State Street Corporation · NYSE:STT
State Street — Investor Day (May 2003)
131 slides from State Street's investor day presentation, May 6, 2003
Slide 1: Investor and Analyst Forum
State Street Investor and Analyst Forum 5.06.03 om Prom STATE STREET.
Slide 2: Reminder
SS ———————————— —(it STATE STREET. Reminder This presentation includes discussion of State Street Corporation’s financial and business goals and strategies, which may be perceived as “forward-looking statements” as defined by Federal Securities Laws. Actual results could differ materially, and there
Slide 3: Agenda: Morning Session
STATE STREET. Expanding Foundation for Growth David Spina Agenda Fueling Financial Our Performance Growth Ed Resch Ron Logue Jay Hooley Morning P|
Slide 4: Agenda: Afternoon Session
STATE STREET. Agenda CONCURRENT CONCURRENT Equity Performance Investment Wealth Trading Enhancing Management Manager Strategies Technology Strategies Solutions Stan Shelton Joe Antonellis Tim Harbert Anne Tangen Afternoon Ses
Slide 5: Expanding Our Foundation for Growth
Expanding Our Foundation for Growth David A. Spina STATE STREET. For Everything You Invest In=
Slide 6: Largest institutional investment manager
. Largest in ni in assets under oem = Largest institutional investment manager with $788 billion* in assets under management = Largest provider of securities lending services = Premier provider of foreign exchange services ——-*As of March 31, 2003 _#
Slide 7: Share of funds and pensions serviced
_ We calculate over 30% of the mutual fund prices that are reported to the NASDAQ each day. = We service 25% of U.S. pension funds and 40% of U.S. public funds. = We service 24% of U.K. pension funds and pooled funds. = We service 21% of German pension funds and pooled funds.
Slide 8: State Street is the only choice
State Street is the only choice Enormous leverage
Slide 9: Business services overview
Investment Wealth Alternative Operations Manager Investment Services Services Services wail Equity | Execution
Slide 10: Business services overview
Investment Operations Services Equity Wealth Manager Services Alternative Investment Services
Slide 11: Business services overview
Investment Wealth Alternative Operations Manager Investment Services Services Services —— Equity Execution Be
Slide 12: A Trusted Partner to Many of the World's Top Investors
— ———————— —<—it STATE STREET. We Are a Trusted Partner to Many of the World’s Top Investors ! Our State Street relationship epitomizes the definition of a strategic partnership. We utilize State Street for a number of services, including global custody, passive and active investment management, FX
Slide 13: Market share metrics
Total funds serviced 9.7% European funds serviced 16.4% Globalassets managed 14. Electronic shares traded = 46.0% Geographic markets served _ 5.8% ee _
Slide 14: We Are Continuing to Grow
aaa i =—Se STATE STREET. We Are Continuing to Grow Operating Earnings Per Share* 2.20 2.08 2.00 1.85 150 1.16 1.00 051 0.50 0.00 92 93 94 9 9 97 98 99 00 Of 02 *Operating eamings as defined in State Street Corporation SEC flings.
Slide 15: We Are a Growth Company
STATE STREET. We Are a Growth Company = Sustainable real growth in earnings per share = Revenue: 12.5% real CAGR, 2000-2010 = Operating ROE: 13-15% in 2003 and 2004
Slide 16: Highly Focused Yet Highly Diversified
— i ———————S —<— STATE STREET. We Are Highly Focused ... Yet Highly Diversified Investment Investment Servicing Management Focus on sophisticated global investors Research and Trading Analytics Services A diversified range of services
Slide 17: Strategy for Continued Growth
STATE STREET. Strategy for Continued Growth a Continue to grow share in core Invest in strategic businesses opportunities + Manage expenses = Investment = Wealth manager = Reduce operating servicing services expenses by $125 = Investment = Alternative inv. tnillion by the end management services of
Slide 18: We Aspire to Be One of the World's Great Companies
" z —x—— tts STATE STREET. We Aspire to Be One of the World's Great Companies A trusted partner to our clients ... Both global and local ... Innovative and high performing ... Growing ... With staying power.
Slide 19: Questions?
Questions? 2 STATE STREET. For Everything You Invest in=
Slide 20: Fueling State Street's Growth
Fueling State Street's Growth Ronald E. Logue President and Chief Operating Officer STATE STREET. For Everything You Invest la~
Slide 21: How We Are Fueling Our Growth
SSS Ss STATE STREET. How We Are Fueling Our Growth Integrating Global Securities Services (GSS) Investing in Strategic Opportunities Realigning Our Infrastructure and Absorbing New Business
Slide 22: Integrating GSS
STATE STREET. Integrating GSS
Slide 23: Operating Goals Today
STATE STREET. Operating Goals Today [State Street Communications.) [Current Outlook Pre-tax cost savings of approximately $125-150 million in the first full year after close..." —November 5, 2002 "State Street is ahead of schedule in reducing GSS expenses, and expects to meet or exceed its targets f
Slide 24: GSS client revenue profile
7 r bene $1.9T Total AUC $575M Total Revenue 289 — = Top 100 clients plus eo ning, A Ao DeAM represent 71% Clients 16% 7: Top 26-100 Clients of total revenue = 10-year contract for DeAM business 27% Top 25 Clients
Slide 25: Client Retention Outlook
tention Outlook DeAM As of April 15, 2003 Total Revenue Retention Status 100% Remaining Client Relationships Top 26 - 100 Top 25 DeAM eh
Slide 26: Client Retention Outlook
— SS _--— — —lll ‘STATE STREET. Client Retention Outlook Out of Scope As of April 15, 2003 Total Revenue Retention Status Me S6OM 28% Firm Commitment 100% Out of Scope 100% Remaining Client Relationships Top 26 - 100 Top 25 Deam
Slide 27: Client Retention Outlook
STATE STREET. Client Retention Outlook Top 25 As of April 15, 2003 Total Revenue Retention Status Out of gj Scope av 2 Firm a Converted Commitment Client In Discussion - a Relationships 28% ; enue ——— —— } Top 26 - 100 qop2s 27% «=| 18% J y a | Lost 28% DeaM 6h Optimistic 41%
Slide 28: Client Retention Outlook
STATE STREET. Client Retention Outlook Top 26 — 100 As of April 15, 2003 Total Revenue Retention Status ae Ga £855 ——— Remaining ran Converted Client an Drecuscton 20 Commitment Relationships 4 1% ] 33% oer Top 26-100 leh , <_ $3i—_ Top 25 DeaM Optimistic 48%
Slide 29: Client Retention Outlook: Remaining Clients
STATE STREET. Client Retention Outlook Remaining Clients As of April 15, 2003 Total Revenue Retention Status Out of [ee scope ce Firm poe ; 79% PA 3, Commitment Remaining — 20% i ee 12% Relationships J Top 26 - 100 Top 25 al Pn piscleeon Optimistic 28% 46%
Slide 30: Loss Status as of April 15, 2003
STATE STREET. Loss Status as of April 15, 2003 4 83.0 3.4 59% 45.3 5.2 90% 3.5 60% 147.8 $17.4M 3.01% ' ' g S
Slide 31: Other Announcements
STATE STREET. Other Announcements State Street will make additional payments of up to an estimated € 300 million, based upon the performance of the acquired business..." —November 5, 2002 State Street will make additional payments of up to an estimated € 360 million, based upon the performance of th
Slide 32: Projected Payment Schedule
STATE STREET. Projected Payment Schedule $2.27" $2.27" $1.9T $XXT EE $700M $620M"** $575M""* $XX PURCHASE PRICE $1.5B $1.5B UPFRONT 116——_—_—__—> HOLDBACK ce $400M $XX * Approximate total revenues are based on annualized projected results, * Assets based on 831402 ** Excludes delayed closings
Slide 33: Investing in Strategic Opportunities
STATE STREET. Investing in Strategic Opportunities investment Management Equity Trading Services Alternative Investment Servicing Investment Operations Services Wealth Manager Services
Slide 34: Investment Management
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Investment Management ‘enue growth in SSgA’s US « Alternative global product set -- Assets in real estate, currency, global fixed income, and emerging markets all grew by more than 25% in 2002. = Enhanced Equity Indexing establishe
Slide 35: Investment Management Update
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Investment Management 04/01/2002 — 03/31/2003 Update = Assets increased by $116.9 billion = Banco Central de Chile = BBC Pension Trust Limited = Credit Suisse Private Banking = Missouri Public Schools Retirement System a = Norges B
Slide 36: Equity Trading Services
CC ——i“‘(.é:‘(—(D! STATE STREET. Investing in Strategic Opportunities Equity Trading Services = Net Equity Trading Revenue up 41%" Management Revenue up 58%" = Our top 100 clients control over 50% of the world’s AUM”™* = 19 of the world’s 20 largest asset managers are our clients = State Street has
Slide 37: Equity Trading Services: Leader in Transition Management
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Equity Trading Services = Industry's largest Public Pension Fund Transition - $30 Billion = Industry's largest Endowment Transition - $23 Billion = A major transition for a large Public Fund in Japan Leader in = Ratings in Global!
Slide 38: Alternative Investment Servicing
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Alternative Investment Servicing Market = Hedge Fund Market Today = $650.0 billion* Overview = Projection by 2010 = Over $2.0 trillion"* = Leverages existing expertise = Serves existing client base = Opens opportunities for a new c
Slide 39: Alternative Investment Servicing Update
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Alternative Investment Servicing 7 = Purchased IFS in July 2002 Eran = Installed $10 billion in new assets currently servicing Ueda $46 billion = CALPERS. Key Client = Wellington Hedge Management Wins = AQR Capital Management LLC =
Slide 40: Investment Operations Services
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Investment Operations Services 04/01/2002 — 03/31/2003 = Largest investment operations outsourcer currently Business servicing over $530 billion in assets globally Update = The only investment operations provider supporting a globa
Slide 41: Wealth Manager Services
CC ——i“‘(.é:‘(—(D! STATE STREET. Investing in Strategic Opportunities Wealth Manager Services = Outsourcing internal operations of global HNW investment = $27T held by high net worth individuals worldwide, estimated to grow 8-10% per year” = Wealth managers looking for scaleable, integrated, global/
Slide 42: Wealth Manager Services Update
CO: —=——C—<“<;3Z; STATE STREET. Investing in Strategic Opportunities Wealth Manager Services 04/01/2002 — 03/31/2003 asus = Grown assets serviced from $0 to $94 billion in 12 months Update = 16 new clients, including J & W Seligman = Broad based success across all segments Key Client ae ees Wins y —
Slide 43: Realigning Our Infrastructure, Absorbing New Business
STATE STREET. Realigning Our Infrastructure Absorbing New Business
Slide 44: Deepening Employee Experience
CO: —=——C—<“<;3Z; STATE STREET. Deepening Employee Experience Turnover Rate 22% 1% 11% p = = 5 O+ 2000. 2001 2002 mm % Turnover Rate
Slide 45: Volume growth statistics
RE) t5s41s 2,051,101 496,945 32% Pomoc = 49.071 74526 25,455 52% Fre) 2.2e7.519 © 3,251,852 964,333 42% 81 195 126 180% [eenSystensSeners 1022 1,500 468 45% [PUPRRSSinginMiPS) == 7,801 12,279 4A18 50%
Slide 46: Summing Up
SSS Ss STATE STREET. Fueling State Street's Growth Summing Up GSS On -Track New Businesses Growing Rapidly Environment to Absorb Volume Is Right Continue to Win Business Globally
Slide 47: Winning Worldwide
Winning Worldwide Joseph L. Hooley Executive Vice President Investor Services STATE STREET. For Everything You Invest la~
Slide 48: How We Are Winning Worldwide
SSS Ss STATE STREET. How We Are Winning Worldwide In A Difficult Environment Growing Core Business Deepening Market Share Expanding the Market Accelerating Growth in Europe
Slide 49: New Relationships with Clients
SS "™"=si—‘“‘“CSCS STATE STREET. Investor Services New Relationships with Clients 01/01/2001 — 3/31/2002 ACE Insurance Hawail ERS __Assante Asset Management Lord Abbett Ca da Pension Plan NYSTRS s 0% Nuveen rach) Satna Emory University merits ARAG UBS Warburg Philips Pensioenfonds
Slide 50: New Relationships with Clients
AXA Ohio Public Employee's Retirement Clarington Funds Inc System James Irvine Foundation ‘Texas Municipal Texas Teachers Retirement System Allianz Dresdner AM, Luxembourg Second Swedish National Pension Fund Aventis Pensionstreuhand e. V. Swiss Life AM, Belgium Deutscher Ring Versicherungen Tate &
Slide 51: New Relationships with Clients: Transfer Agency
C—O SSS"™"-S—“‘“‘Cs™CSCSCS STATE STREET. Investor Services New Relationships with Clients Transfer Agency 01/01/2001 — 3/31/2002 [iotshareholder Accounts” 2,534,236 Nuveen Investec Scottish Amicable St. James Place
Slide 52: New Relationships: Transfer Agency and European Wins
4,068,527 Alberta Treasury Logix Clarington SEI Calvert 529 Plan TIAA 529 Plan Mississippi Citigroup 529 Plans T. Rowe Price Lehman Van Kampen Funds (ey European Wins Allianz Dresdner Royal London Cofunds Schroders UK Isis Tunbridge Wells Prudential’ M&G
Slide 53: Competitive Wins and Losses
STATE STREET. Investor Services Competitive Wins and Losses BoNY 67 56 10 41 Citibank ) 83 40 4 Deutsche 86 3 Be: 0 JPMorgan Chase 123. 12 45 2 Northern 5 4 83 a: Mellon 20 9 13 33 PERe 161 ie) a v3 All Others 181 5s 140 56 TOTAL 648 182 355 154
Slide 54: Key competitive wins
03/21/2008 Scudder Investments $135 Internal GE. Asset Management $64 Internal ALarge Insurance Company $30 Mellon Schroders UK $20 Deutsche Dwight Asset Management $15, Internal Phoenix Life Insurance Company $14 Internal Minnesota Mutual $5 Internal
Slide 55: Summing Up
SSS Ss STATE STREET. Summing Up We are ... Winning Against Our Competition Expanding our ‘share of customer’ Increasing Our Footprint in Europe
Slide 56: Financial Performance
Financial Performance Edward J. Resch Executive Vice President and Chief Financial Officer STATE STREET. For Everything You Invest la~
Slide 57: Discussion
CO: —=——C—<“<;3Z; STATE STREET. Discussion Financial Results Building From a Solid Foundation Expense Reductions Financial Strength Delivering Value to Stockholders
Slide 58: Operating results
Dollars in millions except per erating results as defined in STT’s SEC filings ee se [FotalRevenue 941 92 1,033 read 6 am = ; a Reine sus $0 $145 inc cr $(0.02) $0.44
Slide 59: Operating Results Q4 FY vs Q1 FY '03
CO: —=——C—<“<;3Z; STATE STREET. Operating Results* Q4 FY 02 v. Q1 FY ‘03 Dollars in millions except per |FeeRevenue | $686 $790 +15% (Aether Revenue | 266 243 2% [FotalRevenue | 952 1033 +9% [Fetalexpenses | 691 797 +15% c— | ar a4 +5% [Netincome $174 $145 $17% [Biuteders $0.84 $0.44 19% [Biluted'Sh
Slide 60: Building on a Solid Foundation
STATE STREET. Building on a Solid Foundation
Slide 61: Operating Revenue
CO: —=——C—<“<;3Z; STATE STREET. Operating Revenue* $ in millions 5,000 CAGR $3962 4,000 $3,944 15-year: 14% 10-year: 15% 3,000 5-year: 11% $2,342 2,000 987 1,000 4 $ $529 i a lee 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 *Onerating results as defined in STT's SEC flings. * Impact of Corporate
Slide 62: Operating Earnings
STATE STREET. Operating Earnings* $in millions 800 600 4 400 4 200 4 $83 ae a 1 iia nen 87 88 89 90 91 92 93 94 95 96 97 98 99 00 O1 02 *Onerating results as defined in STT's SEC flings. * Impact of Corporate Trust business which was sold in December 2002
Slide 63: Revenue by business line
nlny. Services ~ Inv. Management © FX & Brokerage # Sec lending # Processing & other Ce Galny. Services Inv. Management # FX & Brokerage Sec lending # Processing & other
Slide 64: Net Interest Revenue
CO: —=——C—<“<;3Z; STATE STREET. Net Interest Revenue Moderate duration balance sheet Lower risk, lower reward — Low credit exposure — Reduced exposure to unexpected rate swings Unfavorable rate environment Service to our clients
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Slide 66: Expense Reductions
STATE STREET. Expense Reductions
Slide 67: Operating Expenses
STATE STREET. | * Operating Expenses $ in millions 3,500 $2,859 3,000 4 CAGR $2,841] 15-year: 15% 4 ae 10-year: 15% 6-year: 10% 2,000 | 3-year: 7% 1734 1,500 4 1,000 4 otoommnne ea: 0 - | | 0 ieeinetecstenst 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 * Operating results as defined in STT's SEC
Slide 68: State Street Expense Reduction Plan
CO: —=——C—<“<;3Z; STATE STREET. State Street Expense Reduction Plan Goal: To Remove $125 Million in Cost This Year . Management reduced rate of growth of expenses in $705 million of baseline expenses in | —Down $15 million in Q2 _ —Down $55 million in Q3 & Q4 C controllable expenses adcount by up to
Slide 69: GSS Expense Reduction Plan
CO: —=——C—<“<;3Z; STATE STREET. GSS Expense Reduction Plan Goal: Reduce Ongoing Expenses by $125-$150 Million in First Year of Operation $50-$75 Million in Years Two and Three Convert significant number of clients in Q3 and Q4 — Reduce headcount at Jersey City and Nashville Retire systems at those l
Slide 70: Financial Strength
STATE STREET. Financial Strength
Slide 71: Average Balance Sheet: Liabilities & Equity
CO -— —C—‘“<s~<;é3é STATE STREET. Average Balance Sheet $ in ifions Liabilities & Equity 160,000 90,000 + $84,842 80,000 4 $76,466 $77,656 70,000 4 60,000 4 50,000 4 Securities Sold 40,000 > Fed Funds
Slide 72: Average Balance Sheet: Assets
STATE STREET. Average Balance Sheet $in millions Assets 100,000, 90,0004 $84,842 80,0004 $76,466 $77,656 70,0004 60,0004 40,000 4 ds 30,000 4 20,0004 Investment Portfolio o i T T
Slide 73: Financial Guidelines
CO: —=——C—<“<;3Z; STATE STREET. Financial Guidelines Consistent, conservative management Opportunistic approach Maintain well-capitalized status Retain AA rating Use balance sheet for client activities
Slide 74: Operating NIAT growth, equity growth and ROE
1995 1998S «1997 «Ss 1998) 1999-2000» 2001-2002 mm Operating NIAT Growth m™" Average Equity Growth —-=Operating ROE
Slide 75: Summary
CO: —=——C—<“<;3Z; STATE STREET. Summary = Build on a strong base = Integrate GSS on plan to achieve $0.01 to $0.03 dilution per share = Leverage balance sheet when appropriate = Continue development of new initiatives = Service one-third more assets with the same number of people as State Street emp
Slide 76: Performance-Enhancing Technology
Performance-Enhancing Technology Joseph Antonellis Chief Information Officer Investor and Analyst Forum May 6, 2003 STATE STREET. For Everything You Invest In=
Slide 77: Technology is a Competitive Advantage for State Street
4 ology is a Competitive ener for State Street « Can accommodate rapid increases in volume without affecting productivity or response time « Deliver consistent levels of excellence on time, every day + Deliver capabilities to all major regions of the world - Provide clients with unlimited access to
Slide 78: Integration and support of strategic initiatives
Integration « 2 Support of strategic initiatives Increasing productivity a ae (a Ensuring business continuity ~~ SSS _
Slide 79: Consolidating GSS onto State Street platforms
= Automated clier operational = Incremental product development under way. Scope within capacity of existing resources = Consolidating GSS onto State Street applications and platforms
Slide 80: Business services overview
Investment Wealth Operations Manager Services Services ; Alternative edu Investment Services - ill
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Slide 131: State Street
{State Street Logo Appears Here] S TATE S TREET For Everything You Invest In SM www.statestreet.com