State Street Corporation · NYSE:STT
State Street — Merger or Acquisition (November 2002)
27 slides from State Street's merger presentation, Nov 5, 2002
Slide 1: Acquisition of Deutsche Bank's Global Securities Servicing Business
STATE STREET. For Everything You Invest In« Acquisition of Deutsche Bank's Global Securities Servicing Business EMeGence Ome WOOs /eading provider of SENVcCeSOMHe NG ODHINSttutional Investole November 5, 2002
Slide 2: Forward-Looking Statements
STATE STREET. Forward-Looking Statements This presentation may contain forward-looking statements, as defined by federal securities laws, including statements about the financial outlook and business environment. Any such statements are based on current expectations and involve a number of risks and
Slide 3: Agenda
STATE STREET. Agenda Summary of the transaction Description of Deutsche Bank’s Global Securities Services (GSS) business Strategic benefits Transaction terms and financial effect Integration framework
Slide 4: Summary of the Transaction
= Summary of the Transaction
Slide 5: Transaction Summary
STATE STREET. Transaction Summary = Acquiring most of Deutsche Bank’s Global Securities Services (GSS) — Includes global custody, fund administration services, Depotbank services, securities lending, performance measurement and benefit payments businesses worldwide, and domestic custody and securiti
Slide 6: Strategic Benefits
ee STATE STREET. Strategic Benefits = Establishes State Street as a global leader in investment servicing = Positions State Street as a leader in Europe’s high- growth investment servicing market = Provides significant economies of scale and scope = 10-year contract to service approximately €350 bil
Slide 7: Description of Deutsche Bank's Global Securities Services Business
STATE STREET. Description of Deutsche Bank’s Global Securities Services Business
Slide 8: GSS Key Services and Locations
eee STATE STREET. GSS Key Services and Locations Country/Region GSS Location Services Provided United Kingdom London Fund Administration Tireland Edinburgh Performance Measurement Dublin Global and Local Custody Securities Lending Europe Frankfurt Depotbank Fund Administration Global Custody Securit
Slide 9: GSS Market Position
ee STATE STREET. GSS Market Position = Global Custody — One of Europe's largest custodians, based on AUC of approximately €2.2 trillion — WM Company is the industry leader in performance measurement = Fund Administration — Europe's largest provider of fund administration services — Leader in offshor
Slide 10: Slide 10
Slide 11: Substantial Global Opportunities
STATE STREET. Substantial Global Opportunities United Kingdom — Significantly expands State Street's servicing for pension, insurance, and unit trust industry segments — Leverages State Street's UK fund accounting capability Continental Europe — Establishes State Street as a leading asset service pr
Slide 12: Europe: A Growth Frontier
STATE STREET. Europe: A Growth Frontier $6.4 trillion total market — Collective Investments: $3.9 trillion — Pensions: $2.5 trillion 2002-2007 projected growth faster than U.S.* — Collective Investments: 18%-20% — Pensions: 8%-10% Pension reform under way Opening of proprietary distribution channels
Slide 13: Substantial Deutsche Asset Management Opportunity
STATE STREET. 7" Substantial Deutsche Asset Management Oppogainicy ons act tgemens EZ] OO a Cus RINT ome = One of the largest asset managers in Continental Europe and in the world = AUM of approximately €350 billion (at 9/30/02) = Deutsche Asset Management: 10-year contract with State Street — Repre
Slide 14: Update on State Street's Strategic Initiatives
Update on State Street’s Strategic Initiatives STATE STREET. = Strong continued focus on core business of global investment servicing and investment management — Purchased hedge fund administration company, IFS, to further strengthen alternative investment servicing capabilities; contributing to the
Slide 15: Transaction Terms and Financial Effect
Transaction Terms and Financial Effect =
Slide 16: Transaction Terms
STATE STREET. Transaction Terms = Initial payment of premium to net book value of approximately $1,200 million ~— Asubstantial portion of premium is tax deductible over 15 years = Holdback, expected to be approximately €300 million, resulting in maximum total purchase premium of about $1,500 million
Slide 17: Financial Effect
ee STATE STREET. Financial Effect = Transaction adds approximately €700 million of additional revenues * State Street's total AUC grows to approximately $7.9 trillion = Expected to be dilutive by approximately $(0.01-0.03)"to 2003 EPS, excluding 2003 pre-tax restructuring costs of approximately $90-
Slide 18: Cost Savings
= Estimated pre-tax cost savings: — $125-150 million in 2003 — Incremental $50-75 million in 2004 — Incremental $50-75 million in 2005 Cost Savings = Three-year plan — Eliminate systems duplication — Reduce technology expenditures — Adjust headcount and occupancy costs
Slide 19: Valuation
STATE STREET. Valuation Multiple valuation methods considered IRR exceeds State Street's cost of capital Valuation in line with precedent transactions, measured by multiples of revenues Significant potential to increase profit margin 18
Slide 20: Financing
STATE STREET. Financing * State Street will finance the transaction from: — Existing balance sheet capacity and proceeds from anticipated corporate trust divestiture — Issuance of equity and equity-related securities of approximately $500 million = Precise amount, timing, and mix subject to market c
Slide 21: Balance Sheet Impact
STATE STREET. Balance Sheet Impact = €7 billion of client deposits acquired as part of the transaction — Deposits transferred to State Street's balance sheet, replacing other funding sources — Deposits subject to revenue sharing while on Deutsche Bank's balance sheet = Additional estimated €7 billio
Slide 22: Integration Framework
BY Integration Framework
Slide 23: State Street's History of Successful Transitions
ee State Street’s History of Successful Transitions State Street is the industry leader in successfully integrating complex custody and fund administration transactions STATE STREET. v Investors Fiduciary Trust Company 1995 v Federated 1997 y Wachovia 2000 v Liberty Financial 2000 y PIMCO 2000 v Llo
Slide 24: Expected Timetable
‘STATE STREET. i Expected Timetable Milestone Estimated Timing = Announcement of the signing of a definitive agreement Today, November 5 = Customary U.S. and European regulatory approvals November 2002 — February 2003 = Financing = Prior to closing = Targeted closing = Within four months * Transacti
Slide 25: Summary and Review
= Summary and Review
Slide 26: Leadership and Growth
STATE STREET. Leadership and Growth = Represents a unique and highly strategic transaction for State Street = Dramatically accelerates State Street's strategic expansion into European marketplace = Expands U.S. business, while providing economies of scale on a global basis = Establishes State Street
Slide 27: For Everything You Invest In
STATE STREET. For Everything You Invest In~