Wholesale Clients Technology, Operations and Property Services (TOPS) Update Keith Edginton

1. Wholesale Clients Technology, Operations and Property Services (TOPS) Update Keith Edginton London, 25th June 2001

2. Agenda Context TOPS Target Operating Model TOPS Transition Plan Progress to Date Sourcing Strategy Update

3. Context TOPS has a strong, committed management team focused on delivering the transition as quickly as possible TOPS COO - Wholesale Clients Keith Edginton TOPS Business Management Martin Smith TOPS Human Resources Barbara Turner Technology Keith Edginton ai. Operations William Higgins Property Martin Smith a.i. IT Strategy, Projects & Development Mike Hampson TOPS Europe Ron Teerlink TOPS America Michael Geslak TOPS Asia Pacific Bob Davis Technology Operations & Infrastructure Waleed Hanafi

4. Keith Edginton • Wholesale Clients COO • Global Head of TOPS • Global Head of Technology a.i. • Deliver Wholesale Clients cost savings • Transform TOPS into a commercial proposition • Maintain business as usual while mitigating operational risk • Global Investment Bank COO • UBS - CIO Europe Mike Hampson • Global Head of IT Strategy, Projects and Development • Project rationalisation • Strategic asset divestment • Overall responsibility for TOPS-wide Transition • Head of UK PMU • Head of UK Equity IT • Morgan Stanley • CSFB Waleed Hanafi • Global Head of Technology Operations and Infrastructure • Infrastructure rationalisation and efficiencies • Technology support • Asia Pacific CIO • Visa International - Network Services William Higgins • Global Head of Operations • Establish global organisation • Deliver regional hub processing • Reduce cost per trade • Head of UK Operations • UBS - Europe Operations Martin Smith • Global Head of TOPS Business Management • Global Head of Property a.i. • TOPS MIS, Operational Risk Management and Audit control • TOPS Financial Control • Optimise property portfolio • London COO • Head of UK Finance Barbara Turner • Global Head of TOPS HR • HR advisory services for TOPS staff and mgt • Key individual policy • Head of UK Central Services HR • UBS - Global HR Context The management team has a wealth of experience and functional expertise Who Role Responsibilities Background

5. Ray Carneiro Lars Gustavsson Bob Davis • Global Head of Propery • Regional Head of TOPS Asia Pacific • Global Head of Technology • Optimise property portfolio • Deliver property transition savings • Deliver transition from regional to functional structure • Maintain oversight, control and co-ordination for region • Define and Implement global IT strategy for Wholesale Clients • ING Barings - Chief Information Officer • Skandinaviska Enskilda Banken - Group Head of IT • COO Asia Pacific Regional Office • Bank of America - Asia Pac Strategy and Planning • Prudential - Head of Property EMEA • Citibank - Head of Property Europe Michael Geslak • Regional Head of TOPS Americas • Deliver transition from regional to functional structure • Maintain oversight, control and co-ordination for region • COO North America Treasury & FI • USA Regional Head of Risk Control & Middle Office Ron Teerlink • Regional Head of TOPS Europe • Deliver transition from regional to functional structure • Maintain oversight, control and co-ordination for region • Manage Workers Councils and Union interactions • European Division - Head of Operations • International Division Head of Organisation and Information • COO Germany Context The structure is strengthened by the implementation of a regional matrix and a number of significant recent hires…. Who Role Responsibilities Background

6. TOPS is the largest of the Wholesale Clients Business Units, with a presence in all major locations around the world Context Technology, Operations and Property Services 47 countries 8000+ people Cost base €2.1bn+

7. In line with the Strategic Review ABN AMRO has prioritised 3 areas to maximise economic profit Context 1 • Double revenues • Reduce operating costs • Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions • Maintain risk capital & reallocate toward priorities 2 3

8. Within this prioritised framework, TOPS will initially focus on Operating Cost Reduction while preparing the ground for revenue generation Context 1 • Double revenues • Reduce operating costs • Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions • Maintain risk capital & reallocate toward priorities 2 3

9. Agenda Context TOPS Target Operating Model TOPS Transition Plan Progress to Date Sourcing Strategy Update

10. TOPS’ strategic goals are focused on reducing cost, establishing a service culture and pursuing revenue opportunities, while continuing to mitigate operational risk TOPS Target Operating Model - TOPS Operating Strategy - ? ? WCS • Cost Reduction • Deliver annualised savings across TOPS of €432m by 2002 • Create cost transparency and accountability Long term Short term • Attain/Maintain Control • Manage and deliver change effectively • Agree service levels • Efficient and responsive Technology, Operations & Property PC&AM Corporate Centre External Providers Internal Staff • Commercialisation • Create performance culture • Pursue revenue opportunities C&CC ? ?

11. Europe Hub • European Securities • GTS Payments • FX/MM Americas Hub Asia Pacific Hub Local Ops Group • Asia Pacific Securities • GTS Payments • FX/MM • Americas Securities • GTS Payments • FX/MM IT infrastructure Local Ops Group Local Ops Group IT infrastructure IT infrastructure Global Hub Global Functional Hub • OTC Derivatives • ET Derivatives • MIS • Static Data • Operations Control • Strategy • Management • Service Management IT Strategy, Projects & Development TOPS Target Operating Model The organisation structure is being simplified and rationalised, duplication removed and support service provision regionalised and globalised

12. Agenda Context TOPS Target Operating Model TOPS Transition Plan Progress to Date Sourcing Strategy Update

13. By the start of the year we had developed a detailed transition programme comprising 34 key control, rationalisation and transformation initiatives TOPS Transition Plan - Current Transition Programme - Control Initiatives Technology Operations • Establish Organisation and Governance • Establish Global Project Office • Define Service Provision with IT Customers • IT Asset control review • Establish TOPS system infrastructure • Global Ops Control and Control MIS • Global Reference Data • Global Organisation “Attain and Maintain Control of the Organisation” Rationalisation Initiatives Technology Operations • Global Network Management • Market Data Rationalisation • Lotus Notes Architecture • Country IT and Data Centre Consolidation • Americas Securities Regionalisation • European Securities Regionalisation • AsPac Securities Regionalisation • Global FX & MM Hub • Global OTC Derivatives Factory • Global ETD Clean-up • Global Network and Supplier Mgt • Consolidate AmLo IB Development • Integrate DI, O&I and RIM • Reduce Contractor Ratios • Consolidate Asia Pacific Country IT • Consolidate North American Development • Rationalise Global Project Portfolio • Platform Management and Consolidation “Reduce Operating Costs” Vision / Transformation Initiatives Technology Operations • Global Operations Performance Framework • Long term IT Operating Model • WCSBU Technology Architecture Initiative “Enable Transformation” Other / Programme Management • Property Review • Transition Management • Global Procurement • TOPS Balance Sheet

14. Since the launch of the transition programme we have been investigating a number of ways of increasing and accelerating the delivery of savings, the first of these was called ‘Project Magellan’ TOPS Transition Plan Deliver Benefits Early Increase Savings Building on the best available infrastructure will deliver benefits in the shortest period Single location (‘Hub and Spoke’) delivers maximum savings ‘Green field’ site does not meet timing criteria, therefore need to consolidate into an existing location The first wave of consolidation should focus on AmLo as this represents approximately 40% of the total TOPS global cost base AmLo shows duplication in all areas: processes, services, IT infrastructure and projects

15. Choices have been made between Amsterdam and London, based on best ‘value for money’ London provides the best solution forAmLo IT Infrastructure service provision Centralisation of associated IT infrastructure Amsterdam provides the best solution for a European Treasury processing hub Centralisation of Treasury processing TOPS Transition Plan London provides the best solution for AmLo securities processing Centralisation of securities processing IT strategy, projects and development should be optimised across AmLo Rationalisation of IT Development and Project Offices

16. TOPS Transition Plan The original transition programme, pre Project Magellan, identified €305m of annualised savings, given a restructuring cost of €506m - High Level Cost Benefit Analysis - Restructuring Cost Annualised Savings FTE Savings Operations Technology Property & Procurement Other Total €192m €150m €94m €70m €138m €108m €59m - 758 589 - - 1347 € 305m €506m

17. TOPS Transition Plan We estimate that the total programme, including Project Magellan, will deliver €432m of annualised savings, given a restructuring cost of €630m - High Level Cost Benefit Analysis - Restructuring Cost Annualised Savings FTE Savings Operations Technology Property & Procurement Other Total €221m €245m €94m €70m €160m €213m €59m - 879 1222 - - 2101 € 432m € 630m Our total annualised savings would reduce the WCSBU efficiency ratio by approximately 6%

18. TOPS has committed to deliver €249m of annualised savings by the end of this year TOPS Transition Plan - Annualised Savings Target (TOPS) - 2000 2001 2002 2003 2004 €143m €92m €110m €63m €161m €99m €114m €108m €161m €99m €114m €100m €0m €0m €30m €0m €19m €12m €87m €33m Operations TOI IT SP&D Property & Procurement Total P&L Savings €482m €474m €408m €30m €151m €476m €474m €432m Total Annualised Savings €0m €249m

19. Agenda Context TOPS Target Operating Model TOPS Transition Plan Progress to Date Sourcing Strategy Update

20. Progress to Date Almost 30% of this year’s targeted annualised savings have been delivered so far and work is underway to deliver the remainder of the savings ‘pipeline’ - Savings Delivered as at End of May - Target Annualised Savings €249m €13m Target P&L Savings €181m €165m €12m The pipeline includes committed outflows of 483 FTEs from 01/06 as a result of Project Magellan €89m €80m €71m Realised Savings Savings in the ‘pipeline’ Savings not yet in pipeline

21. More detailed analysis shows that we are materially on track, with our restructuring costs less than planned and our savings realised to date slightly ahead of schedule Progress to Date Target May 2001 Total 2001 Actual Target Variance €m €m €m €m €m Restructure Costs 630 432 49 55 -6 Annualised Savings 432 249 71 67 4

22. Agenda Context TOPS Target Operating Model TOPS Transition Plan Progress to Date Sourcing Strategy Update

23. TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from Sourcing Strategy Update Target Service Delivery Model LoB6 LoB1 LoB2 LoB3 LoB4 LoB5 LoBn “Client Demand for services” Service Delivery Management “Provision of services” Srv6 Srv1 Srv2 Srv3 Srv4 Srv5 Srv7 Service Level Agreements will be used to manage relationships with the business and service providers

24. TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from Sourcing Strategy Update Target Service Delivery Model LoB6 LoB1 LoB2 LoB3 LoB4 LoB5 LoBn “Client Demand for services” In the target state, TOPS will focus on service delivery management, and the provision of a limited number of services Service Delivery Management “Provision of services” Srv6 Srv1 Srv2 Srv3 Srv4 Srv5 Srv7 Increasingly look for support services to be outsourced either internally or externally Service Level Agreements will be used to manage relationships with the business and service providers

25. A low level of annuity business combined with a largely fixed cost structure leaves Wholesale Clients particularly exposed to market volatility and margin erosion Sourcing Strategy Update - Current Structure - - Target Structure - BULL MARKET BEAR MARKET BULL MARKET BEAR MARKET € € PROFIT PROFIT Total Cost LOSS Fixed Cost Revenue Revenue Total Cost Variable Cost Fixed Cost Variable Cost • High, fixed cost base • No protection from margin erosion COST • Low, variable cost base • Better protection from margin erosion • Better utilisation of resources • Unresponsive to market and competitive pressure • Technology base is inflexible and unreliable VALUE • Deliver more revenue for lower spend • Capability to grow the business more quickly • Cannot measure service delivery • Lack of management bandwidth CONTROL • Agree and implement service levels • Total cost transparency • Retain control of key services • Delivery is high risk for the bank RISK • Delivery is low risk for others

26. The transformation from a fixed to variable cost base will begin with the divestment of businesses that are no longer relevant Sourcing Strategy Update - Managing Technology Assets - Divest assets which are no longer relevant to the business Identify and retain core strategic assets – the ‘family silver’ Decide on the best sourcing model for non-core assets Keep in-house Transform Internally Need: Delivery capability Retain Assets Mgt Contract Need: A supplier Portfolio of Assets Re-source Joint Venture Need: A partner Divest Assets Need: Buyers Outsource Need: A partner

27. A sourcing strategy has been adopted that allows us to move to a variable cost structure while retaining ownership of those core skills and services that we do best Keep and reengineer or partner with outsourcer Keep Outsource to high competence provider Outsource to high value provider Sourcing Strategy Update - Potential Sourcing Model - High Competitive Advantage Key: = Services sourced inside TOPS = Services sourced outside TOPS Low Current Capability Level Low High

28. We have used the sourcing model to analyse capability and competitive advantage for Technology Infrastructure and Development Capability SP&D Business Solutions Technology Development Capability ISAP Development (AAITS) SD&I London ABN AMRO Infoserve Technology Infrastructure eMail Voice SD&I Pakistan Customer Support Network Services Development (AAGITS) IT Operations Sourcing Strategy Update - Capability & Competitive Advantage - High Competitive Advantage Low Current Capability Level Low High

29. The first tranche of the strategy concentrates on our Development Capability Sourcing Strategy Update - Development Capability- Opportunity Transform an organisation of 1000 people who provide development services and systems maintenance to all Business Units in over 50 countries with a current cost base of approximately €140m Strategy Implement a new operating model for our Development Capability, which replaces the current fixed cost base with a variable cost service Approach A variable cost service will be assessed by reviewing development using a new sourcing approach and new licensing agreements for products with a large cost base such as ISAP Benefits Provides a reliable, scaleable service that provides flexibility both in terms of cost and skills Note: Figures include SD&I London, Amsterdam, Pakistan and ISAP

30. The second tranche will run in parallel with the first, addressing the additional cost reduction and service improvement potential in our Technology Infrastructure Sourcing Strategy Update - Technology Infrastructure - Opportunity Improve the operational efficiency of our voice, eMail, network, customer support and IT operations services which represent over €330m of operation cost and approximately 1500 people Strategy Further reduce cost, reduce operational risk and improve service quality through re-sourcing provision of services Approach Infrastructure services will be assessed to determine the appropriate approach, which include the single / multi-vendor and fast track choices Benefits A lower cost, reliable, scaleable service that provides greater flexibility

31. We are managing the vendor relationship issue, which is a choice between the multiple service provision approach versus the strategic partnering approach with a global entity Sourcing Strategy Update - Sole-Sourcing versus Multi-Vendor - Benefits Disadvantages • Greater Value to the Bank • Ability to create innovative solutions, e.g. a venture or alliance, which delivers more value at lower cost • More power over a single supplier • Better service quality worth more than low price alone • Vendor more likely to be flexible to changes in our needs • Greater cost transparency and flexibility from the supplier Perception of Not Getting the Best Deal • No diversification of risk or skills (‘all our eggs in one basket’) • Perception that we have not got the best deal • Does any one organisation have all the required skills? Technology Partnership (Sole-source) • Play Vendors Off Against Each Other • Potential to ratchet down price through competition • Ability to appoint functional/regional ‘specialists’ • Perception that ‘due process’ has been completed • Potentially Poor Service - ‘False Economy’ • Contractors will claw-back the discount, e.g. through contract inflexibility • ‘Beauty Parades’ are slow and expensive – often negating the price reduction achieved • Cherry-picking by vendors (small contracts receive less attention from the vendor) • Smaller scope for innovation or flexibility Multi-Vendor

32. Summary • TOPS are focused on establishing a ‘client first’ organisation and reducing cost through globalising and regionalising service provision • We have developed an aggressive transition programme that will deliver over €430m of annualised savings within the next 24 months • TOPS have already realised over €71m of annualised savings and our pipeline for the rest of the year indicates that we are track to deliver the remainder of the projected savings • Our activities this year will underpin the bulk of the savings scheduled to be delivered in 2002 • We continue to consider ways of delivering even greater savings in a shorter time period, while at the same time minimising execution risk and increasing the certainty of delivery • Focusing on our core competencies while at the same time considering alternative sourcing approaches for those non critical tasks which we do not do well will enable us to deliver even greater value