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice in writing to the Secretary, and such business must be within the purposes specified in our notice of meeting. To be timely, a shareholder’s notice shall be delivered to the Secretary at our principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting.

What happens if the meeting is postponed or adjourned?

Your proxy may be voted at the postponed or adjourned meeting. You will still be able to change your proxy until it is voted.

What are my rights as a participant in the Salary Savings Program?

If you participate in the State Street Salary Savings Program and have invested part or all of your account in the Employee Stock Ownership Plan fund as of the record date, you may direct the trustee how to vote your allocated share of State Street Corporation common stock held in your Salary Savings Program account. You may give the trustee direction through the Internet, by telephone, or by U.S. mail. If you do not provide timely instructions to the trustee, the trustee will vote your allocated share on the same proportional basis as the shares that are directed by other participants. If a matter arises at the meeting, or such other time as affords no practical means for securing participant direction, the trustee will follow the direction of State Street, unless the trustee determines that doing so would result in a breach of the trustee’s fiduciary duty.

Regardless of what method you use to direct the trustee, the trustee must receive your direction no later than 11:59 p.m. Eastern time on May 18, 2009 for your direction to be followed. Your direction will be held in confidence by the trustee. You may not provide this direction at the annual meeting. You must direct the trustee in advance of the meeting so that the trustee, the registered owner of all of the shares held in the Salary Savings Program, can vote in a timely way. You may change your direction to the trustee by submitting a new direction.

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The last direction the trustee receives by 11:59 p.m. Eastern time on May 18, 2009, will be the only one counted. If your direction by mail is received on the same day as one received electronically, the electronic direction will be followed.

The trustee is providing the annual report and the notice of annual meeting and proxy statement electronically to Salary Savings Program participants with investments in the Employee Stock Ownership Plan fund who are active employees and have a company-provided e-mail account and Internet access. Instead of receiving these materials in paper form mailed to your home, you will have on-line access to these materials via the Internet, thus expediting the delivery of materials and reducing printing and mailing costs. An e-mail will be sent to all such participants with detailed instructions to access materials and give your direction to the trustee. All other participants will receive their materials in the U.S. mail. If you prefer, you may request that paper copies be sent to you, which will permit you to send in your direction by U.S. mail if you prefer that method.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 5, 2009, there were 433,633,263 shares of State Street common stock outstanding.

Beneficial Owners

The table below sets forth the number of shares of common stock of State Street beneficially owned (as determined under the rules of the SEC) as of the close of business on March 5, 2009 by each person or entity known to State Street to beneficially own more than 5% of the outstanding common stock. The beneficial ownership by State Street Bank and Trust Company described below comprises shares over which the Bank has voting or investment power as a result of our investment management business and shares held by the Bank as trustee of the State Street Salary Savings Program.

Management

The table below sets forth the number of shares of common stock of State Street beneficially owned (as determined under the rules of the SEC) as of the close of business on March 5, 2009, by each director, the Chairman and Chief Executive Officer, the Chief Financial Officer, the three other most highly compensated executive officers in office for 2008, and the group consisting of current directors and executive officers, based on information furnished by representatives of each person. Neither the persons listed below individually, nor the current executive officers and directors as a group, owned beneficially as much as 1% of the outstanding shares of common stock.

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ITEM 1 - ELECTION OF DIRECTORS

The Board of Directors unanimously recommends that you vote

FOR

each of the nominees for director

Each director elected at the 2009 annual meeting serves until the next annual meeting of shareholders or as otherwise provided in the by-laws. The State Street Board of Directors currently consists of 14 members. Of the 14 directors currently in office, 13 are non-management directors and one is an executive officer of State Street. Each of the non-management directors is an independent director, as determined by the Board in its opinion, under the applicable definition in the New York Stock Exchange listing standards. The Board determines the number of directors.

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Pursuant to the by-laws, on March 12, 2009, the Board of Directors fixed the number of directors at 14, and effective as of March 13, 2009 elected Patrick de Saint-Aignan and Robert S. Kaplan to fill the two vacancies that had been created. Effective on the day of the 2009 annual meeting, the number of directors constituting the Board will be set at 13. Thirteen directors are to be elected at the meeting. Each of the nominees for election as a director is currently a director.

Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the election of the 13 nominees listed below as directors. We have no reason to believe that any nominee will be unavailable for election at the annual meeting. In the event that one or more nominees is unexpectedly not available to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors to be elected at the annual meeting. Information relating to each nominee for election as director, including his or her period of service as a director of State Street, principal occupation and other biographical material, is described below.

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Nader F. Darehshori is retiring as a director at the annual meeting. Mr. Darehshori, age 72, is the Chairman, President, Chief Executive Officer and founder of Aptius Education, Inc., an educational publishing company.

ITEM 2 – APPROVAL OF AMENDMENTS TO OUR ARTICLES OF ORGANIZATION AND BY-LAWS

The Board of Directors unanimously recommends that you vote

FOR

this proposal (Item 2 on your proxy card)

The Board of Directors recommends that shareholders approve the Board’s proposal to amend our articles of organization and by-laws to adopt a majority vote standard for uncontested elections of directors and to make the other changes described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the approval of the amendments to our articles of organization and by-laws.

Current Vote Standard for Electing Directors

Our company is a Massachusetts corporation. Massachusetts law provides that, unless otherwise specified in a company’s articles of organization or by-laws, directors are elected by a plurality of the votes cast. Our by-laws currently include this plurality standard for election of directors by shareholders, which means that a director nominee with the most votes cast in his or her favor is elected, notwithstanding any withheld votes.

To supplement this plurality standard, in October 2005, the Board amended our corporate governance guidelines to provide that any director/nominee who receives a “withhold” vote from a majority of the shares outstanding and entitled to vote in an uncontested election of directors will be required to submit to the Board a letter of resignation, for consideration by the Nominating and Corporate Governance Committee. After consideration, that Committee would make a recommendation to the Board on action to be taken regarding the resignation. The Board would vote to take such action as it deems in its discretion appropriate with respect to the resignation, taking into account the best interests of State Street and its shareholders.

Proposed Amendments to Vote Standard for Electing Directors

Shareholders of many public companies, including our company, have urged that directors be required to receive a majority of the votes cast in favor of their election, rather than be elected under the plurality voting standard. The Board has continued to monitor developments in corporate governance as the practices surrounding the majority vote standard have evolved. As the investor community has focused on this issue, the Board has continued to evaluate the merits, risks and uncertainties relating to a majority vote standard. The Board believes it is now in the best interests of State Street and its shareholders to amend our articles of organization and by-laws to require that a candidate in an uncontested election for director will be elected as a director only if the votes cast for his or her election exceed the votes cast against his or her election. In contested elections, the vote standard would continue to be a plurality of votes cast.

The proposed amendments to our articles of organization and by-laws to implement a majority vote standard in uncontested elections are set forth in Appendix A to this proxy statement. The amendment to our articles of

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organization is an enabling provision, which permits the amendment to our by-laws that implements the majority vote standard in director elections other than contested elections.

Under the proposed amendments, in an uncontested election of directors, a new nominee who does not receive more votes cast “for” his or her election than votes cast “against” his or her election will not be elected to the Board. Similarly, under the proposed amendments, in an uncontested election, an incumbent director who does not receive more votes cast “for” his or her election than votes cast “against” his or her election will also not be elected to the Board. However, under Massachusetts law, such an incumbent director will “hold over” in office as a director until his or her successor is elected or until there is a decrease in the number of directors. If this proposal is adopted, our Board plans to amend our corporate governance guidelines to require a “hold over” director to promptly offer to tender his or her resignation.

An election is uncontested if the number of persons nominated does not exceed the number of director positions to be filled at the meeting.

Other Changes

Effective July 1, 2004, Massachusetts adopted a new Massachusetts Business Corporation Act, known as the MBCA, to replace the prior Massachusetts Business Corporation Law. The Board amended and restated our by-laws to conform them to the provisions of the MBCA. However, the amendment and restatement did not revise the shareholder quorum and voting requirements contained in our by-laws to conform them to the MBCA because, under the MBCA, only shareholders are authorized to amend by-law provisions relating to shareholder quorum and voting requirements.

In light of the fact that the section of our by-laws containing the shareholder quorum and voting requirements is proposed to be amended to implement the majority vote standard for uncontested elections of directors, the Board is also now proposing to amend the shareholder quorum and voting requirements to conform to the provisions of the MBCA. Specifically, if this proposal is approved at the annual meeting: (1) the quorum provisions would be updated to reflect the concept of a “voting group” that was introduced by the MBCA; and (2) the vote required for matters other than the election of directors to pass would be changed from the current standard (which requires the affirmative vote of a majority of the shares of stock present and represented and entitled to vote in order for a matter to pass) to the new statutory standard (which requires that the votes cast within a voting group favoring an action exceed the votes cast opposing the action in order for a matter to pass). As a result of the change in vote standards, abstentions would no longer be included in the denominator in determining whether matters (other than the election of directors) have passed.

Effectiveness of Amendments

If approved, the amendment of our articles of organization will become effective upon the filing of articles of amendment of our articles of organization with the Secretary of State of The Commonwealth of Massachusetts. We would make that filing promptly after approval of this proposal at the 2009 annual meeting. The amendment of our by-laws would be effective immediately after filing of the articles of amendment. The amendments would not be effective with respect to any matters being voted on at the 2009 annual meeting.

If the proposed amendments to our articles of organization and by-laws are approved, conforming changes to our corporate governance guidelines approved by our Board will also become effective. Our guidelines, as revised, would provide that an incumbent director who does not receive more votes “for” than “against” his or her election in an uncontested election will promptly offer to tender his or her resignation. The Board would then need to decide whether to accept or reject the resignation in a process similar to the one the Board currently uses pursuant to the existing majority voting policy.

If this proposal is not approved, the proposed amendments to our articles of organization and by-laws will not be made, and all existing provisions, including the existing plurality vote standard for all elections of directors, will remain in effect.

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ITEM 3 – APPROVAL OF AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN

The Board of Directors unanimously recommends that you vote

FOR

this proposal (Item 3 on your proxy card)

The Board of Directors recommends that shareholders approve the Board’s proposal to amend and restate our 2006 equity incentive plan to increase by 17 million the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the plan and to make the other updates described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the approval of the amended and restated 2006 equity incentive plan.

In February 2009, the Board approved, subject to shareholder approval, the amended and restated 2006 equity incentive plan. The purpose of the plan is to advance the interests of the company by providing for the grant to plan participants of stock-based awards. We are asking our shareholders to approve the amended and restated plan to increase the maximum number of shares available under the plan and to make other updating amendments. The plan was first approved by shareholders in 2006, with 20 million shares, plus up to 8 million shares derived from other prior stock plans, available for delivery in satisfaction of awards under the plan. As of December 31, 2008, we had delivered 1,366,778 shares, with an additional 9,811,557 shares subject to outstanding awards or related restrictions under the plan.

Summary of Proposed Amendments

The material changes implemented by the amendment and restatement of the 2006 equity incentive plan are as follows:

Description of the 2006 Equity Incentive Plan, as Proposed to be Amended and Restated

The following is a summary of the material features of the amended and restated 2006 equity incentive plan, which summary is qualified in its entirety by reference to the entire plan. The summary includes the amendments identified above under “Summary of Proposed Amendments”. A copy of the entire plan is attached as Appendix B to this proxy statement.

The purpose of the plan is to advance State Street’s interests by providing for the grant to participants of awards based on State Street’s common stock, all as more fully described below. The amendment and restatement of the plan will become effective on the date of its approval by the shareholders. The plan will terminate on May 19, 2019, except that awards made prior to termination may continue in accordance with their terms.

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Administration. A committee of the Board, currently the Executive Compensation Committee, will administer the plan. The term “administrator” is used in this proxy statement to refer to the person (the Executive Compensation Committee or other committee, and their delegates) charged with administering the plan. The administrator has full authority to determine who will receive awards and to determine the types of awards to be granted as well as the amounts, terms, and conditions of any awards. Awards may be in the form of options, stock appreciation rights, or SARs, restricted or unrestricted stock, stock units or performance awards or other awards that are convertible into or otherwise based on State Street’s common stock. The administrator has the right to determine any questions that may arise regarding the interpretation and application of the provisions of the plan and to make, administer, and interpret such rules and regulations as it deems necessary or advisable. Determinations of the administrator made under the plan are conclusive and bind all parties.

Limits on Shares Deliverable under the Plan; Limits on Awards. The maximum number of shares of common stock that may be delivered in satisfaction of awards made under the plan is 37 million plus the number (not to exceed 8 million) of shares subject to awards outstanding under State Street’s 1997 equity incentive plan that are either forfeited (in the case of restricted stock) or never delivered (for example, because an option expires unexercised) on or after April 19, 2006 (the date the 2006 equity incentive plan was approved by our shareholders and became effective). Shares withheld to pay the exercise price or to satisfy tax withholding requirements, restricted stock that is forfeited, and shares subject to an award that is exercised or satisfied, or that terminates or expires, without the delivery of the shares do not reduce the maximum number of shares available for delivery under the plan. The maximum number of shares of common stock for which stock options may be granted to any person in any calendar year and the maximum number of shares of common stock subject to SARs granted to any person in any calendar year is in each case 2 million. The maximum number of shares of common stock subject to other awards granted to any person in any calendar year is 2 million. In the event of a stock dividend, stock split or other change in our capital structure, the administrator will make appropriate adjustments to the limits described above and will also make appropriate adjustments to the number and kind of shares of stock or securities subject to awards, any exercise prices relating to awards and any other provisions of awards affected by the change. The administrator may also make similar adjustments to take into account other distributions to shareholders or any other event, if the administrator determines that adjustments are appropriate to avoid distortion in the operation of the plan and to preserve the value of awards.

The closing price of State Street common stock, as reported on the New York Stock Exchange on February 27, 2009, was $25.27 per share.

Eligibility. Participation is limited to those key employees and directors, as well as consultants and advisors, who in the administrator’s opinion are in a position to make a significant contribution to the success of State Street and its subsidiaries and who are selected by the administrator to receive an award. As of February 27, 2009, the group of persons from which the administrator may select participants consisted of approximately 7,600 individuals.

Stock Options. The administrator may from time to time award options to any participant subject to the limitations described above. Stock options give the holder the right to purchase shares of common stock within a specified period of time at a specified price, not less than the fair market value of the common stock at the time of grant. Stock options granted under the plan may not be repriced other than in accordance with the applicable stockholder approval requirements of the New York Stock Exchange. Two types of stock options may be granted under the plan: incentive stock options, or “ISOs”, which are subject to special tax treatment as described below, and nonstatutory options, or “NSOs”. Eligibility for ISOs is limited to employees of State Street and its corporate subsidiaries.

The expiration date of an ISO cannot be more than ten years after the date of the original grant. In the case of NSOs, the expiration date is determined in the discretion of the administrator. The administrator also determines all other terms and conditions related to the exercise of an option, including the time at which options may be exercised and conditions related to the exercise of options.

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Stock Appreciation Rights. The administrator may grant SARs under the plan. A SAR entitles the holder upon exercise to receive an amount, delivered in the form of shares of common stock, determined by reference to appreciation in the value of a share of common stock. The value from which appreciation is measured in the case of a SAR may not be less than the fair market value of the common stock on the date of grant. No SAR, once granted, may be repriced other than in accordance with the applicable stockholder approval requirements of the New York Stock Exchange.

Stock Awards; Stock Units. The plan provides for awards of nontransferable shares of restricted common stock, as well as unrestricted shares of common stock. Awards of restricted stock and unrestricted stock may be made in exchange for past services or other lawful consideration. Generally, awards of restricted stock are subject to the requirement that the shares be forfeited or resold to State Street unless specified conditions are met. Subject to these restrictions, conditions and forfeiture provisions, any recipient of an award of restricted stock will have all the rights of a State Street shareholder, including the right to vote the shares and to receive dividends. Other awards under the plan may also be settled with restricted stock. The plan also provides for stock units, including restricted stock units, entitling the recipient to receive shares of common stock (or cash measured by the value of the common stock) in the future on such conditions as the administrator may specify.

Performance Awards. The administrator may also subject awards otherwise available under the plan to the satisfaction of specified performance criteria. The performance criteria used in connection with a particular performance award will be determined by the administrator. In the case of performance awards intended to qualify for exemption under Section 162(m) of the Internal Revenue Code of 1986, the administrator will use one or more objectively determinable measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenue; assets; expenses; expense control; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; capital or capital ratios; one or more operating ratios; operating leverage; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; shareholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. A performance criterion and any targets with respect thereto determined by the administrator need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Internal Revenue Code, the administrator may provide in the case of any award intended to qualify for such exception that one or more of the performance criteria applicable to such award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions, changes in accounting principles or interpretations, impairment charges) occurring during the performance period that affect the applicable performance criterion or criteria. No performance award may be granted after State Street’s first meeting of shareholders held in 2014 until the listed performance measures (as originally approved or as subsequently amended) have been resubmitted to and reapproved by State Street’s shareholders in accordance with the requirements of Section 162(m) of the Internal Revenue Code, unless such grant is made contingent upon such approval.

Plan Benefits. The future benefits or amounts that would be received under the plan are discretionary and are therefore generally not determinable at this time. However, Patrick de Saint-Aignan and Robert Kaplan, each elected to the Board of Directors in March 2009, will be entitled to a pro rata share of the annual retainer and deferred stock award for the April 2008 to May 2009 period. The pro-rated annual retainer may, at the newly elected director’s election, be payable in shares of State Street common stock. The following individuals and groups of individuals have received the following awards under the plan, stated in aggregate number of shares of common stock underlying options/SARs and other awards, since its inception in 2006: Ronald E. Logue, Chairman and Chief Executive Officer, 542,580 options/SARs and 246,308 other awards; Edward J. Resch,

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Executive Vice President and Chief Financial Officer, 226,373 options/SARs and 99,467 other awards; Joseph L. Hooley, President and Chief Operating Officer, 349,000 options/SARs and 181,436 other awards; Joseph C. Antonellis, Vice Chairman, 277,545 options/SARs and 153,074 other awards; James S. Phalen, Executive Vice President, 132,989 options/ SARs and 66,716 other awards; all current executive officers, as a group, 2,305,058 options/SARs and 1,292,455 other awards; all current directors who are not executive officers, as a group, no options/SARs and 48,200 other awards; and all employees, including all current officers who are not executive officers, as a group, 223,069 options/SARs and 12,574,927 other awards.

General Provisions Applicable to All Awards. Neither ISOs nor, except for gratuitous transfers to the extent permitted by the administrator, other awards may be transferred other than by will or by the laws of descent and distribution. During a recipient’s lifetime an ISO and, except as the administrator may provide, other non-transferable awards requiring exercise may be exercised only by the recipient. Shares delivered under the plan may consist of either authorized but unissued shares or previously issued shares acquired by State Street.

Mergers and Similar Transactions. In the event of a “change in control” of State Street, as defined in the plan, all options and SARs issued under the plan will become fully exercisable, all shares of restricted stock and restricted stock units will vest, and holders of performance awards as to which the performance period has not ended will (if the transaction involves a payment to shareholders) be cashed out. If options and SARs are granted in substitution for existing awards, the substitute awards will remain exercisable after a termination of employment or other service relationship (other than by reason of death or disability), or retirement for the lesser of the period of seven months or the period ending on the latest date on which the option or SAR could otherwise have been exercised. Also, in connection with or following a change in control, awards may not be amended in any manner adverse to the participant without the participant’s consent.

Whether or not there is a change in control, as defined, in the event of a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which State Street is not the surviving corporation or which results in the acquisition of all or substantially all of State Street’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, a sale or transfer of all or substantially all of State Street’s assets, or a dissolution or liquidation of State Street, the following rules will apply except as otherwise provided in an award. If the transaction is one in which there is an acquiring or surviving entity, the administrator may provide for the assumption of some or all outstanding awards or for the grant of new awards in substitution therefore by the acquirer or survivor or an affiliate of the acquirer or survivor. If the transaction is one in which holders of common stock will receive upon consummation a payment (whether cash, non-cash or a combination of the foregoing), the administrator may likewise cash out some or all awards, except that the terms of payment need not be the same as those applicable to holders of common stock. If the transaction (whether or not there is an acquiring or surviving entity) is one in which there is no assumption, substitution or cash-out, awards will become payable, except that the administrator may impose restrictions on amounts payable to carry out the intent of the plan (subject to the requirement of full vesting if the transaction constitutes a change in control). Existing awards requiring exercise, unless assumed, will terminate upon completion of the transaction.

Amendment. The administrator may at any time or times amend the plan or any outstanding award for any purpose which may at the time be permitted by law, and may at any time terminate the plan as to any future grants of awards. The administrator may not, however, alter the terms of an award so as to affect materially and adversely the participant’s rights under the award without the participant’s consent, unless the terms of the plan so provide or the administrator expressly reserved the right to do so at the time of the award.

Non-U.S. Participants: The administrator may provide for special rules applicable to non-U.S. participants.

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Securities Authorized for Issuance Under Equity Compensation Plans

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. The table does not include the additional shares that are the subject of the proposed amendment and restatement of the 2006 equity incentive plan being presented for shareholder approval at the annual meeting.

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 plans, which were approved by shareholders.

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Federal Income Tax Effects

The following discussion summarizes certain United States federal income tax consequences of the issuance and receipt of options under the plan under the law as in effect on the date of this proxy statement. Changes to these tax laws could alter the tax consequences described below. This summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Code related to nonqualified deferred compensation. The summary does not purport to cover federal employment tax or other federal tax consequences that may be associated with the plan, nor does it cover state, local or non-U.S. taxes.

ISOs. An optionee realizes no taxable income upon the grant or, for regular tax purposes, upon the exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the optionee. With certain exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the optionee (and a deduction to State Street) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which State Street is not entitled to a deduction. If the optionee does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss for which State Street is not entitled to a deduction.

NSOs. In general, in the case of a NSO, the optionee has no taxable income at the time of grant but realizes income in connection with exercise of the option in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price; a corresponding deduction is available to State Street; and upon a subsequent sale or exchange of the shares, any recognized gain or loss after the date of exercise is treated as capital gain or loss for which State Street is not entitled to a deduction.

In general, an ISO that is exercised by the optionee more than three months after termination of employment is treated as an NSO. ISOs are also treated as NSOs to the extent they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.

Stock Appreciation Rights. A recipient of a stock appreciation right will not have income upon grant of the SAR. The recipient generally will recognize compensation income upon the exercise of the SAR equal to the amount of cash and the fair market value of any stock received; a corresponding deduction is available to State Street. Upon the subsequent sale of the stock, any recognized gain or loss after the date of exercise is treated as capital gain or loss for which State Street is not entitled to a deduction.

Restricted Stock Awards. A recipient will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a recipient will have compensation income equal to the value of the stock less the purchase price and State Street will be entitled to a corresponding deduction. Upon the subsequent sale of the stock, any recognized gain or loss after the date of grant is treated as capital gain or loss for which State Street is not entitled to a deduction. If the recipient does not make an 83(b) election, then when the stock vests the recipient will have compensation income equal to the value of the stock on the vesting date less the purchase price; a corresponding deduction is available to State Street. Upon the subsequent sale of the stock, any recognized gain or loss after the date of vesting is treated as capital gain or loss for which State Street is not entitled to a deduction.

Restricted Stock Units. A recipient will not have income upon the grant of a restricted stock unit award. A recipient is not permitted to make a Section 83(b) election with respect to a restricted stock unit award. When the restricted stock unit vests, or, if the delivery of the shares has been properly deferred, upon delivery of the shares, the recipient will have compensation income equal to the value of the stock less the purchase price, if any; a corresponding deduction is available to State Street. Upon the subsequent sale of the stock, any recognized gain or loss after the date of vesting (or delivery) is treated as capital gain or loss for which State Street is not entitled to a deduction.

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Golden Parachute Tax. Under the so-called “golden parachute” provisions of the Code, the accelerated vesting of awards in connection with a change in ownership or control of State Street may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards under the plan, may be subject to an additional 20% federal tax and may be nondeductible to State Street.

Section 162(m). Where applicable, Section 162(m) limits the deduction for compensation payable to certain executive officers of State Street. Options under the plan should be able to qualify as performance-based awards not subject to the deduction limitation under Section 162(m) of the Code. The Board may also grant performance awards that are intended to be exempt from the deduction limitation under Section 162(m) of the Code.

ITEM 4 – NON-BINDING ADVISORY PROPOSAL ON EXECUTIVE COMPENSATION

The Board of Directors unanimously recommends that you vote

FOR

this proposal (Item 4 on your proxy card)

The Board of Directors recommends that shareholders approve the non-binding advisory proposal on executive compensation described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the approval of the advisory proposal.

State Street maintains an executive compensation program with the goals of attracting, retaining and motivating superior executives and rewarding them for meeting short-term and longer-term financial and strategic goals. The program contains elements of cash and equity-based compensation and is designed to align the interests of our executives with those of our shareholders. The overall program is described in this proxy statement under the heading “Executive Compensation” and specifically in the “Compensation Discussion and Analysis” section of that disclosure.

As described under the heading “Compensation Discussion and Analysis”, State Street met or exceeded its corporate financial goals for 2008 and maintained a strong regulatory capital position amidst substantial volatility, illiquidity and disruption in the global credit and other financial markets. Nonetheless, in light of this disruption and the challenges faced by our shareholders, as well as of State Street’s participation in the taxpayer-funded efforts to stabilize the financial markets, our Chairman and Chief Executive Officer, Ronald E. Logue, approached the Board in January 2009 to indicate his unwillingness to receive 2008 incentive compensation. Mr. Logue ultimately concluded with our Executive Compensation Committee that none of our “named executive officers” disclosed in this proxy statement under the heading “Executive Compensation” would receive any incentive compensation grants for 2008.

Subsequently, on February 17, 2009, the American Recovery and Reinvestment Act of 2009 was enacted. Under the provisions of this Act, all participants in the United States Department of the Treasury’s Troubled Asset Relief Program, or TARP, are required to permit a shareholder vote to approve executive compensation disclosed in accordance with SEC rules, annually during the period in which any obligation arising from financial assistance arising under TARP remains outstanding. In October 2008 the U.S. Department of the Treasury announced the capital purchase program portion of TARP, designed to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. State Street was invited to be one of the first nine banks to help lead this initiative, and in late October, we received an investment of $2 billion from Treasury in return for shares of our fixed-rate cumulative perpetual preferred stock and a warrant to purchase shares of our common stock. As a participant in the TARP capital purchase program, we are including a non-binding advisory vote on executive compensation in this proxy statement for approval by our shareholders at the annual meeting.

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As noted above, the advisory vote is not binding. In addition, the vote may not be construed as overruling any decision by the Board. Although non-binding, the Executive Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

The text of the vote presented for your approval is as follows:

ITEM 5 – RATIFICATION OF THE SELECTION

OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors unanimously recommends that you vote

FOR

this proposal (Item 5 on your proxy card)

The Board of Directors recommends that shareholders approve the ratification of the selection of the independent registered public accounting firm described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the approval of the proposal.

The Examining and Audit Committee has appointed Ernst & Young LLP as State Street’s independent registered public accounting firm for the year ending December 31, 2009. Ernst & Young LLP has acted as our independent auditor since 1972. We have been advised by Ernst & Young LLP that it is a registered public accounting firm with the Public Company Accounting Oversight Board and complies with the auditing, quality control, and independence standards and rules of that Board and the SEC.

We expect that representatives of Ernst & Young LLP will be present at the annual meeting to respond to appropriate questions, and they will have the opportunity to make a statement if they desire.

While shareholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required, the Board of Directors is submitting the selection of Ernst & Young LLP to the shareholders for ratification to learn the opinion of shareholders on the selection. Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the ratification of the selection of Ernst & Young LLP as State Street’s independent registered public accounting firm for the year ending December 31, 2009. Should the selection of Ernst & Young LLP not be ratified by the shareholders, the Examining and Audit Committee will reconsider the matter. Even in the event the selection of Ernst & Young LLP is ratified, the Examining and Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change is in the best interests of State Street and its shareholders.

ITEM 6 – SHAREHOLDER PROPOSAL

The Board of Directors unanimously recommends that you vote

AGAINST

this shareholder proposal (Item 6 on your proxy card)

The Board of Directors recommends that shareholders vote against the shareholder proposal described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted against the shareholder proposal.

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Patrick A. Jorstad, of 6300 Stevenson Avenue, #413, Alexandria, Virginia 22304, who is the beneficial owner of 338 shares of State Street’s common stock entitled to be voted on the proposal at the meeting, has submitted the proposal set forth below for inclusion in the proxy statement. The text of the proposal and supporting statement, as furnished to us by the proponent, are as follows:

A Proposal to Revise the Relationship with Our Auditors

Proposal

The shareholders hereby recommend that – upon adoption by a majority of the shares voted at the 2009 Stockholders’ Meeting – the Directors amend the By-laws to include the following section:

ARTICLE VI Section 6. Auditor Fees. The Examining and Audit Committee, or its successor, shall certify annually that the Corporation has paid no fees to the Corporation’s audit firm, or to any entity owned by a common parent as said firm, for any services other than for audit activities that are required by State or Federal law. This annual certification shall be written, signed by each Committee member, and may be made in the Corporation’s proxy statement. For the five fiscal years preceding adoption of this section, the Committee shall disclose – no later than the filing date of the definitive proxy statement next following adoption of this section – the full dollar amount of all fees paid to the Corporation’s audit firm, and to any entity owned by a common parent as said firm, regardless of the type(s) of service rendered.

The shareholders recommend that the Directors adopt this provision at the first Board meeting after this proposal’s adoption by a majority of the shares voted at the 2009 Stockholders’ Meeting.

Supporting Statement

The sponsor has been a shareholder continuously since 1996.

During this timeframe, management’s reporting of fees paid to Ernst & Young has – in the sponsor’s opinion – lacked full transparency.

For example, on page 50 of the Corporation’s 2007 proxy statement, management disclosed fees paid to Ernst & Young in four categories: Audit Fees, Audit-Related Fees, Tax Fees, and All Other Fees.

However, management went on to say: “In connection with the advisory or custodial services State Street provides to mutual funds, exchange traded funds, and other collective investment vehicles, State Street from time to time selects, and in limited circumstances employs, outside accountants to perform audit and other services for the investment vehicles. In such cases, State Street typically uses a request-for-proposal process that has resulted in the selection of various outside auditors, including Ernst & Young LLP. Fees paid to Ernst & Young LLP in such circumstances are not included in the totals provided above.”

At the 2006 Meeting, the sponsor prepared the following question: “What is the total dollar amount of all fees paid [to Ernst & Young] that were not disclosed in the proxy statement? Page 33 of the proxy statement indicates that many of these fees were hidden from shareholder view. Thank you.”

The Chairman refused to concede the point, and refused a request to turn to the page in question.

Given the audit issues regarding collective investment funds, SIVs, and CDOs, and given that FASB Statement 157 takes effect in January 2008, the sponsor believes that “unqualified” audits from Ernst & Young – which are addressed to “THE SHAREHOLDERS AND BOARD OF DIRECTORS OF STATE STREET CORPORATION” – should be free from even the appearance of a conflict of interest.

Thank you for your consideration.

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RECOMMENDATION OF THE BOARD OF DIRECTORS

State Street respects the important role that auditor independence plays in ensuring the integrity of our financial statements, protecting the interests of our shareholders and building confidence in our accounting and financial reporting systems.

For that reason, the Examining and Audit Committee is active in monitoring the independence of State Street’s independent auditor. We believe that the implementation of the shareholder’s proposal would be inconsistent with, and unnecessary in light of, comprehensive federal laws and regulations regarding auditor independence. Furthermore, we believe that, if implemented, this proposal would prevent State Street from exercising appropriate business judgment and would not be consistent with the interests of shareholders. An identical proposal was presented to the shareholders for vote at last year’s annual meeting and only received the support of 11,486,336 shares out of 286,231,336 votes cast on this matter.

In enacting the Sarbanes-Oxley Act of 2002 and adopting the rules and regulations promulgated thereunder, Congress and the SEC specifically determined not to prohibit the provision of all non-audit services by a company’s independent auditor. Rather, they determined to prohibit the provision of only certain identified non-audit services and to require companies’ audit committees to evaluate in advance whether to approve the retention of the independent auditor to provide non-audit services that are not prohibited. Implementation of the shareholder’s proposal would be inconsistent with the judgment of Congress and the SEC that a blanket prohibition of tax and other non-audit services is not appropriate.

Congress and the SEC further determined to require detailed disclosure of the fees to a company for professional services rendered by its independent auditor for audit services, audit-related services, tax services and other non-audit services, as well as the audit committee’s policies and procedures for pre-approval of services by the independent auditor. This detailed information is provided on page 58 of this proxy statement. State Street’s total non-audit fees are not deemed “excessive” under the voting standards of RiskMetrics Group, a leading provider of proxy voting and corporate governance services, which considers non-audit (other) fees “excessive” if they are greater than audit fees, audit-related fees and tax compliance/preparation fees combined.

Although not required by Congress and the SEC, we have voluntarily disclosed on page 58 of this proxy statement that Ernst & Young provides audit and tax compliance services to certain mutual funds, exchange traded funds and foreign-based private investment funds for which State Street is the sponsor and investment adviser or manager. The mutual funds and exchange traded funds have boards of directors or similar bodies that make their own determinations as to selecting the funds’ audit firms and approving any fees paid to such firms. In the case of certain foreign-based private investment funds, State Street participates in selecting the audit firm to provide the audit and tax compliance services. All of the fees for such services are paid by these entities and not by State Street.

Shareholders should be aware that this shareholder’s proposal is not limited to requiring additional disclosure. Rather, the shareholder’s proposal would unnecessarily restrain State Street’s flexibility in securing services. For example, the shareholder’s proposal would not allow State Street’s independent auditor to perform certain audit services, such as statutory audits performed in various locations outside the United States. It would also not allow commonly accepted audit-related services, such as audits of employee benefit plans, non-statutory audits and due diligence procedures. It would also prohibit tax compliance/tax return preparation services, such as tax services for foreign entities, which are often performed by a company’s independent auditor.

We also expect that prohibiting State Street’s independent auditor from providing certain non-audit services that are permitted by Congress and the SEC could result in inefficiencies and increased costs to State Street. For example, having a single firm provide both audit services and the related tax compliance services provides significant efficiencies and cost savings to State Street. State Street can realize considerable cost and time savings under other circumstances by using its independent auditor to provide discrete non-audit services that take advantage of the independent auditor’s considerable knowledge of the company. In all such circumstances,

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we believe the best interests of State Street and its shareholders are served by maintaining the flexibility provided under applicable laws and regulations, subject to the Examining and Audit Committee’s approval, including a determination that such services do not impair auditor independence.

Moreover, we note that since 2005, State Street has given its shareholders an opportunity to vote on ratifying the selection of its independent auditors, and each year the selection of Ernst & Young LLP has been approved by more than 97% of the shares that were voted.

In light of the protections already in place, as overseen by the Board’s independent Examining and Audit Committee, we believe that the independence of our outside auditor will not be impaired by the provision of certain non-audit services as permitted under the Sarbanes-Oxley Act and the SEC’s rules and regulations, and that no additional disclosure concerning the fees paid to our independent auditor is required or necessary. We also believe that implementing this shareholder proposal would likely result in additional expense, without a corresponding benefit, for State Street.

Therefore, the Board of Directors unanimously recommends that you vote AGAINST this shareholder proposal (Item 6 on your proxy card)

OTHER MATTERS

The Board of Directors does not know of any other matters that may be presented for action at the annual meeting. Should any other business properly come before the meeting, the persons named on the enclosed proxy will, as stated therein, have discretionary authority to vote the shares represented by such proxies in accordance with their best judgment. In accordance with our by-laws, we reserve the right to determine and declare to the meeting that business was not properly brought before the meeting.

CORPORATE GOVERNANCE AT STATE STREET

State Street is a financial holding company whose principal subsidiary is State Street Bank and Trust Company, which we refer to as the “Bank”. State Street and the Bank are each organized under the laws of the Commonwealth of Massachusetts. In accordance with Massachusetts law and State Street’s by-laws, our Board of Directors has responsibility for overseeing the conduct of our business. Our Board is committed to strong corporate governance practices and is intent on maintaining the reputation for quality, integrity and high ethical standards that State Street has established over many years.

State Street’s Board of Directors, in its role of overseeing the conduct of our business, is guided by our Corporate Governance Guidelines. Among other things, the Guidelines describe the role of the Board of Directors, its responsibilities and functions, the director qualification and selection process, the role of the Lead Director and the guidelines on director independence. The Guidelines contain categorical standards for determining director independence in accordance with the listing standards of the New York Stock Exchange. In general, these categorical standards would prohibit a director from qualifying as an independent director if the director (and in certain circumstances, a member of the director’s immediate family) has, or in the past three years had, certain relationships or affiliations with State Street, its external or internal auditors, or other companies that do business with State Street (including employment by State Street, receipt of a specified level of direct compensation from State Street other than director fees, and compensation committee interlocks). The categorical standards also provide specified relationships that by themselves, would not impair independence. The portion of the Guidelines addressing director independence is attached as Appendix C to this proxy statement. The full Guidelines are available on our website at www.statestreet.com and will be made available without charge by State Street to any shareholder who requests them. In addition to the Guidelines, the charters for each committee of the Board and our Standard of Conduct for Employees, Standard of Conduct for Directors and Code of Ethics for Senior Financial Officers are also available on our website and will be made available without charge by State Street to any shareholder who requests them.

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Pursuant to the Guidelines, the Board undertook a review of director independence in February and March of 2009. As provided in the Guidelines, the purpose of this review was to determine whether any relationship or transaction was inconsistent with a determination that the director was independent. As a result of this review, the Board, after review and recommendation by the Nominating and Corporate Governance Committee, determined that each of the current 13 non-management directors (Mses. Fawcett and Hill and Messrs. Burnes, Coym, Darehshori, de Saint-Aignan, Gruber, Kaplan, LaMantia, Sergel, Skates, Summe, and Weissman) meets the categorical standards for independence under the Guidelines, has no material relationship with State Street, and satisfies the qualifications for independence under listing standards of the New York Stock Exchange.

In February 2008, the Board undertook a similar review with respect to the members of the Board at that time, including Maureen Miskovic, who served as a director until April 7, 2008. As a result of this review, the Board determined that Ms. Miskovic met the categorical standards for independence under the Guidelines as in effect at that time, had no material relationship with State Street, and satisfied the qualifications for independence under New York Stock Exchange listing standards.

The non-management directors (all of whom are independent directors) meet in executive session at least quarterly. Gregory L. Summe is the Lead Director of the non-management directors and is also the presiding director. As such, his duties include presiding at all meetings of the Board at which the Chairman is not present, including at executive sessions of non-management directors, serving as a liaison between the Chairman and the non-management directors, establishing the agenda for executive sessions and consulting with the Chairman as to, and approving, the agendas for Board meetings, information sent to the Board and the schedule of Board meetings. The Lead Director is authorized to call meetings of the non-management directors. The Lead Director communicates with the Chairman to provide feedback and also to implement the decisions and recommendations of the non-management directors.

State Street has established a procedure for communicating directly with the Lead Director regarding concerns about State Street or its conduct, including complaints about accounting, internal accounting controls, or auditing matters. An interested party who wishes to contact the Lead Director may use any of the following methods, which are also described on State Street’s website at www.statestreet.com:

The Lead Director may forward to the Examining and Audit Committee, or to another appropriate group or department, any concerns the Lead Director receives for appropriate review. The Lead Director periodically reports to the non-management directors as a group regarding concerns received.

Although State Street does not have a formal policy regarding attendance of directors at the annual meeting, all directors are encouraged to attend. Eleven of the directors attended the 2008 annual meeting.

State Street has established and maintains internal controls and procedures designed to ensure the integrity and accuracy of its consolidated financial statements and control of its assets, and has established and maintains disclosure controls and procedures designed to ensure that State Street is able to timely record, process and report the information required for public disclosure. State Street is dedicated to maintaining the high standards of financial accounting and reporting that we have established over many years of service to shareholders, employees and clients.

We have a Standard of Conduct for Directors, which together with the Standard of Conduct for Employees, promotes ethical conduct and the avoidance of conflicts of interest in conducting our affairs for directors, officers

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and employees. We also have a Code of Ethics for Senior Financial Officers (including the Chief Executive Officer) as required by the Sarbanes-Oxley Act and the SEC rules thereunder. Any waiver for directors, senior financial officers or executive officers from a provision of the Standard of Conduct for Directors, the Standard of Conduct for Employees or the Code of Ethics for Senior Financial Officers may only be granted by the Board and will be posted on our website at www.statestreet.com.

Meetings of the Board of Directors

During 2008, the Board of Directors held sixteen meetings and each of the directors attended 75% or more of the total of all meetings of the Board and all meetings of the committees of the Board on which such director served during the year (during the period that such director served). Each member of the Board, other than, at this time, Messrs. de Saint-Aignan and Kaplan, is also a member of the Board of Directors of the Bank. The Board of Directors of the Bank held sixteen meetings during 2008. Each member of State Street’s Executive Committee and Examining and Audit Committee is also a member of the corresponding committee of the Bank, and members customarily hold joint meetings of both committees.

Committees of the Board of Directors

The Board of Directors has the following committees to assist it in carrying out its responsibilities, each of which operates under a written charter, a copy of which is available on our website at www.statestreet.com. The charter for each committee, which establishes its roles and responsibilities and governs its procedures, has been approved by the Board.

Executive Committee. The Executive Committee is authorized to exercise all the powers of the Board of Directors, except as otherwise limited by the laws of the Commonwealth of Massachusetts or its charter. The Committee is also responsible for oversight of State Street’s assessment and management of risk. The purpose and function of the Committee includes reviewing, approving, and acting on, as it deems appropriate, regular matters on behalf of the Board of Directors, such as the following: portfolio of investment securities; strategic investments of the Company; personnel issues (including appointment of Senior Vice Presidents and, on occasion, more senior officers); and provisions, charge-offs, and recoveries to the allowances for loan and securities processing losses. The Committee reports periodically to the Board, as appropriate. Its members are David P. Gruber, Chair; Kennett F. Burnes; Amelia C. Fawcett, Charles R. LaMantia and Ronald E. Logue. During 2008, the Committee held fourteen meetings.

Examining and Audit Committee. The Examining and Audit Committee has direct responsibility for the appointment, compensation, retention, evaluation and oversight of the work of the independent registered public accounting firm for State Street, and sole authority to establish pre-approval policies and procedures for all audit engagements and for any non-audit engagements with the independent auditor. The Committee also oversees the operation of a comprehensive system of internal controls covering the integrity of our financial statements and reports, compliance with laws, regulations, corporate policies, and the qualifications, performance and independence of State Street’s independent auditor. The Committee acts on behalf of the Board in monitoring and overseeing the performance of the internal audit function at State Street and in reviewing certain communications with bank regulatory authorities. Specific functions and responsibilities of the Committee are set forth in the charter of the Committee. The Committee’s members are Charles R. LaMantia, Chair; Kennett F. Burnes; David P. Gruber and Ronald L. Skates. During 2008, the Committee held twenty meetings.

The Board of Directors has determined that the Examining and Audit Committee consists entirely of directors who meet the independence requirements of the listing standards of the New York Stock Exchange and the rules and regulations under the Securities Exchange Act of 1934. Further, all of the members of the Committee are financially literate, based upon their education and experience, as such qualification under the listing standards of the New York Stock Exchange is interpreted by the Board. The Board has determined, based upon education and experience as a principal accounting or financial officer or public accountant, or experience

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actively supervising a principal accounting or financial officer or public accountant, that all members of the Committee satisfy the definition of “audit committee financial expert” as set out in the rules and regulations under the Exchange Act, and have accounting or related financial management expertise as such qualification under the listing standards of the New York Stock Exchange is interpreted by the Board. None of the members of the Committee serves on more than two other audit committees of public companies.

Executive Compensation Committee. The Executive Compensation Committee oversees the operation of all compensation plans, policies and programs of the Company in which directors and officers who are Section 16 reporting persons participate and certain other incentive, retirement, welfare and equity plans in which all other employees participate. Acting together with the other independent directors, the Committee annually reviews and approves corporate goals and objectives relevant to the chief executive officer’s compensation, evaluates the chief executive officer’s performance, and reviews, determines and approves, in consultation with the other independent directors, the chief executive officer’s compensation level. The Committee also reviews, evaluates and approves the total compensation of all other executive officers and oversees State Street’s incentive plans. The Committee is also responsible for approving the terms and conditions of employment and any changes thereto, including any restrictive provisions, severance arrangements, and special arrangements or benefits, of any officer who holds the title of executive vice president or above. The Committee also adopts equity grant guidelines from time to time in connection with its overall responsibility for all equity plans, and monitors stock ownership of executive officers and Board members. In addition, the Committee reviews, and recommends to the Board, the form and amount of director compensation. Its members are Richard P. Sergel, Chair; Nader F. Darehshori; Linda A. Hill; and Robert E. Weissman. None of these individuals is or has been an officer or employee of State Street or the Bank. The Board of Directors has determined that the Committee consists entirely of directors who meet the independence requirements of the listing standards of the New York Stock Exchange. During 2008, the Committee held eleven meetings.

In September 2007, Dr. Hill entered into an agreement to provide consulting and related services to a management consulting firm on an ongoing basis. Under the applicable Internal Revenue Service Regulations, Dr. Hill may possibly not be deemed an outside director for purposes of Section 162(m) of the Internal Revenue Code as a result of past or potential future State Street engagements of the management consulting firm, although Dr. Hill may be uninvolved in those engagements. Accordingly, in December 2007, the Board of Directors created a subcommittee of the Executive Compensation Committee and appointed Messrs. Sergel (Chair), Darehshori and Weissman as members of the subcommittee. The purpose and authority of the subcommittee is to perform all functions of the Executive Compensation Committee related to the qualification of performance-based compensation for applicable exemptions under Section 162(m), including establishing and administering performance goals and certifying the attainment of those goals. Each of Mr. Sergel, Mr. Darehshori and Mr. Weissman qualify as outside directors for purposes of Section 162(m) and as non-employee directors for purposes of SEC Rule 16b-3. All references to the Executive Compensation Committee in this proxy statement include the subcommittee, as appropriate.

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee’s principal responsibilities are to assist the Board in identifying and recommending nominees for directors of State Street, to recommend to the Board director nominees for each committee, to provide leadership in shaping our corporate governance, including the Corporate Governance Guidelines, and to lead the Board in its annual review of the Board’s performance. The Committee is also responsible for reviewing and approving State Street’s related-person transactions. Its members are Gregory L. Summe, Chair; Peter Coym; Nader F. Darehshori and Amelia C. Fawcett. The Board of Directors has determined that the Committee consists entirely of directors who meet the independence requirements of the listing standards of the New York Stock Exchange. During 2008, the Committee held six meetings.

In carrying out its responsibilities in order to find the best qualified candidates for directors, the Committee will consider proposals from a number of sources, including recommendations for nominees from shareholders submitted upon written notice to the Chair of the Nominating and Corporate Governance Committee, c/o the Office of the Secretary of State Street Corporation, One Lincoln Street, Boston, Massachusetts 02111 (facsimile number

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(617) 664-8209). The Committee seeks to identify individuals qualified to become directors, consistent with the criteria established by the Board for director candidates. The Board has set as criteria for director candidates those individuals who have had substantial achievement in their personal and professional pursuits, and whose talents, experience, and integrity would be expected to contribute to the best interests of State Street and to long-term shareholder value. When evaluating the need for director candidates, the Committee seeks the advice of the Board and management with respect to attributes that may mold the Board’s capabilities and functionality as a whole, including skill-sets, diversity, specific business background and global or international experience.

The Committee’s process for identifying and evaluating candidates includes actively seeking to identify qualified individuals by reviewing lists of possible candidates, and considering proposals from a number of sources, such as from members of the Board, members of management, employees, shareholders, and industry contacts. The Committee’s charter grants it the authority to retain a search firm to assist it. Upon identifying a possible candidate, from whatever source, the Committee makes an initial evaluation as to whether the individual would be expected to qualify under the criteria established by the Board for director candidates. A possible candidate who the Committee feels is an individual who could qualify under the criteria established by the Board is then further evaluated through a process which may include obtaining and examining the individual’s resume, speaking with the person who has recommended the individual, speaking with others who may be familiar with the individual, interviews by members of the Committee with the individual, discussion at the Committee level of the individual’s possible contribution to State Street, and, if appropriate, voting on the individual as a candidate. The Committee evaluates possible nominees for directors without regard to whether an individual is recommended by a shareholder or otherwise.

Patrick de Saint-Aignan and Robert S. Kaplan are nominees for election as directors by shareholders for the first time at this meeting. Each was elected to the Board by the other members of the Board in March 2009. The Committee recommended them to the directors for appointment to the Board in March 2009, and as candidates for election by the shareholders at this meeting, after evaluating their candidacy. The candidates were first identified by a third-party search firm that was retained to identify director candidates. At the request of the Committee, the search firm discussed with the members of the Committee the priority characteristics in a new director candidate. The search firm developed preliminary criteria for a director candidate, and reviewed it with the Committee. The search firm identified potential candidates that met the criteria as established by the Committee, and submitted a list of potential candidates to the Committee. The Committee met to discuss and finalize the list of candidates, and the Committee reviewed this process and the resulting list with the Board. After conducting a preliminary check to determine conflicts and eliminating from consideration those candidates whose Board commitments precluded them from considering an appointment to the Board, the search firm approached the candidates to determine their interest in serving on the Board. The search firm gave the Committee a list of candidates who were interested, and members of the Committee and the Chairman personally interviewed them. The Committee recommended Patrick de Saint-Aignan and Robert S. Kaplan to the Board, after determining that they met the Board’s criteria for new directors, have the background and potential to make significant contributions to State Street through service as directors and were independent under the Corporate Governance Guidelines.

Related Person Transactions

The Board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which State Street is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders (or their immediate family members), who we refer to as “related persons,” has a direct or indirect material interest.

A related person proposing to enter into such a transaction, arrangement or relationship must report the proposed related-person transaction to State Street’s Chief Legal Officer. The policy calls for the proposed related-person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to the transaction. If advance review is not practicable or was otherwise not obtained, the Committee will review, and,

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if deemed appropriate, may ratify the related-person transaction. The policy also permits the Chairman of the Committee to review and, if deemed appropriate, approve proposed related-person transactions that arise between Committee meetings, in which case they will be reported to the full Committee at its next meeting. Any related-person transactions that are ongoing in nature will be reviewed annually.

A related-person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Committee (or the Committee Chairman) after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Committee (or the Committee Chairman) will review and consider:

The Committee may approve or ratify the related-person transaction only if the Committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, State Street’s best interests. The Committee may, in its sole discretion, impose such conditions as it deems appropriate on State Street or the related person in connection with approval of the related-person transaction.

In addition to the transactions that are excluded by the instructions to the SEC’s related-person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related-person transactions for purposes of this policy:

Based on information provided by the directors and executive officers, and obtained by the legal department, there were no related-person transactions required to be reported in this proxy statement under applicable SEC regulations. In addition, there were no personal loans or extensions of credit by State Street or the Bank to any directors or executive officers.

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EXECUTIVE COMPENSATION

Process and Procedures for Considering and Determining

Executive and Director Compensation

The Executive Compensation Committee of the Board of Directors has direct responsibility for the director and executive officer compensation plans, policies and programs at State Street and for establishing the overall compensation philosophy for executive officers. In this “Executive Compensation” section of this proxy statement, we refer to the Executive Compensation Committee as, the Committee.

Executive Compensation

Under its charter, the Committee is required to approve the compensation of all of our executive officers, other than the chief executive officer, and to act with the other independent directors on the Board to approve the chief executive officer’s compensation. Our executive officers include the five officers named in the tables and related disclosures beginning on page 41 of this proxy statement: Ronald E. Logue, Edward J. Resch, Joseph L. Hooley, Joseph C. Antonellis and James S. Phalen. We refer to those officers in this proxy statement as, our named executive officers.

In January 2009, our Chairman and Chief Executive Officer, Ronald E. Logue, contacted our Lead Director, Gregory L. Summe, and also the Chairman of the Committee, Richard P. Sergel, to inform them that he proposed to forgo his incentive compensation for 2008. Mr. Logue also discussed with Messrs. Summe and Sergel and, subsequently, with the other independent members of the Board the rationale for not providing 2008 incentive compensation to several other executive officers, including all of the named executive officers. Following these discussions, Mr. Logue and the other directors concluded that neither Mr. Logue nor certain other executive officers, including all of the named executive officers, would receive 2008 incentive compensation grants.

The overall process conducted to consider and determine named executive officer compensation for 2008 is described below. As noted below, at meetings in late February 2009, the Committee, and with respect to Mr. Logue, the other independent directors, formally determined that none of the named executive officers would receive any incentive compensation grants for 2008. The factors considered by Mr. Logue, the Committee and the other independent directors in reaching this conclusion are described under the heading “Compensation Discussion and Analysis”.

Prior to the decision that the named executive officers would not receive incentive compensation grants for 2008, and in accordance with its custom, the Committee directly retained the services of Hewitt Associates to provide compensation consulting and compensation data services to the Committee in connection with its annual review of executive compensation. Hewitt Associates participated in meetings of the Committee in connection with its services. Hewitt Associates also provided other services to State Street during 2008, consisting primarily of employment and compensation research and consultancy services in markets outside of the United States and some record-keeping services. During 2008, the ratio of fees paid by State Street to Hewitt Associates for services provided to the Committee to fees paid for other services was approximately 3:2.

The Committee believes that in order for its compensation consultant to provide the Committee with appropriate counsel regarding compensation matters, including the amount, elements and structure of executive compensation, the consultant must be independent of management. The Committee has adopted a policy to aid its determination of its compensation consultant’s independence. Under the policy, to be considered independent:

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At its meeting held at the end of February 2009, the Committee reviewed the independence of Hewitt Associates under this policy and determined the firm to be independent.

To supplement the data provided by Hewitt Associates, the Committee also received data prepared by two other firms, Towers Perrin and McLagan Partners, each of which was engaged by our Global Human Resources Department based on the respective firm’s specialized expertise in the financial services industry. Neither Towers Perrin nor McLagan Partners participated with the Committee in discussions regarding the determination of amounts or forms of executive officer or director compensation. Towers Perrin and McLagan Partners have provided other services to State Street in the past and may do so in the future.

The Committee instructed Hewitt Associates to compile data on compensation paid to comparable executives and directors at a peer group of companies for the purpose of benchmarking State Street’s executive and director compensation. Data provided by Towers Perrin and McLagan Partners was also used for this purpose. At the Committee’s instruction, Hewitt Associates had previously worked with management to develop a list of peer group companies that was recommended to, and approved by, the Committee. The peer group, the members of which are described below in the “Compensation Discussion and Analysis,” consisted of financial services companies against which State Street competes both for business and executive talent. The peer group is segmented based on factors such as asset size to help make sure that no particular comparison produces an unintended result. Hewitt Associates and Towers Perrin also collected publicly available information about the financial performance of companies in the peer group.

At the December 2008 meeting of the Committee, Hewitt Associates presented a report entitled Total Compensation Measurement for Selected Executive Positions in which it reviewed the total compensation paid to executives at companies in the peer group for 2007 (the most recent full year for which this specific data was available) and where the comparable positions at State Street rank compared to the median. For these purposes and as otherwise discussed in this proxy statement, the Committee considers total compensation to consist of base salary and incentive compensation. The report also included information about pay mix (base salary, bonus and long-term incentives) and, where available, detailed information for each position, showing compensation paid at the 25th percentile, the median, the average and the 75th percentile.

In early January 2009, the lead director initiated a process for reviewing Mr. Logue’s performance during 2008. Mr. Logue prepared a self-evaluation for the Board that analyzed his performance for the year, and the lead director solicited the views of the independent directors on that performance. The directors, including Mr. Logue, discussed Mr. Logue’s performance prior to and at a mid-January Board meeting, at which the independent directors also discussed the same subject in executive session. Also in mid-January 2009, the Committee reviewed with other independent directors on the Board the accrual funding for the 2008 executive incentive compensation plans and summary data on chief executive officer compensation, as well as incentive compensation trends for other major U.S. financial institutions.

At this time, the Committee also met with our senior risk officers, the Chief Risk Officer and the Chief Legal Officer, as well as our head of Global Human Resources and external counsel to the Board, to review the incentive compensation arrangements for our senior executive officers, within the meaning of the rules for the capital purchase program portion of the U.S. Department of Treasury’s Troubled Asset Relief Program, or TARP. These officers consisted of the named executive officers. Following this review, the Committee concluded that our senior executive officer incentive compensation arrangements do not encourage those officers to take unnecessary and excessive risks that threaten the value of the company and authorized State Street to include in this proxy statement the certification to that effect appearing below under the heading “Compensation Committee Report”.

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The independent directors on the Board then met in January 2009 and discussed both the directors’ evaluations of Mr. Logue’s performance and his self-evaluation. It was at this point that the Board was informed formally that Mr. Logue requested that he not be awarded any incentive compensation for 2008. The Board and Mr. Logue also concluded that certain other executive officers, including all of the named executive officers, would not receive any 2008 incentive compensation grants. This conclusion was reviewed separately by the Committee at a meeting held in late January 2009.

Our Global Human Resources Department prepared for the Committee tally sheets, which describe and quantify various aspects of compensation and wealth accumulation for the named executive officers, including information on pension and supplemental benefits, aggregate value of outstanding equity awards, value realized upon the vesting of stock awards and the exercise of stock options over the past five years, earnings and balances under non-qualified deferred compensation plans and potential payments upon termination of employment or a change of control. The Committee used the tally sheets as part of assessing the context in which the total compensation for the year is delivered; for 2008, total compensation was limited to base salary only because no incentive compensation grants were awarded to our named executive officers.

In late January 2009, the Committee, in consultation with the other members of the Board and members of senior management, including Mr. Logue, determined that, as a result of continued disruption in the financial markets and the resulting unrealized losses in our investment portfolio and the decline in State Street’s share price, strengthening State Street’s tangible common equity ratio was of long-term importance to our shareholders, customers and employees. The tangible common equity ratio is a non-regulatory ratio often reviewed by investment analysts and investors. Consequently, we initiated several measures as part of a plan announced in early February 2009 to improve our tangible common equity ratio, including a reduction in the cash incentive compensation accruals for 2008 by $278 million. This action had the effect of reducing the amounts available for incentive compensation for all but the most junior levels of State Street’s employees to approximately 50% of incentive compensation for 2007. In connection with this action, we also determined to review our compensation plans in 2009 with the goals of maintaining our current pay for performance approach and continuing to attract, retain and motivate top talent, as well as reflecting the changing environment in which we and the rest of the industry are now operating.

In addition, on February 17, 2009, the American Recovery and Reinvestment Act of 2009 was enacted. As a recipient of investment under the capital purchase program portion of TARP, the Recovery Act mandated additional requirements applicable to the compensation of our executive officers during the period in which we retain obligations under TARP, other than obligations under warrants issued to Treasury. Among other requirements, the Recovery Act provides that no bonus, retention award or incentive compensation may be paid to our named executive officers or any of our next 20 most highly compensated employees, except for equity awards in the form of long-term restricted stock, subject to vesting restrictions and in an amount not greater than one-third of the total amount of the employee’s total annual compensation. In addition, no such equity award may vest fully until after the preferred stock issued to the US Treasury has been redeemed.

In late February, the Committee met to formally review whether corporate financial performance goals had been met under our annual incentive plan and performance cycles for periods ending in 2008. The Committee chose not to, at that time, establish incentive plan opportunities for 2009 for the named executive officers, due to its desire to review the compensation program for 2009 with senior management in light of rapidly evolving developments in executive compensation practices, including the new requirements under the Recovery Act.

Also at that meeting, the Committee developed a recommendation for total compensation for Mr. Logue and, for the other named executive officers, a determination of total compensation. The recommendation and determinations took into account and accepted the recommendation of Mr. Logue that he and certain other executive officers, including all of the named executive officers, not receive any incentive compensation for 2008. The Committee then presented this recommendation for Mr. Logue to the independent directors on the Board, who discussed and approved it. Following this approval, the Committee, independent of the other directors, also approved Mr. Logue’s total 2008 compensation, which did not include any incentive compensation grants.

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Subsequently, at a meeting in early March, the Committee approved settlement to each of the named executive officers under the performance awards granted in early 2007 as part of 2006 incentive compensation and to Messrs. Hooley and Antonellis under awards granted in December 2006 in connection with their appointment to the office of Vice Chairman, consistent with the achievement of corporate performance goals for the recently concluded two-year performance period approved at the February Committee meeting. Each of the named executive officers agreed to permit State Street to recover the stock provided in settlement of these awards, to the extent required by the Recovery Act.

Non-Employee Director Compensation

With respect to our non-employee directors, we target their compensation at the median of the companies in our peer group. At the beginning of each year, Hewitt Associates prepares a review of director compensation at the same peer group of companies that we use for executive compensation generally and provides that information to management. The summary includes data on total compensation for directors at the peer group companies as well as on individual components of that compensation, such as annual retainers, meeting fees and equity awards. Data is also provided that differentiates compensation by board position, such as committee chairs and lead directors. Hewitt Associates also provides data showing trends in director compensation. Management and Hewitt Associates met to review the data with the Committee at its February meeting. The Committee makes its recommendation to the Board, which then in May approves a compensation arrangement effective from May through the following April. The current non-employee director compensation arrangements are described beginning on page 55 of this proxy statement.

Compensation Discussion and Analysis

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.

2008 Operating Results

Despite these conditions State Street achieved strong 2008 operating results. In 2008, State Street met or exceeded its corporate financial goals for the year. The following table sets forth State Street’s 2008 corporate financial performance goals, publicly announced in February 2008, and its actual 2008 operating results relative to those goals. In the table, our performance is presented on an operating basis. As presented in the table, growth in operating-basis revenue and growth in operating-basis earnings per share represent increases in 2008, compared to 2007.

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State Street has also maintained strong regulatory ratios and has remained well capitalized, as determined by the Board of Governors of the Federal Reserve System. The following table sets forth State Street Corporation’s regulatory capital ratios as of December 31, 2008, in comparison to the applicable Federal Reserve standard for consideration as “well capitalized”.

No 2008 Incentive Compensation

In January 2009, Mr. Logue and the Board understood that the turbulent and disrupted global financial markets had presented significant challenges to our shareholders. State Street was considering several measures to further strengthen its capital position due to these continued disrupted market conditions, including a subsequently announced significant reduction of its dividend to the holders of its common stock. In addition, in October 2008 the U.S. Department of the Treasury announced its TARP capital purchase program designed to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. State Street was invited to be one of the first nine banks to help lead this initiative, and in late October, we received an investment of $2 billion from Treasury in return for shares of our fixed-rate cumulative perpetual preferred stock and a warrant to purchase shares of our common stock.

In light of the disrupted financial markets and the challenges faced by our shareholders, as well as of State Street’s participation in the taxpayer-funded efforts to stabilize the financial markets, Mr. Logue approached the other directors to inform them of his proposal to forgo any incentive compensation for 2008 and to open up a discussion of the rationale for not providing incentive compensation for certain of our other executive officers. Mr. Logue and the other directors recognized that State Street had met or exceeded its corporate financial goals for 2008 and maintained a strong regulatory capital position. Nonetheless, they concluded that the same reasons that caused Mr. Logue to approach the Board to indicate his unwillingness to receive 2008 incentive compensation also applied to several other of our executive officers. Therefore, the Committee, and with respect to Mr. Logue, the other independent directors, accepted Mr. Logue’s position and determined not to award any incentive compensation grants to certain other executive officers, including all named executive officers.

Total Compensation for 2008

The goals of our compensation program for executive officers remain unchanged—to attract, retain and motivate superior executives and reward them for meeting short-term and longer-term financial and strategic goals. Given the extraordinary circumstances and challenges the financial services industry and State Street are confronting, the Committee believes limiting 2008 compensation of our named executive officers to base salary is consistent with these goals. Recognizing these market, regulatory and other industry circumstances and challenges, the Committee is reviewing State Street’s compensation programs in 2009 to assess potentially appropriate prospective revisions or other design modifications.

Under the compensation program in effect for 2008, each of the named executive officers would have been eligible to receive total compensation consisting of the base salary paid during the year and incentive compensation. Typically, a substantial portion of an executive’s compensation is incentive compensation, the

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payment of which is based on meeting short-term (annual) and medium-term (two-year) financial performance goals and long-term performance. Payments for meeting these goals are made either in cash or equity awards. The equity awards are designed to align the interests of our executives with those of our shareholders. They are either contingent upon State Street meeting financial performance targets or their value depends on increases in the price of our common stock. Vesting conditions applicable to equity awards also encourage executive retention.

The Committee benchmarks total compensation for each named executive officer against a peer group of companies with which we compete in business and for executive talent. For 2008 compensation, for all of our named executive officers except for Mr. Logue, this peer group of companies consisted of American Express, Bank of New York Mellon, Franklin Resources, Goldman Sachs, JP Morgan Chase, Marsh & McLennan, Merrill Lynch, Morgan Stanley, Northern Trust, PNC Financial, US Bancorp and Wells Fargo. For executive officer positions for which there were not similar positions at peer group companies or when supplemental data is considered necessary for a fair comparison, the Committee used additional information obtained from Towers Perrin and McLagan Partners. For Mr. Logue, the Committee, after discussion with the other independent directors on the Board, used a selected peer group of companies consisting of American Express, Bank of New York Mellon, Northern Trust, PNC Financial, US Bancorp and Wells Fargo. These companies were chosen as the most relevant comparators for the chief executive officer position and exclude outliers on both the high and low ends of the compensation range presented by the peer group for the other named executive officers.

As noted above under “Process and Procedures for Considering and Determining Executive and Director Compensation—Executive Compensation”, the most recent available specific data for the relevant peer groups was for 2007. However, the Committee and Mr. Logue were aware, and were monitoring available information with respect to, public announcements by some members of the peer groups and by other leading financial services organizations, including organizations participating in Treasury’s TARP capital purchase program, of anticipated reductions in 2008 incentive compensation or bonuses. The Committee and the named executive officers also were aware of several proposed and enacted legislative and regulatory initiatives aimed at modifying the level or type of compensation paid to executives at organizations participating in Federal programs designed to support the stabilization of the financial markets.

Due to Mr. Logue’s and the other directors’ conclusion that none of the named executive officers would receive any incentive compensation grants for 2008, the Committee did not make a determination of incentive compensation for each named executive officer absent that conclusion. In prior years, including 2007, for each named executive officer the Committee made a determination of the appropriate aggregate level of total compensation for the year; with reference to the median of the peer group and, for exceptional performance, above the median. The determination of actual total compensation, evaluation of corporate financial performance and assessment of how exceptional performance should be rewarded was based upon a subjective analysis of many factors, including measurements of corporate financial and individual performance, as well as existing market conditions.

Base Salary

Each of our named executive officers received a base salary in 2008, which was paid periodically in cash during the year. The Committee has adopted a policy for reviewing executive base salary levels every two years. For all named executive officers, base salary historically has been a relatively small portion of total compensation, allowing us to vary annual total compensation to reflect performance and other factors deemed relevant at the time. The base salary for each named executive officer was established in February 2008, with reference to the median base salary paid to comparable executives in the peer group and mindful of the then-applicable maximum level of the non-performance-based compensation deduction limitation under Section 162(m) of the Internal Revenue Code. This threshold has subsequently been reduced from $1 million to $500,000, and the exclusion for performance-based compensation has been removed, for compensation for services performed during a taxable year in which State Street participates in Treasury’s TARP capital purchase

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program; however, the Committee did not believe it appropriate to reduce salaries to fall within this new limitation. This is consistent with our general belief that the availability of a tax deduction for compensation is a secondary consideration to the goal of providing compensation at an appropriate level based upon corporate and individual performance and other market considerations. The next review of base salary levels is scheduled to be undertaken in February 2010; however, base salary may be reconsidered prior to then as part of the Committee’s 2009 review of State Street’s compensation programs. Because, in particular, none of our named executive officers received any incentive compensation grants for 2008, management believes that the effect of the non-deductibility of compensation for 2008 in excess of $500,000 per named executive officer will have a relatively limited tax effect on State Street.

Incentive Compensation

As indicated above, no named executive officer received any incentive compensation grants for 2008, nor did a number of other executive officers of State Street. Before the decision to forego incentive compensation grants for the named executive officers, the 2008 incentive compensation called for a determination of named executive officer incentive compensation in a manner generally consistent with the determination of incentive compensation in 2007. Incentive compensation has typically taken the form of annual incentive plan compensation and medium- and long-term incentive compensation.

In 2008, the amounts allocated to each of these two categories of incentive compensation for each named executive officer would initially have been guided by a formula payout opportunity based on the corporation’s operating-basis net income before income taxes and incentive compensation, which we refer to as Operating NIBTIC. In determining Operating NIBTIC for compensation purposes, the Committee has historically exercised discretion in the determination and application of Operating NIBTIC, for example, by including or excluding the financial effects of significant corporate events during the year. For 2008, in light of the determination that none of the named executive officers would receive any 2008 incentive compensation grants, the Committee did not rely upon Operating NIBTIC for purposes of determining named executive officer incentive compensation.

Before the determination that the named executive officers would not be receiving incentive compensation grants for 2008, the anticipated 2008 incentive compensation program, like in 2007, provided for an annual incentive based upon the achievement of annual corporate financial performance goals. As noted above under “2008 Operating Results”, State Street met or exceeded its goals for operating-basis revenue, earnings per share and return on equity for 2008. The Committee determined in February 2008 that for 2008, each named executive officer was assigned a formula payout opportunity expressed as a percentage of Operating NIBTIC. The percentage payout opportunity for each of the named executive officers for 2008 was as follows: Mr. Logue, 0.276813%; Mr. Resch, 0.103804%; Mr. Hooley, 0.155707%; Mr. Antonellis, 0.129756%; and Mr. Phalen, 0.086504%. The amount available for the annual incentive is subject to a cap and is also subject to the Committee’s exercise of negative discretion. In 2007, payouts for annual incentives were made in a combination of cash and restricted stock awards, the latter of which vested over two equal annual installments. The ratio of cash to equity-based components of the annual incentive historically has varied in the Committee’s discretion, based upon industry trends and business and other relevant factors. As noted above, no executive officer received an annual incentive award, either in cash or equity-based compensation, for 2008.

Generally, after taking into account base salary and determining the level of annual incentive payments, the balance of total compensation for the named executive officers has been paid as medium- and long-term incentive compensation in the form of stock appreciation rights and performance awards. The total amount for this type of incentive compensation has been determined for each named executive officer with reference to a formula payout opportunity guideline expressed as a percentage of Operating NIBTIC. The percentage payout opportunity guideline for 2008, set by the Committee in February 2008, for each of the named executive officers was as follows: Mr. Logue, 0.544975%; Mr. Resch, 0.198959%; Mr. Hooley, 0.320065%; Mr. Antonellis, 0.242211%; and Mr. Phalen, 0.108129%. Unlike for annual incentive awards, the amount resulting from the medium- and long-term incentive award formula is not subject to a maximum limit. The Committee historically

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has used the result from this formula as a guideline in developing each named executive officer’s total compensation and has the discretion to increase or decrease the medium- and long-term component of that compensation, based upon its subjective assessment of the appropriate amount of compensation. Normally, 60% is delivered in the form of stock appreciation rights that settle in stock, the value of which depends upon our stock price, and 40% is delivered as a performance award, which may not be earned if we do not meet our corporate financial goals over the performance cycle. In 2009, we settled the performance awards for the performance awards granted in 2007 as part of 2006 compensation in stock. As noted above, no executive officer received medium- or long-term incentive award grants for 2008.

Other Elements of Compensation

In evaluating the compensation of our named executive officers, the Committee also reviews retirement benefits, deferred compensation and perquisites, as described below.

Retirement Benefits. We maintain a frozen qualified defined benefit pension plan for certain U.S. employees that determines benefits, in general, based on an account balance that is increased annually by interest credits. Until recently, the plan also provided for annual pay credits to each participant’s account balance. We amended the plan effective January 1, 2008, to freeze participation and all future pay credits, with the exception of a three-year transition subsidy provided to certain participants who meet a specified combination of age and completed years of service on that date. In place of future pay credits under the qualified defined benefit pension plan, we doubled our employer matching contribution to the State Street 401(k) plan and introduced a performance-based element to the 401(k) plan.

Because pension benefits under our broad-based plan are limited by Internal Revenue Code restrictions, we maintain two frozen supplemental programs: one, with broader eligibility, that is designed to make up for limits imposed by the qualified plan or by the Internal Revenue Code on qualified-plan benefits, and a second that was originally designed to provide, together with other retirement programs, pension benefits for vested participants equal generally to a specified percentage of their compensation. The latter plan now provides for two separate benefit components: a traditional defined benefit component, which was frozen effective January 1, 2008, with certain participants, including all of the named executive officers, receiving transition benefits for a period that generally ends in 2010, and a new defined contribution component. Due to the special circumstances of his late career hire as our Chief Financial Officer, Mr. Resch will receive one extra year of transition subsidy. We provide these plans because we believe they assist in recruiting and retaining executives and are consistent with the practice at many of the companies in our peer group. These plans are described in the narrative accompanying the “Pension Benefits” table below.

Deferred Compensation. We maintain a nonqualified deferred compensation plan that allows executive officers and others to defer salary and the cash portion of annual incentive bonuses and to receive a return based on one or more notional investment options available to be elected by the participant, currently four SSgA funds and a State Street stock fund. The nonqualified deferred compensation plan also supplements deferrals made under our tax-qualified 401(k) plan. The notional investment options under the plan reflect the investment experience of investments available in the market. We provide these nonqualified deferred compensation benefits because, in our experience, most companies of our size provide a similar benefit to their highly compensated employees. This plan is described in the narrative accompanying the “2008 Nonqualified Deferred Compensation Table” below.

Perquisites. We provide a modest level of perquisites, such as financial planning, annual physicals and personal liability coverage, to our executive officers. We provide these benefits because we believe that some level of personal benefits is necessary as part of a competitive compensation arrangement for senior executives. In addition, we provide a driver and other security benefits to each of our chief executive officer, our president and our vice chairman. The income attributable to the financial planning perquisite historically has been subject to a tax gross up; however, this practice was discontinued effective February 2009. We no longer provide a tax gross up for the income attributable to any perquisite for our named executive officers.

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Relationship of Total Compensation to Summary Compensation Table and Related Tables

The Committee views total compensation for any year to consist of base salary and incentive compensation. Given the determination that no named executive officer would receive any 2008 incentive compensation grants, the Committee determined the 2008 total compensation for each of the named executive officers as follows:

The table above reflects the process and philosophy by which the Committee calculated executive compensation in respect of 2008 and is intended to assist shareholders in understanding the elements of total compensation as determined by the Committee. This information differs from the calculation of total compensation in accordance with the disclosure rules of the SEC. The table below under the heading “Summary Compensation Table” reflects the SEC methodology. The following discussion describes the relationship between the amounts reported in the table above and those amounts reported in the Summary Compensation Table and related tables. While the table above is presented to explain how the Committee determines compensation, the table and its accompanying disclosure are not a substitute for the tables and disclosures required by the SEC’s rules. The tables and related disclosures required by the SEC’s rules begin on page 41.

Cash Compensation. The base salary paid and the cash portion of the annual incentive awards for 2008 are set forth in columns (c) and (g) of the Summary Compensation Table. The base salary rate for each named executive officer in 2008, and the cash portion of incentive awards for 2008, are reflected in the table above under the headings “Base Salary Rate” and “Annual Incentive Awards Granted—Cash.” As no named executive officer was awarded an annual incentive for 2008, the amounts under “Annual Incentive Awards Granted—Cash” are zero dollars.

Equity Compensation. As to equity compensation, the table above reflects equity awards in the year they are awarded. In contrast, the Summary Compensation Table and related tables are required under SEC rules to reflect the amount of equity compensation that is recorded as an expense in our consolidated financial statements in the year indicated. The table above indicates that no equity was awarded for 2008 to any of the named executive officers consistent with the determination that no annual, medium- or long-term incentives be awarded to named executive officers for 2008. The Summary Compensation Table and related tables, however, reflect the 2008 expense associated with equity awards granted with respect to prior years. The impact of our decision not to make any incentive compensation grants to the named executive officers with respect to 2008 will be reflected in the Summary Compensation Table in future years. In addition, if an officer is eligible for early retirement, the SEC requires accelerated reporting in the Summary Compensation Table and related tables of amounts that would be eligible upon retirement under the terms of such awards. The amounts that are reported in columns (e) and (f) of the Summary Compensation Table represent the accounting expense that we incurred during 2008 for deferred share awards, performance share awards, options and stock appreciation rights, or SARs, granted to our named executive officers in 2005 through 2008. The value of equity-based awards granted in prior years and held by the named executive officers increases and decreases along with the share price of our common stock.

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Total Compensation. The amounts disclosed in the table above under the heading “2008 Total Compensation” and the amounts reported in column (j) of the Summary Compensation Table differ for two principal reasons. First, the equity awards in the Summary Compensation Table, as required by the SEC rules, represent awards made for prior years that we expensed during 2008 and also reflect, as applicable, expense accelerated due to the relevant named executive officer’s early retirement eligibility under the terms of applicable awards. Second, the 2008 total in the Summary Compensation Table includes amounts relating to the change in pension value during 2008, which the Committee did not view conceptually as a component of 2008 total compensation and therefore did not include in its calculation. In taking this view, the Committee noted that meaningful data from the peer group regarding increases in pension value was not available and, therefore, could not be readily used as a quantitative factor in evaluating compensation relative to the peer group.

Change of Control Agreements

The Recovery Act contains provisions prohibiting State Street, as a recipient of financial assistance under TARP, from making any golden parachute payment to specified State Street employees, including the named executive officers. The Recovery Act defines a golden parachute payment as any payment for departure from a company for any reason, except for payments for services performed or benefits accrued. We are awaiting guidance from Treasury in applying the Recovery Act’s golden parachute payment prohibition to our existing program, in place since 1995, under which all of our senior executives receive potential benefits upon a change of control of State Street. However, pending further guidance, we currently expect the prohibition will significantly limit the payments provided for under those agreements during the period in which any of our obligations arising from financial assistance provided under TARP, other than under common stock purchase warrants, remain outstanding. The Committee intends to review our existing change of control program, as part of its 2009 review of our compensation plans described above under the heading “Process and Procedures for Considering and Determining Executive and Director Compensation—Executive Compensation”.

Subject to the restrictions of the Recovery Act, our current change of control program provides our senior executives with one of three levels of potential benefits upon a change of control. The structure of our change of control agreements with our named executive officers was put in place in 1995 after consideration of appropriate measures to retain key employees in light of a then-threatened hostile bid to acquire State Street. Under this program each of our named executive officers is a party to an agreement entitling him to specified change of control benefits. We have continued to provide these agreements because we believe that providing some protection in the event of a change of control is necessary to attract and retain high quality executives and to keep their attention on the business during the period leading up to a possible change of control. The terms of these agreements and the amounts payable under them are described below under “Potential Payments upon Termination or Change of Control.” Our agreements are structured to provide our executives the benefits under the agreement if they are terminated involuntarily following a change of control. In addition, certain of the executives are entitled to the benefits under the agreement upon a voluntary resignation, but only during a 30-day window beginning either 180 days or one year after the change of control. The agreements for Messrs. Logue and Resch contain the 180-day provision, and the agreements for Messrs. Hooley, Antonellis and Phalen contain the one-year provision. We believe that this modified “single trigger” provides the executive with protection in the event of a change of control, but provides an incentive for the executive to stay with the company for a transition period following a change of control. The agreements for these executives provide for a gross-up payment to make them whole for any “golden parachute” excise tax under Section 280G of the Internal Revenue Code. As noted above, any payments under the change of control agreements are now limited by applicable restrictions under the Recovery Act. Prior to the Recovery Act, payments under the change of control agreements were limited by the omnibus compensation amendments entered into by each of our named executive officers in connection with our participation in Treasury’s TARP capital purchase program. For a discussion of these amendments, see “Omnibus Compensation Amendments” below.

Omnibus Compensation Amendments

As described above, in October 2008 Treasury announced its TARP capital purchase program designed to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and

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consumers and to support the U.S. economy. State Street was invited to be one of the first nine banks to help lead this initiative, and in late October, we received an investment of $2 billion from Treasury in return for shares of our fixed-rate cumulative perpetual preferred stock and a warrant to purchase shares of our common stock. Under the terms of the purchase agreement for this investment, for so long as Treasury holds any State Street securities acquired under the purchase agreement or the warrant, State Street must maintain compliance with the executive compensation and corporate governance requirements of Section 111(b) of the Emergency Economic Stabilization Act of 2008 and applicable guidance or regulations issued by the Secretary of the Treasury on or prior to October 28, 2008. Consistent with these obligations, on October 27, 2008, State Street entered into omnibus amendments with each of its named executive officers, amending its compensation, bonus, incentive and other benefit plans, arrangements and agreements with those officers, including golden parachute, severance and employment agreements, to the extent necessary to be in compliance with those executive compensation and corporate governance requirements. The amendments, among other things, (1) prevent the payment of golden parachute payments to the officer in an amount greater than three times the officer’s “base amount” determined under Section 280G of the Internal Revenue Code (generally the officer’s average annual compensation over the preceding five-year period) and (2) provide that any bonus or incentive compensation paid to the executive will be subject to recovery or “clawback” by State Street if the payments were based on materially inaccurate financial statements or any other materially inaccurate statement of performance metric criteria. Each of these requirements applies during the period that Treasury owns any securities acquired under the purchase agreement and within the meaning of Section 111(b) of the EESA and the applicable guidance and regulations issued by Treasury.

In addition, on February 17, 2009, the American Recovery and Reinvestment Act of 2009 was enacted. As a recipient of investment under the capital purchase program portion of TARP, the Recovery Act mandated additional requirements applicable to the compensation of our executive officers during the period in which we retain obligations under TARP, other than obligations under warrants issued to Treasury. Among other requirements, the Recovery Act contains a provision requiring recovery by State Street of any bonus, retention award or incentive compensation paid to our named executive officers based on statements of earnings, revenues, gains or other criteria that are later found to be materially inaccurate. In March 2009, each of our named executive officers entered into clawback agreements with State Street providing for the recovery by State Street of bonus, retention award and incentive compensation, to the extent required by the Recovery Act.

Executive Stock Ownership Guidelines

We have stock ownership guidelines that apply to all executive officers. The target level of stock ownership is the lesser of 100,000 shares or shares valued at $5,000,000 for the chief executive officer, the lesser of 40,000 shares or shares valued at $2,000,000 for members of our Operating Group, representing our senior-most policy making executive officers, and 10,000 shares or shares valued at $500,000 times base salary for all other executive officers. The level of ownership is calculated on the date that we use for the beneficial ownership table in our annual meeting proxy statement and by reference to the closing price of our common stock on the New York Stock Exchange on that date. There is a phase-in period of five years to achieve these levels, with the first year commencing on the first January 1 after the person becomes an executive officer. The executive is expected to attain the expected ownership level ratably over five years. As of March 5, 2009, the stock ownership of each of our named executive officers exceeded the expected level of ownership under these guidelines.

Equity Grant Practices

Although no named executive officer received any equity awards for 2008, the Committee has adopted an Equity Grant Policy of general applicability, as described below:

Annual grants. Annual grants of equity awards to executive officers and other employees are typically made by the Committee on the date of a scheduled meeting of the Committee or the Board of Directors to be held in February

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of each year following the public release of financial results for the prior fiscal year. Pursuant to authority delegated by the Committee, and subject to any limitations that the Committee may establish, a single-person committee of the Board comprised of the Chairman of the Board may make annual grants to persons other than executive officers on the date of the scheduled meeting in February.

New hire, promotion and other grants. Grants of equity awards to executive vice presidents and above in connection with new hirings, promotions, special recognition or other special circumstances are made by the Committee. However, during the interim periods between scheduled meetings of the Committee, the Chairman of the Committee may make awards to executive vice presidents (and above) who are not executive officers; and a subcommittee made up of the Chairman of the Committee and another independent member of the Board may make awards to executive officers. Awards of these types to other employees may be made either by the Committee or by a single-person committee of the Board comprised of the Chairman of the Board, subject to limitations established by the Committee.

The grant date of all equity awards will be on a date of a scheduled meeting of the Committee or, if pursuant to delegated authority, the last business day of a calendar month. Except for the setting of the February meeting to occur after our release of earnings, there is no program, plan or practice of timing these awards with the release of material financial information. The exercise price for all stock options and stock appreciation rights will be the closing price of the Company’s common stock on the date of grant.

Compensation Committee Report

The Executive Compensation Committee furnishes the following report:

The Committee hereby certifies that it has reviewed with State Street’s senior risk officers the company’s senior executive officer incentive compensation arrangements, within the meaning of the applicable interim final rule under Treasury’s TARP capital purchase program, and has made reasonable efforts to ensure that such arrangements do not encourage State Street’s senior executive officers to take unnecessary and excessive risks that threaten the value of the financial institution.

The Committee has reviewed and discussed the Compensation Discussion and Analysis with State Street management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by,

Richard P. Sergel, Chair

Nader F. Darehshori

Linda A. Hill

Robert E. Weissman

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Summary Compensation Table¹

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Grants of Plan-Based Awards in 2008

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Narrative Disclosure Accompanying Grants of Plan-Based Awards Table

State Street provides for annual incentive bonuses under the Senior Executive Annual Incentive Plan (“SEAIP”), which has been approved by shareholders. The SEAIP is further described above under the heading “Compensation Discussion and Analysis – Total Compensation for 2008– Incentive Compensation”

The awards set forth in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column in the Grants of Plan-Based Awards table were made under a long-term incentive compensation program under which State Street grants performance awards to senior executive officers and are further described above under the heading “Compensation Discussion and Analysis – Total Compensation for 2008– Incentive Compensation.” These performance awards, which are denominated in units of State Street stock, are paid out in State Street stock if over a two-year performance period State Street meets performance goals that the Committee specifies at the time of the award. The awards made in February 2008 that cover the 2008-2009 performance period are included in the table, but as discussed above, these awards represent a portion of 2007 total compensation for the named executive officers. The performance goals are specified levels of cumulative operating earnings per share and operating return on equity.

The awards that appear in the “All Other Stock Awards” column of the Plan-Based Awards Table represent restricted stock awards that comprise a portion of the 2007 bonus awarded in February 2008 and will vest in two equal annual installments.

The awards that appear in the “All Other Option Awards” column of the Plan-Based Awards Table represent SARs, which represent the right to receive a payment in State Street stock equal to the value of the appreciation of the stock over a base price set at the time of the grant. These awards were made in February 2008 and were awarded as part of 2007 total compensation. The base price for these awards was the closing price of State Street stock on the New York Stock Exchange on the date of grant. The SARs have a maximum 10-year term and become exercisable in four equal annual installments, commencing on the first anniversary of the date of grant.

The equity awards described above vest and, as applicable, become exercisable immediately following a triggering event in connection with a change of control, as described below under “Potential Payments upon Termination or Change of Control.”

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Outstanding Equity Awards at Fiscal Year-End, December 31, 2008