The Practical Side of Investment Banking

October 10, 2006

Table of Contents

1. Citigroup’s Investment Banking Michigan Team

2. Structure of an Investment Bank

3. Deal Teams and the Role of an Associate

4. Why Citigroup?

1. Citigroup’s Investment Banking Michigan Team

Citigroup’s Investment Banking Michigan Team

Randy BarkerCo-Head, Global Fixed Income

John CiolekEnergy

James McCummingsGlobal Communications

Timothy DevineFIG

Stephen SchillerClient Strategy

Hugo VerdegaalLatin America

Managing Directors

Nathan EldridgeMergers & Acquisitions

Jodi SchenkMergers & Acquisitions

Victor VoorheisFIG

Peter KappFIG

Directors

Rich HardingHealthcare

Daniel LeeGlobal Communications

Jas SinghEnergy

Keith AndersonLondon

Ramon GonzalezGlobal Communications

Susan ManuelleGlobal Industrial

Christa VolpicelliGlobal Industrial

Vice Presidents

Ben Riback (A4)*Global Consumer

Arun Prasad (A3)Health Care

Owen Bittinger (A3)Palo Alto

Benjamin Carpenter (A3)Los Angeles

Paul Croci (A3) Pablo Pallas (A3)London

Martin Valdes (A3)*Latin America

Sarah Ransdell Bayer (A2) Palo Alto

Patty Yang (A2)Hong Kong

Jason GodleyGeneralist

Julius PeterGeneralist

Harsh SinghGeneralist

Associates

* Team Co-Captain1

2. Structure of an Investment Bank

What is an Investment Bank?

TraditionalInvestment Banking

ResearchSales & 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 firm’s risk and makes markets for the securities underwritten by the investment bank

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

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Large /Global

Small / Regional

Who are the Leading Investment Banks in the United States?

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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

“Ch

ine

se

Wa

ll”

Financial StrategiesDerivativesLiability ManagementPensions

Corporate Banking

Sales & Trading

Research

Private Side Public Side

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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 CommitmentsAdvisory M&A

Restructuring

Financial Strategy

An investment bank provides numerous corporate finance functions.

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Industry Coverage Groups

Consumer

Energy, Power & Chemicals

Financial Entrepreneurs

Financial Institutions

Health Care

Industrials

Communications

Real Estate

Technology

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3. Deal Teams and the Role of an Associate

Structure of a Typical Deal Team

Client

Investment BankingCoverage 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.

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Strategic Advisory

A good investment banker is a trusted advisor to their client – a CEO’s first call for strategic advice

Investment bankers are most valuable when they can provide unique insight regarding a company’s 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”

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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

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Life of an M&A Transaction

The Pitch

Specific pitch ideas

Beauty contests

The Mandate:Deal is Live

AnnouncementClosing:

It’s 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?

Banker’s 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

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?

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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.

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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

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.

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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)

Denver 3 one-on-ones

Minneapolis 1 one-on-one

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

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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

▲ Don’t 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 firm’s 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

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

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Deal Size Companies

$89 Billion

$71 Billion

$44 Billion

$41 Billion

$38 Billion

We 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

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We Have Advised on Many Landmark, Cross-Border Deals

$629 $622 $609 $575$522

$474

GS C JPM MS DB ML

$106

$78 $74 $71 $68 $66

GS C JPM UBS MS CSSource: 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).

Announced Cross-Border (2004–YTD 2006)Volume (US$bn)

International (1) Client Advisory (2004–YTD 2006)Volume (US$bn)

Completed

Advised on CNPC International’s acquisition of PetroKazahkstan

US$3,957 mmAugust 2005

Pending

Advised on Mittal Steel’s proposed offer to acquire Arcelor

US$43,632 mmJanuary 2006

Pending

Advised on Autostrade SpA’s merger of equals with Albertis

Infraestructuras

US$28,389 mmApril 2006

Pending

Advised on NYSE’s proposed merger with Euronext

US$10,203 mmMay 2006

Completed

Advised on Bavaria’s sale of a 71.8% stake owned by Santo

Domingo to SABMiller

US$5,227 mmJuly 2005

Completed

Advised on G-TECH Holdings sale to Lottomatica SpA

US$4,736 mmJanuary 2006

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Citigroup’s Dominance in Capital Raising

THIRD CHANGE INQUARTER MARKET SHARE

MARKET SECTOR NO 1 RANKED MANAGER MKT. SHARE FROM PREV Q

Global Debt, Equity & Equity-related Citigroup 9.3% 0.80U.S.Debt, Equity & Equity-related Citigroup 10.6 0.20

STOCKSGlobal Common Stock J .P. Morgan 11.3 3.60Global Convertibles Citigroup 19.2 3.30Global Common Stock- U.S. Issuers Goldman Sachs 16.0 -0.40Global Convertibles- U.S. Issuers Citigroup 31.6 17.00

BONDSU.S. Asset-backed Securities Citigroup 9.6 -0.60U.S. Investment Grade Corporate Debt Citigroup 17.1 2.20U.S. High Yield Corporate Debt Citigroup 17.8 1.30U.S.Mortgage-backed Securities Royal Bank of Scotland 10.8 0.30

SYNDICATED LOANSU.S. Syndicated Loans J .P. Morgan 28.1 -5.40

THE WALL STREET JOURNAL.

YEAR-END REVIEW OF MARKETS & FINANCE

Citigroup is a leading bookrunner in Global Capital Markets.

Who's No. 1?Leading stock and bond underwriters, by 2005 proceeds.

Global Stocks and BondsU.S. public, Rule 144a, domestic and international equity and euro-market issues, ranked by 2005 proceeds.

R10 TUESDAY, JANUARY, 3, 2006THE WALL STREET JOURNAL.

SCORECARD OF WALL STREET UNDERWRITING: FIRST NINE MONTHS

C12 MONDAY, OCTOBER, 1, 2006

Who's No. 1?Leading stock-and-bond underwriters, by volume, third-quarter 2006.

Global Stocks and BondsIn the U.S. public, Rule 144a, domestic and international equity and Euro markets, ranked by first nine months 2006 proceeds.

2005 MKT CHANGE FROMMARKET SECTOR NO 1 RANKED MANAGER SHARE 2004 (pct. Pts.)

Global Debt, Stock & Stock-Related Citigroup 8.7% -0.70U.S.Debt, Stock & Stock-Related Citigroup 10.1 -0.90

STOCKSGlobal Common Stock Citigroup 9.5 -1.10Global Convertible Offerings J .P. Morgan 14.6 5.00Global Common Stock- U.S. Issuers Morgan Stanley 12.1 -3.30Global Conv. Offerings- U.S. Issuers Goldman Sachs 15.7 4.90

BONDSU.S. Asset-backed Securities Citigroup 8.6 -1.10U.S. Investment Grade Corporate Debt Citigroup 16.5 -3.90U.S. High Yield Corporate Debt J .P. Morgan 13.0 1.60U.S.Mortgage-backed Securities Bear Sterms 10.7 -1.70

SYNDICATED LOANSU.S. Syndicated Loans J .P. Morgan 28.1 -4.00

2005 2004PROCEEDS NO. OF MARKET PROCEEDS

MANAGER (billions) ISSUES SHARE (billions) RANK

Citigroup $564.7 1,856 8.7% $539.9 1Lehman Brothers 420.8 1,249 6.5 377.2 5Deutsche Bank AG 418.1 1,398 6.4 343.4 7J .P. Morgan 414.6 1,553 6.4 395.6 3Morgan Stanley 383.5 1,238 5.9 416.3 2Merill Lynch 343.2 1,450 5.3 385.7 4Credit Suisse First Boston 337.3 1,138 5.2 366.5 6UBS 323.5 1,188 5.0 303.6 8Goldman Sachs 310.2 819 4.8 291.1 9Barclays Capital 269.7 853 4.1 191.8 12TOP 10 TOTALS $3,785.6 12,742 58.3% $3,611.2INDUSTRY TOTAL $6,511.3 20,118 100.0% $5,767.0

FIRST NINE MONTHS 2006 FIRST NINE MONTHS 2005PROCEEDS MARKET NO. OF PROCEEDS MARKET

(billions) SHARE ISSUES (billions) SHARE RANK

Citigroup $490.0 9.0% 1,384 $431.5 8.8% 1J .P. Morgan 382.6 7.0 1,270 322.6 6.5 4Deutsche Bank AG 340.5 6.2 1,072 331.2 6.7 2Lehman Brothers 330.9 6.1 955 326.1 6.6 3Morgan Stanley 319.3 5.8 968 299.2 6.1 5Merill Lynch 300.9 5.5 1,097 259.9 5.3 6Goldman Sachs 276.6 5.1 643 246.8 5.0 9Credit Suisse 262.9 4.8 834 256.4 5.2 8Barclays Capital 241.3 4.4 757 194.2 3.9 12UBS 232.2 4.3 870 256.5 5.2 7TOP 10 TOTALS $3,177.1 58.2% 9,850 $2,924.3 59.3%INDUSTRY TOTAL $5,463.5 100.0 15,264 $4,933.9 100.0

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So What Does This Mean For You?

Acquisition of American Household Inc.

Buy-Side AdvisorAcquisition Finance

$890,000,000January 2005

$1,310,000,000June 2006

Acquisition of Vincor International

Advisor to Constellation

Acquisition by Constellation Brands Inc.

Advisor to Mondavi

$1,355,000,0000December 2004

$4,400,000,000September 2004

New Credit Facility in Connection with Acquisition of Grey Goose

Joint Book-Runner

Acquisition by GTCRBuy-Side Advisor

$240,000,000January 2004

€1,850,000,000February 2006

Financing of Acquisition by Blackstone and Lion Capital

Joint Book-Runner

European Beverages

7.250% Senior Notes due 2016Joint Book-Runner

$700,000,000July 2006

¥18,200,000,000July 2006

Sale of Tohato, Inc. to Yamazaki Baking Co, Ltd.Advisor to Unison Capital

Partners

$555,000,000 April 2004

Acquisition by GTCRBuy-Side Advisor

$400,000,000May 2006

Senior NotesSole Bookrunning Manager

$190,000,000May 2006

Convertible Senior Subordinated Notes

Sole Bookrunning Manager

$600,000,000January 2006

Senior Subordinated NotesJoint Bookrunning Manager

$1,600,000,000Pending

Acquisition of FileNet Corporation

Advisor to IBM

$300,000,000July 2004

Senior NotesJoint Bookrunning Manager

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