working for sustainability

State Street Corporation 2006 Corporate Social Responsibility Report About this Report This annual report covers the global activities and perform- In striving to make our reporting more transparent, we are ance of State Street Corporation relative to corporate social guided by the Global Reporting Initiative criteria. This report is based responsibility (CSR) for calendar year 2006. State Street is a on Version 3.0 of the GRI guidelines, as well as supplemental financial holding company organized under the laws of the reporting guidelines for the sector. Wherever Commonwealth of . We are a publicly held company; possible, data for at least two years are included; in some cases, our common is listed on the New York and stock 2006 and 2005 data are not comparable because of improved data exchanges under the STT. We conduct business collection for 2006. principally through our wholly owned subsidiary, State Street Bank No global management information system is in place for and Trust Company, a Massachusetts-chartered bank. corporate social responsibility. Our Community Affairs Division is the State Street is a leading provider of financial services to “champion” for improved CSR reporting and spearheads the institutional investors. Our customers include some of the world’s information-gathering effort, soliciting input and information from all largest mutual and collective investment funds, corporate and levels of the Corporation around the world. While we have made public retirement plans, companies, foundations, every effort to respond to all GRI guidelines, in some cases a lack endowments, and other investment pools. Our investment servicing of relevant data, regulatory restrictions or competitive or legal capabilities include fund accounting; fund administration; custody; considerations has precluded us from doing so. Responsibility for securities finance; investment manager and manager the reliability and accuracy of the information provided rests with operations outsourcing; recordkeeping; performance, risk and the business units that generate it. No independent audit of the compliance analytics; and transfer agency services. report was conducted. State Street Global Advisors, our We engaged with Ceres and a team of external stakeholders arm, is the world’s largest manager of institutional and offers to review this 2006 CSR report. Ceres is a network of investors, active and passive, including enhanced, investment strategies that environmentalists and other public interest groups that works with capitalize on technological and intellectual innovation. State Street companies and investors to address sustainability challenges. Global Markets, our research and trading arm, provides specialized Companies that are part of the Ceres network agree to work with a investment performance, risk and compliance analytics and trading stakeholder team selected by the Ceres Corporate Accountability in foreign exchange, equity, fixed-income, and money- office. The Ceres stakeholder team is an independent group of indi- market financial instruments to enhance and preserve portfolio viduals drawn primarily from the Ceres coalition and represents a values. We are a global company that operates in 26 countries range of constituencies that have expertise in environmental, social serving customers in more than 100 markets. and governance issues. In reviewing this report, the team consid- Recent Acquisition: In December 2005, State Street ered whether we adequately reported on our sustainability acquired UniverseSoft Technology in Hangzhou, China, and performance and key impacts, including goals, targets, systems, established a new technology center dedicated to information data and initiatives. Through this review process, the Ceres technology application development and maintenance. stakeholder team provided extensive feedback, which was considered in the preparation of the final version of this report. For Structure and Content of the Report more information on State Street’s CSR initiatives or reporting, In addition to an introductory section that contains contact Richard Pearl at [email protected]. statements from the Chairman and CEO and the Director of Community Affairs, the report has five main sections. “Protecting Our Values* Shareholder Value” describes how we ensure the safety of our We are a global, culturally diverse company with a proud investors’ assets and serve our shareholders. “How We Conduct Our heritage of commitment to our customers, employees, shareholders, Global Business” focuses on our customers and suppliers. “How strategic partners and society.

We Protect the Environment” describes the environmental impact of • We understand that we succeed only when our our daily operations, as well as the indirect impacts of our invest- customers succeed.

ment management business and philanthropic activities. “How We • We strive to achieve a consistent level of excellence Create a Positive Work Environment” reports on the value we place in everything we do.

on our employees and on the ways we strive to be an employer of • We operate with absolute integrity.

choice. “How We Serve Our Communities” describes our active • We manage our company to achieve long-term growth.

engagement with the communities where we do business. • We respect the dignity of every employee and believe that our differences make us strong.

• We actively engage with our communities around the world, both as a partner and as a leader.

*Developed in 2001, translated into French, German, Chinese, Spanish and Japanese, and distributed to our employees worldwide.

2006 Corporate Social Responsibility Report

What is sustainability? Corporate sustainability expands the traditional model of success as corporate growth and maximum profitability to also include societal goals such as environmental protection, social justice and equity, and economic development. It recognizes the interests of all stakeholders, direct and indirect. A socially responsible company aims at development that meets the needs of present generations without compromising the ability of future generations to meet their needs.(1)

(1) World Commission on Environment and Development, United Nations. 2 State Street Corporation

future 2006 Corporate Social Responsibility Report 3

State Street’s annual Corporate Social Responsibility Report describes the broad spectrum of activities that contribute to our business success and demonstrate our commitment to sustainability. State Street has long reported on philanthropic activities. Since 2004, we have used Global Reporting Initiative (GRI) criteria to increase transparency through more comprehensive reporting of existing practices and new initiatives beyond our philanthropic endeavors. In this report, you will read messages from our chairman and chief executive officer, as well as our director of Community Affairs, on the current and future outlook for corporate social responsibility at State Street. You will read about how we protect shareholder value through corporate governance; conduct our global business by collaborating with customers and strategic partners; preserve the environment; create a positive work environment for our employees; and serve our communities. In , you will read about how we interact with all of our stakeholders and why we think sustainability is important to our long-term success. Each year, our information-gathering and reporting ability improves. This year’s report responds to more GRI criteria than ever before. It also includes input and feedback from a stakeholder group, which we believe enhances its quality and readability. Our goal is to give you an accurate picture of where we are today and where we hope to be in the future as a good corporate citizen. 4 State Street Corporation

Sustainability Snapshot

State Street Sustainability Snapshot

2006 2005 % Change Shareholder Value Operating basis income from continuing operations per diluted share(1) $ 3.46 $ 2.82 up 23%

Conducting Our Global Business Total operating-basis revenue (billions) $ 6.36 $ 5.52 up 15% (billions) $ 3.62 N/A Europe (billions) $ 1.81 N/A Asia/Pacific (billions) $ .67 N/A Canada (billions) $ .26 N/A Non-US revenue 43% 39% Income from continuing operations $ 1.1 billion $ 945 million Number of countries with State Street offices 26 26 Number of customers worldwide 3,000 3,000 Assets under custody (trillions) $ 11.9 $ 10.1 (trillions) $ 1.7 $ 1.4 Socially responsible investment strategies Assets under management (billions) $ 84.3 $ 99.6 Number of customers 145 150 Number of accounts 209 200 Total spending with suppliers and third parties (billions) $ 2.3 N/A Expenditures to minority- and women- owned suppliers (millions) $ 41 $ 44

Preserving the Environment Target for 2010 2006 2005 (for Massachusetts only) Electricity consumption (KWH) - 113,724,602 - Gas consumption (therms) - 440,997 - Oil consumption (gals.) - 156,043 - Fossil fuel burned -5% - - Greenhouse gas emissions from operations (tons) -5% 4,278 3,614(2) Water consumption (cu.ft.) - 4,421,927 N/A Paper recycled (tons) 5% 662 412 Reclaimed IT equipment (pieces) 3,894 6,200

(1) Excluding tax adjustments. (2) Includes three fewer offices than 2006 CO2 emissions totals. Comparable 2006 emissions are 4,090 tons. 2006 Corporate Social Responsibility Report 5

State Street Sustainability Snapshot

2006 2005 Creating a Positive Work Environment Number of employees worldwide 21,700 21,000 Global payroll (including incentive compensation; billions) $ 2.2 $ 1.8 % local hires (ex-US) 95.1% 95.1% Women – US officers and managers 44.3% 40.0% Minorities – US officers and managers 25.3% 13.3% Performance Evaluation Development plan completed 67% N/A Year-end review completed 80% N/A Training courses completed 22,630 16,527 Voluntary turnover rate 18.6% -

Serving the Community Income taxes paid (millions) $ 533 $ 331 Community Reinvestment Act rating Outstanding Outstanding Investment in small business growth capital (millions) $ 4.5 $ 3 Affordable housing credits purchased (millions) $ 9 $ 4 United Way contributions Employee (millions) $ 2.7 $ 2.3 Corporate (millions) $ 2.2 $ 2.0 Matching Gifts Program Number of employee gifts 1,434 1,407 State Street Foundation funding $ 599,782 $ 555,000 State Street Foundation philanthropic grants (millions) $ 11.4 $ 7.7 State Street Global Outreach program Number of volunteers 6,742 6,444 Number of volunteer service hours 43,977 34,400 Savings to our charitable partners $ 793,345 $ 619,000

Note: Throughout this report, amounts are shown in US dollars, except where noted, and N/A indicates information not available. 6 State Street Corporation

sustainability 2006 Corporate Social Responsibility Report 7

2006 Honors o Awarded Massachusetts Governor’s Points of Light accolade, the state’s highest honor bestowed on volunteer programs, recognizing the State Street Global Outreach employee volunteer program. o Named to Business Ethics magazine’s list of the 100 Best Corporate Citizens among US public companies; ranked 51st based on performance in eight stakeholder categories: shareholders, community, governance, diversity, employees, environment, human rights and product. o Received the Economic Impact Award from the Massachusetts Alliance for Economic Development; State Street was one of 15 Massachusetts companies recognized for their outstanding contributions to the Massachusetts economy. o Received Boston Business Journal’s inaugural Corporate Philanthropy Award, given to the largest corporate charitable contributor in Massachusetts, based on 2005 contributions to nonprofit organizations. o Received distinction for the fifth straight year as a “Caring Company” by the Council of Social Service, awarded to companies that demonstrate excellence in corporate citizenship. o Received a perfect score on the Human Rights Campaign Corporate Equality Index, which rates US companies’ treatment of gay, lesbian, bisexual and transgender employees. o Ranked as a finalist in PR News CSR Awards program in the Annual CSR Report category for 2005 State Street Corporate Social Responsibility Report. o Named to the list of the “100 Best Places to Work in Information Technology (IT)” by Computerworld magazine, based on our financial investment in IT, intensive training program, ability to develop and reward key performers and flexible working arrangements. o Achieved second place in Business Week magazine’s and Boston Consulting Group’s 2006 list of innovative companies. 8 State Street Corporation

customers

shareholders employees STT

community strategic neighbors partners

Letter from the Chairman At State Street, our primary objective is to create We are proud that in three short years, our enhanced value for our shareholders. Sustainability is a fundamental environmental management and corporate governance underpinning of our ability to meet this objective. We policies, strong citizenship and philanthropy programs, believe strongly that being a socially responsible company and improved reporting have qualified us for inclusion on contributes to our long-term sustainability. In recent the DJSI. years, increased awareness of the importance of corporate As a leading provider of financial services to social responsibility has prompted us to look at many institutional investors around the world, we help our aspects of our operations with new eyes. We have become customers carry out their global investment strategies. Our more transparent in reporting on long-standing practices, collective efforts help make it possible for a large number of and we have launched new initiatives that contribute to people to share in the world’s economic progress. The the long-term health of our company. Recognition has nature of our business is different from many other financial increased among our business units that CSR is a material institutions. Project finance, for example, is not in our factor in our ongoing success. In this report, we demonstrate product mix; thus, the Equator Principles are not germane the materiality of CSR through the lens of our various to our CSR activities. Over the years, we have taken a stakeholder relationships. creative approach to corporate citizenship, focusing on State Street has a long tradition of conducting innovative public/private partnerships and developing business with integrity and honesty. Today, we are building socially responsible investment opportunities for our on that tradition by strengthening our relationships with all of customers. We are committed to being a good corporate our stakeholders, through improved data gathering and citizen, in how we conduct our business, in preserving reporting practices, increased awareness of sustainability natural resources and minimizing negative environmental issues and ongoing dialogue with our employees, impact, in creating a positive work environment for employ- customers, suppliers, shareholders and community part- ees, and in serving and strengthening our communities. It’s ners. Our efforts were rewarded in 2006 when we qualified good for business, and it’s good for our shareholders. for the first time for the World and North America Dow Jones Sustainability Indexes (DJSI). Inclusion in the DJSI and other investment portfolios with social responsibility mandates makes our stock attractive to a broader range of investors. The last time we responded to the DJSI survey in 2003, we didn’t have some of our CSR programs in place, Ronald E. Logue nor did we track our impacts as extensively as we do today. Chairman and Chief Executive Officer 2006 Corporate Social Responsibility Report 9

Our stakeholders include shareholders, customers, employees, strategic partners and community neighbors. For each group, we have developed methods of communication that strengthen and clarify our relationships. Our 2006 CSR report marks the first time that we have formally sought comments from external stakeholders, selected by Ceres, during the preparation of the report. Ceres, of which we are a member, is a network of investors, environmentalists and other public interest groups that works with companies and investors to address sustainability challenges. The stakeholder team was an independent group of individuals and repre- sented a range of constituencies with expertise in environmental, social and governance issues. They provided extensive, valuable feedback during the preparation of the report, which was considered in the preparation of the final version. Throughout this report, you will read about how we engage all of our stakeholders.

Letter from the Director of Community Affairs I am pleased to report that 2006 has been a year of services, educational programs and community improve- great progress in our efforts to strengthen State Street’s ment and development. Our employees’ commitment to their corporate social responsibility activities and reporting. We local communities is demonstrated by the more than 6,700 built on our strengthened environmental policy by State Street employees and alumni who participated in State developing a comprehensive Environmental Management Street Global Outreach volunteer activities in 2006. System (EMS) for State Street activities with an In 2006, we laid the groundwork for enhancements environmental impact in 2006. Using our new EMS to our Matching Gift Program that will be fully implemented manual as a guideline, an outside consultant conducted an globally in 2007. We will expand significantly the number environmental audit of our Massachusetts locations to and types of organizations that qualify to receive matching establish a baseline and set goals and standards for gifts, make volunteer time and fundraising efforts eligible reductions in several areas. During 2007, we expect to for matching gifts and make the program available to implement the EMS throughout our North American employees outside the United States. locations and, ultimately, in our locations around the world. As we strive to meet the challenges of increased We laid the groundwork for launching a CSR transparency and benchmarking to measure our success, Working Group in early 2007, with representation from all we are steadfast in our belief that a healthy environment of our business units and geographic regions, as well as and strong communities are good for business, now and in key corporate operations areas. The group will help define the future. the scope of our CSR activities, share information and be an important factor in helping State Street meet the goal of incorporating CSR into everything we do. Working with the Ceres stakeholder group has been a valuable aid in helping us think about how we can improve our efforts to increase transparency in reporting on CSR issues. George A. Russell, Jr. Our Community Affairs and State Street Foundation Executive Vice President efforts continued to focus on supporting and strengthening and Director of Community Affairs charitable organizations in locations where State Street operates. At the request of our European Community Support Committees, we formed a Europe-wide Community Affairs Team to align more closely that region’s efforts in our three areas of strategic emphasis: human 10 State Street Corporation

sustainability value

29 consecutive years of growth in operating earnings 2006 Corporate Social Responsibility Report 11

How We Protect Shareholder Value

At State Street, our primary financial objective is to create value for our shareholders. We do this primarily by operating a successful, growing business that focuses on meeting the needs of our customers. As a global and culturally diverse company, we have a strong commitment to respecting all those associated with and affected by our Corporation. Our long-term sustainability hinges on our dedication to operating honestly and transparently. We set high standards for corporate governance and conduct, with strong oversight by our Board of Directors. As a result, investors have confidence that they can trust us.

DJSI Listing portfolios with socially 12 responsible mandates

$3.46 earnings per share in 2006 12 State Street Corporation

2006 Highlights engage in ongoing communications with senior manage- • Achieved $3.46 in operating earnings per share from ment and have full access to all employees; with continuing operations (excluding tax adjustments). facilitation from an independent firm, employees can • Qualified for the World and North America Dow Jones report any concerns about business conduct, accounting Sustainability Indexes, based on enhanced environmen- practices, internal accounting controls or auditing matters tal management and corporate governance policies, to the lead director of the Board. strong citizenship and philanthropy program, and improved reporting. The DJSI tracks the financial Corporate Governance and Compliance performance of the leading sustainability-driven State Street is committed to strong corporate gover- companies worldwide, providing managers with nance practices and to maintaining the reputation for reliable, objective benchmarks to manage sustainability quality, integrity and high ethical standards that we have portfolios. established over many years. The Federal Reserve System • Added three new directors to our Board, reflecting our is the primary federal banking agency responsible for evolution as a global company and commitment to regulating State Street and its subsidiaries, including State diversity: a German citizen, a British citizen and a dual Street Bank and Trust Company; banking American/British citizen. subsidiaries are also subject to regulation by the • Terminated the existing shareholder rights plan by vote Massachusetts Commissioner of Banks, the Federal of the Board of Directors and adopted a policy requiring Deposit Insurance Corporation, the Office of the shareholder approval of any future shareholder Comptroller of the Currency, and regulatory authorities of rights plan. those states or countries in which a branch or subsidiary • Included flier in our Annual Report directing readers to of State Street is located. Information relative to our our CSR report online. corporate governance, including Articles of Association • Future challenge: Establish Board of Directors oversight and By-Laws, compensation plans and programs, and of sustainability issues. biographical information on directors, can be found at www.statestreet.com/company. Board of Directors Our Regulatory and Industry Affairs group engages State Street’s Board of Directors is subject to our regulators and governments on regulatory and policy issues Standard of Conduct for Directors, Code of Ethics for Senior important to State Street. In 2006, we expanded our Financial Officers and State Street’s Standard of Conduct regulatory calling program through visits to new (available at www.statestreet.com/company). Directors are jurisdictions, such as China and India, and through the reviewed annually for independence and must complete a launch of a global regulatory reporting system. yearly self evaluation and assessment. Board members Risk Management Our Corporate Continuity Program is an important Board of Directors Profile aspect of State Street’s long-term sustainability. The Examining and Audit Committee of the Board of Directors (1) Board Membership (subject to annual reelection) is responsible for the annual review and approval of the White women 4 program policy, which is designed to ensure timely, secure Black woman 1 recovery of our data processing systems, data communica- White men 11 Total number of Directors 16 tions facilities, information, data and business functions. The policy applies to State Street and customer data

Permanent Committees resident in all businesses and on all data processing Examining and Audit(2) platforms and systems owned, leased or managed by State Nominating and Corporate Governance(3) Street Corporation. Reporting to the head of our Service Executive Compensation(3) Delivery Management group, the Corporate Continuity and Executive Committee(4) Client Services department is responsible for developing

(1) 15 independent; Chairman is also CEO. (2) All members are independent and financially literate under NYSE standards. (3) All members are independent. (4) May include non-independent directors who also serve as officers of the Corporation. 2006 Corporate Social Responsibility Report 13

and maintaining the policy and associated program. Risk Serving our Shareholders assessment, business disruption prevention, avoidance and State Street creates value for shareholders by deliver- recovery are critical components of the planning process. ing consistently strong financial performance. We have Each business unit is charged with developing a continuity achieved growth in operating earnings for 29 consecutive plan for its operations and supporting technologies. years. Institutional investors hold approximately 80% of State In addition, business and corporate functional Street stock; the remainder is held by individual investors. areas are required to implement risk management and We provide quarterly and annual reports of financial compliance programs that are linked to our strategic plan results in accordance with SEC regulations. Our senior and provide for risk assessment in multiple categories of executives brief securities analysts on a regular basis. risk. We require a formal risk assessment of new business, Shareholders can make inquiries via our corporate new products and services, and significant capital website. Finally, our Investor Relations group updates transactions. Suspected incidents of unlawful activities senior management on shareholder concerns on a quarterly such as money laundering, employee fraud and computer basis; typical questions concern stock performance and intrusion are investigated internally, and a Suspicious market analysis. Activity Report is filed with the Financial Crimes State Street stock is included in a variety of Enforcement Network or the relevant regulatory or law investment portfolios with a socially responsible mandate: enforcement authority outside the United States. By law, • Calvert Social Index these events are not disclosed. Our Bank Secrecy Act and • Citizens 300 Index Anti-Money Laundering policies are reviewed by a • Dow Jones Sustainability Indexes committee of the Board of Directors every two years. - Global Information lies at the heart of State Street’s business, - North America and our Standard of Conduct for employees provides clear • ECPI Ethical Index Global guidelines on treating customer-related information, as well • FTSE4Good US Index as State Street-related information, as private and • FTSE ISS Corporate Governance Index confidential. In 2006, we introduced a new Corporate • Kinder Lydenberg & Domini Information Security standard to ensure proper safeguarding - Domini Social 400 Index of consumer and customer information in compliance with - KLD Broad Market Social Index Title V of the Gramm-Leach-Bliley Act of 1999. - KLD Large Cap Social Index • Oekom Research • Storebrand Investments

State Street’s Largest Shareholders as of December 31

2006 % of Total 2005 % of Total Shares Shares Shares Shares (in millions) Outstanding (in millions) Outstanding

Wellington , L.L.P. 25.3 7.6% Wellington Asset Management, L.L.P. 25.0 7.6% T. Rowe Price Associates, Inc. 22.4 6.8 T. Rowe Price Associates, Inc. 20.3 6.1 Fidelity Management & Research (US) 21.9 6.6 Fidelity Management & Research (US) 19.8 6.0 Vanguard Group, Inc. 9.3 2.8 GE Asset Management 10.9 3.3 Capital Research & Management Co. 8.9 2.7 Capital Research & Management Co. 10.3 2.9 Global Investors 8.5 2.6 Barclays Global Investors 9.6 2.9 State Street Global Advisors (US)(1) 8.2 4.3 State Street Global Advisors (US)* 8.6 2.4 GE Asset Management 7.6 2.3 Vanguard Group, Inc. 8.4 2.5 MFS Investment Management 5.4 1.6 Alliance Capital Management 5.7 1.7 J.P. Morgan Investment Management 4.7 1.4 J.P. Morgan Investment Management 4.7 1.4

(1)Includes shares held for external participants; does not include shares in the State Street Salary Savings program (approximately 6 million additional shares in 2005 and 5.7 million additional shares in 2006). 14 State Street Corporation

$1.7 trillion in assets under management

sustainability trust 2006 Corporate Social Responsibility Report 15

$84.3B SRI assets

$2.3 billion spent with suppliers $41M supplier diversity spending

How We Conduct Our Global Business

Our customers, some 3,000 worldwide, are among the world’s largest institutional investors – governments, corporations, insurance companies, mutual funds and collective investments, investment managers, central banks and monetary authorities, nonprofit organizations, endowments and foundations, health care institutions and unions. At year-end 2006, we serviced $11.85 trillion of assets under custody that our customers invest in more than 100 markets, and we managed $1.7 trillion of assets. Led especially by public-sector investors, emphasis is increasingly being placed on CSR issues by our customers and potential customers in the competitive bidding process. They want to know that our commitment to social responsibility starts at the top and is genuine and verifiable. Due to the nature of the services we provide, the impact we have on issues related to social responsibility differs from that of other financial institutions that engage in consumer banking, corporate lending and project finance. One way we make it possible for our customers to meet their own CSR mandates is by being a leader in developing socially responsible investment opportunities. Our strategic sourcing practices are an important aspect of our efforts to be a good corporate citizen in the way we do business. By developing mutually beneficial relationships with strategic partners and suppliers and setting CSR standards for their activities, we extend the reach of our CSR commitment, reducing our risk and enhancing our long-term sustainability. 16 State Street Corporation

governance 2006 Highlights

• $1.1 billion of income from continuing operations • Assigned a top manager to head international operations for investment servicing and investment research and trading, based in Europe so as to bring key environmental social decision-making closer to non-US markets and expedite our ability to increase market share in Europe and the Asia-Pacific region. • Introduced a new Corporate Information Security standard to ensure proper safeguarding of consumer and customer information in compliance with Title V of the Gramm-Leach-Bliley Act of 1999. In 2006, with respect to anti-trust and monopoly • Included in requests for proposals (RFPs) our Standard practices and product responsibility, including consumer of Conduct for Vendors and Third Parties Doing privacy and loss of customer data, State Street was not Business with State Street and questions concerning involved in a court decision or case and not subject to supplier CSR policies. fines or non-monetary sanctions for noncompliance with • Spent $41 million with minority- and women-owned laws and regulations that would be expected to have a suppliers material adverse effect on our financial position, results of • Future challenges: Engage more with our customers operations or ability to perform the services we offer. about CSR issues; integrate sustainability more fully into As a leader in financial services, we participate in a our daily operations. variety of industry organizations around the world, advocating for adherence to industry “best practices” and Industry Leadership encouraging the highest ethical standards by all industry At State Street, we strive for solid, long-term, participants. Our involvement includes: collaborative relationships with our customers. We are a In the United States: Bond Market Association, committed and capable guide in the creation and Investment Company Institute, Securities Industry and integration of solutions that make our customers Financial Markets Association, Financial Services fundamentally stronger and more successful. We recognize Roundtable, Financial Services Forum, Council of that our integrity is an important business asset. Our Institutional Investors, Coalition of Service Industries, Standard of Conduct, available in its entirety at American Bankers Association, the Financial Markets www.statestreet.com/company, provides guidelines for Lawyers Group, the Foreign Exchange Committee, doing business in full compliance with the laws that Associated Industries of Massachusetts, Massachusetts regulate our activities and with honesty and fairness in Bankers Association, Chamber of how we conduct ourselves. In 2006, employees were Commerce, Boston Municipal Research Bureau. requested to certify that they had received, read and Outside the United States: Association of Global understood the Standard of Conduct. The completion rate Custodians, American Chamber of Commerce EU, British was approximately 99%. Some of the topics covered in American Business Inc., British Bankers Association, the Standard of Conduct include: Australian Foreign Exchange Committee, Canadian Capital • Confidentiality of Information Markets Association, the Bank of England’s Foreign • Competition Exchange Joint Standing Committee, European Central • Global Business Practices Bank Foreign Exchange Contact Group, European • Political Affairs Securities Forum, Forum of European Asset Managers, • Gifts and Entertainment German Bankers Association, American Chamber of 2006 Corporate Social Responsibility Report 17

A State Street priority is helping to keep our customers informed about industry trends, including CSR news. In October 2006, a State Street Global Advisors newsletter described how investing that considers environmental, social and governance factors con- tinues to move to the mainstream, beyond traditional socially responsible investing. The article noted that at the request of the United Nations Secretary-General, a group of professional investors had developed the Principles of Responsible Investment (PRI). The PRI, to which State Street is not currently a signatory, provide a framework for voluntarily incorporating environmental, social and governance issues into the investment philosophies and ownership practices of asset owners, operating across the totality of investment options, in contrast to SRI’s focus on strategy-specific negative screening.

Commerce Japan, Hong Kong Securities Industry Group, known as the State Street Bank and Trust Company Institute of International Finance, United Nations Voluntary Political Action Committees. Campaign contribu- Environment Programme Finance Initiative (UNEP FI). tions are not made outside the United States. No new funds were sought for the State Street PACs in 2006. Public Policy Activities Contributions made by the PACs totaled $17,500. We State Street participates in public policy dialogues made no in-kind political contributions. around the world. In general, we support policies that encourage expansion of retirement and savings vehicles; Helping Customers through Socially Responsible recognize the unique position and needs of institutional Investment Opportunities investors; improve market structure through efficiency and State Street introduced the first institutional socially innovation; reduce cost and risk in the clearing and screened portfolio in 1986. As the demand for the ability to settlement of securities; improve access to global markets manage investments based on a broad variety of environ- for institutional investors and service providers; and mental, social and governance (ESG) criteria has grown, we promote effective regulation of global markets. have developed a broad array of investment capabilities to In 2006, State Street supported and actively worked accommodate our customers’ requirements. At year-end on behalf of two bills in Massachusetts. (1) Senate Bill 2540 2006, we were managing more than $84 billion in assets was designed to raise the 100-year-old caps on bank invest- incorporating ESG factors. ments in highly rated foreign sovereign debt and will allow State Street offers an investment product in which State Street to invest foreign-denominated custody deposits shareholder engagement on issues such as the environ- in the sovereign debt of the countries in which the custody ment, biodiversity, climate change, labor and human rights, deposits originate; the bill was passed by the Massachusetts bribery and corporate governance is the centerpiece. We Legislature and signed into law in December 2006. (2) also manage approximately $2 billion in Sudan-free Senate Bill 1692 was designed to allow Massachusetts- mandates. We use outside resources, including research based financial services companies to file, on an optional from Innovest Strategic Value Advisors and Governance basis, one consolidated corporate tax return, bringing Metric International (GMI), two firms in which we have a Massachusetts in line with other states such as New York, financial stake, to develop environmental and governance Florida and Rhode Island; the bill did not advance past the investment strategies for the institutional marketplace. Legislature’s Joint Committee on Revenue. To keep abreast of issues and initiatives related to the State Street executives make periodic, voluntary environment and climate change, we are a signatory to the contributions of personal funds to two US political action Carbon Disclosure Project, a group of 225 institutional committees (PACs) (one federal and one in Massachusetts) investors that seeks disclosure by 500 of the world’s 18 State Street Corporation

largest publicly traded corporations of their greenhouse Communicating with Customers gas emissions, and we have endorsed the Extractives We use a variety of communication methods to Industry Transparency Initiative, a project initiated in the UK nurture customer relationships. We hold annual face-to-face to improve the disclosure of compensatory arrangements meetings with customers for formal review of our service between the natural resource industries and the govern- levels and receive ongoing feedback via direct ments of resource-rich developing countries. We have contact and monthly report cards. Our annual quality/cus- been a supporter of US shareholder initiatives calling for tomer satisfaction surveys, conducted by the Quality Office, more sustainability reporting. have been administered online since 2004, with a response rate that has improved to 70%. We also host annual confer- Protecting the State Street Brand ences with our largest customers to share information about State Street’s marketing communications are our services, learn about their emerging needs and primarily business to business, directed at institutions concerns, and explore important industry topics. oriented to investment management and servicing and Internally, State Street strives to ensure that having limited tolerance for “hype.” This preference plays employees are updated with industry and customer a significant role in our marketing strategy and the manner information. We publish valuable industry information as in which all marketing communications are created and well as news of our products, services and organizational produced. Our editorial-standards manual dictates a style structure in a variety of communications. Dedicated and approach consistent with this customer preference and relationship teams use multiple methods of communica- emphasizing high-quality editorial, rather than promotional, tion to ensure that customer needs are being met. To content; the same is true for our visual language guidelines. further internal education efforts, State Street’s State Street’s reputation as a global business leader is rooted Relationship Management group launched an annual in part in a commitment to inclusion – ensuring that we build program that educates employees about selected relationships with and communicate appropriately to customer organizations. The program includes market business markets and our employees around the world. In trend discussions that feature the challenges facing our this regard, all materials are reviewed by local experts for customers and how State Street helps address them, as cultural translation, both in content and design. This well as engaging employees and customers together on corporate priority is supported by a global marketing team, community outreach projects. 40% of whom reside in Europe and Asia-Pacific locations. Virtually all of our marketing communications Collaborating with Strategic Partners undergo a rigorous legal review. A small proportion of We believe that relationships with our strategic marketing materials are regulated by the National partners should be mutually beneficial. Our Social Association of Securities Dealers (NASD) and the SEC. Responsibility Standard of Conduct for Vendors and Third These materials are reviewed and approved by State Street’s Parties Doing Business with State Street spells out our expec- legal, risk and compliance divisions consistent with those tations for conducting business in a socially responsible regulations. Upon completion, materials are filed with the manner, and is included in outgoing RFPs and is available in NASD. Marketing communications that fall outside NASD its entirety at http://www.statestreet.com/utility/vendor_con- and SEC regulations, such as press releases, product tact_us.html#. RFPs include questions about suppliers’ and brochures, advertisements and the like are reviewed by potential suppliers’ social responsibility policies. We review legal and compliance areas. To date, we have not identified our supplier database quarterly against guidelines provided any incidents of non-compliance with regulations and/or by the US Office of Foreign Asset Control. To date, no voluntary codes concerning marketing communications. suppliers have been identified as unacceptable. 2006 Corporate Social Responsibility Report 19

Strategic Sourcing Guidelines ensure a fair and equitable bidding process where appropriate. We have no policy stipulating use of local suppliers but do actively spend with local, regional and global suppliers consistent with our bidding process. No discrimination is allowed in the selection of suppliers; they are covered under State Street’s Equal Employment Opportunity Policy Statement. Our Supplier Diversity Program is an example of doing good business while strengthening local communities. Established in 1983, the program provides opportunities for minority- and women-owned businesses to establish mutually profitable relationships with State Street. The Strategic Sourcing Department, which oversees the Supplier Diversity Program, is a full corporate member of the National Minority Supplier Diversity Council. It also plays an active role, including Board representation, in the Minority Supplier Development Council.

Supplier and Third-Party Spending(1) $ millions

Location

Canada $ 62 Austria 1 Germany 50 Ireland 117 Italy 11 United Kingdom 234 United States 1,820 Total $ 2,294

Supplier Diversity Program spending (U.S.)

2006 $ 41(2) 2005 $ 44

(1) Centralized data capture of spending outside North America began in 2006. (2) Lower in 2006 because of an unusually high technology equipment expenditure in 2005. 20 State Street Corporation

3 energy conservation projects

sustainability preservation 2006 Corporate Social Responsibility Report 21

$78,000 annual cost savings

662 tons of paper recycled 11,254 trees saved(1)

How We Preserve the Environment

As State Street’s Environmental Policy states, our “commitment to our community and our environment is an integral part of who we are. We strive to apply our collective efforts to advance the long-term preservation of our surroundings as this will directly contribute to the quality of life in our community and to the success of our business.” (The full Environmental Policy is available at www.statestreet.com/company/community_affairs). As a financial services company, our products and services have minimal direct environmental impact. Our primary environmental impacts result from our daily operations. Other potential impacts include those related to our philanthropic and investment opportunities, raising the environmental awareness of our employees and protecting resource areas such as the wetlands on our properties. As demand for the world’s natural resources increases, the use of fossil fuels threatens major climate change, and deforestation results from the vast demand for paper, we consider it a corporate imperative to minimize our negative environmental impact. The law requires it, many of our customers demand it, and our experience has shown that redesigning our operations often results in considerable cost savings. Improving our environmental performance is fundamental to our long-term sustainability. Enhanced tracking and reporting of our performance is both a priority and a challenge.

(1) United States Environmental Protection Agency. 22 State Street Corporation

2006 Highlights inspections of the two buildings in Massachusetts that are • Developed an Environmental Management System wholly owned by State Street and cursory inspections of two (EMS) manual that summarizes and describes our others in which we lease space to determine if more approach to managing our environmental impacts. in-depth reviews would be desirable. EASI used our EMS • Conducted, with the help of an outside environmental manual, developed in early 2006, as a guideline for auditing firm, site inspections of four State Street conducting the audits. Areas evaluated included building facilities; results provide a baseline for future evaluation systems, hazardous materials, general waste and proximity and reporting. to wetlands and conservation land. The objectives of the • Established an Ethical Committee in the United Kingdom audits were threefold: to foster improvement of environmental performance in • Review and assess the environmental practices being our and Edinburgh offices. conducted at the selected facilities. • Future challenges: Roll out EMS program in North • Evaluate compliance with Federal, state and local America in 2007 and worldwide in future years; use environmental regulations. benchmarks established in 2006 to develop additional • Provide recommendations to meet the regulations. targets for environmental performance. In general, the comprehensive audits uncovered no Our Operations and the Environment substantive issues, although recommendations were State Street’s EMS manual provides a mechanism for made for improved documentation of some processes environmental management throughout all functional areas and consolidated storage of flammable materials. The of our company. We enlisted CB Richard Ellis (CBRE) to cursory audits concluded that in-depth inspection of both implement the EMS program, and we will be using EnTech’s facilities was recommended. These inspections are electronic reporting system in 2007 to validate all utility scheduled to be completed in 2007. information and paper usage. As a first step in creating a State Street experienced no recordable spills in baseline for the program, CBRE had Environmental Asset 2006, nor did we incur any fines for non-compliance with Services, Inc. (EASI) conduct in-depth environmental environmental laws and regulations.

Direct Gas Consumption therms Direct Electric Consumption(1) kilowatt hour

Average Average Consumption Consumption 2006 per Person 2006 per Person Building Consumption per Year Building Consumption per Year

John Adams Building 304,010 152 John Adams 35,555,900 17,742 Grafton Data Center 55,249 1,973 State Street Financial Center 18,630,119 6,687 State Street Financial Center 49,493 18 Westborough Data Center 17,667,300 477,495 2 Granite Ave 28,874 77 Grafton Data Center 12,378,478 442,089 Lafayette Corporate Center 3,206 1 Lafayette Corporate Center 8,634,700 3,534 Westwood 165 0 225 Franklin Street 5,925,183 12,142 Total 440,997 53 Westwood 5,682,120 7,586 Josiah Quincy Building 5,617,000 9,456 2 Granite Ave 2,369,902 6,337 Direct Oil Consumption(2) oil usage for heating; gallons Allen Forbes Building 1,263,900 3,326 Total 113,724,602 10,238 Consumption 2006 per Person Consumption per Year

Total 156,043 78

(1)This information does not include four buildings where electricity is included in the landlord’s cost. (2)John Adams Building only. 2006 Corporate Social Responsibility Report 23

About Our Environmental Consultants CBRE is the world’s largest service provider to the real estate sector, with more than 1.2 billion square feet of property and corporate facilities under management and extensive experience in developing and implementing “green building” and corporate sustainability initiatives. Its sustainability practice is focused on driving resource efficiency and environmental performance in corporate real estate to help clients optimize capital and facility management services throughout the life cycle of buildings and through supply chain management. EnTech Utility Service Bureau was founded in 1979 and achieved prominence when the United Kingdom first deregulated its energy marketplace in 1994. With offices in five worldwide locations, EnTech is at the forefront of the utilities information services marketplace, providing an Internet-based international platform for monitoring and tracking global expenditures and usage trends for a range of services including energy, water/sewer, telecommunications and environmental services. EASI is CBRE’s in-house environmental department. EASI provides specialized environmental expertise specific to the development and management of commercial real estate, providing support services to both internal sources and to CBRE clients.

2006 Energy Conservation Projects/Utility Rebates efficiency unit along with a new variable frequency drive. At State Street, energy conservation is an important Annual savings in electrical costs will be approximately area of emphasis, not only for its environmental impact but $16,400 over the original cooling tower, and the rebate also for its financial benefits. At the end of each year, we was $35,352. meet with utility companies to identify possible projects that could result in an energy rebate in the coming year. If our BREEAM Rating for New-Building Construction analysis indicates that the project is viable we submit In developing our new facility in Canary Wharf, paperwork to our utility company, National Grid, to qualify London, England, State Street and the developer, Canary for the relevant rebates. Rebates and cost savings in 2006 Wharf Limited, decided to make best efforts to achieve a totaled more than $220,000. Building Research Establishment Environmental John Adams Building (Quincy, Massachusetts, Assessment Method (BREEAM) rating of “excellent.” The wholly-owned by State Street): As part of a two-year, BREEAM rating system was developed by the British complete renovation of the building’s architectural and Research Establishment in 1990 and has evolved into a infrastructure systems, business units housed in the build- comprehensive assessment tool to be used in various stages ing are being relocated based on their levels of interaction of a building’s life cycle. It is recognized as the national and communication. Two aspects of the relocation project benchmark for assessing a building’s environmental resulted in rebates in 2006. The powerhouse was performance and is equivalent to the US Leadership in completely upgraded, with the existing 800-ton absorber Energy and Environmental Design (LEED) rating system and 1,265-ton York chiller replaced with two high-efficiency, developed by the US Green Building Council to accelerate 800-ton Trane chillers. Annual savings are about $23,000 the adoption of green building practices. BREEAM assesses (163,860 kwh x $0.14/kwh), and the rebate was $76,905. the performance of buildings in the following areas: We also upgraded the Heat Ventilation Air Conditioning • Resources (building materials, water consumption, (HVAC) system by installing new, high-efficiency, fan- water efficiency) powered boxes on the building’s fifth floor, providing • Health and well-being (indoor and external issues) approximately 1% overall savings in the building’s energy • Air and water pollution usage. The new VAVs will save approximately $38,000 • Transport-related CO2 (car park spaces, access to annually in electrical costs over the existing cooling units, alternate transportation, etc.) and the rebate was $35,352. • Energy efficiency in design Josiah Quincy Building (Quincy, Massachusetts, • Land use and impact on local ecology (species wholly-owned by State Street): In 2006, the building’s protection, etc.) existing cooling tower was replaced with a similar, higher- • Long-term building management 24 State Street Corporation

As of February 2007, the building design and Street conducted a survey to determine and report on the operating model has achieved an “excellent” rating. Actual commuting patterns of our employees in Boston and certification will occur once the building is fully constructed, Quincy, Massachusetts, in 2006. We continue to commissioned and occupied in January 2009. implement a full spectrum of trip reduction programs to meet the Rideshare Program regulatory requirements and Initiatives to Reduce Greenhouse Gas Emissions to support the commuting needs of our employees, includ- State Street recently entered into a three-year energy ing pre-tax transportation benefits, on-site pass sales, purchase agreement with SUEZ Energy Resources NA. carpool matching and guaranteed ride home programs. This agreement runs from March 2007 through March 2010 and will provide electrical power to State Street’s Recycling Initiatives Massachusetts facilities. The total value of the energy State Street’s recycling efforts encompass paper and purchase agreement is approximately $12 million per year. electronic equipment/computers. During 2006, we recycled During the negotiations, State Street requested alternate more than 660 tons of paper in our Massachusetts pricing options for renewable (green) power. SUEZ provided locations. We also recycled more than 2,400 computers and several pricing options for renewable power. We concluded nearly 1,500 monitors. that the Maine Renewable pricing option provided the most affordable green power and, more importantly, is Green E Our Business and the Environment certified. The State Street Financial Center corporate head- Although State Street’s products and services have quarters at One Lincoln Street in Boston represents minimal direct environmental impact, we can have indirect approximately 20% of the total State Street electrical load in impact, especially in our asset management business, Massachusetts. This facility has been designated to run on State Street Global Advisors (SSgA). SSgA has established renewable power for the three-year duration of the new a global environmental investment effort designed to meet energy agreement, resulting in a 20% reduction in increasing demand from institutional customers for greenhouse gas emissions in our Massachusetts operations. investment strategies that factor in environmental risk and Recognizing that air travel has a significant impact on opportunity analysis. In partnership with SSgA’s Global air emissions, including greenhouse gases, we have made Alliance company, Innovest Strategic Value Advisors, significant investments in video and audio teleconferencing investment teams are integrating environmental research equipment with the aim of reducing travel. We invested $4.4 with established global investment strategies. Demand is million in audiovisual products and services in 2006. increasing for environmental strategies from public In compliance with the Massachusetts Department employee funds in North America, as well as European of Environmental Protection “Rideshare” regulation, State pension schemes. Pension trustees are starting to evaluate

Total Direct and Indirect Greenhouse tons Paper Recycling tons Gas Emissions by Weight

Oil Gas Facility Emissions Emissions Totals 2006 662(1)

Quincy 1,544 1,784 3,328 2005 412 Grafton 95 331 426 2004 579 One Lincoln 10 286 296 2 Granite 0 167 167 2003 976 Westborough 39 0 39 Lafayette Center 1 18.5 19 2002 1,086 One Federal 2 0 2 Westwood 0 1 1 All Facilities 1,691 2,587 4,278

(1)Incorporates tonnage from two more locations than in previous years. 2006 Corporate Social Responsibility Report 25

Travel Miles and CO2 Emissions miles

Country Air Rail Car Rental Total

Australia 5,284,099 - N/A 5,284,099 Austria 49,328 1,727 N/A 51,055 Canada 1,628,755 26,459N/A 1,655,214 France 568,447 18,902N/A 587,349 Germany 2,497,280 118,388N/A 2,615,668 Ireland 1,544,514 0N/A 1,544,514 Japan 983,448 0 N/A 983,448 Luxembourg 1,304,375 2,372N/A 1,306,747 Netherlands 294,626 0N/A 294,626 CO2 4,063 3,601 462 South Africa 983,448 0 N/A 983,448 SO2 22.5 3.4 19.1 Switzerland 198,347 2,535 N/A 200,882 UK 12,229,242 56,690 N/A 12,285,932 NOx 10.9 8.8 2.1 USA 44,176,141 19,720 488,000 44,195,861 PM10 1.7 0.7 1.0 Total Travel Miles 71,742,050 246,793 488,000 71,988,843 Total 4,098 3,614 484

SO2 24.8 0.5 24.3 Total Annual CO2 Emissions (pounds in millions) 31.6 22.4 19.6 73.6 NOx 14.4 8.8 5.6 PM10 2.0 0.8 1.2 Total 41.2 10.1 31.1 Total Water Withdrawal by Source cubic feet Total Water Discharge by Quality and Destination cubic feet

CO SO NOx PM10 Total Average Average 2 2 Consumption Consumption 3,601 3.4 8.8 0.7 3,614 2006 per Person 2006 per Person 4,063 22.5 10.9 1.7 4,098 Building Consumption per Year Building Consumption per Year 462 19.1 2.1 1.0 484

John Adams Building 1,919,700 958 CO2 John4,063 Adams 3,601 Building 462 1,621,800 809 Westborough Data Center 690,000 18,649 Grafton Data Center 872,667 31,167 SO2 22.5 3.4 19.1 Westborough Data Center 690,000 18,649 Grafton Data Center 689,391 24,621 NOx 10.9 8.8 2.1 Josiah Quincy Building 362,000 609 Westwood 292,100 390 PM10 1.7 0.7 1.0 Westwood 297,000 397 2 Granite Ave 280,560 750 2 Granite Ave 280,560 750 TotalJosiah4,098 Quincy 3,614 Building 484 250,740 422 Totals 4,421,927 1,168 Totals 3,824,591 1,010

Actual Emissions vs. Potential with Heavy Oil tons CO2 Reductions Firing Gas tons Heavy Oil Equivalent Actual Emissions Savings Equivalent Reduction Gas Oil From Firing Emissions Emissions Gas SO2 24.8 0.5 24.3 Quincy 1,784 2,505 (721) NOx 14.4 8.8 5.6 Grafton 331 465 (134) Tons Westwood 1.0 1.4 (0.4) PM10 2.0 0.8 1.2 One Lincoln 0 0 0 Westborough 0 0 0 Total 41.2 10.1 31.1 All Facilities 2,116 2,971 (855)

4063 35.099998 4063

0 0.000000 0 26 State Street Corporation

environmental risks and the potential impacts on their pension fund holdings. SSgA stands prepared to meet this emerging environmental, social and governance (ESG) investment trend. 2006 We utilize a product in which shareholder engage- ment on issues such as the environment, biodiversity, climate change and other issues is the centerpiece. SSgA incorporates environmental analysis on existing investment strategies at the direction of customers. Of total SRI assets under management, 15.5% employ environmental investment criteria. We have minority interests in Innovest and GMI, ESG research firms whose strong environmental sustainability while underweighting work has been incorporated into active and passive equity those with poor environmental practices. These products strategies to enhance the risk/return profiles of the strate- include a European Environmental Strategy and an gies. Many of our socially responsible equity strategies International Environmental Strategy, both of which employ environmental assessment using fundamental incorporate research from Innovest. More stringent climate analysis and/or outside research vendors. regulation in the future will allow for differentiation among SSgA has structured an ESG investment team, led companies across economic sectors that develop new by a dedicated, full-time investment professional who products and services centered on climate change. works with institutional customers in designing and Enhanced transparency on environmental externalities, as managing ESG investment strategies. The team’s mission well as legislation, may allow portfolio managers to uncover is championing ESG investing globally on behalf of SSgA. investment opportunities and identify companies with poor The team also educates SSgA investment, sales and positioning relative to their peers. relationship management staff on the global trends driving SSgA manages investment strategies meeting a ESG issues. Through our investment holdings, members of variety of customer-directed ESG solutions. Examples the team have access to and interaction with company include Sudan-free, environmental and religious screens, management concerning ESG issues. as well as labor investment strategies. We currently manage Our Global Fundamental Strategies group manages negative screen SRI portfolios using the following criteria: strategies that focus on individual stock selection. In abortion/contraception; addictives; animal testing; diversity; particular, our energy, utilities, industrials and technology environment; firearms; genetically modified foods; Islamic analysts factor in environmental sustainability as industry screens; labor rights; MacBride Principles; military; growth themes. Expanding global environmental nuclear power; oppressive regimes; pornography. We also regulations, coupled with renewable energy mandates, are manage assets implementing the following positive driving growth in clean technology investments. screens: community involvement; diversity; employee Additionally, clean air and climate legislation is expanding relations; and the environment. rapidly, targeting the utilities sector, and these actions, as SSgA does not engage directly with companies on well as the emergence of new global environmental environmental issues, as we act as a fiduciary for our technologies, are taken into consideration by our analysts. institutional customers. We can introduce outside SSgA works with customers concerned about the organizations to our customers who can engage on their investment implications of climate change, and we look for behalf, provided the assets are placed in a separate account. opportunities to develop investment products that respond Members of our ESG team meet with our Investment to its impact and related legislation on stock prices. We also Committee to update its members on ESG proxy trends. In sponsor global initiatives targeting risk factors and invest- certain ESG commingled strategies, SSgA has contracted ment opportunities related to climate change. Our Global with outside proxy agencies in order to vote in accordance Active Investment team currently manages environmental with ESG principles. investment strategies that overweight companies with 2006 Corporate Social Responsibility Report 27

In 2006, State Street launched a UK Ethical Committee to identify ways to increase awareness of environmental issues for staff in our London and Edinburgh offices and reduce the cost of operations. Initially concentrating on the London office, the committee’s first area of focus was recycling and waste reduction, which resulted in the purchase of new recycling bins and a significant increase in the collection of recyclable waste. The current area of focus is energy efficiency, specifically electricity usage. Future areas of focus will include enhancements to the work environment and amnesties and collections of unwanted goods for charity collections. A region-wide communications effort supports the committee’s efforts.

SSgA does not have a specific policy with regard to • EarthWorks, which restores urban green space, offers proxy voting on environmental issues. At customer direction, educational programs and provides volunteer conserva- we vote proxies in favor of environmental resolutions on tion opportunities, for expansion of its Outdoor strategies that implement ESG factors. Our policy and Classrooms program; procedures are designed to ensure that customers receive • “e” inc., which combines science education, environ- the best possible returns on their investments. Of SSgA’s mental citizenship and civic involvement, for its $755 billion of equity assets, we can advise on voting for “Planet Protectors” program for urban youth; approximately 60%. • Appalachian Mountain Club, which promotes the As an active shareholder, SSgA’s role is to ensure that corporate policies serve the best interests of the protection, enjoyment and wise use of the mountains, Corporation’s investor-owners. Although SSgA does not seek rivers and trails of the Appalachian region, for expansion involvement in the day-to-day operations of an organization, of its Youth Opportunity Program; and we recognize the need for conscientious oversight of and • Save the Harbor/Save the Bay, which advocates for input into management decisions that may affect a clean water while working to ensure access to Boston company’s value. To that end, SSgA meets directly with Harbor and the waterfront, for its Summer Youth portfolio company representatives on a consistent basis in Environmental Education Programs. an effort to effectively monitor corporate management and ensure that shareholder value is being maximized. We participate in a variety of initiatives focused on environmental issues and climate change in order to stay informed about current trends and to be a part of the dialogue. Our involvement includes Columbia University’s Global Roundtable on Climate Change, the Investor Network on Climate Risk (a Ceres organization), the United Nations Environment Programme Finance Initiative (UNEP FI) and the Global Reporting Initiative. We have been a signatory to the Carbon Disclosure Project for four years.

Our Philanthropy and the Environment Included in State Street’s Global Philanthropy Program is support for community-based cleanup, beautification and environmental education initiatives (not including conserva- tion programs). In that category, grants were awarded in 2006 to four Boston organizations: 28 State Street Corporation

Global Inclusion Initiative

sustainability fulfillment 2006 Corporate Social Responsibility Report 29

80% completion of employees’ year-end reviews

21,700 employees $2.2 billion in payroll

How We Create a Positive Work Environment

As a company that employs 21,700 people in 26 countries around the world, State Street recognizes that highly skilled, productive employees are essential to our success. Our aim is to foster a culture that enables all employees to have fulfilling and rewarding careers. In all of our geographic locations, we seek to be an employer of choice – through competitive com- pensation and benefits, personal and professional development opportunities, and an environment that promotes a diverse array of people, ideas and job skills. Our policies and practices are designed to fully meet applicable employment and labor laws. Our mission is to attract and retain talented, dedicated employees, which is essential to our long-term sustainability. 30 State Street Corporation

2006 Highlights Promoting Diverstiy

• Worldwide payroll of $2.2 billion, including incentive Diversity and inclusion are fundamental strategic compensation; employee benefits totaling $446 million. imperatives at State Street. We seek to be a company where • Conducted a confidential global employee engagement all employees are engaged and valued. Our strength comes survey that produced a 57% response rate. from the diversity of ideas and perspectives in our global • Held a Disability Awareness Day as part of Disability work force. At all levels of our organization, diversity Awareness Month. emerges from human differences – age, ethnicity, gender, • Future challenges: Reduce employee turnover; respond physical and mental ability, race, sexual orientation, to findings of employee engagement survey. spiritual practices, family status – and is representative of the communities in which we operate. Putting these charac- teristics to work in a collaborative manner makes a measurable difference in our organization’s performance by:

Employee Statistics by Country as of December 21

2006 2005 Net Net No. of Employment % Total Local No. of Employment % Total Location Employees Creation(1) Turnover % Native Sr. Mgt. Employees Creation(1) Turnover % Native

Australia 649 29 27.1% 98.9% - 643 34 30.9% 99.5% Austria 21 (2) 13.9 90.5 - 25 - 31.1 95.2 Belgium 33 4 9.8 78.8 100% 29 4 11.8 77.3 Canada 1,045 118 29.2 99.9 - 949 149 25.3 100.0 Cayman Islands 11 (9) 54.8 90.9 - 20 1 15.0 100.0 Chile 2 - 0.0 100.0 - 2 - 0 100.0 France 384 17 16.6 98.7 - 381 73 14.5 98.2 Germany 618 32 11.0 99.2 75 636 102 9.5 99.7 India 2 N/A N/A N/A - 1 N/A N/A N/A Ireland 1,458 210 27.1 99.9 91 1,228 175 25.7 99.2 Italy 50 (1) 9.7 98.0 100 56 10 7.1 100.0 Japan 347 14 22.0 99.7 - 341 2 15.0 100.0 Korea 15 5 15.0 100.0 - 15 2 0 100.0 Luxembourg 698 134 25.8 46.3 65 566 128 22.2 2.3 Netherlands 85 (21) 39.0 98.8 >50 101 13 12.2 100.0 People’s Republic of China 659 177 15.9 99.5 - 340 167 23.7 99.2 Singapore 183 16 36.6 99.4 - 161 6 30.1 98.1 Switzerland 97 (23) 39.1 99.0 - 121 (13) 30.0 99.3 South Africa 106 26 34.8 99.1 100 78 38 16.4 98.3 Taiwan 19 3 0.0 100.0 - 16 2 26.7 100 Thailand 0 N/A N/A N/A - 3 N/A N/A N/A United Arab Emirates 3 - 0.0 100.0 - 5 1 0 100.0 United Kingdom 2,118 65 20.4 99.5 - 2,105 67 20.6 99.4 United States 13,117 134 18.2 N/A - 13,143 423 16.8 N/A Total(2) 21,720 928 20.2% 95.1% - 20,965 1,384 18.6% 95.1%

(1)Defined by net terminations and net hires and does not include internal transfers. (2)Methodology changed in August 2006 to exclude terminated employees still receiving payment. 2006 Corporate Social Responsibility Report 31

• creating a more rewarding work environment for more opportunities for employees, improving recognition all employees; and rewards for employee contributions, and listening to • enabling us to attract and retain an increasingly employee feedback and taking appropriate action. Other diverse work force; actions arising from our commitment to workplace • engaging qualified employees from all types inclusion are: of backgrounds; • quarterly town hall meetings for all employees; • enhancing personal and professional development; • regular distribution of corporate goals to all employees; • encouraging creativity and diversity of thought; and • a new series of managers’ guides, including information • improving employee pride, commitment and contributions. on promotions, compensation and inclusion; • implementation of a global recruitment system; State Street’s Global Inclusion initiative, launched in • development of a global internal mobility process; and 2004, aims to ensure that the opportunity to do one’s best • expansion of our employee affinity program. work is available to every employee through the creation of an open and honest working environment where people Our commitment to diversity and inclusion is know what to expect and what is expected of them. Led by underpinned by a variety of other practices. The senior managers and supported by regional groups with Employee Handbook sets out all corporate policies; our representation from each business unit and staff function, Standard of Conduct provides guidelines for how business employee teams identified three priorities: providing is to be conducted and how employees are to conduct managers with best practices support for themselves. In the United States, our Equal Employment developing skills in managing people; building the Opportunity (EEO) Policy Statement is distributed to all infrastructure needed to attract and retain a diverse employees; non-compliance is grounds for disciplinary employee population; and increasing openness and action. Among the policies distributed to all employees transparency in communications. The teams have started annually are Discrimination/Harassment; EEO/Affirmative to set strategy around these priorities. Action; Drugs/Alcohol; and Hours of Work/Overtime. In One action arising from this initiative was an online 2006, the EEO and Discrimination/Harassment policies employee engagement survey conducted in the autumn of were updated to include gender identity. Progress against 2006 to gain insight into employee engagement levels and goals for hiring and promoting minorities and women is identify opportunities for the company to strengthen monitored. We are in compliance with regulations of the strategies, initiatives and metrics to achieve a more inclusive, US Office of Federal Contract Compliance Program and meaningful and productive employee experience. Offered have received letters of compliance in all government in five languages and conducted across all levels of our audits conducted within the past two years. worldwide organization, the survey yielded a 57% response rate. Opportunities for improvement included increasing employee commitment to the company; in Employee Development and Performance response, steps to be taken include better articulation of our corporate strategy and the role each employee plays 2006 2005 in fulfilling it, refining our corporate culture by creating Employee Development and Performance Goal 87% N/A Development Plan completed 67% N/A Mid-Year Review completed 71% N/A For US Officers and Managers percent Year-End Review completed 80% 2006 2005 2004 Classroom and Online Training Women 44.3 40 40 Number of participants 29,987 16,527 Minorities 25.3 13.3 12.6 Average number of hours 3.5 3.3 32 State Street Corporation

work health

Sexual harassment and discrimination are not into contractual relationships with worker representatives tolerated in the workplace.We offer training on policies and with respect to workplace rules. Specific employment-related practices concerning diversity in the workplace, appeals processes exist, and any employee may raise an sexual harassment and human resource laws. Companies issue with any member of management or a member of providing security personnel to State Street are required to the Global Human Resources staff. In addition, we have a provide classroom training in sexual harassment, reporting system that is available to all employees world- discrimination, powers of arrest, workplace violence and wide through which an employee may raise any issue of dealing with aggressive individuals. The 194 current secu- concern. Some of our country-specific contractual rity personnel are 100% compliant with this requirement. relationships are described below. Diversity priorities include increasing the representa- tion of women, minorities and non-US nationals at the Asia/Pacific: No collective bargaining agreements/trade senior management level. Recruiting efforts are focused on unions. 10% of workforce in Japan represented in joint local markets and use a variety of mechanisms, including management-worker health and safety committee to monitor advertising in local and regional media and on the Internet, and advise on occupational health and safety programs. recruiting at local schools and universities, advertising on job boards, using local recruitment agencies and incentive- Austria: 100% of staff covered by collective bargaining based employee referral programs. We have set targets to agreement for banks. remain on track with our diversity goals and will aim in 2007 to achieve a full two-thirds of these metrics. In the Belgium: No staff delegation required (fewer than 50 United States, we also sponsor affinity groups that focus on people employed); bound by rules of “Commission paritaire the concerns of various constituencies among our 310” for companies performing banking services. employees, including disability awareness, issues facing working parents, and the experiences of gay, lesbian, France: 100% of employees covered under Banking Latino, black, Muslim and Asian employees, and Collective Agreement; negotiations conducted with union professional women. A variety of new initiatives was representatives and Workers’ Council; monthly meetings introduced in 2006. For example, all eastern between Workers’ Council and management; health and Massachusetts employees were invited to attend the security council representing all employees meets four Muslim Affinity Group’s Eid Gala Celebration, and a times per year. Disability Awareness Day was held as part of Disability Awareness Month. Germany: Works Council implemented at employee request; 9-member Council in Eschborn; no Council in Contractual Relationships Cologne or ; committee with representatives from State Street complies with the applicable employment, TUV (organization for occupational safety), GRS, the CAO labor and employee privacy laws of the locations in which it and a doctor specializing in occupational health meet twice does business. All employees are expected to adhere to our per year on occupational health and safety issues; regular Standard of Conduct. We have adopted employment-related information sessions held for employees by TUV on topics policies applicable to one or more business units within a related to occupational health and safety; eye tests and flu geographic area and may, in some cases, also have entered vaccinations provided. 2006 Corporate Social Responsibility Report 33

State Street has a strong incident management program that includes an infectious disease response plan built around three key elements: incident management and communication, business continuity, and employee health and safety. We draw on information provided by the World Health Organization, the Centers for Disease Control and International SOS to provide guidance and direction on infectious disease planning. We offer seasonal flu shots in many of our global locations. During a measles outbreak in eastern Massachusetts during the summer of 2006, we offered on-site clinics on three separate occasions.

Italy: Two major unions with local employee representatives; Compensation and Benefits local agreement supplements National Collective Bargaining; Our compensation and benefits practices, as well health and safety practices comply with local laws; trade as personal and professional development opportunities, unions consulted on health and safety issues and informed aim at making State Street an effective competitor in by employer; specific agreements cover issues such as use attracting and retaining employees who can contribute to of video cameras and attendance systems. our success while striving to achieve their personal goals. A Board of Directors committee is responsible for setting Luxembourg: 75% of employees covered by Banking and corporate executives’ incentive compensation based in Insurance sector trade union, represented by Staff part on achievement of financial goals and State Street’s Delegation; Workers’ Council with representatives from overall performance. In general, under SEC rules, State management and non-management staff; Joint Works Street is required to report the annual and long-term Council reviews health and safety issues on an ongoing compensation of the five most highly compensated basis; full-time, trained health and safety representative executives. Directors who are also employees of State advises senior management on health and safety matters, Street do not receive any compensation for serving on the supervises security equipment, controls security register, Board. Non-management directors receive compensation organizes related training sessions, liaises with governmental based on their service on the Board. Their compensation authorities; safety representative works closely with Staff is reviewed annually by the Executive Compensation Delegation’s appointed safety delegate, who inspects Committee, which makes a recommendation to the Board working conditions, makes proposals on risk prevention, for approval. performs consultative role in assessing health and safety We understand that fulfilling personal needs is vital risks, reports issues to government authorities, implements to feeling engaged as an employee. We provide a variety actions with health and safety implications. of programs, resources and benefits that support our employees as they face challenges in their daily lives, in Netherlands: Employees covered under Collective Labor their work lives, and in caring for themselves and others. Agreement, represented by Union and Works Council. Our flexible benefits program includes medical and life insurance and flexible spending accounts for health care North America: No collective bargaining agreements/ and dependent care. Employees with contagious diseases trade unions. are, at a minimum, covered by short-term disability policies worldwide. United Kingdom/Channel Islands: Information and Our Work/Life program, described in full at Consultation Committees in place covering all UK locations www.statestreet.com/company, includes a broad variety of and all UK staff. In 2007, UK health and safety board to be programs designed to help employees balance the established to ensure consistency of compliance. requirements of their work and personal lives. A Corporation-funded defined benefit retirement plan is We have identified no operations with significant risks provided as well as a 401(k) plan that includes company associated with freedom of association or forced child labor, matching. and we have had no incidents of violations involving the With some exceptions, temporary employees and reg- rights of indigenous people. ular employees who work fewer than 20 hours per week are 34 State Street Corporation

not eligible for benefits. Permanent part-time employees two weeks’ notice as part of the Company Severance Plan. who work between 20 and 28 hours per week are eligible for Additional severance benefits depend on an employee’s benefits with some limitations; those working more than 28 grade level and length of service with the company. hours are eligible for full benefits. Minimum notice periods may also be extended due to The Performance Planning and Review process for regulatory requirements such as the WARN Act. In employees around the world allows us to develop our workforce reductions, we partner with premier outplacement professional talent and recognize and reward outstanding service providers to support departing employees. performance. Each business unit sets goals for employee development. Corporate offerings include the Global Fostering Community Involvement Curriculum, offered for employees at all levels based on Today, employees are drawn increasingly to compa- the 16 core competencies used in the Performance nies that have a commitment to community service and Planning and Review process, and the Educational provide opportunities for personal involvement in making Assistance Program, which helps employees obtain the world a better place. Volunteerism is an important continuing education and business-specific and technical aspect of work/life balance. As a company that strives to be skills training. In 2006, we introduced 45 new online an employer of choice, volunteerism has become an training programs in areas such as developing inclusion important part of our corporate identity. We provide a skills, financial skills and project management skills. variety of outlets for employees to volunteer their time, In a company-initiated restructuring, outsourcing of talent and passion to make a difference in the lives of operations, closure, expansion, new opening, takeover, sale others. We also provide mechanisms for employees to make of all or part of the organization, or merger in which US financial contributions to their communities via the annual employees are severed, employees receive a minimum of United Way Campaign and our Matching Gift Program.

Benefits Available to State Street Employees in the United States

hours per week Benefit > 28 20-28 < 20

Employee Assistance Program • •• Company discounts ••• Business travel accident insurance ••• Voluntary contributions to 401(k) plan ••• 401(k) Program company match ••1 •1 Retirement Plan ••1 •1 Paid vacation and holidays ••2 •2 Work/Life Program ••• Dental/vision/medical insurance ••3 Flexible spending and pretax transportation accounts •• Adoption assistance •• Short-term disability •• Long-term disability • Life insurance •• Optional term life insurance for self or family • Life insurance flex credit • Accidental death/dismemberment (AD&D) insurance • Optional AD&D insurance for self or family • Educational assistance •

(1) If employee works at least 1,000 hours during the year. (2) Prorated. (3) Employee pays 50% of premium versus 25% for full-time employees. 2006 Corporate Social Responsibility Report 35

In 2006, an innovative partnership between State Street and Boston University – the Corporate Volunteer Network – merged with nonprofit Harbinger Partners, to form Common Impact. Common Impact provides a full range of skills-based volunteering opportunities to employees at participating state street common impact companies while bringing a wide array of pro bono services to nonprofit organizations, including information technology, marketing and human resources. Common Impact offers its corporate and nonprofit partners a single-source solution that matches the intellectual and professional talents of employees with the needs of nonprofit organizations.

State Street Global OutreachTM, a company-wide Outstanding Volunteer Efforts volunteer program launched in 2001, is designed to let Following are the outstanding volunteer efforts for 2006. employees tailor their volunteer activities to their own interests. Employees are given the opportunity to devote at Chairman’s Award for Exceptional Volunteerism(1) least two business days per year to serve their communities, Michele Christian, Boston (Keeping Pace with Multiple and they may use flex-time to participate in ongoing Miracles); Ante Galic, Munich (German Red Cross); volunteer activities. Projects may engage individuals or Amy Gutschenritter, Boston (Becket Chimney teams of employees. Community needs are identified by Corners YMCA) Global Outreach staff or the local Community Support Program Committee, a formal group of State Street Global Office of the Year(1) employees who oversee philanthropic and employee , Japan (Oxfam Japan) volunteer activities. In Massachusetts, Global Outreach includes the Spirit of State Street Alumni Volunteer Golden Gloves Award(4) Program, which connects retired and former employees A tie between Securities Finance and Global Real with one another and with current employees by providing Estate/Relationship Management, Boston meaningful opportunities for community service. Global Outreach provides help with structural and Manager of the Year(2) strategic planning to State Street offices around the world Peter Bennett, Boston (Boston Partners in Education) that choose to launch volunteer programs, recognizing that decision-making about community needs ought to be done (3) on a local level. An important aspect of the program is Spirit of State Street Alumni Award participation by managers, who are urged to volunteer with Madeleine Cotugno, Boston (Community Servings, their employees. Global Outreach also works with Father Bill’s Place) customer relationship managers to engage customers in joint volunteering projects, which strengthens and builds State Street Global Outreach Volunteer of the Year(2) business relationships. A 2007 launch of an employee Shane Doyle, Kilkenny (Enable Ireland, No Name Club) involvement Web site is planned to help employees identify individual and team volunteer project opportunities, United Way Hero Award(3) track their volunteer hours, propose projects, and request Richard Ragusa, Boston (South Shore YMCA, United Way and track matching gift donations. of Massachusetts Bay)

Volunteer Team of the Year(1) SSgA Interactive, Boston (Boston Partners in Education)

(1) Combines individual recognition with a $10,000 grant to the charitable organization (listed in parentheses). (2) Combines individual recognition with a $5,000 grant to the charitable organization (listed in parentheses). (3) Combines individual recognition with a $2,500 grant to the charitable organization (listed in parentheses). (4) Awarded to the winner of a food sorting competition at the Greater Boston Food Bank. 36 State Street Corporation

44,000 volunteer hours

sustainability opportunity 2006 Corporate Social Responsibility Report 37

$800,000 savings for charities

570 grants worldwide $11.4 million

How We Serve Our Communities

Active engagement with our communities around the world, both as a partner and as a leader, is a fundamental value at State Street. By the very nature of our business, our long-term, sustainable success is linked to the strength of the global economy and to helping make it possible for larger numbers of people to share in the world’s economic progress. We are committed to increasing the economic well-being of communities around the world where we operate, especially by helping to equip the less advantaged with the resources to be well, thrive and succeed. Our efforts are multi-layered. As a successful business enterprise, we provide employment and pay taxes. Since the early 1980s, we have been a leader in forming public-private partnerships that have a positive effect on the community. Each of our offices around the world has responsibility for developing strong relationships with community leaders and organizations and for initiating programs appropriate for its locale. We provide monetary support through a variety of community investment initiatives and our Global Philanthropy Program, and we encourage our employees around the world to be active, contributing members of their communities. We are proud of our tradition of community support, and we believe our efforts help create a safer, stronger, more vibrant world. 38 State Street Corporation

2006 Highlights

• Global Commercial Microfinance Consortium was one of five finalists for the ’ “Sustainable Deal of performance outstanding the Year Award.” • Made State Street Foundation grants totaling $11.4 million. • Through employee volunteer efforts, saved our charitable partners $800,000. • Devoted our UK holiday card budget to the CRISIS Christmas Card Challenge in support of its work with the homeless. • Future challenge: Provide all employees full access to our employee involvement programs. State Street’s US investment in small business totals $4.5 million. Much of the investment is with small-scale Corporate Support for the Community venture capital funds that, in turn, invest in businesses that State Street’s business is providing financial services provide economic growth and job opportunities primarily in to institutional investors. As such, activities such as com- underserved markets. mercial lending fall outside our core business strategy. As State Street has made investments in two global part of our community support, however, we have made a microfinance funds that provide small-business loans to corporate commitment to supporting initiatives that specialized institutions that offer credit to the self-employed strengthen the economic fiber of our communities. around the world. The Global Commercial Microfinance State Street has purchased more than $85 million in Consortium (GCMC), a landmark $75 million fund, housing credits with the Massachusetts Housing includes a $4 million investment by State Street, one-third Investment Corporation (MHIC), a financial intermediary of which has been funded. GCMC loan commitments total that helps community-based developers and nonprofit $73 million in 22 countries, benefiting 100,000 people. We organizations finance high-quality affordable housing also made a $500,000 commitment to Blue Orchard projects by pooling financial resources provided by Microfinance Securities I, which has concentrated its Massachusetts financial institutions. During the past 16 investments in Latin America, making $120 million in loans years, this public/private partnership has provided more to 14 microfinance institutions in seven countries. An than $1 billion in investments to help finance the creation estimated 90,000 individuals have received funds through of more than 12,400 affordable housing units. We invested this transaction. an additional $6 million with MHIC in 2006. We also Other corporate-funded initiatives in 2006 include: invested an additional $3 million in “new markets tax sponsorship of nonprofit events, to which State Street credits,” which enable MHIC to provide financing for contributed $530,525; the Boston Summer Jobs Program, a mixed-use developments that combine sorely needed major initiative of the Boston Private Industry Council, commercial and retail space with affordable housing. providing summer employment to 175 high school students

Global Commercial Microfinance Consortium % of total investment Blue Orchard Microfinance Securities I % of total investment

Africa 7 Cambodia 8

Eastern Europe 12 Columbia 9

East Asia & Pacific 13 Peru 13

Central & South Asia 31 Nicaragua 14

Latin America & Carribean 37 Russia 15

Ecuador 19

Bolivia 22 2006 Corporate Social Responsibility Report 39

Classified as a “wholesale bank” under the Community Reinvestment Act (CRA) regulations in the United States, State Street is evaluated every two years on its record of meeting the needs of the communities in which it oper- ates, particularly in low- and moderate-income neighborhoods, by the Federal Reserve Bank (the Federal Reserve) and the Commonwealth of Massachusetts Division of Banks (the State). State Street’s CRA performance is rated “outstanding” by both the Federal Reserve and the State. The rating was most recently affirmed by the Federal Reserve after its 2005 examination.

and associated salaries, benefits and expenses totaling corporate contributor to the United Way of Massachusetts $450,000; and charitable contributions made by individual Bay for the 16th consecutive year and number one in all of business units of more than $753,000. New England for the seventh straight year. (Our United Way totals in Massachusetts and Florida include contributions The State Street Foundation from CitiStreet, our joint venture with Citi Group.) Every year, State Street Corporation directs a portion of its pre-tax profits to the State Street Foundation, a Global Philanthropy nonprofit, tax-exempt charitable trust. The Foundation Since its inception 29 years ago, the State Street funds our corporate United Way contribution, Matching Gift Foundation has made some 6,900 grants totaling more Program and Global Philanthropy Program. In 2006, our than $111 million. In 2006, grants totaled $11.4 million. combined corporate and employee United Way gifts totaled The focus of our Global Philanthropy Program is to ensure $5 million, marking the seventh straight year that total con- that less-advantaged citizens are equipped with the tributions have exceeded $4 million. We were the largest resources they need to be well, thrive and succeed. As part of the Program, we maintain a Disaster Relief Emergency Assistance Fund that provides grants in response to large-

Income Taxes Paid by State Street Corporation $ thousands scale disasters around the world that have a significant, net of refunds lasting impact and require a concerted relief and rebuilding effort. In 2006, State Street made a three-year, $1.5 million Country 2006 2005 commitment to the American Red Cross (ARC) Annual Leadership Giving Program. During each of the three years, Australia $ 14,251 $ 25,897 Belgium 694 75 $250,000 will be provided to the ARC to ensure its Canada 21,134 11,519 preparedness to respond to large-scale natural disasters France 7,435 4,316 or terrorist acts, and $250,000 will be committed for Germany 53,467 20,179 designation by State Street should a disaster occur. Guernsey 23 N/A Should no such disasters occur, as was the case in 2006, Ireland 9,209 6,976 the remaining $250,000 will go to the Annual Leadership Italy N/A 461 Giving Program. Japan 16,674 12,070 Around the globe, 30 State Street contributions Luxembourg 1,614 1,627 committees are in place to evaluate and recommend Netherlands 2,095 N/A funding for organizations that are making a difference in People’s Republic of China 9,825 6,443 Singapore 1,634 1,101 South Africa 397 N/A South Korea 13,201 9,971 State Street’s Matching Gift Program Switzerland 559 599 Taiwan N/A 1,113 2006 2005 United Kingdom 59,341 59,365 United States 321,215 169,241 Foundation Matching Funds $ 599,782 $ 555,290 Total $ 532,768 $ 330,953 Number of employee contributions 1,434 1,407 40 State Street Corporation

their communities, focused in three major areas: human In Asia, an unprecedented pace of population aging is services, educational programs, and community improve- placing an increased burden on families and social ment and development. Examples of the programs we systems. One example of how State Street is helping to meet supported in 2006 are described below. Examples by the needs of the elderly is our support for HOPE worldwide country and a complete list of grant recipients are available affiliates in Hong Kong and Singapore. The at www.statestreet.com/company/community_affairs. mission of HOPE worldwide, an international charity founded in 1991, is to serve the emotional, physical and social needs Human Services of the underprivileged in communities around the world. A Helping to ensure that basic human needs are met is 2006 State Street grant to its Hong Kong affiliate helped fundamental to our support for the less advantaged. In the make possible a year-long “Fulfill the Needs of Seniors” human services area, grants are awarded in three categories: program that expanded a volunteer effort to • hunger-reduction programs such as food pantries and refurbish homes and provide important health care and meal provision; emotional support for senior citizens. Our grant to the • programs that provide access to health care, legal, Singapore affiliate helped fund a new “Hope for Seniors” social and family services; and program in which volunteers make weekly visits to the • transitional and emergency shelter programs for elderly in hospitals and in their communities. the homeless.

State Street United Way Contributions $ thousands

2006 2005 Employees Foundation Employees Foundation

United Way of Massachusetts Bay $ 2,178 $ 1,832 $ 1,860 $ 1,604 United Way of Northeastern Florida (Jacksonville, FL) 205 173 200 172 United Way of Greater 110 93 105 91 Heart of America United Way (Kansas City, MO) 73 62 55 48 Orange County’s United Way (Newport Beach, CA) 29 24 24 20 Centraide du Grand (Montreal, Quebec) 27 23 24 21 United Way of Greater Mercer County, Inc. (Princeton, NJ) 25 21 24 20 United Way of New York City 11 9 8 7 United Way of the Bay Area (Alameda, CA) 10 8 9 8 United Way of Forsythe County (Winston-Salem, NC) 4 3 3 3 United Way of Greater Los Angeles 4 3 3 2 United Way of Metropolitan Atlanta 2 2 1 1 United Way of the Lower Mainland (Vancouver, BC) 1 1 3 2 Total $ 2,679 $ 2,254 $ 2,319 $ 1,999 2006 Corporate Social Responsibility Report 41

Educational Programs Community Improvement and Development Beyond basic human needs, people require As a global financial services organization, State opportunities to be educated and to develop the job skills Street operates in large cities that face the challenge of necessary for success in a technology-oriented world. State building and maintaining infrastructures to better serve their Street supports a wide variety of educational programs in citizens. The challenges are significant – ensuring that the areas of: today’s workforce can afford the available housing, building • job readiness/job skills training community networks that create a sense of belonging, • out-of-school enrichment fostering entrepreneurialism and helping immigrants • high-school and secondary-school equivalency become productive members of the community. In the area • college and university awareness of community improvement and development, we provide • mentoring support for: • tutoring • affordable housing programs • access to arts and culture • community organizing programs • financial and economic literacy • neighborhood revitalization and regeneration programs • environmental education • small business development • language literacy • capacity-building initiatives for charitable organizations • volunteerism Work force development is an important area of • citizenship initiatives that foster the successful transition emphasis for State Street. Preparing individuals for success of immigrants and refugees in the workplace is an essential ingredient in a community’s • environmental improvement focused on community- economic well-being. It is also in our interest to help ensure based cleanup and beautification a steady stream of employees trained in the latest technolo- gy and motivated to do their best. In 2006, State Street State Street has long been a leader in developing and joined with Microsoft-Europe in sponsoring and developing a supporting programs aimed at easing the burdens of pan-European job skills development program, especially in homelessness. In keeping with the national trend in the information technology, to address the issue of employability United States toward ending homelessness rather than of the work force in the European Union (EU). The program, simply managing it, we are placing greater emphasis on “European Alliance on Skills for Employability,” works with programs that exemplify this model. In Boston, one European nongovernmental organizations to create or example is Travelers Aid Family Services (TAFS). enhance current job training and placement programs, as Established in 1920, TAFS is one of the leading social well as to increase general awareness of the need to increase service agencies dedicated to ending family homelessness. investment in training and education programs. The goal of TAFS helps families find housing and employment, helps the program is to help the EU realize its mandate to create homeless families transition into permanent housing, and 20 million jobs by 2010. This strategic partnership is intend- arranges emergency transportation. In 2005, TAFS served ed to help fill the “talent gap” between high-technology jobs more than 3,800 individuals from 736 families. To address and low-skill workers. It will strengthen local economies the fact that as many as 30% of families requesting state while supporting State Street’s long-term sustainability by shelter in Massachusetts are turned away because they ensuring the availability of a qualified, indigenous work force earn too much money to qualify, TAFS is developing three in a region that is important to the growth of our business. A units of permanent, affordable housing for families, key element of the Alliance is the development of supported by a grant from State Street. All of the tenants partnerships with local public sector employment agencies, will be formerly homeless, low-income families, who will skills councils and chambers of commerce, as well as receive ongoing skills-building and emotional support. associations focused on small and medium enterprises. To date, three such partnerships – in Belgium, Germany and the United Kingdom, have been launched. 42 State Street Corporation

State Street Global Outreach Our company-wide volunteer program (described in detail on page 34) was established in 2001 in recognition that the skills and enthusiasm of State Street employees are valuable resources for the communities in which they live and work. In addition to ongoing volunteer efforts around the world, our Global Volunteer Month in December is a concentrated effort to get employees involved in their communities.

State Street Foundation 2006 Funding State Street Corporation’s Allocation to the Foundation $ millions

Global Philanthropy Program Human Services $ 3,401,000 Education Programs 5,076,000 Community Improvement and Development 2,363,000 Disaster Relief 500,000 Volunteer Award Grants 102,500 Philanthropy Subtotal(1) $ 11,442,500 United Way 2,254,000 Matching Gifts 599,800 Total Funding by State Street Foundation $ 14,296,300

Amount of Philanthropic Grants $ millions Number of Philanthropic Grants

2002 7.4 2002 605

2003 9.1 2003 558

2004 9.4 2004 528

2005 7.7 2005 469

2006 11.4 2006 570

(1)Includes $1.8 million in future commitments. 2006 Corporate Social Responsibility Report 43

State Street Global Outreach Statistics

2006 2005 2004

No. of Offices Participating on an Ongoing Basis 26 23 21 Total Projects 532 515 303 No. of Volunteers(1) Asia/Pacific 533 525 436 Europe 798 697 470 North America 5,411 5,222 4,120 Total 6,742 6,444 5,026

Total Volunteer Hours 43,977 34,400 31,600 Savings to our Charitable Partners(2) $ 793,345 $ 619,000 $ 540,000

Global Volunteer Month No. of participating offices 23 27 25 No. of volunteers 1,575 1,360 1,100 No. of projects 97 85 75 Since 2001 Total Volunteers 28,786 22,044 15,600 Total Volunteer Hours 164,377 120,400 86,000 Total Projects 1,915 1,383 868

(1) Some locations have not formally joined Global Outreach. (2) Based on the hourly wage for volunteers as determined by Independent Sector, a nonprofit and philanthropic advocacy research group. 44 State Street Corporation

State Street Leaders in the Community

Ronald E. Logue Joseph L. Hooley Chairman and Chief Executive Officer Vice Chairman Co-chair, United Way of Massachusetts Bay Campaign Boston College Corporate Advisory Board Metropolitan Boston Housing Partnership Boys and Girls Club of Boston

Joseph C. Antonellis William W. Hunt Vice Chairman Vice Chairman, State Street Corporation Chairman, Boston Partners in Education President and Chief Executive Officer, State Street Global Advisors James C. Caccivio, Jr. Boston Symphony Orchestra Board of Overseers Executive Vice President Japan Society of Boston Advisor, Knitting for Angels Museum of Fine Arts Board of Overseers

Joseph W. Chow Madge M. Meyer Executive Vice President Executive Vice President Asian Community Development Corporation Asian American Civic Association Board of Advisors

Jeff D. Conway Douglas J. Miller Executive Vice President Executive Vice President YMCA of Greater Boston Mutual Funds Against Cancer National Foundation for Teaching Maureen P. Corcoran Entrepreneurship of New England Executive Vice President William T. Blackwell Charitable Foundation James S. Phalen Executive Vice President Sharon E. Donovan Hart Vice Chair, American Red Cross of Massachusetts Bay Executive Vice President BELL Foundation Stonehill College Visit Business Committee David C. Phelan Gary E. Enos Executive Vice President Executive Vice President New England Legal Foundation President, William T. Blackwell Charitable Foundation Mutual Funds Against Cancer Alison A. Quirk Taunton Area Boys and Girls Clubs Executive Vice President Treasurer, Taunton Dynamites Girls Athletic Foundation Ellis Memorial House

Sean P. Flannery George A. Russell Executive Vice President Executive Vice President Catholic Charities of Greater Boston OneUnited Bank The Ryan Flannery Memorial Fund US Fund for UNICEF Northeast Region Stanley W. Shelton Executive Vice President Stefan M. Gavell Boston College Financial Advisory Board Executive Vice President Boston Symphony Orchestra Business Leadership Organization Robert R. Tarter Executive Vice President Pamela D. Gormley Treasurer, The Partnership, Inc. Executive Vice President Boston Ballet K. K. Tse Executive Vice President Alan D. Greene Chairman, Oxfam Hong Kong Executive Vice President Boston Minuteman Council of the Boy Scouts Michael L. Williams Executive Vice President Vice Chair, New England College of Finance Foundation 2006 Corporate Social Responsibility Report 45

Glossary

ARC GRI American Red Cross Global Reporting Initiative

BREEAM HVAC Building Research Establishment Environmental Heat Ventilation Air Conditioning Assessment Method LEED CBRE Leadership Energy and Environmental Design CB Richard Ellis MHIC CRA Massachusetts Housing Investment Corporation Community Reinvestment Act NASD CSR National Association of Securities Dealers Corporate Social Responsibility PAC DJSI Political Action Committee Dow Jones Sustainability Index PRI EASI Principles of Responsible Investment Environmental Asset Services, Inc. SEC EEO Securities and Exchange Commission Equal Employment Opportunity SRI EMS Socially Responsible Investment Environmental Management System SSgA ESG State Street Global Advisors Environmental, Social and Governance STT GCMC State Street Stock Symbol Global Commercial Microfinance Consortium UNEP FI GMI United Nations Environmental Programme Finance Initiative Governance Metrics International VAV Variable Air Volume 46 State Street Corporation

State Street Worldwide

Australia Italy Thailand Massachusetts Melbourne Milan Bangkok Boston Cambridge Japan United Arab Emirates Grafton Austria Tokyo Milton Vienna Quincy Luxembourg United Kingdom Westborough Belgium Luxembourg Westwood Brussels England Mauritius London Missouri Canada Port Louis Windsor Kansas City Montreal Ottawa Netherlands Guernsey New Hampshire Toronto Amsterdam Saint Peter Port Nashua Vancouver New Zealand Jersey New Jersey Cayman Islands Wellington Saint Helier Princeton George Town, Grand Cayman People’s Republic Scotland New York of China Edinburgh New York Chile Beijing Santiago Hangzhou United States North Carolina Hong Kong Winston-Salem France Singapore Alameda Singapore Irvine Germany Los Angeles Cologne South Africa San Francisco Eschborn Cape Town Frankfurt Georgia Munich South Korea Atlanta Seoul India Illinois Mumbai Switzerland Chicago Zurich Ireland Dublin Taiwan Kilkenny Taipei sustainability reporting

2006 GRI Content Index GRI Content Index

Strategy and Analysis 4.5 Linkage between compensation and p.12 1.1 Senior management statement p.8 organization's performance 1.2 Key risks and opportunities p.8-9 4.6 Processes to ensure conflicts of p.12 interest are avoided Organizational Profile 4.8 Internally developed statements IFC 2.1-2.3, Name, products, structure and IFC of mission or values, etc. 2.6-2.9 ownership, and markets served 4.10 Processes for evaluating highest p.12 2.4 Location of headquarters BC governance body's performance 2.5 Number of countries where p.46 the organization operates Commitments to External Initiatives 2.10 Awards received p.7 4.12 Externally developed initiatives to p.17 which the organization subscribes Report Profile 4.13 Memberships in associations or p.16 3.1 Reporting period IFC advocacy organizations 3.2 Date of most previous report IFC 3.3 Reporting cycle IFC Stakeholder Engagement 3.4 Contact points IFC 4.14 List of stakeholder groups engaged IFC, 9 by the organization Report Scope and Boundary 4.15 Basis for identification and selection p.3 3.5 Process for defining report content IFC of stakeholders 3.6 Boundary of the report IFC 4.16 Approaches to stakeholder p.11,15, 3.7 Specific limitations on the scope IFC engagement 21,29,37 or boundary 3.8 Basis for reporting on joint ventures, IFC Economic Performance Indicators subsidiaries, etc. EC1 Direct economic value generated p.4 3.9 Data measurement techniques IFC and distributed and the basis of calculations EC3 Coverage of the organization's defined p.33 3.11 Significant changes from previous IFC benefit plan obligations reporting periods EC6 Policy and proportion of spending p.18-19 on locally based suppliers GRI Content Index EC7 Procedures for local hiring and p.32 3.12 Table identifying location of the IBC proportion of senior management Standard Disclosures in the report EC8 Development and impact of p.23 infrastructure investments Assurance 3.13 Policy with regard to seeking IFC Environmental Performance Indicators external assurance for report EN3 Direct energy consumption p.22 EN4 Indirect energy consumption p.24 Governance, Commitments, and Engagements EN5 Energy saved p.23 4.1 Governance structure of the organization p.12 EN8 Total water withdrawal p.25 4.2 Independency of chair of p.12 EN16 Total direct and indirect p.24 governance structure greenhouse gas emissions 4.3 Number of independent and/or p.12 EN17 Other relevant indirect p.25 non-executive members greenhouse gas emissions 4.4 Mechanisms for feedback to p.12 EN18 Initiatives to reduce greenhouse p.23-24 governance structure gas emissions EN20 NO, SO and other significant p.25 SO7 Legal actions for p.16 air emissions anti-competitive behavior EN21 Total water discharge p.25 SO8 Sanctions for non-compliance p.16 EN22 Total weight of waste p.24 EN23 Total number and volume p.22 Social: Product Responsibility of significant spills PR5 Customer satisfaction p.18 EN28 Value of non-monetary sanctions p.22 PR6 Adherence to laws related to marketing p.18 EN30 Total environmental protection p.23-24 PR7 Marketing non-compliance p.18 expenditures PR8 Complaints regarding customer privacy p.16 PR9 Non-compliance with laws concerning p.16 Social: Labor Practices and Decent Work use of products and services LA1 Total work force p.30 LA2 Employee turnover p.30 FSSS: Environment LA3 Benefits provided to full-time p.33-34 F1 Environmental policies p.21 employees not provided to applied to business temporary or part-time employees F5 Improving staff competency p.26 LA4 Collective bargaining agreements p.32-33 F6 Environmental risk systems p.22 LA5 Minimum notice periods p.34 and procedures audits LA6 Management-worker health p.32-33 F9 Assets subjected to p.26 and safety committees environmental screening LA8 Programs to assist work force, p.33 F10 Voting policy on environmental issues p.26-27 families, community regarding diseases F11 Assets under management with p.27 LA9 Health and safety topics p.32-33 the right to vote LA10 Average hours of training p.31 LA11 Skills management and lifelong learning p.33-34 FSSS: Social LA12 Performance and development reviews p.31 CSR2 Structure and relevant IFC CSR responsibilities Social: Human Rights CSR3 Number of audits and auditor hours IFC HR1 Investment agreements on human rights p.17-18 CSR5 Non-compliance with any law p.16 HR2 Supplier screening on human rights p.18-19 or code of conduct HR3 Employee training on human rights p.31-32 CSR6 Stakeholder dialogue p.9 HR5 Operations in which freedom of p.33 INT1 Social responsibility issues p.30-32 association is at risk in human resources HR6-7 Operations where child labor and p.33 INT2 Staff turnover p.30 forced labor are a risk INT3 Employee satisfaction p.31 HR8 Security personnel human rights training p.32 SOC1 Contributions to charitable causes p.39-42 SOC2 Salaries, taxes and profits p.4-5, 39 Social: Society SUP1 Procedures to screen suppliers’ p.18-19 SO2 Business units analyzed for p.13 social performance corruption risks SUP2 Supplier satisfaction p.18-19 SO3 Employees trained in anti-corruption p.12-13 AM1 Social criteria applied p.17 SO4 Response to incidents of corruption p.13 in asset management SO5 Positions and participation AM2 Assets under management p.17 in lobbying p.17 with social benefit SO6 Political financial and in-kind p.17 contributions State Street Corporation State Street Financial Center One Lincoln Street Boston, Massachusetts 02111-2900 +1 617 786 3000 www.statestreet.com

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