1. Wall Street 101 UMBS Investment Association September 2002

2. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

3. Examples Mutual Funds: Fidelity, Vanguard –Institutional Investors: CalPERs, University of Michigan Broker/Dealers: Merrill Lynch, Morgan Stanley –Private Clients: ML, Salomon Smith Barney –Discount / Online: Charles Schwab, E*Trade Trading: Bear Stearns Investment Banks: Goldman Sachs, Lehman Brothers –Niche players: Robert Baird, Greenhill Conglomerates: Citigroup, JPMorgan

4. Investors Invest in securities of corporations via: –Buy stocks/bonds through brokers –Buy mutual fund shares, essentially hiring a professional money manager –Invest directly in company via “DRiPs” Increasingly knowledgeable (Internet), more trading volume Research increasingly available

5. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

6. Brokers Execute trades for clients, earn commissions Bring individual investors’ assets into fee- based accounts (“asset gatherers”) Evolving job function: –Online brokers = cheaper commissions –Internet offers research, less need for advice Essentially sales function

7. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

8. Portfolio Managers Manage investment portfolios for: –Institutions: pension funds, university endowments, corporations –Individuals: private clients, retail mutual funds In-house research or from sellside (Analysts and/or Institutional Sales reps) Hedge funds: growing, increased scrutiny Start as Analyst, move up to Portfolio Manager

9. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

10. Institutional Sales Provide research/insight for Portfolio Managers to bring in trading commissions –The link between sellside and buyside Primarily relationship management Start in supporting role, then pick up smaller relationships

11. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

12. Sell-side: sell research to buyside in order to: –Earn commissions –Close investment banking deals Buyside: report to Portfolio Managers within own firm Associates manage models, client calls, eventually cover their own space

13. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

14. Investment Bankers Underwrite corporations’ equity and debt offerings, advise on mergers & acquisitions, take a % of deal as fee revenue Regulated interaction with Analysts Analysts: modeling, presentations Associates: jack of all trades VPs / MDs: deal sourcing, relationship management

15. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

16. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “Chinese Wall” Brokers / Advisors Analysts

17. Current Trends Re-regulation –Conflicts of interest between investment banking and commercial banking Analyst scrutiny –Conflicts between research and investment banking Accounting –Quality of reported financial results

18. Further reading Wall Street Journal – daily Barron’s – Saturdays Bloomberg –www.bloomberg.comwww.bloomberg.com –Bloomberg terminals in the library (coming soon in the Tozzi Financial Research & Trading Room) Limitless internet resources