STT State Street Corporation

State Street Global Advisors (SSgA), the investment management arm of State Street Corporation (NYSE: STT) and the largest institutional fund manager in the world, announced today that it has launched a U.S. version of its Pooled Asset Liability Matching solution (PALMS), first introduced in the U.K. in January 2005. U.S. PALMS is designed to help plan sponsors manage interest rate and duration risk within a liability-driven investment framework. Liability-driven investing (LDI) presents an alternative to conventional static benchmarks by structuring an asset allocation that better matches expected investment returns with the liabilities of an individual pension plan. This investing style has gained popularity in the U.K. and the Netherlands in response to issues of pension scheme solvency and changes in pension regulations. In the U.S., as regulatory and accounting changes focus more attention on plan funding and its balance sheet effect, liability management has assumed new urgency. "Making liabilities the point of reference for measuring pension fund risk transforms conventional assumptions about risk and return," said Alistair Lowe, director of global asset allocation and currency at State Street Global Advisors. "By addressing unrewarded liability risks, including interest-rate and duration risk, through a restructuring of the fixed-income portion of their portfolios, plan sponsors can better manage future liabilities and work to increase funding levels by allocating that 'risk budget' to return-generating strategies. State Street Global Advisors' U.S. PALMS provides an easy first step with a highly effective tool for hedging longer-dated liabilities." U.S. PALMS uses a pooled series of five-year swaps vehicles--primarily invested in zero coupon swaps--reaching out over 40 years to help plans extend the duration of their assets and manage changes in interest rates to ensure sufficient cash flows for projected liabilities. These easy-to-implement, flexible strategies offer a natural investment hedge to the dynamic properties of pension liabilities while keeping costs low and freeing plans from the need to manage collateral and counterparty risk on their own. Moreover, plans can choose how much liability risk they wish to remove by varying the percentage allocation to particular maturity strategies. State Street Global Advisors' U.S. PALMS offers institutional investors additional benefits over liability matching solutions currently available in the market, including transparent pricing, flexibility to adjust investment allocations across the maturity spectrum, fixed entry and exit spreads, and monthly valuations. By contrast, many alternative approaches are burdened with high costs, lack of flexibility, time-consuming processes and a level of complexity that contributes to lack of understanding of these products by pension fund trustees. "PALMS gives pension funds the opportunity to match their future liabilities in a flexible, cost-efficient way that can't be achieved using conventional bonds," said Lowe. "Because SSgA's solution addresses many of the cumbersome administrative and risk management issues up front, PALMS lowers the entry barrier for many funds interested in better managing their liability risk." The new strategy will be managed by State Street Global Advisors' Boston-based Global Fixed Income management team. State Street Global Advisors will provide market data on each of the five strategies to the pension fund's consultant so they can recommend any necessary changes in allocation weights in order to meet liabilities. To determine liabilities, pension funds will continue to rely on their consultants to provide actuarial advice. About State Street Global Advisors State Street Global Advisors, the investment management group of State Street Corporation, delivers investment strategies and integrated solutions to clients worldwide across every asset class, investment approach and style. With $1.4 trillion in investment programs and portfolios (as of December 31, 2005), State Street Global Advisors has investment centers in Boston, Hong Kong, London, Milan, Montreal, Munich, Paris, Singapore, Sydney, Tokyo, and Zurich, and offices in 25 cities worldwide. For more information, visit State Street Global Advisors at www.ssga.com. This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment. Those statements are based on current expectations and involve a number of risks and uncertainties, including those related to the pace at which State Street adds new clients or at which existing clients use additional services, the value of global and regional financial markets, the pace of cross-border investment activity, changes in interest rates, the pace of worldwide economic growth and rates of inflation, the extent of volatility in currency markets, consolidations among clients and competitors, State Street's business mix, the dynamics of markets State Street serves, and State Street's success at integrating and converting acquisitions into its business. Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in State Street's 2005 annual report and subsequent SEC filings. State Street encourages investors to read the corporation's annual report, particularly the section on factors that may affect financial results, and its subsequent SEC filings for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, April 10, 2006, and the company will not undertake efforts to revise those forward-looking statements to reflect events after this date.