Investment Bank Structure (Typical Example of Primary & Secondary Trading) Rates Structured Credit Equities Govt/Agencies Sovereigns (non US) FX spot/options Municipals IR Swaps/Deriv Money Market (CP) Commodities Custom Products: Financing Hedging Tax Strategies Yield Enhancement Ad-hoc Corporates Bonds Derivatives Mortgage-backed Residential Commercial Asset-backed Loans Agency Business Exchange Interfaces Single Stock Program Trading Derivatives Algo trading AMM Institutional Sales, Investment Banking, Capital Markets Proprietary Trading Risk Management, Product Control/Finance Research

Trading Function Maintain competitive markets in their sectors as well as adequate liquidity in lead managed deals Responsibly commit capital for clients and strategically position the desk Use various parts of the capital structure and other financial instruments to hedge/mitigate risk and seek arbitrage opportunities Determine appropriate bid/ask spread to maximize revenue while balancing volumes Performance Metrics: Trading volumes Contribution of intellectual capital and idea generation Individual P&L Sector expertise Primary Execution Risk Managment

Sales Function Responsible to cover 15-20 Institutional Investors Disseminate markets and field inquiry Communicate trading ideas Distribute primary offerings Serve as their accounts liason to the institution Develop relationships to capture client flows and foster partnership Gather market intelligence and investor feedback Performance metrics: Sales credits Quality of business Account influence Information gathering Desk protection and P&L enhancement

Risk Management Function Independent & objective control function Not P&L driven Set and maintain trading limits Credit (notional, potential exposure) Market (Value at Risk, sensitivity, notional) Operational (capital put aside for other risks which are not market or credit event triggered) Measure and maintain adequate capital Regulatory body interface Drafting and enforcement of firm policies and procedures Trade approval Reserves management (more of a “finance” function)

Research Function Maintain coverage of each of the debt issuers in a specific industry group, sector, country Fundamental analysis to determine credit quality and forecast results Macro-economic analysis, understand macro-trends Assist sales force in it’s effort to distribute new issues and secondary “axes” (what I want to buy or sell) Synchronize the coverage universe with what is actively traded by the desk Familiarization with covenants and terms for the various securities and derivatives in their space Performance metrics: Gather market intelligence and investor feedback Institutional Investor ranking and overall franchise enhancement New Issue contribution Maintain a strong sense of relative value to increase hedging and arbitrage opportunities Keep the desk positioned ahead of trends to maximize P&L and maintain orderly markets

Establishing a Brand Create high visibility with accounts as market-makers and achieve “Top Tier Status” Trade broad array of sectors to match our origination footprint Underwrite high quality transactions and monitor after-market performance Generate toll-collecting revenue, superior market intelligence, maximize desk liquidity Consistent market-making - set the standard by being first to lead with prices in the morning or post High level of transparency with accounts to gain trust and partnership Maintain disciplined inventory management and be patient in waiting for opportunities (separate “flow” from “prop”) Proactively establish and vet all larger risk positions and prop trades (“strategic aging”).

Role of Technology with Capital Markets Risk Management - flexible ways to view and understand risk and correlation in the trading books Superior analytics - having faster, steadier systes to process data better than the competition Innovation - being on the forefront to develop new ways to exploit arbitrage opportunities by devising new tools Maintenance - keeping systems up and running during the peak demands of market hours as well as allowing for enhancements and scalability Education - teaching the business people how to use technology to more efficiently and intelligently do their day-to-day job