425 1 form425_67815.txt FIRST UNION FORM 425 Filed by First Union Corporation Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Wachovia Corporation Commission File No. 333-59616 Date: June 27, 2001 This filing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's and Wachovia's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's and Wachovia's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which the combined company will conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's capital markets and asset management activities. Additional factors that could cause First Union's and Wachovia's results to differ materially from those described in the forward-looking statements can be found in First Union's and Wachovia's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to First Union or Wachovia or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. First Union and Wachovia do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. The proposed transaction will be submitted to First Union's and Wachovia's stockholders for their consideration, and, on June 27, 2001, First Union filed an amended registration statement on Form S-4 with the SEC containing a joint proxy statement/prospectus of First Union and Wachovia and other relevant documents concerning the proposed transaction. Stockholders are urged to read the joint proxy statement/prospectus contained in the registration statement and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). First Union and Wachovia, and their respective directors and executive officers, and others may be deemed to be participants in the solicitation of proxies from the stockholders of First Union and Wachovia in connection with the merger. Information about the identity of participants in the solicitation and a description of their direct or indirect interests, by security holdings or otherwise, is set forth in an exhibit to the registration statement and in the joint proxy statement/prospectus regarding the proposed transaction. THE FOLLOWING NEWS RELEASE WAS ISSUED BY FIRST UNION AND WACHOVIA [FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE] Wednesday Media Contacts: June 27, 2001 First Union: Mary Eshet 704-383-7777 Wachovia: Ed Hutchins 336-732-4200 Investor Contacts: First Union: Alice Lehman 704-374-4139 Wachovia: Robert S. McCoy Jr. 336-732-5926 Marsha Smunt 336-732-5788 FIRST UNION AND WACHOVIA TO MAIL PROXY MATERIALS Merger Proxy Statements Declared Effective by SEC Charlotte and Winston-Salem, N.C. - First Union Corporation (NYSE: FTU) and Wachovia Corporation (NYSE: WB) announced today that their joint merger proxy statement has been declared effective by the Securities and Exchange Commission. Printing of the proxy statements will begin immediately and distribution to Wachovia and First Union shareholders is expected to begin by the end of this week. First Union's annual meeting of shareholders is scheduled for July 31, 2001, and Wachovia's annual meeting of shareholders is scheduled for August 3, 2001. L.M. Baker Jr., chairman and chief executive officer of Wachovia, said, "In our view, the merger of equals with First Union is a thoughtful, strategic combination designed to give Wachovia shareholders the same Wachovia dividend rate and potential for superior earnings. We believe the case for our merger is compelling, and we welcome the opportunity for shareholders of both companies to review this proposed combination." Ken Thompson, chairman and chief executive officer of First Union, said, "The mailing of the proxy statement is an important milestone in the merger process. The integration planning process continues at full speed, and we are more enthusiastic than ever about the growth prospects for the new Wachovia. We look forward to the votes on July 31st and August 3rd, when we shareholders of both companies will have the opportunity to vote on this combination." First Union: (NYSE:FTU), with $253 billion in assets and stockholders' equity of $16 billion at March 31, 2001, is a leading provider of financial services to 15 million retail and corporate customers throughout the East Coast and the nation. The company operates full-service banking offices in 11 East Coast states and Washington, D.C., and full-service brokerage offices in 47 states and internationally. Online banking products and services can be accessed through www.firstunion.com. Wachovia (NYSE: WB) is a major interstate financial holding company offering banking and financial services to individuals primarily in Florida, Georgia, North Carolina South Carolina and Virginia and to corporations and institutions throughout the United States and globally. Wachovia Corporation is headquartered in Winston-Salem, N.C., and Atlanta and had assets of $75.6 billion at March 31, 2001. Wachovia Web site is located at www.wachovia.com. This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's and Wachovia's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's and Wachovia's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which the combined company will conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's capital markets and asset management activities. Additional factors that could cause First Union's and Wachovia's results to differ materially from those described in the forward-looking statements can be found in First Union's and Wachovia's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to First Union or Wachovia or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. First Union and Wachovia do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. Additional Information The proposed transaction will be submitted to First Union's and Wachovia's stockholders for their consideration, and, on June 27, 2001, First Union filed an amended registration statement on Form S-4 with the SEC containing a joint proxy statement/prospectus of First Union and Wachovia and other relevant documents concerning the proposed transaction. Stockholders are urged to read the definitive joint proxy statement/prospectus when available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain (or will contain) important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that have been or will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). First Union and Wachovia, and their respective directors and executive officers, and others may be deemed to be participants in the solicitation of proxies from the stockholders of First Union and Wachovia in connection with the merger. Information about the identity of participants in the solicitation and a description of their direct or indirect interests, by security holdings or otherwise, is set forth in an exhibit to the registration statement and in the joint proxy statement/prospectus. THE FOLLOWING IS A TRANSCRIPT OF A PRESENTATION AT A CREDIT SUISSE FIRST BOSTON SEMINAR. THE STATEMENTS THEREIN REPRESENT THE CURRENT OPINIONS, BELIEFS AND EXPECTATIONS OF THE SPEAKER. 1 1 2 3 4 5 6 7 JUNE 26, 2001 8 DON MCMULLEN 9 WEBCAST WITH 10 CREDIT SUISSE FIRST BOSTON 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 >> AS YOU ALL KNOW, THE LARGE CAP BANKS, BANKS 2 GENERALLY HAVE BECOME INCREASINGLY DIVERSE, A LOT 3 OF COMPANIES PLAYING AN INCREASINGLY ACTIVE ROLE 4 IN THE ASSET MANAGEMENT BUSINESS. 5 OUR NEXT SPEAKER THIS MORNING IS DON MCMULLEN, 6 VICE CHAIRMAN AND HEAD OF FIRST UNION'S CAPITAL 7 MANAGEMENT GROUP, A GROUP WHICH INCLUDES ITS 8 BROAD-BASED MANAGEMENT BUSINESS FOR ABOUT $170 9 BILLION, AND IT ALSO INCLUDES THEIR RETAIL 10 BROKERAGE BUSINESS. 11 BETWEEN 1995 AND 2000 THROUGH ACQUISITIONS AND 12 ORGANIC GROWTH, FIRST UNION MANAGED TO GROW ITS 13 ASSETS UNDER MANAGEMENT AT AN IMPRESSIVE NEAR 30% 14 RATE. 15 I'M GOING TO TURN THE PODIUM OVER TO DON, BUT, 16 FIRST, I'VE BEEN GIVEN THE OPPORTUNITY TO READ A 17 LITTLE SEC MANDATED THING HERE. 18 BEFORE WE BEGIN, PLEASE LET ME REMIND YOU THAT 19 ANY FORWARD-LOOKING STATEMENTS MADE DURING THIS 20 PRESENTATION ARE SUBJECT TO RISKS AND 21 UNCERTAINTY. 22 FACTORS THAT COULD CAUSE FIRST UNION'S RESULTS TO 23 DIFFER MATERIALLY FROM ANY FORWARD-LOOKING 24 STATEMENTS ARE SET FORTH IN FIRST UNION'S PUBLIC 25 REPORTS FILED WITH THE SEC INCLUDING FIRST 3 1 UNION'S REGISTRATION STATEMENT ON FORM S-4 2 RELATING TO THE PROPOSED MERGER WITH WACHOVIA. 3 PLEASE READ THAT DOCUMENT AND OTHER RELATED 4 DOCUMENTS FILED WITH THE SEC WHICH ALSO CONTAIN 5 INFORMATION REGARDING THE INTERESTS OF CERTAIN 6 PARTICIPANTS IN THE PROXY SOLICITATION. 7 THESE DOCUMENTS CAN BE OBTAINED FOR FREE AT THE 8 SEC'S WEBSITE AND FROM FIRST UNION AND WACHOVIA. 9 DON? 10 [ LAUGHTER ] 11 >> DON: GOOD MORNING, ANY QUESTIONS? 12 GOOD MORNING TO EVERYBODY IN ATTENDANCE AND TO 13 THE FOLKS LISTENING ON THE WEBCAST TODAY. 14 IT'S AN HONOR TO BE HERE, QUITE CANDIDLY, WITH SO 15 MANY FRIENDS, COMPETITORS, TEAMMATES THAT WE WORK 16 WITH IN THIS INDUSTRY AS IT'S REALLY BLENDED 17 TOGETHER, AND MANY TIMES, I THINK, AS THE TITLE 18 SUGGESTS, FOLKS CALL US FROM TIME TO TIME TO TALK 19 ABOUT THIS WHOLE BANK STUFF. 20 WHAT IS GOING ON IN THE BANK DISTRIBUTION 21 NETWORK? EVEN THE TITLE I WAS GIVEN TO TALK 22 ABOUT, ATTACKING THE DISTRIBUTION BOTTLE NECK, IS 23 AN INDICATION OF SORT OF THE PERCEPTION THAT'S 24 OUT THERE AROUND THE BANKING CHANNELS. 25 WE SORT OF WANTED TO RETITLE IT AKA, ALSO KNOWN 4 1 AS, REALLY TAKING A BANK CHANNEL, IF YOU WILL, 2 AND OPTIMIZING THAT TO YOUR ADVANTAGE TO BE THE 3 KEY TO BUILD WHAT I WOULD CALL A MULTICHANNEL 4 PLATFORM INTO A FINANCIAL SERVICES POWERHOUSE. 5 I JOINED FIRST UNION IN 1995, MIXED BACKGROUND 6 WITH ASSET MANAGEMENT FIRMS AND BANKING 7 EXPERIENCE; AND AT THAT TIME, WHAT I REALLY SAW 8 WORKING IN DIFFERENT SIDES OF THE INDUSTRY IS THE 9 POTENTIAL THAT WAS OUT THERE, AND THE MODEL THAT 10 WE ATTEMPTED TO BUILD STARTING IN 1995, AND IT 11 WOULD HAVE BEEN A LOT DIFFERENT BACK THEN, 12 BECAUSE WE REALLY SAW AN INSTITUTION THAT WAS A 13 LARGE BANKING INSTITUTION, BUT ALSO UNDERSTOOD 14 THE FINANCIALS OF THE WORLD: 15 WHERE THE CONSUMER WAS GOING, WHERE THE CLIENT 16 WAS GOING IN TERMS OF INVESTMENT PRODUCTS, WHERE 17 PEOPLE WERE VOTING WITH THEIR FEET. 18 WHAT WE STARTED TO DO WAS TRY TO CONSTRUCT THE 19 MODEL THAT WOULD TAKE ADVANTAGE OF ALL THE 20 SERVICES THAT CLIENTS CAME TO HAVE, THE 21 DISTRIBUTION CAPABILITY, AND WE WANTED TO REALLY 22 BUILD OUT A BALANCE MODEL. 23 SO IF YOU LOOK AT IT TODAY, WE HAVE A SITUATION 24 WHERE OUR TRADITIONAL GENERAL BANK IS REALLY 25 GENERATING ONLY 45% AS THE KEY CORE OF THE 5 1 ORGANIZATION, BUT WE BLENDED IN THE OTHER KIND OF 2 SKILL SETS THAT I THINK ARE GOING TO BE NECESSARY 3 TO COMPETE IN THE COMING YEARS. 4 FOR EXAMPLE, WHAT I'M HERE TO DO TODAY IS TALK 5 ABOUT THE CAPITAL MANAGEMENT AREA, AND WE'VE COME 6 TO A POINT THAT'S SIGNIFICANT. 7 WE'RE ABOUT 26% OF THE REVENUES. 8 WE'RE $168 BILLION OF ASSET UNDER MANAGEMENT. 9 WHEN YOU LOOK AT IT FROM A BROKERAGE POINT OF 10 VIEW, WE'RE THE THIRD LARGEST BANK-OWNED 11 BROKERAGE FIRM BEHIND CITICORP, AND WE DO HAVE 12 THE PRESENCE IN 47 STATES. 13 WE MANAGE ABOUT $87 BILLION IN MUTUAL FUNDS, AND 14 WE HAVE A VARIETY OF SERVICES IN THE WEALTH, 15 TRUST, 401(K), INSURANCE AREA. 16 OUR WHOLE PHILOSOPHY FROM THE BEGINNING WAS TO 17 TRY TO TAKE A LOOK REALLY FROM THE CUSTOMER'S 18 POINT OF VIEW, WHETHER THAT CUSTOMER BE AN 19 INDIVIDUAL, SMALL BUSINESS, COMMERCIAL TYPE OF 20 ENTITY; AND IF YOU LOOK AT IT, AND YOU SORT OF 21 SAID, WELL, WHAT ARE THE KINDS OF SERVICES THAT 22 THESE INDIVIDUALS NEED AS YOU GO FORWARD? YOU 23 LOOK AT THE PRODUCTS THAT ASSET MANAGEMENT, 24 FINANCIAL PLANNING, BROKERAGE SERVICES, INSURANCE 25 TYPE SERVICES, ALL YOUR TRADITIONAL BANKING, 6 1 CONSUMER, FINANCE, RETAIL, SMALL BUSINESS 2 BANKING, AND TRUST SERVICES. 3 THIS IS WHAT WE'VE BEEN BUILDING OVER THE LAST 4 FOUR TO FIVE YEARS, AND, AGAIN, MANY OF YOU 5 PROBABLY KNOW FIRST UNION MORE BECAUSE OF A LOT 6 OF THE BANKING ACTIVITIES, BUT WHAT WE HAVE 7 QUIETLY DONE IS BUILD A STRONG PRODUCT SKILL SET. 8 THEN WE'VE COUPLED THAT WITH -- I'M VERY BIASED 9 AND I'M IN FAVOR OF ADVICE GIVING. 10 WE'RE AN ADVISER GIVING RELATIONSHIP. WE BELIEVE 11 IN WRAPPING ADVISEMENT AROUND THE RELATIONSHIP. 12 WE PUT IN SERIES SIX AND SEVEN INDIVIDUALS. 13 WE HAVE WEALTH MANAGERS, PRIVATE CAPITAL 14 MANAGERS, IF YOU WILL. 15 WE HAVE THE WHOLE SERIES SEVEN WORK FORCE. 16 WE HAVE TELEPHONE DIRECT SPECIALISTS THAT 17 INTERFACE WITH CLIENTS, INSTITUTIONAL TRUST 18 REPRESENTATIVES. 19 OF COURSE, WE HAVE THE ON-LINE THAT WE DEVELOPED, 20 BUT THE WHOLE IDEA WAS TO TAKE OUR CLIENT BASE, 21 TAKE THAT PRODUCT SKILL SET AND THEN TRY TO BLEND 22 IT WITH TAILORED ADVICE TO ALLOW THE CUSTOMER TO 23 BASICALLY HAVE A SINGLE POINT FOR SOLUTIONS, AND 24 REALLY COMBINING THAT WITH ALL OF THE TYPES OF 25 SERVICES THAT ARE OUT THERE TODAY. 7 1 HERE'S WHERE WE ARE IN THE STORY TODAY. 2 IF YOU GO BACK TO 1995 WHEN I FIRST CAME ON THE 3 SCENE, WE WERE LAYING OUT OUR STRATEGY. 4 WE SAID WE WANTED TO BE A MAJOR PLAYER IN THESE 5 BUSINESSES. 6 LIKE A LOT OF THE PRESENTATIONS I THINK YOU'RE 7 GOING TO HEAR TODAY AND YOU HAVE HEARD FROM MITCH 8 IS OBTAINING SOME SORT OF MASS AND SCALE ON THESE 9 BUSINESSES, I THINK WILL BE CRITICAL FOR 10 COMPETITION IN THE YEARS AHEAD, AND IF YOU LOOK 11 AT IT STARTING WITH THE BROKERAGE SIDE, TODAY 12 FROM THE NUMBER OF REPS, WE'RE THE SIXTH LARGEST. 13 WE'RE THE EIGHTH LARGEST IN THE AMA ACCOUNTS, 14 WHICH IS THE CASH MANAGEMENT SWEEP ACCOUNTS 15 COMBINING BANKING AND BROKERAGE. 16 OUR INSURANCE EFFORT, WE'VE COME A LONG WAY, AND 17 WE'RE BEHIND ONLY TO CITICORP. 18 THE PRIVATE CAPITAL MANAGEMENT AREA, SOMETHING 19 WE'RE ALL GOING TO HAVE TO DEAL WITH AT SOME 20 POINT, AND IT'S SOMETHING I CALL GETTING OLDER, 21 AND YOU'VE GOT A DEMOGRAPHIC RIGHT NOW WHERE WE 22 HAVE A LOT OF FOLKS AS THEY GET INTO THE 50s AND 23 MID-50s, THEY'RE STARTING TO UNDERSTAND WHAT 24 ESTATE PLANNING MEANS. 25 THEY'RE STARTING TO UNDERSTAND WHAT INHERITANCE 8 1 TAX MEANS, AND THERE'S AN UNBELIEVABLE DYNAMIC 2 THAT'S GOING ON IN THE NEXT 20 YEARS, 30 YEARS 3 AROUND THAT WHOLE TOPIC. 4 MUTUAL FUNDS, TODAY, WE RANK 21st FROM THE LATEST 5 REPORTING STATISTICS. 6 WE A VERY LARGE INSTITUTIONAL MANAGER, AND THE 7 401(K) BUSINESS IS SOMETHING THAT WE THINK WILL 8 BE VERY IMPORTANT. 9 IN TERMS OF THE HISTORY OF WHERE WE'VE COME FROM, 10 MANY ANALYSTS ASK US THESE QUESTIONS, AND WE TRY 11 TO ANTICIPATE AND PUT IT UP ON THE SCREEN. 12 IN 1995, WE HAVE ROUGHLY 400 MILLION OF REVENUE 13 IN THIS AREA TODAY AND IN 2000 REPORTED DATA THAT 14 WE HAVE OUT THERE ALREADY. 15 WATCHING THE PRECAUTIONARY STATEMENT, NOT TO GIVE 16 A FORWARD-LOOKING COMMENT, WE FINISHED LAST YEAR 17 WITH $3.7 BILLION IN REVENUE, AND IF YOU ADJUST 18 FOR THE ACQUISITIONS, -- AND WE WILL SHOW YOU 19 THAT LATER ON --IT WAS A 30% GROWTH RATE. 20 AS YOU LOOK AT THE DIRECT BOTTOM LINE 21 CONTRIBUTION, WE WENT FROM 200 MILLION PLUS TO A 22 BILLION PLUS, AND AGAIN, ADJUSTING GRAPH 23 POSITIONS, THAT WOULD BE IN THE MID-20s, ABOUT 24 25% ORGANIC GROWTH RATE. 25 IF YOU LOOK AT SOME OF THE PRODUCT LINES THAT WE 9 1 FOCUSED ON, IF YOU REMEMBER, WE SAID WHEN WE 2 LOOKED AT IT, CUSTOMERS WERE LEAVING THE BANK 3 BECAUSE THEY WANTED TO GET MUTUAL FUNDS. THEY 4 WANTED BROKERAGE ADVICE, ET CETERA. 5 THE MAJOR PRODUCT LINES EARLY ON WERE TO BUILD 6 MUTUAL FUND CAPABILITY. 7 WE WENT TO 85 BILLION REPORTED AT THE END OF THE 8 YEAR, AGAIN, ADJUSTING FOR ACQUISITIONS AS 24% 9 GROWTH RATE OVER THAT PERIOD. 10 BROKERAGE CLIENTELE WENT FROM 10 BILLION TO 205 11 BILLION IN ASSETS, 31% GROWTH. 12 AMA ASSETS, 12 TO 121 BILLION, 38%; ASSETS UNDER 13 MANAGEMENT, 47 TO 171, ABOUT A 19% GROWTH RATE. 14 WE DIDN'T PUT THE INSURANCE IN THERE, AND IT'S AN 15 ASSET PER SE, AND IN ITS MOST SPECIFIC SENSE, AND 16 THE GROWTH RATE WOULD HAVE BEEN PHENOMENAL. 17 WE WERE DOING ANNUITY TYPE OF BUSINESS. 18 WE DID ABOUT A 1.8 BILLION LAST YEAR. 19 A SUPER PRODUCT IN THE MARKETPLACE OUT THERE, 20 ESPECIALLY FOR OUR BANK CHANNEL, IS FIXED 21 ANNUITIES BECAUSE IT ALLOWS PEOPLE TO TAKE THE 22 FIRST STEP, IF YOU WILL, TOWARD SOME TYPE OF 23 INVESTMENT PRODUCT, AND THEN YOU CAN ADD INTO 24 THAT VARIABLE ANNUITIES, WHICH WE'VE DONE IN THE 25 LAST SEVERAL YEARS. 10 1 THIS SLIDE, MANY TIMES YOU CAN'T SEE IT. 2 OUR WHOLE STRATEGY HAS BEEN TO BUILD, IF YOU 3 WILL, A BALANCE. 4 THAT'S SUPPOSED TO BE A SCALE. 5 IF YOU LOOK AT THE CAREER I'VE HAD, SOMETIMES 6 I'VE WORKED ON THE DISTRIBUTION SIDE. 7 SOMETIMES I'VE WORKED ON THE PRODUCT SIDE, AND 8 BOTH HAVE VERY STRONG POSITIVES AND SOME 9 NEGATIVES TO THEM. 10 ON THE DISTRIBUTION SIDE, QUITE CANDIDLY, IT'S 11 NOT AS HIGH MARGIN TYPE OF BUSINESS AS THE 12 PRODUCT LINE, BUT IT'S SURE GREAT FOR HAVING 13 CUSTOMER RELATIONSHIPS AND THE ABILITY TO GROW 14 AND BUILD. 15 PRODUCTS OFFER A TERRIFIC MARGIN, BUT ONCE AGAIN, 16 GREAT PRODUCT WITHOUT A LOT OF DISTRIBUTION CAN 17 ALSO BE A VERY DIFFICULT TASK. 18 WHAT WE WANTED TO DO IS TRY TO BALANCE THOSE TWO 19 AS WE WENT THROUGH TIME, SO IF YOU FOLLOW THE 20 LAST FOUR OR FIVE YEARS WITH US, WHAT WE'VE BEEN 21 DOING IS A COMBINATION OF TRYING TO BUILD OFF 22 SKILL SET ON EITHER SIDE OF THAT SCALE, BUT, 23 TODAY, WHAT WE TRIED TO EVOLVE TO IS ON THE 24 LEFT-HAND SIDE IS MULTIPLE DISTRIBUTION CHANNELS, 25 GOING BACK TO THAT BANK STATEMENT. 11 1 STARTING WITH THAT ADVANTAGE THAT WE HAD WITH THE 2 LARGE BANKING ORGANIZATION, GREAT CHANNEL BUT WE 3 WERE MISSING THE WHOLE CHANNEL THAT MANY OF US 4 LOOK AT ONLY, THE BROKERAGE CHANNEL AS THE ONLY 5 PLACE TO GET ADVICE, AND WE NEEDED TO DEVELOP 6 THAT KIND OF CHANNEL ALSO. 7 SO WE LAUNCHED OUR NATIONAL BROKERAGE STRATEGY, 8 AND THE HIGH NET WORTH AREA, WE CALL PRIVATE 9 CAPITAL MANAGEMENT. 10 INDIVIDUALS IN THAT AREA NEED A WHOLE ARRAY OF 11 SERVICES, ESTATE PLANNING, SOPHISTICATED TAX 12 MANAGEMENT, THE WHOLE TRUST AREA. 13 THERE'S JUST A WHOLE LOT OF SERVICES THERE THAT'S 14 NOT -- IT'S A DISTRIBUTION CHANNEL ITSELF THAT 15 HAPPENED TO THAT NETWORK. 16 EVERGREEN DISTRIBUTION REFERS TO THE MUTUAL FUND 17 STRATEGY. 18 AGAIN, WE DON'T USE THE WORD PROPRIETARY BECAUSE 19 WE DON'T WANT TO RUN A PROPRIETARY MUTUAL FUND 20 GROUP. 21 WE WANT TO RUN A MUTUAL FUND GROUP, AND IF IT'S 22 GOOD, IT WILL BE COMPETITIVE. 23 IF IT'S NOT, WE'LL CHANGE MANAGEMENT AND MOVE ON. 24 BUT IT IS SOMETHING THAT YOU HAVE TO RUN AS A 25 GREAT BUSINESS, BUT YET THERE'S A DISTRIBUTION 12 1 CHANNEL THERE. 2 THE INSTITUTIONAL MARKET IS A DISTRIBUTION 3 CHANNEL. 4 AGAIN, CONTACT POINTS IN THE LIKE AND THEN THE 5 ON-LINE CHANNEL. 6 FLIP OVER TO THE RIGHT-HAND SIDE. WE HAVE A FULL 7 ARRAY OF INVESTMENT MANAGEMENT PRODUCTS, MUTUAL 8 FUNDS, WRAP ACCOUNTS WHICH ARE VERY, VERY LARGE 9 IN RECENT YEARS. 10 PERSONAL TRUST SERVICES, AMA SERVICES, AND 11 INSURANCE, AND 401(K). 12 LET'S LOOK AT WHERE WE STARTED. 13 IN 1995, WE LOOKED AT AND REALIZED OUR STRENGTH 14 WAS A FAST-GROWING BANKING FRANCHISE. 15 WE HAD SOMETHING LIKE 2,000 FINANCIAL CENTERS. 16 WE HAD A NUMBER OF TELEPHONE CENTERS WHERE FOLKS 17 CAN CALL IN. 18 WHEN THEY'RE MOVING FROM ONE CITY TO ANOTHER, 19 OFTEN THE FIRST CALL THEY MAKE IS TO A BANK TO 20 SEE WHAT KINDS OF SERVICES ARE OUT THERE. 21 LARGE ATM NETWORK, WHICH WAS VERY, VERY IMPORTANT 22 TO WHAT WE CALL OUR CAP ACCOUNT, WHICH IS THE 23 BROKERAGE TYPE OF BANKING ACCOUNT, BUT PUTTING AN 24 ATM NETWORK INTO THAT MADE THAT ACCOUNT VERY 25 POSITIVE. 13 1 OUR WHOLE ON-LINE CAPABILITY GAVE US ACCESS TO 2 ABOUT 1.8 MILLION CLIENTS USING THE ON-LINE 3 ACCESS FOR FIRST UNION BANKING PRODUCTS IN THE 4 LIKE. 5 WHAT WE DID IS WE WENT OUT AND TRIED TO BASICALLY 6 LOOK AT EVERY BRANCH AND SAY WE WANT TO HAVE 7 SOMEWHERE IN THE NEIGHBORHOOD OF TWO FINANCIAL 8 SPECIALISTS IN EACH OF THOSE BRANCHES. 9 IN OTHER WORDS, A LICENSED INDIVIDUAL, WHETHER IT 10 BE SERIES SIX OR SERIES SEVEN, AND THE IDEA TO 11 BEGIN TO TALK WITH OUR CLIENTS, CUSTOMERS, FIND 12 OUT WHAT THEIR NEEDS AND SERVICES ARE AND LET 13 THEM KNOW THAT WE HAVE, INDEED, THE ABILITY TO 14 OFFER BROKERAGE TYPES OF SERVICES. 15 AS WE DID THAT, IT WAS VERY CLEAR FROM A LOT OF 16 OUR WORK THAT MANY INDIVIDUALS OUT THERE WILL 17 ONLY SEE A BANK FOR CERTAIN THINGS, AND THEY'LL 18 ONLY SEE A BROKERAGE FIRM FOR CERTAIN THINGS. 19 WHAT WE NEEDED TO DO IS DEVELOP A BRAND AND 20 IDENTITY IN HOW TO BANK CHANNEL, AND YOU MAY HEAR 21 THAT PHRASE TODAY, AND WE BOUGHT THE OLD WHEAT, 22 BUTCHER-SINGER ORGANIZATION, THE EVEREN 23 ORGANIZATION, FIRST ALBANY, J.W. GENESIS, AND 24 TODAY, WE'RE A NATIONWIDE BROKERAGE FIRM. 25 WE'RE IN 47 STATES. 14 1 WE HAVE 531 BROKERAGE OFFICES THAT ARE 2 STAND-ALONE BROKERAGE OFFICES AND HAVE NOTHING 3 ASSOCIATED WITH THE BANK, AND WE HAVE 76 OFFICES 4 THAT WE DEVELOPED OUT WHERE WE DO HIGH NET WORTH 5 TYPE OF BUSINESS, TRUST BUSINESS, INVESTMENT 6 OFFICERS, ESTATE PLANNERS, ET CETERA, AND THAT'S 7 OBVIOUSLY TRYING TO FOCUS ON CERTAIN MARKETS 8 WHERE THERE'S A LOT OF CLUSTERS OF WEALTH. 9 AND THE GREAT NEWS FOR US WAS THE BANKING 10 FRANCHISE BEING A STRONG EAST COAST ORGANIZATION 11 AND PUT US NATURALLY IN A LOT OF THOSE AREAS. 12 IF YOU BREAK THAT DOWN, AGAIN, BY THE NUMBER OF 13 TYPES OF INDIVIDUALS THAT WE HAVE IN EACH OF 14 THESE MODELS, YOU CAN SEE THE GROWING ADVISER 15 MODEL THAT WE HAVE, AND TODAY AT THE END OF THE 16 FIRST QUARTER, WE WERE ROUGHLY 7,784 LICENSED 17 INDIVIDUALS BROKEN DOWN WITH A STRATEGY OF 18 OUT-OF-BANK SERIES SEVEN, IN-BANK SERIES SEVEN, 19 LICENSED SERIES SIX, AND THE ORANGE BAR AT THE 20 TOP THERE IS THE INDEPENDENT CHANNEL, WHICH WE'RE 21 DEVELOPING OUT WITH THE ACQUISITION OF J.W. 22 GENESIS. 23 SO WHEN YOU LOOKED AT THIS, WHAT WE WERE TRYING 24 TO DO IS, ONE, MEET THE CLIENTS, MAYBE YOU AND I 25 AS INDIVIDUALS, THE WAY WE WANT TO BE MET. 15 1 HAVE THE STORE FRONT THAT YOU AND I ARE 2 COMFORTABLE DOING BUSINESS IN, BUT SINCE WE'RE 3 ORIENTED TO DRIVER TYPES OF BUSINESSES, WE WANTED 4 TO CREATE A HOME FOR INVESTMENT ADVISERS THAT 5 THEY WOULD WANT TO WORK IN. 6 IF YOU LOOK AT THIS SCHEMATIC, YOU'RE LOOKING AT 7 THE ABILITY IF YOU'RE A GREAT FINANCIAL ADVISER 8 AND YOU WANT TO MAKE YOUR BUSINESS BEING A 9 BROKER, FINANCIAL ANALYST, CONSULTANT, HOWEVER 10 YOU REFER TO THAT FUNCTION TODAY, WE HAVE THE 11 ABILITY TO TRACK SOMEONE FOR A BANKING CHANNEL, 12 WHICH IS A TOTALLY DIFFERENT CHARACTERISTIC THAN 13 TRADITIONAL NATIONAL BROKERAGE CHANNEL. 14 ON TOP OF THAT, WE HAVE THE INDEPENDENT CHANNEL, 15 AND I PUT CLEARING IN THERE ALSO BECAUSE WE 16 DEVELOPED A CLEARING BUSINESS THAT WE'RE EXCITED 17 ABOUT. 18 NOT SO MUCH FOR JUST DAY IN AND DAY OUT CLEARING, 19 BUT REALLY TO SUPPORT A LOT OF FIRMS THAT ARE 20 RUNNING MORE AS AN INDEPENDENT, AND WE CAN OFFER 21 THEM A VERY BROAD PRODUCT SWEEP AS WELL AS THE 22 INDEPENDENCE, AND OF COURSE, THE ON-LINE 23 CAPABILITY, WHICH WE FELT WE HAD TO DEVELOP 24 ESPECIALLY IN ALL OF THE HAY DAY OF EVERYBODY 25 TALKING ABOUT ON-LINE AND DO IT YOURSELF, WHAT WE 16 1 WANTED TO DO WAS SUPPORT THOSE TYPES OF ON-LINE 2 INQUIRIES IN THE LIKE WITH SERVICES AND SUPPORT, 3 AND WE WANTED TO TIE IT IN WITH INVESTMENT 4 ADVISER DRIVEN TYPE OF STRATEGY. 5 LET'S LOOK AT THE BANK SIDE FOR A SECOND. 6 TODAY, WE HAVE ABOUT $34 BILLION OF CLIENT 7 ASSETS. 8 WE HAVE 874,000 ACTIVE ACCOUNTS. 9 ONE OF THE STRATEGIES IS TO CONTINUE TO EVOLVE 10 THIS BUSINESS TO BE A MORE RECURRING FEE 11 BUSINESS. 12 THIS IS BASICALLY BEING PAID AS AN ADVISER, AND 13 HAVING A RECURRING FEE AND NOT LIVING OFF THE 14 TRANSACTION VOLUME. 15 IF YOU LOOK AT THE -- JUST TO GIVE SOME 16 PERSPECTIVE TODAY, MASS AND SCALE, SIZE AND SCALE 17 ARE IMPORTANT. 18 YOU CAN PROBABLY HAVE THREE DAYS OF PRESENTATIONS 19 WHERE JUST ABOUT EVERY BANK IS IN THIS BUSINESS. 20 THIS IS THE KEY. 21 DO THEY REALLY HAVE THE SIZE AND SCALE? AS WE 22 STATED AT THE TOP, OUR BANK PUTS US IN A GOOD 23 FOOTPRINT WHEN YOU LOOK AT ITS EAST COAST 24 ORIENTATION AND THE NUMBER OF INCOME MARKETS. 25 IF YOU LOOK AT THE FINANCIAL CENTERS COUPLED WITH 17 1 THE BROKERS, WHAT WE DID WAS ROUGHLY 5.5 BILLION 2 WORTH OF PRODUCT, AND WE'RE A FAN OF OPEN 3 ARCHITECTURE. 4 OUR ADVISERS, TO DO BUSINESS, THEY HAVE TO REALLY 5 BE FREE TO CHOOSE FROM ANY TYPE OF PRODUCTS LINES 6 THEY WANT. WE DO THAT. 7 IF YOU PUT THAT TOGETHER, YOU SEE ANNUITIES, 1.8 8 BILLION. 9 NON-PROPRIETARY MUTUAL FUNDS, 1.9 BILLION. 10 THAT'S WHY I SAY THERE'S A LOT OF FRIENDS IN THE 11 ROOM BECAUSE WE WORK TOGETHER SELLING THEIR 12 PRODUCTS, AND 1.8 BILLION OF EVERGREEN, BUT THAT 13 5.5 BILLION, IF YOU LOOK IN THE DIFFERENT 14 RANKINGS IN THE LIKE, THAT'S A NATURED OFFERING 15 IN AND OF ITSELF. 16 THE NATIONAL CHANNEL, WE HAVE 130 BILLION OF 17 CLIENT ASSETS. 18 ABOUT 1.6 ACTIVE ACCOUNTS WORKING ON THE 19 RECURRING FEE PERCENTAGE. 20 IF YOU LOOK AT THE INDEPENDENT CHANNEL, WHICH IS 21 NOW UP TO 30 BILLION IN CLIENT ASSETS, 450,000 22 ACTIVE ACCOUNTS. 23 HIGHER PERCENTAGE OF RECURRING FEES THERE BECAUSE 24 WE DO A FAIR AMOUNT OF THAT BUSINESS ON A 25 FEE-BASED BUSINESS TO SUPPORT A NUMBER OF THE 18 1 CLEARING FIRMS, AND THEN ON-LINE, NEVER GOT TO 2 THE TOTALS THAT A LOT OF PEOPLE THOUGHT, BUT IT'S 3 BECOME A HELPFUL KIND OF THING THAT TIES THE 4 BROKERS IN TOGETHER WITH THE CLIENTS THAT WANT 5 THOSE TYPES OF ACTIVITIES. 6 IF YOU PUT THAT ALL TOGETHER, YOU HAVE A SUITE OF 7 ORGANIZATIONS THAT AN ADVISER CAN CHOOSE. 8 YOU WANT TO BE THE FIRM OF CHOICE FOR THOSE 9 ADVISERS, AND WE ALSO SUBSCRIBE TO THE ONENESS 10 THEORY. 11 BY THAT, I MEAN, WE HAVE ONE BACK OFFICE, ONE 12 TECHNOLOGY PLATFORM, ONE SUITE OF PRODUCTS, ET 13 CETERA, SO IF YOU HAPPEN TO BE AN ADVISER, AND 14 YOU WANT TO JOIN US, IT DOESN'T MATTER WHICH 15 CHANNEL YOU SIT IN, YOU HAVE THE BASIC SUPPORT 16 SYSTEM, PRODUCT SYSTEM, AND THAT PRODUCT SYSTEM 17 BY THE WAY, ALSO INCLUDES BANKING PRODUCTS, WHICH 18 IS VERY, VERY IMPORTANT TO TIE UP THE 19 RELATIONSHIP FROM ANY OF THESE ADVISERS, AND THAT 20 ONE MANAGEMENT STRUCTURE HELPED US GAIN SOME 21 EFFICIENCIES AND HELPED US DOING THIS DURING THIS 22 RECENT TIME PERIOD WITH TOUGHNESS IN THE 23 MARKETPLACE. 24 WHEN YOU LOOK AT WHAT TYPE OF DISTRIBUTION IS 25 THIS WHEN YOU PUT IT ALTOGETHER, ACTUALLY, THIS 19 1 WHOLE TEAM SOLD ABOUT $11 BILLION WORTH OF 2 PRODUCTS, AND THE ONLY PRODUCTS I'M PICKING ON 3 ARE THE MORE VISIBLE ONES THAT WE MADE AN EFFORT 4 IN, MUTUAL FUNDS, THE ANNUITIES, BOTH FIXED AND 5 VARIABLE. 6 SO IF YOU LOOK AT THAT WHOLE LIST, THAT'S ABOUT 7 $12 BILLION WORTH OF PRODUCT. 8 ABOUT A THIRD OF THAT, A THIRD PERCENT OF THAT, 9 WAS WITH PRODUCTS THAT WE MANUFACTURED, SO WE'RE 10 PARTICIPATING IN OUR DISTRIBUTION CHANNEL, WHICH 11 IS VERY POSITIVE. 12 IN ADDITION, AS FAR AS DISTRIBUTION FIRE POWER IS 13 CONCERNED THIS GROUP SOLD ABOUT $3 BILLION WORTH 14 OF WRAP PRODUCTS LAST YEAR, AND YOU HAVE ALL OF 15 THE COMMISSION IN THE TRADING BUSINESS OUT THERE. 16 LET ME MOVE TO ANOTHER CHANNEL, WHICH I THINK IS 17 GOING TO BE JUST A VERY, VERY IMPORTANT CHANNEL 18 TO FOCUS ON, AND THIS IS AN INTERESTING CHANNEL 19 BECAUSE FROM A BANKING POINT OF VIEW, -- AND I'M 20 TRYING TO REPRESENT THE BANKING CHANNEL IN SOME 21 RESPECTS HERE TODAY. FROM A BANKING POINT OF 22 VIEW, THIS IS ONE WHERE THE BANKING HISTORY IS 23 SORT OF AN ADVANTAGE. 24 ON THE BROKERAGE SIDE, IN A WAY, WE'VE BEEN 25 SWIMMING UPSTREAM OVER THE LAST FOUR, FIVE YEARS 20 1 TO ESTABLISH LEGITIMACY. 2 PART OF THAT WAS OVERCOME AND EASILY DONE BY 3 GETTING THE EXPERTISE OF EVEREN, WHEAT, FIRST 4 ALBANY, AND EXPERIENCED BROKERS IN THE LIKE, BUT 5 IT TOOK A WHILE FOR PEOPLE TO REALIZE THAT WE 6 COULD BE IN THE BROKERAGE BUSINESS, ESPECIALLY 7 WHEN YOU COUPLE THE PRODUCT SET. 8 WHEN YOU MOVE INTO THE HIGH NET WORTH AREA, A LOT 9 OF THESE FOLKS, THE NUMBER ONE SERVICE THAT THEY 10 NEED IS MULTIPLE SERVICES. 11 THESE FOLKS ARE BUSY. THEY'RE SUCCESSFUL. 12 THEY HAVE A LOT OF WEALTH, AND THEY TEND TO WANT 13 ONE SINGLE ADVISER, AND WE CALL THAT PCM, PRIVATE 14 CAPITAL MANAGEMENT RELATIONSHIP MANAGER. 15 WE WANT THAT PERSON TO BE AN EXPERT ON THE 16 CLIENT. 17 WE WANT THEM TO BE A CLIENT ADVOCATE FOCUSED ON 18 HELPING THEIR RELATIONSHIP. 19 WHEN YOU LOOK BELOW, THESE ARE THE TYPES OF 20 SERVICES THAT WE DO, AND MANY OF THEM ARE THE 21 TYPES OF SERVICES THAT BANKS HAVE DONE FOR 22 CENTURIES. 23 THE LENDING CAPABILITIES, THE CREDIT OFFICER, THE 24 TAX STRATEGIES, THE PERSONAL TRUST, THE ESTATE 25 PLANNING. 21 1 THESE ARE TYPES OF SERVICES THAT ARE REALLY A 2 HOME ADVANTAGE FOR THE BANKING INDUSTRY, AT LEAST 3 IF YOU HAVE BEEN IN THE HIGH NET WORTH OR TRUST 4 PART OF YOUR BUSINESS FOR A LONG TIME. 5 THIS REALLY GIVES US A VERY STRONG OPENING TO THE 6 DEMOGRAPHICS THAT ARE OUT THERE. 7 FOR THOSE OF US THAT WILL ADMIT AS WE GET OLDER, 8 YOU START THINKING ABOUT, IN FACT, HOW TO 9 MINIMIZE ESTATE TAXES. 10 HOW DO YOU PASS YOUR WILL ON? AND GOD FORBID, IF 11 SOMETHING SHOULD HAPPEN, HOW DO YOU MAKE SURE 12 YOUR HUSBAND, WIFE, KIDS ARE TAKEN OF? 13 MANY OF US HAVE OLDER PARENTS ALIVE AND YOU HAVE 14 CHILDREN ALIVE, AND YOU'RE TRYING TO EDUCATE SOME 15 OF THEM AND TRYING TO KEEP SOME OF THEM HEALTHY; 16 AND THERE'S A LOT OF CHALLENGES OUT THERE, AND SO 17 MUCH THAT A BANKING ORGANIZATION CAN DO FOR YOUR 18 TRUST IS VERY HELPFUL IN THIS AREA. 19 IF YOU LOOK AT THAT, YOU CAN SUMMARIZE IT. 20 YOU CAN SAY, WHAT DO WE HAVE GOING HERE? WE HAVE 21 A GENERAL BANK. 22 WE LOOKED AT THE CHANNEL THAT WE RESTRUCTURED, 23 AND WE TALKED ABOUT HOW IMPORTANT THIS WAS TO US, 24 AND WE REALIZED HOW MANY WEALTH CENTERS WE'RE IN, 25 AND WE LAUNCHED THIS MONTH A NEW GOLD CENTER 22 1 CONCEPT. 2 TRANSLATION: WHAT WE'RE REALLY DOING IS WE'RE 3 OUT THERE IN THOSE BANKING AREAS WHERE WE ALREADY 4 HAVE BANKS, FINANCIAL CENTERS, BRANCHES, IF YOU 5 WILL, AND WE REALIZED THAT WHAT A SWEET SPOT 6 THERE IS OUT THERE TO DEVELOP. 7 USE THAT BRICK AND MORTAR, USE THAT HOME BASE TO 8 DEVELOP HIGH NET WORTH CENTERS, PUTTING IN MORE 9 INVESTMENT MANAGEMENT AND ESTATE PLANNING TALENT, 10 PRIVATE CAPITAL MANAGEMENT RELATIONSHIP OFFICERS. 11 IN FACT, WHEN WE LOOKED THROUGH THE DATA BASE AND 12 STARTED TO FINE TUNE THAT, WE REALIZED THERE'S 13 107,000 HOUSEHOLDS DEALING WITH THE BANK THAT 14 DON'T USE US FOR THESE TYPES OF SERVICES. 15 IT'S A SWEET SPOT WE CAN DEVELOP. 16 FIRST UNION SECURITIES BUILT A BRIDGE SYSTEMS 17 LAUNCH BETWEEN OUR TRUST AND OUR BROKERAGE 18 CAPABILITY, SO IF YOU'RE A BROKER-ADVISER OUT 19 THERE IN ANY OF THE BROKERAGE CHANNELS, CHANCES 20 ARE YOU'RE WORKING WITH A LOT OF WEALTHY PEOPLE. 21 YOU CAN INTRODUCE THEM TO TRUST CAPABILITIES. 22 THE SYSTEMS ARE RANKED. 23 YOU CAN SEE THE TRUST ASSETS. 24 YOU CAN HELP MANAGE THAT, AND IT GIVES A SINGLE 25 POINT OF CONTACT FOR THE CLIENT, AND IT GIVES THE 23 1 CLIENT, IF YOU WILL, A TRUST BUSINESS THAT WE'VE 2 BEEN IN FOR HUNDREDS -- WELL, NOT HUNDREDS OF 3 YEARS BUT DECADES. 4 WE ALREADY PUT ABOUT 1.5 BILLION OF ASSETS ON THE 5 BOOKS THROUGH THE BROKERAGE CHANNELS, AND THERE'S 6 THE PRIVATE CAPITAL MANAGEMENT OFFICES WHERE WE 7 HAVE 300 RELATIONSHIP MANAGERS ACROSS THE 8 COUNTRY. 9 WE LAUNCHED AN AREA CALLED CALIBRE HERE IN JUNE 10 FOR THE ULTRA NET WORTH, HIGH NET WORTH TYPE OF 11 GROUP, AND THERE'S WHERE YOU WILL BE FOCUSING 12 MORE AND MORE ON THE PLETHORA OF AGGREGATING 13 SERVICES. THIS IS WHERE THE TECHNOLOGY CAN COME 14 INTO PLAY IN CONJUNCTION WITH THE ASSET 15 MANAGEMENT SERVICES AND THE LENDING SERVICES OF 16 THE BANK. 17 IF THAT'S DISTRIBUTION, THINK ABOUT PRODUCT 18 CAPABILITY FOR A MOMENT BECAUSE THE PRODUCT HELPS 19 YOU WITH THE WHOLE IDEA OF HOW YOU WILL DEVELOP 20 AND MAINTAIN CLIENTS. 21 IT ALSO IS GOING TO HELP YOU WITH YOUR 22 FINANCIALS, WHICH ARE VERY IMPORTANT TO US, AND, 23 OF COURSE, THE BIG ONE FOR US THAT WE REALLY 24 WANTED TO DEVELOP WAS ASSET MANAGEMENT, AND SO, 25 TODAY, AGAIN, $168-$170 BILLION RANGE OF ASSETS 24 1 UNDER MANAGEMENT AND MUTUAL FUNDS. 2 WE'RE A PLAYER IN THE INSTITUTIONAL MARKET AND 3 THE HIGH NET WORTH MARKET. 4 A COUPLE OTHER AREAS TO MENTION. 5 THE WRAP ACCOUNT AREA, AND WE HAVE A WRAP PROGRAM 6 CALLED MASTERS THAT ALLOWS US TO NAME MONEY 7 MANAGERS IN A WRAP TYPE OF FORMAT. 8 WE HAVE A FUND SOURCE WHICH ALLOWS YOU TO WRAP 9 MONEY MANAGEMENT TOGETHER WITH MUTUAL FUNDS, AND 10 WE HAVE HIGH PLUS THAT ALLOWS THE CLIENT TO HAVE 11 UNLIMITED TRADING, FINANCIAL ADVISER, WRAP 12 PRODUCTS, ET CETERA. 13 OUR PERSONAL TRUST AREA WITH 53,000 ACCOUNTS 14 MAKES IT THE FOURTH LARGEST IN THE TRUST AREA AS 15 FAR AS PERSONAL TRUST ACCOUNTS ARE CONCERNED. 16 WE'VE TALKED TO YOU A LITTLE BIT ABOUT THE 17 FOOTPRINT WE HAVE THERE. 18 INSURANCE AND ANNUITIES, I WILL QUICKLY SAY, THE 19 WHOLE INSURANCE AREA IS SOMETHING THAT I THINK IS 20 A VERY IMPORTANT KEY TO OUR STRATEGY, NOT JUST 21 WITH THE SUCCESS THAT WE'VE HAD WITH FIXED 22 ANNUITIES OR VARIABLE ANNUITIES, BUT THE WHOLE 23 INSURANCE PLATFORM. 24 ONE OF THE FIRST THINGS YOU WILL FIND OUT WHEN 25 AND IF YOU EVER DECIDE TO DO AN ESTATE PLAN IS 25 1 THE IMPORTANCE OF INSURANCE AND HELPING WITH THE 2 TAX STRATEGIES, CREATING CASH FLOW, ESPECIALLY IF 3 YOU MANAGE YOUR OWN BUSINESS, HAVE A FARM, 4 INSURANCE PLAYS A KEY ROLE. 5 INSURANCE STRATEGY IS IMPORTANT TO THE 6 DEVELOPMENT OF THE SWEET SPOT FOR US IN THE 7 COMMERCIAL SMALL BUSINESS BANKING SERVICES. 8 THE AMA IS A VERY LARGE ACCOUNT BASE FOR US. 9 THAT'S BASICALLY A BANKING AND BROKERAGE 10 TOGETHER. 11 THE BROKERAGE INDUSTRY REALLY LAUNCHED AND 12 STARTED THAT YEARS AGO, WITH TAKING BROKERAGE AND 13 TRYING TO ADD BANKING TO IT. 14 WE DID IT FROM REVERSE. 15 WE TOOK A BANKING PLATFORM, AND ADDED BROKERAGE 16 TO IT, AND THAT'S BECOME A STRONG SERVICE FOR US, 17 AND THEN THE 401(K), WHICH WE PROBABLY WON'T HAVE 18 TIME TO DEVELOP IN ANY STRONG FORMAT, IS THAT WE'RE 19 ALSO VERY SERIOUS ABOUT THAT BUSINESS. 20 WE HAVE ABOUT $18 BILLION UNDER ADMINISTRATION. 21 WE USE AN OPEN ARCHITECTURE IN TERMS OF USING 22 MANY ASSET FIRMS IN THE ROOM TODAY, BUT WE ALSO 23 HIGHLIGHT EVERGREEN FUNDS AS BEING ONE OF THE 24 ALTERNATIVES THAT YOU CAN CHOOSE. 25 WE SERVICE ABOUT 400,000 PARTICIPANTS. 26 1 WE'RE WEB ENABLED AND HAVE THE FULL SERVICE 2 RECORD KEEPING AN THE LIKE, AND THE REAL SECRET 3 IN THAT BUSINESS I THINK IS, A, NOT ONLY RUNNING 4 THAT BUSINESS RIGHT, AND YOU HAVE TO RUN IT RIGHT 5 BECAUSE YOU DON'T MAKE MONEY OFF OF PURE 401(K) 6 ADMINISTRATION. IT HAS TO BE ASSET MANAGEMENT 7 CHOICES, BUT, IT WILL BE THE TURNOVER OF THE 8 INDIVIDUALS WITHIN THAT 401(K) PLAN. 9 WHETHER IT BE RETIREMENT, WHETHER IT BE 10 RESTRUCTURING FROM CORPORATIONS AN THE LIKE, AND, 11 TODAY, WE'RE ACTUALLY CAPTURING ABOUT 30% OF 12 THOSE ASSETS AS AN INDIVIDUAL COMES OUT OF A 13 401(K) PLAN. MANY TIMES WHAT THEY NEED IS ADVICE 14 WITH OUR NATIONAL BROKERAGE FIRM. 15 WE CAN GIVE THEM THE ADVICE. 16 WE'VE GOT THE ROLLOVER PRODUCTS, AND OF COURSE, 17 MANY TIMES, IF YOU DON'T MAKE YOUR CAREER IN THIS 18 INDUSTRY, YOU'RE JUST NOT AWARE OF THINGS, LIKE 19 YOU CAN'T TAKE YOUR 401(K) MONEY OUT IF YOU ARE 20 SUBJECT TO A LOT OF TAXATION AND THE LIKE. 21 MANY TIMES PEOPLE SAY, YEAH, BUT AN INDIVIDUAL'S 22 ONLY RETIRING WITH $30,000. 23 I KNOW THAT'S A NICE ACCOUNT, BUT IS THAT WORTH 24 IT? 25 BUT WHAT YOU FIND OUT IS THAT THESE INDIVIDUALS 27 1 MAY BE WORTH A LOT MORE BECAUSE THEY HAVE ASSETS 2 OF WEALTH IN OTHER AREAS, OR MAYBE THEY'RE 3 MARRIED AND HAVE A MATE OR PARTNER THAT HAS A LOT 4 OF WEALTH, AND THEY NEVER GOT AROUND IN THEIR 5 BUSY CAREERS TO DO THE FINANCIAL PLANNING THAT 6 THEY NEED. 7 LET ME MOVE ON TO ASSET MANAGEMENT BECAUSE IT'S 8 SO CRUCIAL TO US. 9 WHAT WE WOULD BE IS I WOULD CALL US A VERY STRONG 10 BALANCED MANAGER. 11 WE HAVE BALANCED MANAGEMENT IN TERMS OF ASSET 12 DISTRIBUTION SYSTEMS, AND IN EFFECT, WE HAVE A 13 BALANCE HERE WHEN YOU LOOK AT IT. 14 I'M NOT REFERRING TO THE SPECIFIC STYLE OF 15 INVESTMENT. 16 I'M SAYING LOOK AT HOW WE BREAK THIS DOWN. 17 FOR EXAMPLE, THE $168 BILLION. WE HAVE ROUGHLY 18 $87 BILLION IN MUTUAL FUND FORMAT, AND $81 19 BILLION IN A SEPARATE ACCOUNT FORMAT. 20 IF YOU BREAK THAT DOWN, WE HIT TWO DIFFERENT 21 MARKETS. 22 WE HIT THE INSTITUTIONAL MARKET WITH $43 BILLION 23 IN SEPARATE ACCOUNT MANAGEMENT, AND THE HIGH NET 24 WORTH TO ABOUT $38 BILLION OF ASSETS UNDER 25 MANAGEMENT. 28 1 IF YOU LOOK AT THE TOTAL HIGH, MANY TIMES WHEN 2 YOU LOOK AT A BANKING ORGANIZATION, YOU THINK OF 3 A FIRM THAT'S MAYBE DOMINATED WITH MONEY MARKET 4 FUND ASSETS, AND IN OUR CASE, WE'RE ACTUALLY 5 ABOUT A THIRD, 34% ARE EQUITY TYPE FUNDS, 28% ARE 6 IN FIXED INCOME FUNDS, AND 38% ARE IN MONEY 7 MARKET FUNDS SO WHAT WE'RE GOING TO HAVE IS A 8 ROCKETSHIP ENVIRONMENT OUT THERE. 9 WE'RE GOING TO TRAIL IN THE ASSET GROWTH, IF YOU 10 WILL, TO THE 100% EQUITY FIRMS, BUT IN SORT OF 11 THE TRUE TIME, IF YOU WILL, WE HAVE A NICE 12 BALANCE TO IT, SO WE HAVE DEFENSIVE 13 CHARACTERISTICS WHEN YOU GET INTO A MARKET LIKE 14 WE'RE IN AT THE MOMENT. 15 EVERGREEN HAS BEEN THE BRAND THAT WE HAVE 16 DEVELOPED IN THE MUTUAL FUND AREA. 17 VERY IMPORTANT THAT WE HAVE A BRAND IN THIS AREA. 18 IT SHOULD NOT BE TAKEN LIGHTLY THAT YOU CANNOT 19 USE THE NAME AND THE BRAND OF THE ORGANIZATION 20 BECAUSE THEN IT BECOMES A PROPRIETARY FUND. 21 WE RUN THIS AS A SEPARATE PLATFORM, AS A SEPARATE 22 BUSINESS, BUT PART OF OUR FAMILY. 23 THE GROWTH HAS BEEN SUBSTANTIAL, AND IT'S BEEN 24 THROUGH A COMBINATION OF ACQUISITIONS WHICH WE 25 PUT HERE ON THE LEFT. 29 1 MANY FOLKS WANT TO SORT OF ANALYZE THIS, SO YOU 2 HAVE A COMBINATION OF ACQUISITIONS. 3 ROUGHLY ABOUT $45, $46 BILLION, PUT INTO THAT SOME 4 CONVERSIONS OF TRUST FUNDS IN THE MUTUAL FUND 5 FORMAT, AND THEN YOU PUT TOGETHER SOME MARKET 6 APPRECIATION, AND THEN THE ORGANIC GROWTH THAT WE 7 DID, AND YOU END UP WITH $87 BILLION. 8 A KEY TO THIS, AGAIN, YOU HEARD THE ONENESS OF 9 BROKERAGE CHANNEL, THE ONENESS, IF YOU WILL, ON 10 RUNNING THE TRUST CHANNEL AND THE HIGH NET WORTH 11 CHANNEL, ONCE AGAIN, WE'VE GONE WITH THE ONENESS 12 HERE. 13 DESPITE ALL OF THESE ACQUISITIONS AND LOOKING 14 LIKE A LOT OF CHAOS IN MANY RESPECTS AT ANY GIVEN 15 DAY, WE ONLY HAVE ONE BOARD OF DIRECTORS. 16 AS WE BOUGHT COMPANIES, WE LAID OUT OUR STRATEGY 17 AS TO WHAT WE WERE TRYING TO DO WITH THE BOARDS. 18 THEY AGREED WITH IT. 19 WE HAVE ONE DISTRIBUTION EFFORT AND ONE 20 TECHNOLOGY PLATFORM, ET CETERA, AND THE ONE THING 21 THAT WE DO IF YOU GO FAR ENOUGH BACK IN MY 22 CAREER, I WAS MONEY MANAGER, RESEARCH DIRECTOR IN 23 THE LIKE, WE DON'T BELIEVE THAT ANY ONE LOCATION 24 HAS MAGIC WATER IN IT, AND EVERYBODY SHOULD MOVE 25 TO ONE BUILDING. 30 1 ASSET MANAGERS SHOULD BE WHERE THEY WANT TO BE, 2 WHERE THEY'RE HAPPY, WHERE THEY CAN MAKE GOOD 3 INVESTMENT DECISIONS, SO WE ALLOW OUR INVESTMENT 4 FOLKS TO LIVE WHERE THEY WANT TO LIVE, RUN MONEY 5 THE WAY THEIR STYLE IS SUPPOSED TO BE RUN. 6 WE JUST HAVE IT ALL TIED TOGETHER WITH ONE 7 PLATFORM AND ONE DISTRIBUTION, AND THAT'S 8 SOMETHING THAT, QUITE FRANKLY, VERY GOOD MONEY 9 MANAGERS LIKE BECAUSE THEY WANT TO RUN THE MONEY. 10 THEY DON'T WANT TO BE MESSING AROUND WITH 11 DISTRIBUTION DECISIONS AND TECHNOLOGIES AND THOSE 12 KINDS OF THINGS. 13 THE INSTITUTIONAL MARKET, AND I THINK I SHOWED 14 YOU ON AN EARLIER SLIDE, WE RUN AN ACCOUNT 15 BUSINESS OF $43 BILLION. 16 THERE'S PROBABLY CLOSE TO $80 SOME BILLION TOTAL 17 IF YOU CUT MUTUAL FUNDS THAT WE HAVE DEDICATED TO 18 THE INSTITUTIONAL MARKET. 19 IT'S A LARGE MARKET FOR US. 20 WE DEVELOPED A VERY BROAD SUITE OF PRODUCTS, AS 21 YOU CAN SEE BY THE EXHIBIT. 22 WE HAVE APPROXIMATELY 147 DEDICATED INVESTMENT 23 PROFESSIONALS ACROSS DIFFERENT STYLES. 24 AGAIN, THEY'LL GIVE ME THE HOOK IF I TRY TO GIVE 25 YOU A SALES PITCH FOR EACH AND EVERY ONE OF THESE 31 1 STYLES, BUT THEY ARE DOING A GREAT JOB, AND WE 2 HAVE, AGAIN, WITH INSIDE THIS ONE BRAND, WE HAVE 3 FIRMS LIKE TATTERSALL THAT IS AN EXCITING CORE 4 BOND FIXED INCOME MANAGER, AND WE USED THE 5 TATTERSALL NAME THERE, BECAUSE THE CONSULTANTS 6 KNOW THAT NAME AND THE INSTITUTIONAL MARKETS KNOW 7 THAT NAME, AND HAVING SAID THAT, WE HAVE STRONG 8 INSTITUTIONAL SKILL SETS THAT WE'VE GOT FROM 9 CERTAIN ACQUISITIONS THAT WE'VE DONE, AND IT 10 REALLY IS A STRONG BASE THAT WE THINK WILL BE 11 IMPORTANT IN THE FUTURE. 12 THE HIGH NET WORTH PLATFORM, ABOUT $38 BILLION AS 13 I SAID EARLIER IN SEPARATE ACCOUNTS. 14 IF YOU INCLUDE THE MUTUAL FUNDS WHICH A LOT OF 15 THOSE ARE MUNICIPAL FUNDS AN THE LIKE WHICH HELP 16 WITH SOME OF THE TAX STRATEGIES AND SO FORTH OF 17 THESE INDIVIDUALS, AND WE HAVE $45 BILLION WORTH 18 OF ASSETS. 19 312 DEDICATED INVESTMENT PROFESSIONALS. 20 WE HAVE INVESTMENT PROFESSIONALS ACROSS OUR 21 FOOTPRINT WITH THIS TYPE OF BUSINESS. 22 OF THE HIGH NET WORTH INDIVIDUALS, AN THE LIKE, 23 LIKE TO SEE THEIR PORTFOLIO MANAGERS AND LIKE 24 THAT LOCAL TOUCH, IF YOU WILL. 25 ONCE AGAIN, IT'S ONE INVESTMENT PLATFORM, ONE 32 1 CHIEF INVESTMENT OFFICER AND ONE TECHNOLOGY 2 OFFICER, 42 OFFICES, 10 STATES AND A BROAD RANGE 3 OF PRODUCTS. 4 INCLUDING ALTERNATIVE INVESTMENTS AND OPEN 5 ARCHITECTURE TO BRING UNDER STYLES OF MONEY 6 MANAGEMENT IN WHAT WE DON'T SPECIALIZE IN THAT 7 WHAT THE CLIENTS MIGHT WANT. 8 TO SUMMARIZE, OUR ASSET GROWTH MANAGEMENT PLANS 9 ARE WE WANT TO LEVERAGE THE BANK PLATFORM, WE WANT 10 TO OFFER THESE SERVICES THROUGH THE BROKERAGE 11 PLATFORM. 12 WE HAVE THE WEALTH MANAGEMENT PLATFORM. 13 WE HAVE DIFFERENT TYPES OF CAPABILITIES, RETAIL, 14 HIGH NET WORTH, EVEN 401(K). 15 AND WE WANT TO CONTINUE TO OFFER AND ORIGINATE 16 PRODUCTS AND FEE-BASED SERVICES. 17 THE FEE-BASED PIECE IS SO IMPORTANT BECAUSE WHEN 18 YOU PUT THESE FEE-BASED SERVICES TOGETHER, YOU GO 19 BACK TO THE THAT RECURRING FEES ON THE BROKERAGE 20 SIDE, AND WHEN YOU PUT IT ALLTOGETHER, WE'RE OVER 21 100% OF RECURRING FEES THAT COVER THESE COSTS. 22 HIDDEN VALUE, WELL, WORKING FOR FIRST UNION OVER 23 THE LAST SEVEN YEARS, THERE'S JUST BEEN A LOT OF 24 STORIES. 25 THE BANKING STORIES CONTINUE TO BE THE DOMINANT 33 1 STORY, BUT PART OF WHAT I'M TRYING TO DO TODAY IS 2 SAY WHAT WE DEVELOPED AND GROWN. 3 YOU'RE ALL IN ASSET MANAGEMENT FIRMS. 4 PUT YOUR KEY RATIOS UP THERE. 5 THESE ARE PUBLISHED P/E RATIOS. 6 ASSET MANAGEMENT FIRMS IN THE 20s. 7 WEALTH COMPANIES, MID-20s. 8 BROKERAGE FIRMS, 15. 9 THEN COMPARE THE MULTIPLES PUT ON GENERAL BANKING 10 ORGANIZATIONS. 11 WHAT WE'RE TRYING TO DO IS BUILD A REAL BALANCE 12 THAT WILL BLEND THAT TOGETHER, AND I THINK THIS 13 IS A LOT OF HIDDEN VALUE THAT WILL ULTIMATELY BE 14 UNDERSTOOD AND BECOME KNOWN THROUGH TIME BECAUSE 15 WE HAVE REACHED THAT CRITICAL SCALE. 16 WE HAVE REACHED THAT PLACE THAT WE CAN LEVERAGE 17 GOING FORWARD. 18 IT'S A WELL POSITIONED MULTICHANNEL. 19 IT'S NATIONAL. 20 WE'RE NOT JUST AN EAST COAST BANK. 21 WE HAVE A BROAD SPECTRUM OF PRODUCT, PROVEN TRACK 22 RECORD, AND ALL OF THIS IS FOCUSED ON HIGHER P/E 23 BUSINESSES. 24 AT LEAST HIGHER P/E BUSINESSES RELATIVE TO A 25 GENERAL BANKING PLATFORM. 34 1 FINALLY, SINCE THERE'S SO MUCH GOING ON IN OUR 2 COMPANY, THIS IS THE REASON FOR THE PRECAUTIONARY 3 STATEMENT. 4 THE ONE QUESTION THAT FOLKS ASK ME THAT I CAN'T 5 ANSWER IS, IF YOU LOOK AT WHAT'S GOING ON TODAY, 6 IN CASE YOU MISSED IT, THERE'S A PROPOSED MERGER 7 WITH THE WACHOVIA TEAM, AND IF YOU LOOK AT WHAT 8 THEY HAVE IN SOME OF THESE BUSINESSES, YOU CAN 9 SEE THE ADDED STRENGTH THAT WE WILL HAVE BOTH FOR 10 WACHOVIA CLIENTS AND FOR OURSELVES. 11 THERE'S OUR CAUTIONARY STATEMENT, AGAIN, I REFER 12 YOU TO THAT. 13 LET ME NOW TURN IT OVER TO YOU FOR QUESTIONS. 14 >> THANK YOU FOR REMINDING US OF THE CAUTIONARY 15 STATEMENT. I'M CURIOUS. 16 IT'S A MORE DIFFICULT MARKET AND INVESTING 17 ENVIRONMENT HERE TODAY. 18 IS THERE A DIFFERENCE IN THE BUYING PATTERNS 19 BETWEEN CUSTOMERS IN THE BANK CHANNEL AND THE 20 BROKERAGE CHANNEL? 21 >> DON: WHAT YOU SEE AT THE END OF THE DAY IS 22 THERE'S MORE SIMILARITIES THAN THERE'S 23 DIFFERENCES. 24 A LOT OF THAT DEFINITION, IF YOU WILL, IS WHAT 25 THE CLIENTS SEE THEMSELVES, WHERE THEY MIGHT 35 1 PARTICULARLY GO FOR BUSINESS, BUT I THINK THE 2 GENERAL TRENDS WOULD BE THE SAME. 3 THE MAJOR DIFFERENCE WE HAVE IN THE BANKING 4 CHANNEL, THOUGH, FROM AN INVESTMENT OPPORTUNITY 5 POINT OF VIEW IS SO MANY OF THESE INDIVIDUALS 6 HAVE NOT STARTED THEIR INVESTMENT PROGRAMS. 7 THEY KNOW THEY NEED TO START. 8 THEY'RE BUSY. 9 THEY'RE NOT SURE THEY HAVE THE WEALTH OR KNOW, IF 10 YOU WILL, WHERE TO GET THE TIME TO STUDY UP ON 11 INVESTMENTS, FIND A BROKERAGE FIRM AN THE LIKE, 12 SO WHAT WE HAVE EXPERIENCED IS MORE OF A MASS 13 MARKET TYPE OF DEVELOPMENT WHERE WE INTRODUCE 14 PEOPLE FOR THE FIRST TIME TO ANNUITIES, FIXED 15 ANNUITIES, VARIABLE ANNUITIES. 16 THEY'RE STARTING THAT FIRST MUTUAL FUND 17 INVESTMENT PROGRAM, AND THAT'S A REAL NICE 18 CHARACTERISTIC TO HAVE, AND QUITE FRANKLY, THE 19 EASE AND THE BENEFIT OF HAVING THAT AT ONE 20 ORGANIZATION, WE CAN DO YOUR BANKING BUSINESS AND 21 START YOUR INVESTMENT BUSINESS, IS EXCELLENT, AND 22 THEN AS WE DEVELOPED OUT THE SERIES SEVEN 23 PLATFORM WITHIN THE BANK, TODAY, I THINK OUR 24 AVERAGE ADVISER IN THE BANK HAS 15, 16 YEARS OF 25 EXPERIENCE, AND WE'RE NOW ATTRACTING EFFECTIVELY 36 1 THE CHARACTERISTICS THAT YOU WOULD SEE IN THE 2 OUT-OF-BANK CHANNEL. 3 [ INAUDIBLE QUESTION ] 4 >> DON: ON THE FIRST QUESTION IN TERMS OF HOW TO 5 TAP THE BANK CHANNEL, IT'S A COMBINATION OF 6 THINGS, AND THE SLIDE I HAD BACK THERE, -- AND I 7 WON'T GO BACK TO IT -- IT'S WHAT WE'RE CALLING 8 GOLD CENTERS THAT WILL BE THE FIRST MAJOR THRUST 9 IN TRYING TO DO THAT. 10 THE GOLD CENTERS, WE LOOKED AT THE BRANCHES. 11 WE LOOKED AT WHERE THEY'RE LOCATED. 12 WE LOOKED AT THE 172,000 CLIENT LIST, AND SAID, 13 OKAY, IF YOU LOOK AT THESE AREAS, AND OUR GOAL 14 SOME DAY WILL BE TO GET TO 100, BUT WE'RE 15 STARTING WITH 25. 16 THESE ARE AREAS WHERE WE KNOW THOSE TYPES OF 17 CLIENTS ARE COMING THROUGH THE DOOR, AND THEY 18 HAVE THAT KIND OF CAPABILITY RIGHT THERE ON THE 19 SPOT THAT THEY CAN MEET AND CHAT WITH FOLKS, 20 ESTATE PLANNERS, ASSET MANAGERS, ET CETERA, 21 INSURANCE SPECIALISTS, TRUST SPECIALISTS. 22 THIS WE FEEL IS HOW WE'RE REALLY GOING TO TAP IT, 23 AND MY PARTNER, BEN JENKINS, WHO RUNS THE GENERAL 24 BANK, IS VERY SUPPORTIVE OF THAT, BECAUSE WHEN 25 YOU GO BACK TO LOOK AT THE PRIVATE CAPITAL GROUP 37 1 WE HAVE TODAY, WE ALREADY HAVE 60,000 CLIENTS 2 INAUDIBLE, AND WHEN YOU LOOK AT THOSE 3 CLIENTS, THEY'RE TERRIFIC BANKING CLIENTS. 4 THEY HAVE MORE DEPOSITS. 5 THEY GROW DEPOSITS. 6 THEY HAVE GOOD LOANS WITH US. 7 THEY'RE A GREAT CREDIT RISK. 8 MANY OF THESE PEOPLE RUN BUSINESSES, RUN LAW 9 FIRMS, ET CETERA, SO FROM A GENERAL BANKING 10 INTEREST POINT OF VIEW, IT'S IN THEIR INTEREST 11 ALSO TO WANT TO INTRODUCE THEIR CUSTOMERS TO 12 THESE KINDS OF SERVICES BECAUSE IT HELPS BUILD 13 THAT WHOLE RELATIONSHIP. 14 ON THE INSURANCE SIDE, THE QUESTION OF THE 15 ECONOMICS, THEREIN, AN THE LIKE, IS FROM FIRST 16 UNION'S POINT OF VIEW, WE'RE NOT INTERESTED IN 17 ACQUIRING INSURANCE COMPANIES. 18 WE DON'T THINK FOR US THAT WOULD BE THE WAY WE 19 COULD MAXIMIZE THE USE OF OUR CAPITAL. 20 UNDERWRITING THE PRODUCTS, WE DON'T NEED TO DO. 21 WE'RE A DISTRIBUTOR. 22 INSURANCE PRODUCTS PLAY A ROLE IN ALL OF OUR 23 CLIENTS' LIVES, WHETHER IT BE THE INDIVIDUAL 24 FROM, AGAIN, I KEEP GOING BACK TO THE ESTATE TAX 25 AND THE LIKE, THE ANNUITIES, ET CETERA, RIGHT 38 1 THROUGH THE COMMERCIAL AGENCIES AND SO FORTH, SO 2 FOR US, WE CAN PARTICIPATE IN THE DISTRIBUTION 3 PROFITS, WHICH IS WHAT WE'RE ALL GOOD ABOUT. 4 AND SECOND OF ALL, WE USED OUR MASS AND SCALE, 5 THAT IN A LOT OF THE ANNUITIES WE ARE A 6 CO-ADVISER AND MANAGE A LOT OF THE MONEY. 7 WE DO THAT ANYWAY FOR A LIVING, SO WE CAN SHARE 8 IN SOME OF THE ASSET MANAGEMENT ECONOMICS, BUT TO 9 GET INTO THE UNDERWRITING WOULD BE A USE OF 10 CAPITAL, AT LEAST FROM OUR STRATEGY, WE DON'T SEE 11 THAT THAT MAKES SENSE. 12 >> CAN I FOLLOW UP ON THAT? YOU DEVELOPED 13 INCREASING CONFIDENCE IN YOUR ABILITY TO 14 DISTRIBUTE PRODUCTS THROUGH THE BROKERAGE 15 CHANNEL, WHICH IS A RELATIVELY NEW CHANNEL FOR 16 YOU. 17 WOULD THAT GIVE YOU MORE CONFIDENCE TO CROSS-SELL 18 FROM THE LIFE INSURANCE CHANNEL NOT BEING A 19 MANUFACTURER? 20 >> DON: YES, WE COULD DO THAT IN ADDITION TO THE 21 LIFE INSURANCE BUSINESSES THAT WE WHOLESALE TO 22 AND TALK TO THROUGH OUR MUTUAL FUND GROUP TODAY, 23 AND THE COMMERCIAL AGENCY SIDE, IF YOU FOLLOW US, 24 WE MADE A NUMBER OF SMALL ACQUISITIONS IN 25 COMMERCIAL AGENCIES, THE AGENCY UP IN NEW JERSEY 39 1 AREA FOR EXAMPLE; AND, AGAIN, WE HAVE A CLASSIC 2 SITUATION WHERE YOU HAVE INDIVIDUALS WHO MADE 3 THEIR CAREER WITH ONE SET OF PRODUCTS, IN THIS 4 CASE, COMMERCIAL INSURANCE, AND WE CAN NOW LINK 5 EVERYTHING TOGETHER. 6 OUR GOAL IS ANY SERVICE THAT WE HAVE AT FIRST 7 UNION, WE WANT WHOEVER IS DEALING WITH THE CLIENT 8 TO BE ABLE TO BRING ALL OF THAT THROUGH, AND WE 9 ALREADY HAD TREMENDOUS CROSS-SELL SUCCESSES 10 BECAUSE THE CLIENTS OF THESE COMMERCIAL AGENCIES 11 KNOW AND TRUST THESE PEOPLE. 12 THEY KNOW WHEN THEY NEED SOME OF THEIR BANKING 13 SERVICES OR ASSET SERVICES. 14 Q. YOU LET YOUR MONEY MANAGERS MOVE ANYWHERE 15 THEY WANT. 16 [ INAUDIBLE ] 17 WHAT ARE YOUR RULES IN HOW YOU GOVERN THAT? 18 >> Don:: THAT'S WHY IT'S HELPFUL TO HAVE ONE 19 SALES STRUCTURE FOR THE MANAGEMENT SIDE BECAUSE 20 IT'S A DIFFICULT TASK. 21 EVERYBODY WANTS TO SEE THE MONEY MANAGERS. 22 WE BASICALLY SAT DOWN AND NEGOTIATED, IF YOU 23 WILL, WHAT WOULD BE A REASONABLE AMOUNT OF TIME 24 FOR A MANAGER TO BE AWAY BECAUSE YOU CAN'T GO 25 INTO ESPECIALLY THE EXTERNAL BROKERAGE CHANNELS, 40 1 WHICH BY THE WAY, WE SELL ABOUT AS MUCH EVERGREEN 2 FUND THROUGH A LOT OF THE PARTNERS IN THE ROOM 3 TODAY TO WHAT I WOULD CALL EXTERNAL CHANNEL THAN 4 WE MADE THROUGH FIRST UNION-OWNED CHANNEL, AND WE 5 TRY TO FIGURE OUT THE AMOUNT OF TIME THAT A 6 PORTFOLIO MANAGER COULD BE AWAY, AND THEN ARE 7 AHEAD OF THAT WHOLE DISTRIBUTION SIDE. 8 IT'S LIKE A LIMITED QUANTITY TO GET THE MANAGER 9 SO MUCH. 10 IF YOU WERE A MANAGER OF A CERTAIN FUND, AND YOU 11 WERE CHOSEN TO SPEAK TO A MORGAN STANLEY MEETING, 12 SO BE IT, YOU MAY NOT BE AVAILABLE FOR ANOTHER 13 MEETING. IT'S A BALANCING ACT. 14 YOU'VE GOT TO PROTECT YOUR ASSET MANAGERS. 15 MAYBE THIS IS MY OLD ASSET MANAGEMENT BACKGROUND 16 COMING THROUGH, BUT YOUR JOB IS REALLY TO MANAGE 17 ASSETS, AND THAT'S WHAT WE LET THEM DO. 18 >> DON, THANK YOU. 19 >>DON: THANK YOU VERY MUCH. APPRECIATE YOUR 20 TIME. 21 THANK YOU. 22 [ APPLAUSE ] 23 24 25