The Practical Side of Investment Banking

October 10, 2006

Table of Contents
1. Citigroups Investment Banking Michigan Team 2. Structure of an Investment Bank 3. Deal Teams and the Role of an Associate 4. Why Citigroup?

1. Citigroups Investment Banking Michigan Team

Citigroups Investment Banking Michigan Team

Managing Directors Randy Barker Co-Head, Global Fixed Income John Ciolek Energy James McCummings Global Communications Timothy Devine FIG Stephen Schiller Client Strategy Hugo Verdegaal Latin America

Directors Nathan Eldridge Mergers & Acquisitions Jodi Schenk Mergers & Acquisitions Victor Voorheis FIG Peter Kapp FIG

Vice Presidents

Rich Harding Healthcare

Daniel Lee Global Communications

Jas Singh Energy

Keith Anderson London

Ramon Gonzalez Global Communications

Susan Manuelle Global Industrial

Christa Volpicelli Global Industrial

Associates Ben Riback (A4)* Global Consumer Arun Prasad (A3) Health Care Owen Bittinger (A3) Palo Alto Benjamin Carpenter (A3) Los Angeles Jason Godley Generalist Paul Croci (A3) Pablo Pallas (A3) London

Martin Valdes (A3)* Latin America

Sarah Ransdell Bayer (A2) Palo Alto

Patty Yang (A2) Hong Kong

Julius Peter Generalist

Harsh Singh Generalist

* Team Co-Captain

2. Structure of an Investment Bank

What is an Investment Bank?

An investment bank typically consists of three distinct, but related businesses:

Traditional Investment Banking

Sales & Trading

Research

Capital raising Debt Equity Strategic advisory services Mergers & acquisitions Restructuring Takeover defense

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

Analysis and recommendations of stocks and bonds Includes company coverage and sector coverage

Who are the Leading Investment Banks in the United States?

Large / Global Small / Regional

Structure of an Investment Bank Conduit to the Corporate Client

Private Side
Client

Public Side

Capital Markets
Chinese Wall

Corporate Banking

Investment Banking Coverage Groups

Bank Loans Inv. Grade Debt

High Yield Equity

Sales & Trading

Other Product Groups

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M&A

Research

Financial Strategies Derivatives Liability Management Pensions

Products and Services

An investment bank provides numerous corporate finance functions.

Balance Sheet Management

Hedging

Capital Raising

Equity

Share and Debt Repurchases

Investment Grade Debt

Debt Exchanges

High Yield Debt

Consent Solicitations

Syndicated Loans

Bridge Commitments Advisory M&A

Restructuring

Financial Strategy
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Industry Coverage Groups

Consumer

Financial Institutions

Communications

Energy, Power & Chemicals

Health Care

Real Estate

Financial Entrepreneurs
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Industrials

Technology

3. Deal Teams and the Role of an Associate

Structure of a Typical Deal Team

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.

Client

Accountants

Investment Banking Coverage Officer

Attorneys

Capital Markets

Associate

IBD Support

Analysts

Compliance/ Legal

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 Fairness opinion Purchase/Sale documentation Process management Whatever else it takes Structuring

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

Life of an M&A Transaction

The Pitch

The Mandate: Deal is Live

Announcement

Closing: Its Official!

Specific pitch ideas Beauty contests

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

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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 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?

Secondary Valuation Techniques

Pro Forma Consequences Analysis Accretion/dilution Capital Structure EPS Growth Rates Relative Contribution Analysis Liquidation Analysis

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?

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Valuation and the Associate

The associate is responsible to ensure numbers are accurate and assumptions are realistic.

Valuation is NOT . . . A single, quantitatively derived answer A precise number A static number

Valuation is . . . Lots of number crunching More art than science Heavily dependent on judgment

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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

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Capital Raising Assignment

The associate manages the flow of information and therefore must be organized and anticipate everything.

Pitching

Pre-Filing Preparation

Marketing

Pricing / Closing

Post-deal follow-up

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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

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Capital Raising: Marketing

Prepare memos for sales forces Institutional sales memo Retail Sales Memo Coordinate dry-run (company presentation to sales force) Roadshow: Responsible that Milwaukee Minneapolis Denver ALL logistics run 2 one-on-ones 1 one-on-one 3 one-on-ones smoothly Accompany company to investor meetingskeep meetings on time Feedback to Capital Markets desk: know how San Francisco 4 one-on-ones the book is 1 group mtg building San Diego 1 one-on-one 1 group call ANTICIPATE everything

Chicago 1 one-on-one

Toronto 5 one-on-ones 1 group mtg

Montreal 1 group mtg Boston 7 one-on-ones 1 group mtg New York 6 one-on-ones 1 group mtg

Philadelphia 6 one-on-ones

Kansas City 2 one-on-ones

Europe 1 group call

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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

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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

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4. Why Citigroup?

Citigroup is the #2 Global M&A Advisor YTD

Global Volume ($B)
769.5 Rank 1

U.S. Volume ($B)

437.9 Rank 1

Europe Volume ($B)

326.1 Rank 5

714.7

315.1

440.9

664.3

315.3

384.9

592.2

260.4

371.0

524.2

185.0

344.8

472.9

166.5

279.6

452.8
Source: Securities Data Company, Inc. Note: Data as of September 30, 2006, based on rank date.

297.6

175.3

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We Advised on 7 of the 10 Largest Deals YTD

Deal Size Companies Deal Size Companies

$89 Billion

$32 Billion

$71 Billion

$30 Billion

$44 Billion

$28 Billion

$41 Billion

$27 Billion

$38 Billion

$26 Billion

Source: Securities Data Company, Inc. Data as of September 30, 2006, based on rank date.

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We Have Advised on Many Landmark, Cross-Border Deals

Pending Pending

Announced Cross-Border (2004YTD 2006)

Volume (US$bn)

Advised on Mittal Steels proposed offer to acquire Arcelor

Advised on Autostrade SpAs merger of equals with Albertis Infraestructuras

$629

$622

$609

$575

$522

$474

US$43,632 mm January 2006

US$28,389 mm April 2006

Pending

Completed

Advised on NYSEs proposed merger with Euronext

Advised on Bavarias sale of a 71.8% stake owned by Santo Domingo to SABMiller

GS
Volume (US$bn)

JPM

MS

DB

ML

International (1) Client Advisory (2004YTD 2006)

$106 $78

US$10,203 mm May 2006

US$5,227 mm July 2005

Completed

Completed

$74

$71

$68

$66

Advised on G-TECH Holdings sale to Lottomatica SpA

Advised on CNPC Internationals acquisition of PetroKazahkstan

US$4,736 mm January 2006

US$3,957 mm August 2005

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 31st).

GS

JPM

UBS

MS

CS

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Citigroups Dominance in Capital Raising

Citigroup is a leading bookrunner in Global Capital Markets.
C12 MONDAY, OCTOBER, 1, 2006

THE WALL STREET JOURNAL.

R10 TUESDAY, JANUARY, 3, 2006

THE WALL STREET JOURNAL.

SCORECARD OF WALL STREET UNDERWRITING: FIRST NINE MONTHS

Global Stocks and Bonds
In the U.S. public, Rule 144a, domestic and international equity and Euro markets, ranked by first nine months 2006 proceeds. FIRST NINE MONTHS 2006 FIRST NINE MONTHS 2005
PROCEEDS (billions) MARKET SHARE NO. OF ISSUES PROCEEDS (billions) MARKET SHARE RANK

YEAR-END REVIEW OF MARKETS & FINANCE

Global Stocks and Bonds
U.S. public, Rule 144a, domestic and international equity and euro-market issues, ranked by 2005 proceeds.
PROCEEDS (billions) 2005 NO. OF ISSUES 2004 MARKET SHARE PROCEEDS (billions) RANK

MANAGER

Citigroup J.P. Morgan Deutsche Bank AG Lehman Brothers Morgan Stanley Merill Lynch Goldman Sachs Credit Suisse Barclays Capital UBS TOP 10 TOTALS INDUSTRY TOTAL

$490.0 382.6 340.5 330.9 319.3 300.9 276.6 262.9 241.3 232.2 $3,177.1 $5,463.5

9.0% 7.0 6.2 6.1 5.8 5.5 5.1 4.8 4.4 4.3 58.2% 100.0

1,384 1,270 1,072 955 968 1,097 643 834 757 870 9,850 15,264

$431.5 322.6 331.2 326.1 299.2 259.9 246.8 256.4 194.2 256.5 $2,924.3 $4,933.9

8.8% 6.5 6.7 6.6 6.1 5.3 5.0 5.2 3.9 5.2 59.3% 100.0

1 4 2 3 5 6 9 8 12 7

Citigroup Lehman Brothers Deutsche Bank AG J.P. Morgan Morgan Stanley Merill Lynch Credit Suisse First Boston UBS Goldman Sachs Barclays Capital TOP 10 TOTALS INDUSTRY TOTAL

$564.7 420.8 418.1 414.6 383.5 343.2 337.3 323.5 310.2 269.7 $3,785.6 $6,511.3

1,856 1,249 1,398 1,553 1,238 1,450 1,138 1,188 819 853 12,742 20,118

8.7% 6.5 6.4 6.4 5.9 5.3 5.2 5.0 4.8 4.1 58.3% 100.0%

$539.9 377.2 343.4 395.6 416.3 385.7 366.5 303.6 291.1 191.8 $3,611.2 $5,767.0

1 5 7 3 2 4 6 8 9 12

Who's No. 1?
Leading stock-and-bond underwriters, by volume, third-quarter 2006.
MARKET SECTOR NO 1 RANKED MANAGER

THIRD QUARTER MKT. SHARE

CHANGE IN MARKET SHARE FROM PREV Q

Who's No. 1?
Leading stock and bond underwriters, by 2005 proceeds.
MARKET SECTOR NO 1 RANKED MANAGER 2005 MKT SHARE CHANGE FROM 2004 (pct. Pts.)

Global Debt, Equity & Equity-related U.S.Debt, Equity & Equity-related STOCKS Global Common Stock Global Convertibles Global Common Stock- U.S. Issuers Global Convertibles- U.S. Issuers BONDS U.S. Asset-backed Securities U.S. Investment Grade Corporate Debt U.S. High Yield Corporate Debt U.S.Mortgage-backed Securities SYNDICATED LOANS U.S. Syndicated Loans

Citigroup Citigroup J.P. Morgan Citigroup Goldman Sachs Citigroup Citigroup Citigroup Citigroup Royal Bank of Scotland J.P. Morgan

9.3% 10.6 11.3 19.2 16.0 31.6 9.6 17.1 17.8 10.8 28.1

0.80 0.20 3.60 3.30 -0.40 17.00 -0.60 2.20 1.30 0.30 -5.40

Global Debt, Stock & Stock-Related U.S.Debt, Stock & Stock-Related STOCKS Global Common Stock Global Convertible Offerings Global Common Stock- U.S. Issuers Global Conv. Offerings- U.S. Issuers BONDS U.S. Asset-backed Securities U.S. Investment Grade Corporate Debt U.S. High Yield Corporate Debt U.S.Mortgage-backed Securities SYNDICATED LOANS U.S. Syndicated Loans

Citigroup Citigroup Citigroup J.P. Morgan Morgan Stanley Goldman Sachs Citigroup Citigroup J.P. Morgan Bear Sterms J.P. Morgan

8.7% 10.1 9.5 14.6 12.1 15.7 8.6 16.5 13.0 10.7 28.1

-0.70 -0.90 -1.10 5.00 -3.30 4.90 -1.10 -3.90 1.60 -1.70 -4.00

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So What Does This Mean For You?

Acquisition of Vincor International Advisor to Constellation $1,310,000,000 June 2006

Acquisition of American Household Inc. Buy-Side Advisor Acquisition Finance $890,000,000 January 2005

Acquisition by Constellation Brands Inc. Advisor to Mondavi $1,355,000,0000 December 2004

New Credit Facility in Connection with Acquisition of Grey Goose Joint Book-Runner $4,400,000,000 September 2004

European Beverages Financing of Acquisition by Blackstone and Lion Capital Joint Book-Runner 1,850,000,000 February 2006

7.250% Senior Notes due 2016 Joint Book-Runner

Sale of Tohato, Inc. to Yamazaki Baking Co, Ltd. Advisor to Unison Capital Partners 18,200,000,000 July 2006

Acquisition by GTCR Buy-Side Advisor

Acquisition by GTCR Buy-Side Advisor

$700,000,000 July 2006

$555,000,000 April 2004

$240,000,000 January 2004

Acquisition of FileNet Corporation Advisor to IBM $1,600,000,000 Pending

Senior Notes Sole Bookrunning Manager

Convertible Senior Subordinated Notes Sole Bookrunning Manager $190,000,000 May 2006

Senior Subordinated Notes Joint Bookrunning Manager

Senior Notes Joint Bookrunning Manager

$400,000,000 May 2006

$600,000,000 January 2006

$300,000,000 July 2004

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Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. This presentation is not a comm itment to lend, syndicate a financing, underwrite or purchase securities, or commit capital nor does it obligate us to enter into such a commitment, nor are we acting as a fiduciary to you. By accepting this presentatio n, subject to applicable law or regulation, you agree to keep confidential the existence of and proposed terms for any transaction contemplated hereby (a Transaction). Prior to entering into any Transaction, you should determine, wi thout reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences of any such Transaction. In this regard, by accepting this present ation, you acknowledge that (a) we are not in the business of pr oviding (and you are not relying on us for) legal, tax or accounting advice, (b) there ma y be legal, tax or accounting risks associated with any Transact ion, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organizatio n as to such legal, tax and accounting advice (and any risks ass ociated with any Transaction) and our disclaimer as to these mat ters. By acceptance of these materials, you and we hereby agree that from the commencem ent of discussions with respect to any Transaction, and notwiths tanding any other provision in this presentation, we hereby conf irm that no participant in any Transaction shall be limited from disclosing the U.S. tax tr eatment or U.S. tax structure of such Transaction.

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