Kelley MacDonald – Senior Vice President Investor Relations Ronald E. Logue – Chairman of the Board & Chief Executive Officer Edward J.

Resch – Chief Financial Officer & Executive Vice President

[Brian Born – Goldman Sachs] Mike Mayo – CLSA Howard Chen – Credit Suisse Nancy Bush – NAB Research Kenneth Usdin – Bank of America Securities Merrill Lynch Vivek Juneja – J. P.

Morgan [Greg Ketchum] – Citigroup Thomas McCrohan – Janney Montgomery Scott

Before Ron Logue our Chairman and CEO and CFO Ed Resch begin their remarks, I’d like to remind you that during this call we will be making forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in State Street’s 2008 annual report on Form 10K and subsequent filings with the SEC.

We encourage you to review those filings including the sections on risk factors concerning any forward-looking statements we make today. Any such forward-looking statements speak only as of today, April 21, 2009 and the corporation does not undertake to revise these forward-looking statements to reflect events or changes after today.

I’d also like to remind you that you can find slide presentations regarding the corporation’s capital, investment portfolio and asset backed commercial paper conduits as well as our first quarter earnings press release which includes reconciliations of non-GAAP measures referred to on this webcast can be accessed in the investor relations portion of our website as referenced in our press release this morning.

All of us trust banks, commercial banks, investment banks have been through and continue to go through the most challenging times we’ve seen in decades. Financial institutions have all dealt with similar problems and we all have our unique issues to address.

At State Street we look at the issues we face from two perspectives: how we manage through this current crisis with the most favorable financial results given the market environment; and just as important how do the decisions we make now position the company to take advantage of the emerging opportunities as the economy turns around realizing that we will be operating in a more regulated deleveraged world. We think we have an advantage over some of our competition because our business is focused upon servicing institutional investors rather than on traditional banking activities such as making loans, commercial or consumer.

Having said that we do have issues to deal with and we are taking steps to do so. I want to talk about how we are reshaping the company to operate more efficiently in the future and how we are playing close attention to building the type of balance sheet that will be necessary to support our business in this new environment.

Amid this uncertain environment, this morning we announced results that are favorable in light of the challenges we in the industry will continue to face this year. At the same time we continue to maintain positive earnings throughout the market crisis our regulatory capital ratios also remain strong.

Our Tier-1 Capital stands at 19.13% and our Tier-1 leverage ratio stands at 10.44%, each at March 31, 2009. We are implementing our tangible common equity improvement plan that we announced on February 5th at our Investor and Analyst day and increased our pro forma TCE ratio which assumes the consolidation of our asset backed commercial paper conduits that we sponsor.

As of March 31, 2009 the TCE ratio is 5.87% and the pro forma TCE ratio is 2.22%. An improvement in the pro forma ratio of 103 basis points compared to December 31, 2008.

Our TCE ratio when calculated on risk weighted assets is 8.15% and on a pro forma risk weighted basis is 3.34% each at March 31, 2009. Ed will discuss the details of this plan and our assumptions in a minute.

We’re also making progress reducing the size of our asset backed commercial paper program which stood at $29 billion as of December 31, 2007 and was about $23.9 billion as of December 31, 2008 and at March 31, 2009 was $22.5 billion. As I said, we’re making progress on our TCE improvement plan.

The unrealized after tax loss in the investment portfolio has improved about $465 million since December 31, 2008 from approximately $6.3 billion to approximately $5.9 billion as of March 31, 2009. The unrealized after tax loss in the conduit assets has remained about flat with December 31, 2008.

As of last Friday, April 17th the unrealized after tax loss has improved another $91 million to about $5.8 billion in the investment portfolio compared to March 31, 2008. Some of the highlights of the recent quarter include achieving positive operating leverage of 440 basis points compared to the first quarter of 2008, significantly reducing expenses in the first quarter compared to the first quarter of 2008 most notably in salaries and benefits as well as in other expenses.

$1.8 billion of assets in our investment portfolio either matured or paid down at par in the first quarter despite an average price of $0.91 per dollar at December 31, 2008. Through March 31, 2009 all of the assets in both our investment portfolio and our conduits continue to be current for principal and interest and we have had no defaults.

Although hedge fund markets continue to deleverage we continue to win mandates in servicing alternative funds as funds are beginning to move from prime brokers to independent third party administrators or custodians. Since the beginning of 2008 only one of our hedge fund clients has closed its business.

Our private equity business has added five new clients and has reached $138 billion in assets under administration. In total our alternative business has added 14 new clients, eight new hedge funds, five new private equity funds and one new client using our global risk services.

Our core business continues to perform well as overall declines in asset based fees are partially offset as we integrate the wins from the fourth quarter and first quarters for both servicing and management. As investor managers are faced with weak markets and increase expenses, they are looking to us to turn some of their fixed cost into variable costs.

We won mandates for about $111 billion of assets to be serviced in the first quarter. We believe our middle office offering which is now built out and operating at scale is a key differentiator for State Street and will be a competitive advantage as large investment managers seek to control fixed costs throughout outsourcing arrangements.

We’ve been in this business for nine years and have carefully built out this platform that is adaptable to markets worldwide. Let me briefly be a little more specific about some of our recent wins.

Among the 14 wins in alternative investments in the first quarter we’ve been appointed to provide fund administrative services for [See Change Investments]. We’re also now providing custody and foreign exchange services for the corporate and group services division of Canadian Western Trust, a wholly owned subsidiary of Canadian Western Bank.

Orlando Healthcare awarded a custody and accounting mandate to us for $500 million in assets. Canadian Broadcast Incorporation Pension Board of Trustees awarded us a $1 billion mandate to provide custody, accounting and securities lending.

[M&G] a UK investment manager awarded us a $5.8 billion pounds mandate to provide unit trust pricing and funds accounting. At State Street Global Advisors we are seeing demand for our passive index strategies as well as our ETS with net new business in the first quarter 2009 of about $37 billion.

State Street Global Advisors has been appointed as a portfolio strategist firm by [GEM] Financial Wealth Management a [GEM] Financial Company to manage a series of six tactical asset allocation portfolios. The portfolios will be implemented using State Street’s industry leading Spider exchange traded funds.

SGA also won a $160 million fund management mandate from [Fontaine] Funds, an Italian fund that represents about 168,000 workers in the chemical and pharmaceutical industries. The king fish of pension scheme and retirement trust London, added an incremental $40 million pounds to a passive global fixed income portfolio.

In the first quarter we launched four new exchange traded funds and also announced that Spider gold shares surpassed $30 billion in assets making it the second largest ETF by assets in the world. While we believe the company remains positioned to achieve its long term goals of annual performance, those being 8% to 12% growth in operating revenue, 10% to 15% growth in operating earnings per share and achieving a 14% to 17% operating churn on common equity, we have taken steps to align our expenses to a weaker market environment so we believe we are well positioned for an economic recovery.

Given the continued unsettled economic environment and more weakness in the first quarter than we expected, we now believe that in 2009 we will achieve nearer the weaker end of the ranges we established at our investor and analyst forum in February. Operating revenues to decline between 8% and 12% versus 2008, operating earnings per share to decline between 12% and 16% versus 2008 and operating return on equity to be between 14% and 17%.

Given the more than 40% declines in the S&P 500 and the MSCI EAFE for indexes in the past year, our servicing and management fee revenue performed well in these market conditions. Servicing fee revenue was down 20% versus the decline in the daily average valuations in the S&P 500 of more than 40% compared to the first quarter of 2008 and compared to the fourth quarter was down 9% versus an 11% decline in average daily equity valuations.

Management fee revenue was down 35% compared to the first quarter of 2008 versus a decline of 40% in average month end equity valuations compared to the previous year’s first quarter and was down 13% compared to the fourth quarter of 2008 where average month end equity valuations were down 15% compared to that quarter. Although trading services and securities lending in the first quarter of 2009 declined sharply from the fourth quarter of 2008, we gained new business from clients who have left their former providers or have decided to distribute their risk a bit more.

Until markets begin to repair and resume some degree of normalcy we expect softer revenue to continue particularly in foreign exchange and in securities finance. What is important to understand is that we have used this crisis as the basis for realigning our infrastructure to operate more efficiently and to be able to accommodate volume without adding significant expense.

The reduction in force was not a flat 8% cut in staff. It was a structured exercise realigning units, combining positions, transferring work and thinning management levels.

We are well positioned to add more efficiently and more profitably the business we continue to win. Now, I’ll turn the call over to Ed.

I’m sure our approach to a number of issues is of interest to you so I’ll touch on them before beginning my review of the quarter. First, our progress on our tangible common equity improvement plan that we announced at our investor and analyst day on February 5th.

Two, our view of FAS B’s announcements regarding FAS 157 and FAS 115 as well as changes to the after tax on unrealized loss in our investment portfolio and asset backed commercial paper conduits. Three, the potential impact of the newly announced government program called PPIP for Public Private Investment Partnership on the industry and on State Street in particular.

Four, the $84 million loan loss provision which we recorded in the first quarter. Five, finally the tax accounting associated with restructuring of certain of our international operations and the resulting change in our tax rate in the first quarter and in subsequent quarters of 2009.

First, the progress on our tangible common equity improvement plan; in the first quarter we improved on our pro forma TCE ratio which assumes consolidation of our asset backed commercial paper conduits from 1.19% at December 31, 2008 to 2.22% at March 31, 2009. 29 basis points of this improvement came from our organic capital generation, 15 basis points came from reduction in the size of our balance sheet, especially the size of earning assets, 30 basis points came from price improvement in the investment portfolio and asset backed commercial paper conduits, 14 basis points net came from securities paying down or maturing in the investment portfolio and another seven basis points came from assets paying down or maturing in the asset backed commercial paper conduits.

Lastly, eight basis points came from our dividend reduction. We are moderately behind the improvement to our TCE ratio that we projected in our investor and analyst forum presentation primarily due to less improvement in pricing during the first quarter on our portfolio and conduits than was reflected in our plan.

We have revised our plan slightly for the remainder of the year such that by the end of the second quarter we expected our pro forma TCE ratio to be about 3.16%, by the end of the third quarter to be about 3.94% and to be about 4.57% by year end. The details behind each of these quarterly goals are listed on Slide Five in the capital package which you can find on our website.

Next, the changes in recording unrealized losses and the impact on State Street; given the timing of the FSPs we elected to evaluate the impact during the second quarter and implemented the FSPs on the effective date which is as of June 30, 2009. We do not anticipate there will be significant impact on our earnings or our capital as a result of the adoption of the FSPs.

This is because we believe that the FAS B and its announcement on FAS 157 defined the price at which the value which securities must be marked as the exit price which is exactly the requirement of the current rule. So, in our view nothing changed.

So, as Ron indicated the unrealized after tax mark up on the investment portfolio improved by about $465 million from approximately $6.3 billion at December 31, 2008 to approximately $5.9 billion at March 31, 2009 and by another $91 million as of April 17th, last Friday. The unrealized after tax mark-to-market loss in the conduits as of March 31, 2009 was $3.6 billion, about flat with December 31, 2008 and also flat with April 17th, last Friday.

The after tax unrealized loss on the mortgage backed securities increased while it declined a like amount on the asset back securities. Regarding the PPIP, until further details of the program are known such as the amount of leverage that will be available to investors, we will not be able to predict the impact that the program will have on valuations for different classes of assets.

We remain hopeful that the program will have a positive impact on the valuation of securities in our investment portfolio and conduits. Right now we are focused on our TCE improvement plan which appears to be working as anticipated.

We noted in our press release this morning we recorded a provision for loan losses of $84 million to provide for the company’s revised estimate of future cash flows expected from certain commercial mortgage loans versus those expected at the time of acquisition of the loans which was in the fourth quarter of last year. The provision reflects our view of the impact of deteriorating economic conditions on the commercial real estate market.

As has been widely publicized the losses in the commercial real estate market have been significant and the loans we hold have been adversely impacted. Our expectations of cash flows may change in the future depending on conditions in the commercial real estate markets.

We have received net pay downs of $113 million and now carry these loans with the remaining net book value of $603 million or with a dollar price of about $0.50 on the dollar. We recorded income tax expense of $138 million for the first quarter 2009 compared with $273 million for the first quarter of 2008 with a decrease due to a lower level of pre-tax earnings and a lower effective tax rate.

The effective tax rate in the first quarter of 2009 is 22.5%,down from 345 in 2008 and is expected to be about 31.5% for the full year 2009. Consistent with our business strategy our intent to reinvest the earnings in certain of our non-US subsidiaries overseas allowed us to reduce taxes accrued with respect to 2009 earnings as well as certain taxes occurred in prior periods by $63 million.

This morning all of my comments will based on our operating basis results as defined in today’s press release. As Ron mentioned servicing and management fees actually performed well particularly in light of the more than 40% decline on average in market valuations on both the S&P and the EAFE comparing the first quarter of 2009 with the first quarter of 2008.

Clearly securities finance and trading services revenue were weaker especially when compared with the very strong 2008 where both businesses exhibited unusual growth. Compared to the first quarter of 2008 securities finance revenue declined 40% and compared to the fourth quarter it declined 45%.

This was due to lower demand offset by slightly improved spreads as well as our conservative investment management including shorter dated assets to increase liquidity in our funds. At quarter end we had $363 billion of securities on loan up from $347 billion at December 31, 2008.

The balance of securities on loan had improved from March 31, 2009 to about $415 billion as of last Friday, April 17th. About 10 additional customers have suspended participation in our program since our last disclosure and about eight have returned to our program.

In addition, we have added several new customers so all in the number of customers in our program is about flat with our disclosure in the fourth quarter. Average lendable assets for the first quarter of 2009 were $1.7 trillion dollars, down about 40% from $2.8 trillion in the first quarter of 2008 in line with market declines as measured by the S&P 500 or the MSCI EAFE fund.

The duration of the securities finance book is approximately 21 days. Foreign exchange was weaker due to a slowing cross border investing as well as the result of financial weakness globally.

Trading slowed as well due partly to declines in equity valuations. During the quarter however, we added new customers that are just beginning to affect revenue.

Our brokerage and other fee revenue was also impacted by losses in the trading account due to the performance of several of the bonds that we acquired in 2008 as well as a decrease in revenue management. I should note that we did not manage a proprietary trading desk.

These bonds were one offs that we acquired and we intend to sell as soon as practical. Now, for the remaining items in the income statement.

The decline in processing and other fees on a sequential quarter basis was primarily due to decreases in product related revenue. Of particular note, are the lower fees from the asset backed commercial paper program where fees from this program decreased from $28.5 million in the fourth quarter of 2008 to $23.8 million in the first quarter of 2009 due primarily to higher commercial paper funding costs.

Net interest revenue on an operating basis declined about 9% in the first quarter of 2008 and about 27% from the fourth quarter of 2008. The decline from the first quarter of 2008 was primarily due to a decline in customer deposit volume and spreads partially offset by lower interest rates worldwide.

The decline compared to the fourth quarter 2008 was due primarily to the decline in LIBOR rates after year end and narrower spreads in both the investment portfolio and on customer deposits. Net interest margin of 203 was down 25 basis points from the fourth quarter of 2008 on an operating basis.

Regarding operating basis expenses, a 26% decrease in first quarter expenses compared to the first quarter of 2008 and a 16% decrease from the fourth quarter of 2008. I will comment on only two areas, first salaries and benefit expenses declined 31% from the first quarter of 2008 due primarily to a reduction in incentive compensation in the first quarter of 2009 as well as our reduction in force which is now completed.

Salaries and benefits increased 5% compared to the fourth quarter which included a significant reduction in 2008 incentive compensation all of which was recorded in the fourth quarter of 2008. This change relative to the fourth quarter was partially offset by the impact of the headcount reduction which we just completed.

Other expenses also declined significantly in the first quarter of 2009 down about 45% from the first quarter of last year and down 64% from the fourth quarter of 2008. These declines were due primarily to reduced securities processing costs and a reduction in professional fees.

We plan on continuing to be vigilant in managing these expenses. Now, let me turn to the investment portfolio.

The size of the average investment portfolio at March 31, 2009 has declined about $3 billion since the first quarter of 2008. As you may recall as of November 7, 2008 we transferred most of our non-agency mortgage backed securities and our commercial mortgage backed securities portfolio to our hold to maturity portfolio so neither has negatively impacted our OCI any further this quarter.

The unrealized losses on each of these reflect the declining housing and commercial real estate valuations. So, while the unrealized after tax losses on our available for sale and our hold to maturity portfolio improved about $465 million, the improvement in the other comprehensive income was about $665 million.

In our investment portfolio slide presentation we have updated the data through quarter end for you to review. As of March 31, 2009 our portfolio is 84.3% rated AAA or AA, 73.1% AAA and 11.2% AA rated.

We have had no defaults in these assets and all are current as to principal and interest. The duration of the investment portfolio is very low at 1.3 years, the result of our conservative reinvestment plan.

At the same time we are not in the corporate or consumer lending business. The majority of the loans on our balance sheet are customer overdrafts, mostly overnight and are not subject to the types of credit risks associated with commercial or mortgage lending.

In the second half of 2008, our balance sheet has been much larger than normal due to increased liquidity from our customer deposits in the recent market environment and our participation in the Fed’s AMLF facility. However, in the first quarter customer deposits reverted back to pre Lehman bankruptcy levels and are excess liquidity was $3.7 billion at March 31st down $18.6 billion from year end.

As of March 31, 2009 we left about $30 billion in excess balances with central banks down from $52 billion at the end of 2008. Next, a further discussion on the asset backed commercial paper program.

As in the past, you can find a detail quarterly review of the assets displayed by type, country of origin and rating in the asset backed commercial paper slide presentation which you will find on our website. Also there, you will find the unrealized after tax mark-to-market losses for each asset type and the stresses we applied to them.

In the interest of time I will not discuss them in detail today. As of March 31, 2009 the conduits held assets of $22.5 billion, down from $23.9 billion on December 31, 2008 due to asset amortization and the strengthening of the US dollar.

65% of the assets are rated AAA, AA or A compared to an average computed by Moody’s of 53 banks of 29% as of December 31, 2008. None of the assets in our conduits are subprime, nor are there any structured investment vehicles in the conduit program.

However, during the first quarter of 2009 the conduits continued to experience more downgrades principally affecting about 66 securities in the US, RMBS and HELOC asset classes. These securities are downgraded in some cases from AAA, to below investment grade.

As of March 31, 2009 the assets continue to have a weighted average maturity of about four years and all securities in the conduits are current as to principal and interest. The commercial paper market continues to be considerably strained particularly since the end of the third quarter 2008.

As a result, we utilized the CPFF program to prudently manage our liquidity position. As of march 31, 2009 our conduit sold an additional $3 billion in commercial paper to the CPFF program for a total of $8.5 billion sold to that program as of March 31, 2009.

Since those assets are sold through a period of 90 days our weighted maturity on the commercial paper extended to 31 days. As of March 31, 2009 we held $4.7 billion of our commercial paper on our balance sheet.

As of last Friday, April 17th, several large customers have returned to our program and that amount had declined by $3.2 billion to $1.5 billion as markets became more active in early April after quarter end. You might ask why the conduits didn’t sell additional paper to the CPFF.

A number of factors determine whether the conduits will utilize the CPFF including our management of liquidity, the cost associated with each funding source as well as the conduits desire to maintain sufficient paper to sell to customers. Remember, any paper sold to the CPFF must be sold for 90 days.

Let me now make a few brief remarks on our outlook for net interest margin for 2009. First of all, 2008 was an anomalish year with unusual strong growth in net interest revenue and A typical net interest margin expansion.

In 2009 we assume that we will continue to delay investments in the investment portfolio in order to meet the goals of our TCE improvement plan. As of March 31, 2009 we have about $13 billion in assets maturing or paying down in the remaining three quarters of 2009 which are currently priced at a dollar price of about $0.84 on average.

In the second quarter we expect to continue to limit reinvestments and deposit most of the cash for maturing or paying down assets with central banks. Later in the year we will proceed cautiously with a conservative reinvestment strategy consistent with the goals of our plan.

We expect interest earning assets to decline relatively modestly over the remainder of 2009. We continue to expect the net interest margin to be between 170 and 180 basis points on average for the year excluding the impact of the AMLF in 2008 and 2009 and in 2008 also excluding the SILO adjustments to the net interest revenue.

The Bank of England recently reduced its overnight rate to 50 basis points and we expect it to remain there for the rest of the year the ECB recently cut its overnight rate to 1.25% and we expect it to remain there throughout the rest of the year and finally, we expect the Fed to keep the overnight fed funds rate at 25 basis points for all of 2009. So, in conclusion, despite a decline in revenue due primarily to the weakness in the equity and fixed interest markets we performed well in the first quarter.

The conduits remain unconsolidated, their assets continue to decline and the unrealized loss has stabilized compared to year end. Although we have not suffered any losses from the conduit program, that program continues to experience heightened stress due to the downgrades in US RMBS assets and several of the WRAP providers.

We essentially expect to gain little benefit from the FAS 157 announcement this quarter. However, we did see some improvement at March 31, 2009 and again at April 17th in the unrealized losses of the investment portfolio.

As we’ve noted previously we expect our net interest margin for 2009 to be between 170 and 180 basis points. But, we maintained good expense control this quarter and expect that to continue throughout the year.

We made progress on our TCE improvement plan and expected to return to our pro forma TCE ratio to be in line with our 4.25% to 4.75% target range by year end. Now, I’ll turn the call back to Ron.

So, where do we stand? While signs of improvement are beginning to appear, we’re still being cautious about the outlook for this year as many uncertainties remain as reflected in our updated outlook.

To address the uncertainties we’re focused on the factors we can control. The steps we announced in the fourth quarter to reduce expenses have positioned us more favorably for 2009 and for a return to more normalized markets.

At the same time we’ve maintained our capacity to add new business being positioned to benefit from increased business as markets improve and we execute upon our marketing goals. In addition, in the first quarter we controlled expenses and achieved significant positive operating leverage compared to the first quarter of 2008.

Our servicing and management fee revenue while down from the previous years’ first quarter and record fourth quarter compared favorably to the declines in the S&P 500 and the MSCI EAFE index. We continue to believe that this period is one in which we have opportunities to build market share.

Our TCE improvement plan is progressing and has resulted in demonstrable improvement in our ratio. Prepayments were a little lower than our assumptions but overall we improved our adjusted pro form TCE by 103 basis points and have set a target of over 4.5% for yearend within our long range target for TCE ratio of 4.25% to 4.75%.

While we, like others in our industry expect operating results in 2009 to decline from 2008 in our case from record levels in 2008, I want to emphasize that our core business is strong and that we are well positioned for continued growth in our long term growth ranges upon market recovery. We’re beginning to see brightening signs but we have a way to go before government programs and other market forces take full effect and investors step back in to the markets in a significant way.

Until then we’ll continue to be vigilant in calibrating our expenses to align with the market environment while insuring we continue to invest in solutions for our customers who are increasingly looking to us for a broader range of services. With that, Ed and I are very happy to take any of your questions at this time.

I guess first to start and I apologize if you said this earlier, I joined late, but JP Morgan for their TSS business, assuming a flat equity market was actually guiding to the rest of the year run rate revenue being higher than it was in the first quarter. Given what you’re seeing, do you share that view?

I can’t compare to what JP Morgan Chase is doing. If my memory serves me well they have other sources of income in that, things like corporate cash management things, so I don’t think it’s a good comparison.

I guess maybe asked a little bit differently relative to Bank of New York they were also making comments that some of the deleveraging in the securities lending business was probably behind us at this point, when we look at your securities lending business, do you feel like we’re fully through the deleveraging process and what we’re seeing now, is kind of base line revenue run rate we can forecast out? Or, do you think there’s still some deleveraging in that book to go?

You saw the volume numbers we gave pretty much flattened out and actually increased from the end of the quarter to recently. So, from a volume point of view I’d say things have pretty much bottomed out.

Then lastly if I could, other banks that seem at high level to have somewhat similar levels of risk in securities book are taking pretty big OTTI charges the past couple of quarters, including this one. When you look out over the rest of the year and kind of embedded within your guidance is there any OTTI assumption included in the guidance?

And, as we think about just kind of reported earnings rather than operating earnings should we expect any meaningful OTTIs as we look out to the rest of the year?

We don’t include any expected OTTI in any of the guidance that we give. If we have any, we consider it operating as we have in the past, as we did in 2008 and we can’t predict the future obviously but OTTI and the determination we’ve made under the newly issued FSP in the second quarter, OTTI is something we evaluate every quarter.

We go through a process, we identify candidates that are possible candidates and then we do a detailed cash flow analysis on each of the securities and make a determination.

I just wanted to understand more of the expense levers that you have and to make sure I’m reading you correctly, so you’re shrinking the balance sheet, you expect the margin to go down, soft revenues continue, that shouldn’t be surprise. So, I guess my question is what percent of your expenses are fixed versus variable and how much more in levers do you have now that the investor financial savings are far along?

I think as Ed said we finished our reduction in force, about 2,200 people but I think importantly as I said we realigned our infrastructure so I think we’re at a point where we have a pretty efficient operating infrastructure. I don’t anticipate any more reductions there but we seem to have quite a bit of room anyways.

When you think about the significant reduction in revenue and the ability to generate positive operating leverage, I think we have some capacity there for the future.

With regard to the revenues, the non-US story has been a bright spot and I’m just wondering if that’s now more a relative negative to the extent that you might be a few months behind the US. What are you seeing the US versus non-US in terms of revenues?

Actually, US is picking up. We’ve got I think as we said on the investor day a lot of discussion in the US in terms of outsourcing the complete operations of US fund managers and hedge managers as well.

That’s continuing and there’s also when you look at that kind of business, US and non-US component to it and I think we’re somewhat uniquely positioned to be able to satisfy those kind of requirements in different jurisdictions. So, the pipeline continues to be full.

I guess, is the change in the pipeline better, worse or the same non-US versus US?

I’d say US has picked up, non-US has always been pretty strong. The one thing I would say is the decision making takes a lot longer in some of these deals because they’re bigger deals.

So, there’s a lot of activity. In the first quarter we sold a lot of business but the decision making takes some time so the realization of that revenue is slower right now.

Is that slower decision making kind of what you saw back in 2000? Are we going through that kind of cycle again?

That’s interesting, it could be. Yes, we probably are a little bit.

Apologies if I missed this in your prepared remarks but can you discuss your latest thoughts on the TARP program and potential payback there?

No, we didn’t talk about it. We like everybody else, I’m sure would like to pay back the TARP money but there’s a process we all have to go through and we’ll go through that process just like everybody else.

At the appropriate time we’ll make those decisions. That’s probably the only thing I can say about that.

Ed thanks for the detail on the revised TCE improvement plan assumptions. Looking at the changes just from the February analyst day there isn’t much change in your prospects for organic capital generation particularly in the back half of the year so coming of a weaker than expected revenue quarter does the revised plan assumption assume you anticipate a material revenue rebound in the second half?

And, if so, what do you think drives that or am I just missing something, another offset?

The TCE improvement plan is predicated on the guidance that we gave which is towards the weaker end of the ranges that we put forth so both of them are totally in synch Howard.

Then finally for me, with respect to the securities lending business in particular, in recent quarters you guys have been helpful in discussing that the lower volumes being somewhat offset by the richer spreads. Could you give us some of your latest kind of thoughts and color around that business in particular?

Well, the volumes did come in the fourth quarter, they’ve rebounded somewhat in the first quarter but, they’re still below the very robust volumes that we had going back a couple of quarters but the spread environment has improved in overall market which has been that the rates have come down a bit, spreads have come down a bit which has not been a positive driver to the earnings results of the securities lending business particularly.

Maybe just to follow up on that end, any kind of I guess specifics that you can provide, not to get so near term oriented but if I thought about the fourth quarter environment versus what you saw in the March quarter, any sense of the magnitude of spread compression within that business?

The average spread for the entire program Howard, just to put it in some numbers, first quarter was about 84 basis points, in the fourth quarter of last year it was 137 basis points.

Ron, I guess I’m still missing something here in sort of getting to the final shape of the company after TCE improvement. How big do you want these investment portfolios to be and as a percentage of assets are the conduits going to be eliminated or downsized to some kind of minimal size.

If you could just give us a sort of preview of sort of the shape of the company to come?

Let me talk about the conduits first, similar to what we’ve said in the past I think is we definitely want to downsize the conduits. I think I’ve said in the past we want to make it at least half of what it once was but I think the important metric is to look at the conduits with respect to how much capital we have and I think we have to look at it that way so we’re going to be doing that going forward.

We’re going to be continually look to bring those conduits down. With the investment portfolio we don’t make loans.

We invest in securities so in today’s environment that’s probably a pretty good place to be. So, we’re going to continue to have probably a sizeable investment portfolio we’re just obviously look to see the content of that investment portfolio going forward.

But, it’s clear to us that we’re going to live in a much more highly regulated deleveraged world and we’re going to have to look at that. But, that’s the nature of our business.

I guess that’s about what I could say about that.

Are there other places in the company that you would be looking to derisk? Are there places in SGA, are there products or whatever volatilities products?

I guess I’m just trying to get to the ultimate risk profile of the company.

I think we’ve done a pretty good job putting the risk structure in place. I think we’ve identified where all the risks are.

Generally speaking what I would say is that traditionally what you see in a lot of banks is where you find the risks are in some of the smaller businesses that you may not put a lot of focus on. We’ve done that.

There are a number of smaller businesses that we looked at where the risk reward ratio may not be what we want it to be so we’ll take a look at those things and restructure if necessary. But, in terms of the major pieces of business, I think we’ve got a pretty good handle on the risk associated with those businesses.

If you look back at our history and probably the history of others, it’s those smaller businesses that end up with the different kind or risk reward ratio. So, we spent a lot of time looking at those businesses and looking at the risk reward ratio of those businesses and we’ll make decisions going forward based on that.

Just one question on the guidance again, I was just wondering, you mentioned that obviously there are a couple of pieces in the revenue environment that are weaker and you did indicated that the tax rate would be lower throughout the year so Ed I was just wondering can you give us a little more detail on if the tax rate is a net benefit perhaps and keeps you in that guidance range, specifically outside of the market levels which are more obviously, what areas of the business are you expecting to be a little tougher relative to your prior expectations on the top line perspective?

I don’t think there are any particular area Ken that we expect to be tougher over and above what we said on February 5th. We expect the foreign exchange securities lending and net interest revenue performance to be about in line with what we’ve said previously and a lot of that is where certainly [inaudible] is driven by the TCE improvement plan.

So, there’s not any one thing per say to point to in terms of changed revenue expectation. We still expect ’09 to be a challenge year on the top line across the board.

Within in that would you say is there any change in fundamentally to second quarter is typically a very historically has been a seasonally strong area in terms of foreign exchange and sec lending most specifically. Has anything changed with regards to the deleveraging environment or activities that would deem that not to be the case this second quarter as far as seasonality is concerned?

No, we don’t foresee anything that is relative to this second quarter as opposed to some others.

Just the general environment which is slower volumes we do see relative to the environment.

Then the last question just on the TCE rebuild plan, just to clarify, the $457 that you’re expecting from yearend that does not assume any improvement from here as far as unrealized?

Prices, correct.

So there’s nothing baked in to that $457 by yearend and that is based on directional change in either the portfolio or the conduit?

No. The same assumptions we made on Feb 5 Ken.

A couple of question, firstly asset management can you talk a little bit about when you look at what you see in terms of outflows versus inflows this quarter? Your passive assets were down about 8%, can you comment on how much of that was market driven versus business flows or volume flows.

Most of that was market driven as I think we’ve said even though we enjoyed some net new business, the ETF business continues to be strong. There was no one thing that I could point to that would make a big difference.

The next one is probably appropriate for Ed, other expenses what’s a good run rate for that as we look out given that was down so sharply this quarter, how should we think about it for the rest of the year?

Well, I think you should think about it as being up a bit from this quarter where we enjoyed a pretty significant benefit certainly sequentially. In terms of the full year, I think the exact line you should be thinking about probably in terms of about a 15% or so decline over last year’s full year number.

Lastly, one little thing, with the CP conduits, I noticed that there was a lot more of the CP back on the balance sheet as of March 31st. Any reason why that’s come back on balance sheet as opposed to tapping the treasury?

Well, we saw some customers back away a little bit from the asset class, not just necessarily our program but we believe the asset class more broadly in the first quarter. So we saw some more come on the balance sheet in general.

The decision whether or not to put any CP that we get on our balance sheet in to the CPFF as a function of our own liquidity and the cost associated with putting them in the CPFF for the 90 day term. In addition, we’ve seen some customers subsequent to the end of the quarter come back in to the asset class and we’ve seen some improvement there to the first couple of weeks of the second quarter.

So, we try to strike a balance between the liquidity needs, cost and the amount of paper we want to have available to sell to customers and that’s the decision we made at the end of the quarter.

A question on the conduits, you had it looks like about $1.4 billion reduction in size, can you comment on how much of that was cash flow or if there were any conduit assets that were added to the balance sheet?

It was all cash flow and the strengthening of the US dollar. There were no conduit assets added to the balance sheet.

Would it be fair that in the past you’ve mentioned $1.2 billion to $1.5 billion reduction in size expectation for the conduits, does that continue to be a reasonable assumption going forward?

It’s about a billion a quarter Greg.

Then on the credit, you had mentioned the provision that you took was related to the commercial real estate portfolio was I believe was around $800 million?

That is correct.

Is there anything else, I know most of your blending is related to securities activities, is there anything else in the credit portfolio that we should look for or that concerns you going orward?

No. I mean the commercial real estate loans are an isolated position that we have that we took on in the fourth quarter of last year.

As we said, as a matter of course lend per say in that marketplace. So, clearly those loans are things that we’re focused on and looking at but nothing else.

Could you give us an idea of how much of your earning assets are in highly liquid securities? BK this morning disclosed that they shifted a lot of their assets and balance sheet to really save securities so I’m just trying to really make comparisons?

We have been putting a lot of excess liquidity as we noted Tom in to our central bank accounts over the last several quarters and that’s probably been the main structural shift if I can call it that that we’ve made over the last several quarters. We have not, and that balance was obviously decreased from December to now as I noted in my comments, I think from $52 billion down about $30 billion and that’s a function of customer deposits being put back to work by our customers which we think is a good thing.

We have not made any conscious structural shift to move any elements of the portfolio in to some safer securities whether it’s treasuries or agency mortgage backed so I would say from our standpoint it’s central bank balances that would be the thing you should focus on to do the comparison you want to try and draw.

Shifting to the outsourcing trends, it sounds like there’s a pickup in activity surrounding outsourcing which is something we haven’t heard about for some time. It was a big kind of discussion item a few years ago and now it sounds like something is changing in the market.

Maybe you can talk some more about what’s going on in the hedge fund space, I think you pointed to that in particular as being more right for kind of outsourcing activities.

Tom, in the hedge fund space there is a keener desire for hedge funds to outsource the administrative functions for a number of reasons, obviously the cost pressures to the fact that you have an independent third party doing these things, I think last time we called it the made off effect and that’s pretty intense and that’s continuing and we have a pretty robust platform to do that through our purchase of [inaudible], three or four years ago. So, that’s enjoying a lot of discussion.

Then, the traditional outsourcing of investment management back offices it has I think enjoyed a resurgence and when I say that a resurgence in terms of discussion, not necessarily sold deal but with a lot of discussion about the outsourcing of much larger investment management organizations. People are looking at it, we haven’t seen a lot of closed deals I think as I said in an answer to a previous discussion the sales cycle is a lot longer because these are big decisions.

But, there’s a lot more discussion about doing that for the obvious reasons of trying to turn a fixed cost in to a variable cost, reduce the cost of future expense and reduce the cost of future expense and the allocation of capital is becoming so dear now and investment management companies need to allocate that towards investment performance and distribution. So, there’s a much greater desire to reduce the percentage of capital directed towards administration and I think over the longer period of time we would become the beneficiary of that.

Do you see anything like on the regulatory side that would kind of accelerate that process?

Oh yes, we see it every day and it’s clear to us it’s going to be a much higher regulatory burden on any type of investment management organization. We haven’t necessarily seen that translated yet in to rules and regulations which then we’ll translate in to products but it’s beginning to happen.

So, you’ll see that in the intermediate and longer term and those that have fairly robust accounting and administrative capabilities I think will take advantage of that but that’s going to come and I think it’s going to come when it does very quickly with a lot of regulatory burden and again another reason why these organizations want to eliminate that expense. So, if they can avoid that they’re going to.

I don’t have a lot of closing remarks, I just want to remind you that I think what we have done is position the company to take advantage of growth opportunities that will emerge. We’ve built I think a very efficient processing platform given what we’ve done in the last two quarters and we’re going to take advantage of it and I think you’ll see that going forward.

With that I’d just say thank you and we’ll talk again soon.