Ahold Another Enron?

Company Snapshot: Royal Ahold NV Worlds 3rd largest food distributor $2.2 T 9000 supermarkets/hypermarkets across USA, Europe, Latin America and Asia. Examples: $3.1 T $8.1 T Albert Heijn, ICA, Superdiplo, Peapod 450,000 people worldwide Net sales in excess of E 66.6 bn in 2001 $5.4 Over 50% sales generated in USA T The most widely held stock in the Netherlands
Global Retail Assets $104 Trillion
$6.7 T

Breakdown in Corporate Governance

Pre 2003 Aholds pursuit of earnings growth must occur within the framework of our values and $2.2 T corporate identity. Ahold strives to deliver on promises to financial shareholders, associates, $3.1 T the local communities in which we operate$8.1 T and to society at large.
$5.4 T Feb 2003 How do you spell Ahold now..E-N-R-O-N?

Global Retail Assets $104 Trillion

$6.7 T

Breakdown in Corporate Governance

US subsidiary overstated profits by US$880 million Shares lost two thirds of value $2.2 T
$3.1 T
$8.1 T

$5.4 T $6.7 T

Global Retail Assets $104 Trillion

Background
Opportunities exist to expand the product offering to this sector

Mutual Funds and Retirement Plans are a small fraction of the HNW market
50 40
$Assets in Trillions

HNW Assets in Mutual Funds & Retirement Plans 1999 vs. 2004(E)

Global HNW Market

30 20 10 0
1999 2004(E) Global Defined Contribution

Global Mutual Funds

Global Defined Benefit

1999

2004(E)

1999

2004(E)

1999

2004(E)

Mutual Funds, Retirement Plans (9%)

Sources: Merrill Lynch/CapGemini, Bernstein, InterSec Research, Goldman Sachs, Cerulli Associates, DWS Research, VIP Forum , PwC Analysis

Background
PwC research indicates an expected shift in competitive focus, for example, competing for quality staff is perceived as becoming more intense than competition for new clients

%
100

Most important areas of competition now and in three years

91 78 87 83 78 70 52 48 48

80

60

44

44

40

39

20

0
Competition to acquire new clients Competition for good staff Investment performance Competition to retain good clients Price Competition for more of clients' business

Now In three years

Background
Valued advice is expected to be more important than personal relationships in three years

Why clients select your organization and why they will in three years
%

80

78 61

74 61 61 52 48 39 39 44 65 48 39

Now In three years

60

40

39

20

17 4

Personal relationships

Service quality

Rec. from existing client

Image

Investment performance

Value advice

Recom. from 3rd parties

Access to other providers' products

Background
Wealth management has very attractive margins

$ (mm)
500 25% 400 9% Other 4% IT Mkting/ Sales 8% 11% Other

Profit and loss breakdown*

25%

Net
Interest 66%

Overhead

52%

300

Brokerage
200 Fees 100

Staff

35% Profit $162 million

AUM

Revenues

Costs

*Data reflects PwC North American Private Banking/Wealth Management Survey Sample median values Note: Overhead may include some IT costs as an allocation from parent/affiliate company

Proposed Objectives and Scope

ASSESS The current Barclays IPB situation through; 1) personal interviews with key IPB executives and Senior Management, and, 2) a thorough review of internally developed information on all relevant aspects of the business ANALYZE The opportunities and challenges presented by significant external factors, including: Market dimensions Key market forces Client Segments Product demand Competitor activity Etc. BRAINSTORM High level strategic alternatives for Barclays IPB business based upon the current situation, market characteristics, perceived opportunities and capabilities and availability of resources. These high level alternatives will be developed in conjunction with the Barclays Steering Committee to obtain agreement on the desired model DELIVER A comprehensive and actionable Business Plan, from Vision to Implementation steps, which Barclays can use as a blueprint for transforming and managing its IPB business going forward

Overview of Project Approach and Methodology

STEP ONE INTERNAL ASSESSMENT - INTERVIEWS
Mobilize Project Team Obtain and analyze internal IPB business data, including all relevant information pertaining to the Organizational Structure, Clients, Products, Markets, Cost and Revenue, etc. Identify key external factors impacting Barclays IPB effort

STEP TWO INTERNAL ASSESSMENT - BARCLAYS IPB BUSINESS

STEP THREE ASSESSMENT OF EXTERNAL FACTORS

STEP FOUR CREATION OF FINAL DELIVERABLES

Develop initial Vision and Strategy around how Barclays should address identified opportunities and challenges Refine Vision and Strategy Formulate recommended Vision and Strategy and brainstorm with Steering Committee Develop a draft Business Plan transforming Vision and Strategy considerations into a comprehensive and actionable Plan Refine Business Plan

Interviews with key IPB and Senior Management executives

Develop and analyze the opportunities and challenges presented by significant external factors

High level description of key business drivers Develop initial hypotheses around business effectiveness Present findings and initial hypotheses based on internal assessment to Steering Committee for discussion

Document interview results and synthesize findings

Present final Business Plan to Steering Committee Present Business Plan

Kick-Off Meeting 1 Week

Brainstorm 3 weeks

Brainstorm 1 week 10

Brainstorm

Brainstorm 3 weeks

Approach and Methodology

Step One: Internal Assessment - Interviews
Task
1 Mobilize Project Team
q

Process
Agree on workplan, research agenda, and schedule for deliverables and presentations Review planning work completed by Barclays to date (local and relevant global plans) Gould and Mark North to conduct interviews, covering points and issues agreed upon as vital to the understanding of Barclays IPB business dynamics
q

Deliverables
Barclays and PwC team working roles and responsibilities Project assessment criteria Assessment of Barclays core competencies and areas of added value Areas requiring improvement Opportunities for more effective and profitable business Clarification of issues surrounding client secrecy requirements Surfacing of significant roadblocks to success

2 Conduct Interviews with key IPB and Senior Management executives

Rob

Interview topics will cover: Vision and Mission concepts Market and business trends Aspirations for the business Client requirements In house elements facilitating success In house elements perceived as roadblocks Compensation drivers Competitive threats Product available and product needs Training depth Legal and regulatory issues, particularly KYC IT/Systems issues What works, what could be better

3 Document assessments and synthesize findings

Creation of Interview Results document Documentation of Barclays Internal Capabilities Assessment Synthesize findings

Interview Results document, detailing key findings and implications

11

Approach and Methodology

Step Two: Internal Assessment - Barclays IPB business
Task
1 Obtain and analyze internal Ipb business data

Process
Work with Barclays team members to obtain, fully understand analyze key elements driving the IPB business. These will include:
q

Deliverables
Assessment of Barclays core competencies and areas of added value Areas requiring improvement Opportunities for more effective and profitable business Surfacing of significant roadblocks to success Financial impacts of strengths and weaknesses

2 Document assessments and synthesize findings

Organizational Structure Operating model Team Structures Links with Head Office Success measures Compensation structure Revenue and Cost details Current Client segmentation process Description of Target Markets Level and type of Operational support Branding issues Onshore opportunities in Brazil, the Caribbean, US, and Canada Credit process IT, Systems and software capabilities Product mix and utilization Third party product offerings Existing portfolio distribution Target Market concentration Geographical concentration Internal and external IPB related audit reports Client acquisition details Client maintenance/cross sell techniques Referral procedures Distribution channels and usage Existing and contemplated Alliance Partners
12

Findings and initial hypothesis document, detailing key findings and implications

Approach and Methodology

Step Three: Assessment of External Factors
Task
1 Identify Key External Factors impacting Barclays IPB effort and analyze resulting opportunities and challenges
q

Process
PwC will draw upon previous experience, contact network, market date and external research to provide a relevant assessment of critical external factors. These include: Detailed economic, political and risk sensitive Country Profiles and Market Dimensions for relevant geographical Regions IPB related Market Characteristics Detailed description of potential client segments Product purchasing behavior by client segments Competitor analysis: Operating models Client segments targeted Technology utilized Overview of Third Party product/service providers Legal and Regulatory issues and mitigants
q q q q q q q q q q q q

Deliverables

External Factors document, detailing key forces impacting Barclays IBP business going forward

13

Approach and Methodology

Step Four: Creation of Final Deliverables
Task
1 Develop and refine the initial Vision and Strategy
q

Process
Analyze how Barclays should adapt to and address key external forces in view of internal characteristics, refined through Project team and Steering Committee input
q

Deliverables
High level overview, then refined view, including high level operational and financial models

2 Formulate Recommended Vision and Strategy

Further brainstorming utilized to reach a clear and powerful Vision and Strategy for Barclays IPB

Vision and Strategy document Refined view, including high level financial model and operating model

14

Approach and Methodology

Step Four continued: Creation of Final Deliverables
Task
3 Develop a draft Business Plan, transforming Vision and Strategy considerations into a comprehensive and actionable Plan
q

Process
Moving from Vision and Strategy to a Business Plan which will include sections derived from previous work on the internal and external environments and supplemented by Barclays specific analysis and implementation steps
q

Deliverables
A Business Plan comprising of sections derived from previous work on the internal and external environments and additional sections detailing Barclays IPB business going forward including: A SWOT analysis The target markets, identified and segmented The Products and Services applicable to the target markets Primary and Secondary Distribution Channels The Sales and Service approach Branding issues The Credit and Collection process The IT/Systems and Operational support structure A high level financial analysis of the business going forward and an estimated cost of implementation.
q q q q q q q q q

4 Refine and finalize the Business Plan and present to the Steering Committee

Further brainstorming the Plan with Project team and Steering Committee to reach a comprehensive and actionable Business Plan

Present to Steering Committee

15

Staffing
Why PwC

PwC brings outstanding capabilities to this project

We have the premier Wealth Management Consulting Practice, with over 200 professionals devoted to the industry globally. PwCs proposed project team has relevant experience directly applicable to this project: Proven expertise in IPB business strategy development and implementation A full understanding, based on personal experience, of the various Latin American markets in terms of their economic, political, cultural and risk related characteristics A solid understanding of Barclays business activities in Latin America which will enhance the project in terms of speed and initial understanding of the banks IPB business drivers PwCs on the ground network across Latin America will complement the primary teams legal and regulatory experience

16

Staffing We recommend structuring a joint project team from PwC and Barclays

Rob Gould Project Partner PwC Project Advisors Mark North Project Manager

Barclays Steering Committee

Steering Committee
Executive Leadership Overall direction / oversight Periodic presentations to review progress Ownership of results Linkages with global business priorities

Core Team
Project leadership Project deliverables Day-to-day project administration Summarization / Reporting to Steering Committee IPB / Banking / Latin American expertise

PwC Consultants

Barclays PwC Professionals

17

Staffing Brief background information on the key PwC team members

Rob Gould is Partner-in-Charge of the Americas Financial Services Strategy Practice and Global Leader of PwCs Wealth Management Practice. Rob will lead all major project meetings and provide overall oversight to the project. Rob has over 21 years experience in consulting to clients on corporate strategy, market entry strategies and business development. He has led projects throughout the world including Europe, Asia and the Middle East as well as in the Americas. He specializes in the investment management industry and leads our Global Practice in advising clients on the Wealth Management market including, leading Private Banks, Family Offices, Investment Companies and Hedge Funds. Most recently Rob has led the publishing of PwCs North America Inaugural Survey of the Private Banking/Wealth Management Industry. Mark North is a Principal Consultant in the Financial Services Strategy Practice and will manage the project. His background is in banking and related financial services, with significant experience in implementing and growing business lines in Latin America and Europe. Particular areas of specialization include, Private Banking, Consumer Banking, Wholesale Banking, development of effective organizational structures and the design and implementation of new business initiatives in the financial services sector. He has also developed hands on experience with acquisitions and post acquisition integration. Prior to joining PwC, Mr. North was an Executive Vice President at Standard Chartered Bank with responsibility for the banks Consumer Banking business in Latin America, which consisted of a Private Banking unit in Miami and a small branch network in Peru, Colombia and Venezuela.

18

Examples of recent engagements include:

Selected Qualifications
For a European Private Bank, PwC conducted primary and secondary research and analysis, including

market segmentation, required products/services, competitive positioning, and distribution channels. Strategic options were then generated and tested, covering organic growth, acquisition of investment managers, and a major acquisition of a private bank. The private bank decided to invest toward expansion in the Americas, targeting the High Net Worth segment in the U.S., Canada, and select Latin American markets For a major U.K. clearing bank, PwC developed a private banking strategy including an assessment of financial performance with a focus on the primary drivers of profitability. Financial strategy incorporated profitability projections for targeted segments and products as well as financial projections for alternative scenarios For a major International Bank with a significant presence in Latin America, PwC recommended an organizational model for the offshore and onshore High Net Worth business units, including target market segmentation and the required Relationship Manager skill set. This project also detailed the business activities best managed either onshore or offshore from legal & regulatory and client driven requirements For a major national bank, PwC provided analysis and recommendations on the development of a private banking outsourcing service. We defined the operational services and needs of private banks, defined the way the Bank could serve those needs and estimated the global market which could employ these services. We presented this strategy to the Chairman of the Bank and the bank is currently implementing this strategy For a major European Private Bank, we assisted the development of alliances with other firms involved in the Wealth Management business, identifying where and with whom alliances would work best. We set performance criteria and structured norms and revenue/cost targets for the establishment of effective and profitable alliances For a mid-sized Swiss Private Bank, PwC developed a strategy targeting specific customer segments 19 and defining alternative distribution channels. The Bank adopted PwCs recommendations and is currently

Professional Arrangements

Project Fees Estimated fees for this project are $134,000 per four week period. In return, Barclays will benefit from a carefully chosen team of full time project members, project advisors and Subject Matter Experts who have the knowledge and experience necessary to deliver a comprehensive business plan for the Banks IPB business Our fees are based on expected efforts needed to provide the results proposed. If we need less time than expected, the fees will decline proportionately. Should Barclays and PwC agree that a change in the scope is required to further analyze elements not covered in the original scope, we will discuss this with you and agree on a way forward. Out of pocket expenses including travel, room and board, and other administrative expenses, including reproduction and administrative support, etc., will be billed at cost. An invoice will be sent at the end of each month and will be payable upon receipt.

20