INVESTMENT BANKING : INVESTMENT BANKING An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing

securities. Most also maintain broker/dealer operations, maintain markets for previously issued securities, and offer advisory services to investors. Investment banks also have a large role in facilitating mergers and acquisitions, private equity placements and corporate restructuring. Unlike traditional banks, investment banks do not accept deposits from and provide loans to individuals. also called investment banker

What does an Investment Bank offer? : What does an Investment Bank offer? Asset Management Issuing House (Capital Raising) Stock broking Business & Financial Advisory services Export Financing Project Finance An Investment Bank Offers :

Functions of Investment Banking : Functions of Investment Banking Investment banking help public and private corporations in issuing securities in the primary market, guarantee by standby underwriting or best efforts selling and foreign exchange management . Other services include acting as intermediaries in trading for clients. Investment banking provides financial advice to investors and serves them by assisting in purchasing securities, managing financial assets and trading securities. Investment banking differ from commercial banking in the sense that they don't accept deposits and grant retail loans. However the dividing line between the two fraternal twins have become flimsy with loans and securities becoming almost substitutable ways of raising funds. Small firms providing services of investment banking are called boutiques. These mainly specialize in bond trading, advising for mergers and acquisitions, providing technical analysis or program trading.

What Actually an Investment Banker Do ?: What Actually an Investment Banker Do ? Investment bankers are agents. Simply,they dont create anything and they dont buy anything; they just sell things that arent theirs to begin with. And they make a lot of money doing that. If the business world were like Entourage, bankers would be the agents, private equity firms and large companies would be the studios, and companies would be the actors and movies. Private equity firms buy and sell companies. Studios buy and sell actors and movies. Bankers make introductions and try to sell things. Agents make introductions and sell their clients.

Structure of an Investment Bank: Structure of an Investment Bank

What is an Investment Bank?: What is an Investment Bank? Traditional Investment Banking Research Sales & Trading Capital raising Debt Equity Strategic advisory services Mergers & acquisitions Restructuring Takeover defense Analysis and recommendations of stocks and bonds Includes company coverage and sector coverage Distribution and execution arm of the investment bank Sells and trades stocks and bonds Manages the firms risk and makes markets for the securities underwritten by the investment bank An investment bank typically consists of three distinct, but related businesses: 2

Slide 11: Large / Global Small / Regional Who are the Leading Investment Banks in the United States? 3 Structure of an Investment Bank Conduit to the Corporate Client: Structure of an Investment Bank Conduit to the Corporate Client Client Investment Banking Coverage Groups Other Product Groups M&A Capital Markets Bank Loans Inv. Grade Debt High Yield Equity Chinese Wall Financial Strategies Derivatives Liability Management Pensions Corporate Banking Sales & Trading Research Private Side Public Side 4

Products and Services: Products and Services Balance Sheet Management Hedging Share and Debt Repurchases Debt Exchanges Consent Solicitations Capital Raising Equity Investment Grade Debt High Yield Debt Syndicated Loans Bridge Commitments Advisory M&A Restructuring Financial Strategy An investment bank provides numerous corporate finance functions. 5

Industry Coverage Groups: Industry Coverage Groups Consumer Energy, Power & Chemicals Financial Entrepreneurs Financial Institutions Health Care Industrials Communications Real Estate Technology 6

Deal Teams and the Role of an Associate: Deal Teams and the Role of an Associate

Structure of a Typical Deal Team: Structure of a Typical Deal Team Client Investment Banking Coverage Officer IBD Support Accountants Associate Analysts Capital Markets Compliance/ Legal Attorneys The Coverage Officer has primary

client responsibility and the Associate ensures that all members of the working party, both internal and external, are informed and working together. 7

Strategic Advisory: Strategic Advisory A good investment banker is a trusted advisor to their client a CEOs first call for strategic advice Investment bankers are most valuable when they can provide unique insight regarding a companys operations or strategic direction As part of a normal client dialogue, investment bankers will show clients strategic ideas that may or may not be obvious to their client CEOs often use their bankers to approach potential counterparties on an informal basis Investment bankers typically handle negotiations and most other aspects of the M&A process, allowing management to focus on running their business Valuation Process management Structuring Fairness opinion Purchase/Sale documentation Whatever else it takes 8

Strategic Advisory M&A: Strategic Advisory M&A Purchasing other companies Friendly Mergers Hostile Takeovers Leveraged Buyouts Selling companies Selling entire companies Spin-off of subsidiaries Defending Company Buyouts Poison Pill 9

Life of an M&A Transaction: Life of an M&A Transaction The Pitch Specific pitch ideas Beauty contests The Mandate: Deal is Live Announcement Closing: Its Official! Preparation Solicitation of preliminary bids Solicitation of binding bids Negotiations Contract Signing Preparation for announcement Press release Q&A script Week of announcement Market reaction Roadshow? Bankers work is largely done once the deal is made public Between announcement & closing SH vote HSR Other regulatory approvals Closing Lucites Dinner 10

Valuation: The Foundation of Every Deal: Valuation: The Foundation of Every Deal Primary Valuation Techniques Discounted Cash Flow Analysis Public Market Analysis (Comparable Companies) Private Market Analysis (Precedent Transactions) LBO Analysis Secondary Valuation Techniques Pro Forma Consequences Analysis Accretion/dilution Capital Structure EPS Growth Rates Relative Contribution Analysis Liquidation Analysis How is my client trading relative to peers? WHY is it trading this way? Growth? Margins? Hot market versus fundamentals HOW can the company improve its valuation? Does an acquisition make sense? What is an appropriate price? Is cash or stock a better choice? What is appropriate leverage? How would the market

value the company in a public offering? How long will a company take to pay back debt holders? Do cash flows support an LBO? 11

Valuation and the Associate: Valuation and the Associate A single, quantitatively derived answer A precise number A static number Lots of number crunching More art than science Heavily dependent on judgment Valuation is NOT . . . Valuation is . . . The associate is responsible to ensure numbers are accurate and assumptions are realistic. 12

Raise Capital for Clients: Raise Capital for Clients One of the most common functions of investment bankers is to assist companies in raising capital Investment banks are the intermediaries between users of capital and providers of capital Equity IPO Secondary Offering Preferred Stock Debt Investment Grade High Yield Debt Structured & New Product Financing 13

Capital Raising Assignment: Capital Raising Assignment Pitching Pre-Filing Preparation Marketing Post-deal follow-up Pricing / Closing The associate manages the flow of information and therefore must be organized and anticipate everything. 14

Capital Raising: Pre-Filing: Capital Raising: Pre-Filing Screen the Deal Internally Put together all internal memos and coordinate meetings Commitment Committee Investor Issues Committee Organizational Meeting Establish agenda, timetable, information request list and working group list Due Diligence Meetings Drafting of Registration Statement Development of business section and positioning Participation in drafting sessions Work with underwriters counsel on underwriting agreement Marketing Preparation Prepare roadshow presentation with company Coordinate for reds to be delivered as necessary 15

Capital Raising: Marketing: Capital Raising: Marketing Prepare memos for sales forces Institutional sales memo Retail Sales Memo Coordinate dry-run (company presentation to sales force) Denver 3 one-on-ones Minneapolis 1 one-onone Milwaukee 2 one-on-ones Chicago 1 one-on-one Boston 7 one-on-ones 1 group mtg New York 6 one-on-ones 1 group mtg Philadelphia 6 one-on-ones 2 one-on-ones Kansas City 1 group call Europe San Francisco 1 one-on-one 1 group call 4 one-on-ones 1 group mtg San Diego Toronto 5 one-on-ones 1

group mtg Montreal 1 group mtg Roadshow: Responsible that ALL logistics run smoothly Accompany company to investor meetings keep meetings on time Feedback to Capital Markets desk: know how the book is building ANTICIPATE everything 16

Capital Raising: Pricing/Closing: Capital Raising: Pricing/Closing Pricing: Handled by ECM Coordinate bring down due diligence call prior to pricing Finalize registration statement Meet with lawyers and printers to add in final pricing information Closing: Help coordinate wiring of funds to company How much? Where? When? Wire instructions via memo to syndicate Post-deal client relationship Create post-mortem book Organize closing dinner Design Lucite 17

Keys to Success as an Associate: Keys to Success as an Associate Goals Develop credibility early with team, especially analysts Leadership: Delegating authority Time management skills: Balance multiple projects Understand the transaction and communicate both up and down Develop a rapport with the analysts and communicate the big picture Manage expectations and define responsibilities Get your hands dirty Dont be afraid to ask questions Proactive client interaction Educate senior bankers and exceed expectations Pitfalls Presenting materials with mistakes or typos Waiting to get involved Failure to anticipate Not leveraging firms resources appropriately Getting lost in the detail and missing the big picture Insubstantial interaction with clients Does not properly delegate work Losing confidence under pressure Lack of attention to detail Lack of follow through Lack of involvement in recruiting and training activities 18

MAJOR PLAYERS IN THE MARKET : MAJOR PLAYERS IN THE MARKET First Boston Goldman Sachs Merrill Lynch Morgan Stanley Salomon Brothers Lehman Brothers Citi Groups performance over its peers: Citi Groups performance over its peers

Citigroup is the #2 Global M&A Advisor YTD: Citigroup is the #2 Global M&A Advisor YTD Source: Securities Data Company, Inc. Note: Data as of September 30, 2006, based on rank date. Global U.S. Europe Volume ($B) Rank Volume ($B) Rank Volume ($B) Rank 769.5 1 437.9 1 326.1 5 714.7 2 315.1 3 440.9 1 664.3 3 315.3 2 384.9 2 592.2 4 260.4 5 371.0 3 524.2 5 185.0 7 344.8 4 472.9 6 166.5 8 279.6 8 452.8 7 297.6 4 175.3 13 19

Citi Group advised on 7 of the 10 Largest Deals YTD: Deal Size Companies $89 Billion $71 Billion $44 Billion $41 Billion $38 Billion Citi Group advised on 7 of the 10 Largest Deals YTD Source: Securities Data Company, Inc. Data as of September 30, 2006, based on rank date. Deal Size Companies $32 Billion $30 Billion $28 Billion $27 Billion $26 Billion 20

Citi Group have Advised on Many Landmark, Cross-Border Deals: Citi Group have Advised on Many Landmark, Cross-Border Deals Source: Securities Data Company, Inc. (1) Advising a non-U.S. or non-European client in a cross-border transaction. M&A deals rank-eligible 2004-YTD 2006 (as of August 31 st ). Announced Cross-Border (2004 YTD 2006) Volume (US$bn) International (1) Client Advisory (2004 YTD 2006) Volume (US$bn) Completed Advised on CNPC Internationals acquisition of PetroKazahkstan US$3,957 mm August 2005 Pending Advised on Mittal Steels proposed offer to acquire Arcelor US$43,632 mm January 2006 Pending Advised on Autostrade SpAs merger of equals with Albertis Infraestructuras US$28,389 mm April 2006 Pending Advised on NYSEs proposed merger with Euronext US$10,203 mm May 2006 Completed Advised on Bavarias sale of a 71.8% stake owned by Santo Domingo to SABMiller US$5,227 mm July 2005 Completed Advised on G-TECH Holdings sale to Lottomatica SpA US$4,736 mm January 2006 21