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1 The following forms State Street s UK Pillar 3 disclosure under BIPRU R in respect of BIPRU R (1) Information concerning the decision-making process used for determiningg the remuneration policy, including if applicable, information about the composition and the mandate of a remuneration committee, the external e consultant whose services have been used for thee determination of the remuneration policy and the role of the relevant stakeholders The Executive Compensation Committee ( ECC ) of State Street Corporation has oversight and approval of the remuneration policy and practices within State Street s operations globally, ncluding thosee in its UK operations. There is no separate remuneration committee for State Street in the UK. In accordance with the listing standards of the Neww York Stock Exchange, ECC members are senior professionals with strong financial and business knowledge, whoo are independent memberss of the board of directors of State Street Corporation (the Board ). They are appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee. There are currently five members of the ECC E who are: : Dame Amelia C Fawcett, Linda A Hill, Robert S Kaplan, Richard P Sergel (Chairman) and Robert E Weissman. One member of the ECCC (currently Dame Amelia C. Fawcett) serves on bothh the Risk and Capital Committee of the Board ( RCC ) and the ECC, providing continuity between the two committees. The RCC is responsible for reviewing and discussing with management the assessment and management of risk withinn the State Street group. In addition, other independent directors of the Board who are not members off the ECC attend ECC meetings from time to time. The ECC has sole authority to: (i) (ii) retain and terminate any compensation consultantss and other advisers used byy the ECC to assist a in the evaluation of compensation for the Chief Executive Officer ( CEO ) and/or other executive officers of State Street Corporation; and approve these consultants and advisers fees and other retentionn terms. The ECC engages Aon Hewitt, a management andd compensation consulting firm, f to provide compensation consulting as part of its review of executive compensation, and retains its ownn external legal counsel, Shearman & Sterling LLP. The ECC operates under a Board-approved charter. Under this charter, the ECC oversees all the compensation plans, policies, and programs of the State Street group in which senior executives participate and incentive, retirement, welfare and equity plans in i which certain other employees of the State S Street group participate. It also oversees the alignment of the group ss incentive compensation ( IC ) arrangements with the group s financial safety and soundness, consistent with applicable related regulatory rules and guidance. In overseeing the compensation plans, policies and programs, the ECC takes full account of the strategic objectives of the State Street group and its duties to shareholders and other stakeholders. Thee ECC seeks to preserve shareholder value by ensuring the successful retention, recruitment and motivation off employees. The CEO and ECC review IC allocations for all Executive Vice Presidents ( EVPs ) and review annually the compensation of all employees who are a in the top 100 globally with respect to total compensation. The ECC approves the overall allocation of the ICC pool, the main variable compensation plan used within the State Street group. The CEO initially allocates IC poolss to business units based upon a variety of factors, which may include budget performance, achievement of key goals and other considerations. The final expenditure and a overall allocation between current and deferred awards is then reviewed by the ECC prior to payment, which normally occurs in the February or March following the performance year to which thee awards relate. 1

2 The ECC meets regularly with senior risk officers to discuss the implications of compensation policy and practices for risk and risk management. Human Resources are heavily involved in overseeing the remuneration process and this process is well documented. State Street has also introduced a formal process for integrating the perspectives of the RCC into compensation decisions made by the ECC. The RCC evaluates annually the material risks applicable to State Street, as well as management actions during the year designed to mitigate those risks. The RCC then makes recommendations to the ECC as to positive or negative factors to be considered in compensation decisions. These recommendations are presented to the ECC by the Chair of the RCC, who is also a member of the ECC. By way of example of how remuneration decisions take risk implications into account, during the 2011 and 2012 reviews (for the 2010 and 2011 IC compensation years, respectively), the senior risk officers, including the Chief Risk Officer, the Chief Legal Officer, the Head of Global Human Resources and the ECC s independent compensation consultant, met with the ECC to discuss the implications of compensation policy and practices for risk and risk management in 2010 and 2011 and review the incentive compensation arrangements for the group s employees. BIPRU R (2) Information on the link between pay and performance The policies and practices as set out below apply on a global basis to all employees of the State Street group. Introduction The group aims to attract and retain high-performing employees via its reward strategy. The group recognises that, for the business to succeed, it must remain competitive and cultivate an environment that encourages employees to learn and grow in their careers. There are five key principles that define the compensation strategy: An emphasis on total compensation. A pay-for-performance philosophy. Group, business unit and individual performance drive overall compensation levels. A competitive compensation package to attract and retain key talent which is regularly benchmarked against a defined peer group that contains both asset management and asset-servicing companies. An alignment with shareholder interests as reflected through the mix of cash and equity compensation. Compliance with applicable regulations and related guidance, including limiting incentives to take excessive risks. Through a process of structured discretion in determining IC pool funding and individual incentive award decisions (please see below as to how such decisions are taken), and the use of deferred equity as a pay delivery vehicle (with ex-post adjustments during the deferral period, further details of which are set out below), our compensation system is made appropriately risk-sensitive and links current decisions and actions to future risk outcomes. A comprehensive set of factors such as risk and capital are considered in addition to business performance and competitiveness. Base Salary Base salary is one element of an employee s compensation. Employees base salaries are determined by role, job band and by a number of other factors such as individual performance, proficiency level, year-over-year increase guidelines, budget and position to market. Variable Remuneration i.e. IC State Street operates a fully-flexible and discretionary bonus policy. The compensation policy is structured so as to achieve a balance between fixed and variable components. 2

3 The overall IC bonus pool is based on the group s profits. The primary component in the calculation of the IC bonus pool is operating-basis 1 Net Income Before Tax and Incentive Compensation ( NIBTIC ). The allocation of the IC bonus pool by business unit is decided by reference to the performance of the relevant business unit. The sub-allocation of the business unit pool to an individual is determined by reference the individual s performance. In its establishment of the IC bonus pool, the ECC reviews operating-basis NIBTIC calculations and identifies any applicable adjustments to reflect its assessment as to elements of revenues and expenses that should apply, should not apply or should apply differently for IC purposes. In making these determinations, the ECC considers a number of factors, which may include capital, risk, business and other considerations. Specific capital measurements considered in 2011 and 2012 (for the 2010 and 2011 compensation years, respectively) included the Tier 1 riskbased capital ratio; the tangible common equity (TCE) ratio 2 ; unrealized portfolio gains and losses; and the Tier 1 leverage ratio. Historically, the ECC has exercised its discretion in the determination and application of NIBTIC to reduce the IC bonus pool. On an individual basis, both financial and non-financial performances are factors in determining IC. Non-financial or qualitative factors are evaluated subjectively and, for the 2011 performance year, were based upon the following four goals (explained further below): driving strategy, delivering highly-valued services and solutions to our clients, enhancing our culture and engaging employees. In making individual IC awards, the group permits the use of discretionary adjustments to awards for non-compliance with internal policies and procedures or significant audit findings. The group also has a performance planning and review ( PPR ) process for employee compensation that involves a collaborative planning process in which employees and their managers establish performance goals that align individual goals with corporate goals (in respect of the 2011 performance year in relation to the four categories noted above). Mid-year and year-end progress reviews are conducted and the employee s performance level is reviewed and rated on a five-point scale ( consistently exceeded expectations, often exceeded expectations, consistently achieved expectations, sometimes achieved expectations and unacceptable performance ). This rating is a key factor used by managers and the ECC in determining IC and salary decisions during the annual compensation planning process. Typically, employees receiving a rating of 2 or lower will receive a much-reduced or zero IC award. Performance management employs consistent processes to cascade goals, create "line of sight" and measure actual individual and organizational performance. Frequent feedback is a critical element of State Street's PPR process. State Street's PPR process is designed to maximize individual performance and further the accomplishment of its corporate goals, as follows: Drive Our Strategy 1. Build company value through successful execution of our strategy 2. Optimize our response to the opportunities and requirements of anticipated new financial services regulation 3. Deliver on financial commitments Deliver Highly-Valued Services and Solutions to our Clients 1. Transform global operating model to build capacity, increase efficiency and fuel innovation 2. Continuously improve the client experience 1 State Street measures and reports its financial performance in accordance with U.S. generally accepted accounting principles, or GAAP. It also separately measures and compares its financial performance on an operating basis, which reflects revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of its business. State Street reviews its results on an operating basis, as these results, in addition to results presented in accordance with GAAP, facilitate comparisons from period to period and the analysis of comparable financial trends with respect to State Street s normal ongoing business operations. 2 The TCE ratio is calculated by dividing consolidated total common shareholders' equity by consolidated total assets, after reducing both amounts by goodwill and other intangible assets net of related deferred taxes. Total assets reflected in the TCE ratio also exclude cash balances on deposit at the U.S. Federal Reserve and other central banks in excess of required reserves. The TCE ratio is not required by GAAP or by bank regulations, but is a metric used by management to evaluate the adequacy of State Street's capital levels. Since there is no authoritative requirement to calculate the TCE ratio, State Street s TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. 3

4 Enhance Our Culture 1. Build a performance culture by driving clear goals, accountability for results and a sense of urgency and empowerment 2. Make risk and capital management integral to our strategy and how we run the business Engage our Employees 1. Continuously strengthen our talent globally The PPR process is a three-staged approach to performance management. The first stage, called Performance Planning, involves the employee and manager working in partnership to ensure that performance goals and targets, skills and behaviours, and development goals are set collaboratively for every employee at the beginning of the performance year. Goals are recorded in the PPR documentation with final approval being given by the relevant manager. Stage two focuses on the facilitation of regular review and feedback between the employee and manager throughout the year. The third stage is the completion of a year-end review by mid-december and includes a performance level description. Where applicable, individual financial targets are incorporated into the Performance Planning stage of the PPR process and the level of achievement against these financial goals will form part of the year-end review process and contribute to the performance rating. BIPRU R (3) The most important design characteristics of the remuneration system, including information on the criteria used for performance measurement and risk adjustment, deferral policy and vesting criteria For the 2011 performance year (paid in March 2012), IC awards consisted of deferred equity awards, and immediate cash payments. The allocation of deferred compensation is formulaically-driven based on total value of an individual s 2011 IC. In general, the more senior an employee is, the greater the percentage of IC that was paid in deferred equity. At the most junior level of the organisation, awards are generally small and were delivered entirely in immediate cash. Of those employees receiving deferred equity, the proportion of IC delivered in this form typically ranged on average from 40% at junior levels to 80% at the most senior level. For all UK Code Staff, upon vesting, all equity delivered pursuant to a deferred equity award is subject to a 6- month retention period during which recipient is prohibited from sale or other transfer of the equity. Ex-Post Performance Adjustment Beginning with IC awards for the 2011 compensation year, State Street added a malus-based forfeiture provision to the equity award agreements of all material risk takers, including UK Code Staff. In addition, State Street has for several years included in its equity award agreements for all employees, a contractual provision requiring any unvested equity to be forfeited in the case of termination on account of gross misconduct. Gross misconduct is determined in State Street s discretion and includes conduct which places State Street at legal or financial risk. For members of the Management Committee ( MC ), this forfeiture is triggered upon a termination on account of misconduct that was materially detrimental to the interests or business reputation of State Street or any of its businesses (again, determined in State Street s discretion). The Vesting Period, Vesting Schedule & Proportion Subject to Performance Adjustment For all Code Staff, at least 60% of IC for the 2011 compensation year was delivered in the form of deferred equity awards. All deferred equity awards for Code Staff vest on an annual pro-rata basis over four years following the award date and are subject to the above ex-post performance adjustments. Other Information Members of State Street s MC, including one MC member in the UK, also received Performance Related Stock Units ( PRSUs ) as a portion of their deferred equity for the 2011 compensation year. Performance over a oneyear period (2012, in the case of awards made for the 2011 compensation year), will determine, based upon satisfaction of a GAAP return on equity ( ROE ) performance metric as certified by the ECC, what percentage of the shares awarded will be eligible for vesting. The maximum payout under these awards is capped at 100%, i.e., there is no leverage or upside associated with the awards. The shares that are eligible for vesting, based on satisfaction of the ROE metric, vest on an annual pro-rata basis over four years following the award date. 100% of PRSUs for Code Staff are subject to the above ex-post performance adjustments and to a 6-month retention period during which recipient is prohibited from sale or other transfer of the equity. 4

5 BIPRU R(6) Aggregate quantitative information on remuneration, broken down by business area. Asset Management Banking Operations & Broker/Dealer Other (CEO & Control Functions) All Code Staff Total Remuneration ( k) of Code Staff 7,964 1,736 10,046 19,746 BIPRU R(7)(a) Aggregate quantitative information on remuneration, broken down by senior management and members of staff whose actions have a material impact on the risk profile of the firm indicating the amounts of remuneration for the financial year, split into fixed and variable remuneration, and the number of beneficiaries. "Senior Management" "Members of staff whose actions have a material impact on the risk profile of the firm" All Code Staff Number of "Code Staff" Total Fixed Remuneration ( k) 2,622 1,425 4,047 Total Variable Remuneration ( k) 11,747 3,953 15,700 5