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TRANSACTION SUMMARY
SLM Holding Corporation and USA Group
[GRAPHIC]
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TERMS OF THE TRANSACTION
- "BUYER" - SLM HOLDING
- "SELLER" - USA GROUP FOUNDATION
- $770 MILLION PURCHASE PRICE
- $400 MILLION CASH
- $370 MILLION RESTRICTED STOCK
- HEADQUARTERS - RESTON, VIRGINIA
- LARGEST OPERATION - INDIANAPOLIS, INDIANA
- TOTAL EMPLOYEES: 6,500
- ANTICIPATED DATE OF CLOSING: SEPTEMBER 30, 2000
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TRANSACTION SUMMARY
This transaction is virtually a perfect match for Sallie Mae
Strategically and Financially
- Creates "full service" student loan organization
- Completes loan origination and delivery process
- Matches Direct Lending's loan delivery advantages
- Adds $400 million fee income to Sallie Mae's $1 billion net interest
margin (projected 2001)
- Significant (20%) productivity potential
- Accretive in 2001
- Goodwill - approximately $480 million
- Equity capital to exceed $1.2 billion
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FORWARD LOOKING STATEMENTS
- Statements in this document referring to this transaction, expectations as to
future earnings and operations, and other future developments are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve risks,
uncertainties and other factors that may cause the actual results to differ
materially from such forward-looking statements. Such factors include, among
others, the ability to successfully integrate operations, the effect of
competitors' and customers' responses, changes in terms of student loans and the
educational credit marketplace arising from changes in interest rates and from
the implementation of applicable laws and regulations, and from changes in such
laws and regulations, and changes in the demand for educational financing or in
financing preferences of educational institutions, students, and their families.
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Overview of USA Group
USA GROUP, INC
- Private, non-profit incorporated in 1990 to provide direction and
administrative support to its affiliated companies (predecessor was United
Student Aid Funds incorporated in 1960)
- Comprised of several entities that participate in higher education credit
- USA FUNDS - FFELP guarantor
- USA GROUP GUARANTEE SERVICES, INC. - provides administrative
support to guarantors
- USA GROUP LOAN SERVICES, INC. - FFELP third party loan servicing
company
- USA GROUP SECONDARY MARKET SERVICES, INC - secondary market
company
- EDUCATION ONE GROUP - Bank One marketing affiliation
- NOEL-LEVITZ, INC. - higher education enrollment management
consulting
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USA GROUP GUARANTEE SERVICES, INC.
- PROVIDES A FULL RANGE OF ADMINISTRATIVE SERVICES FOR A GUARANTOR TO
CARRY OUT ITS FUNCTIONS
- Loan origination and maintenance
- Default prevention and collection
- 12 GUARANTOR CUSTOMERS INCLUDING USA FUNDS
- PROCESSED $10.2 BILLION OF GUARANTEES FOR THE FYE SEPTEMBER 30, 1999
($8 BILLION FOR USA FUNDS)
- FEES BASED ON LEVEL OF SERVICE PROVIDED TO GUARANTORS
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USA GROUP LOAN SERVICES, INC.
- MANAGES LOAN SERVICING FOR LENDER AND SECONDARY MARKET CLIENTS
- $15.5 BILLION SERVICING PORTFOLIO, AS OF SEPTEMBER 30, 1999
(APPROXIMATELY $5.0 BILLION FOR USA GROUP)
- 130 CLIENTS
- 1.8 MILLION ACCOUNTS
- FEE REVENUE IS BASED ON EITHER THE NUMBER OF ACCOUNTS OR THE DOLLAR
VOLUME OF LOANS OUTSTANDING
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USA GROUP
SECONDARY MARKET SERVICES, INC.
- Secondary market
- $6 billion portfolio
- 600 lender relationships
- Key customer: Bank One
- Projected annual acquisitions of $1 - $1.5 billion
- Spread based revenue
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USA GROUP
PRINCIPAL OPERATING ENTITIES
<TABLE>
<CAPTION>
UNIT FUNCTION ACQUIRED SLM EQUIVALENT PRINCIPAL REVENUE
BY SLM OPERATING UNIT SOURCES
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Guarantor, DOE - Department of
Education and
Borrowers
USA FUNDS Reinsured No None
-----------------------------------------------------------------------------------------------------------
Administrative services - Fees from lenders
USA GROUP supporting USA Funds, None / Sallie Mae & guarantors
GUARANTEE other guarantors, schools, Yes Servicing Corp. - Collection of
SERVICES, INC. borrowers, lenders & defaulted loans
secondary markets - $10.2 billion of
guarantees
-----------------------------------------------------------------------------------------------------------
USA GROUP - Loan servicing fees
LOAN SERVICES Student loan servicing, Yes Sallie Mae Servicing from lenders &
INC. collections Corp. secondary markets
- $15.5 billion
servicing portfolio
-----------------------------------------------------------------------------------------------------------
- Interest income on
loans owned or
USA GROUP Student Loan managed
SECONDARY Purchase loans in the Yes Marketing Assoc./ - $6 billion portfolio
MARKET secondary market Nellie Mae / SLFR - Projected
SERVICES, INC. acquisitions of $1-
1.5 billion
</TABLE>
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USA Group* Pro Forma Operating Margin
Operations Acquired
($ IN MILLIONS)
<TABLE>
<CAPTION>
Pro forma
REVENUES 1999 2000**
-------- ---- ------
<S> <C> <C>
Default Activity Fees $136 $148
Loan Origination Fees 130 142
Other Loan Servicing Fees 77 73
Net Interest Income 48 71
---- ----
TOTAL REVENUES 390 433
TOTAL EXPENSES 313 339
PRETAX INCOME $ 77 $ 95
OPERATING MARGIN 20% 22%
</TABLE>
*EXCLUDES GUARANTEE AGENCY USA FUNDS
** PROJECTED FOR 2000 FISCAL YEAR
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APPENDIX
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STUDENT LOAN LIFE CYCLE
<TABLE>
<CAPTION>
ORIGINATION DISBURSEMENT IN SCHOOL REPAYMENT DELINQUENCY DEFAULT
<S> <C> <C> <C> <C> <C> <C>
ENTITIES - University - University - Guarantor - Servicer - Servicer - Servicer
- Lender - Lender - DOE - Lender/ - Guarantor - Guarantor
INVOLVED - Guarantor - Servicer - Secondary - DOE - DOE
- DOE - Market - Collection
- DOE Agencies
FEES/ - Origination Fee - Disbursement - Account - Servicing Fee - Default - Collection Fee
(DOE to Fee (Lender to Maintenance (Lender to Aversion Fee (Retention of
INCOME Guarantor) Disbursement Fee (DOE to Servicer) (Federal defaulted loan
- Guaranty Fee Agency) Guarantor) Interest Reserve Fund collections)
(Student to - Conversion Fee - Interest Income Income to to Guarantor)
Guarantor) (Lender to to Lender Lender - Servicing Fee
(Lender to
Servicer)
USA - USA Funds - Guarantee - Guarantee - Loan Services - Guarantee - Guarantee
(Guarantor) Services Services - SMS (if holder Services Services (Default
GROUP - Guarantee (Origination & (Maintenance) of loan) (Default Collections)
ENTITY Services Maintenance) Prevention) - Guarantee
(ACTIVITY) (Origination & - Loan Services Services
Maintenance) (Conversion) (Portfolio
Management)
</TABLE>
DOE = Department of Education
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STUDENT LOAN LIFE CYCLE
DIAGRAM OF REVENUE SOURCES
[GRAPHIC]
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COMPARISON - SALLIE MAE/USA GROUP
Note: Figures represent FY99 unless otherwise noted. Sallie Mae fiscal year
ends 12/31; USA Group fiscal year ends 9/30.
<TABLE>
<CAPTION>
SALLIE MAE USA GROUP
<S> <C> <C>
EMPLOYEES 3,500 3,000
LOAN $54.7 billion $6.0 billion
PORTFOLIO
OPERATING $926 million(1) $370.9 million (2)
REVENUE
LOAN $13.7 billion $3.1 billion (3)
ACQUISITIONS
GUARANTEE N/A $10.2 billion
PROCESSING
SERVICING $49.3 billion $15.5 billion
PORTFOLIO
BORROWER 5.3 million 1.5 million
BASE
</TABLE>
(1)core cash basis net interest income
(2)As reclassified for comparable presentation to Sallie Mae
(3)Includes $1.5 billion spot purchase
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MORE INFORMATION
- PLEASE CONTACT:
- Jeff Heinz
- Sallie Mae Investor Relations
- 703.810.7743
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