See the Disclosure Appendix for the Analyst

Certification and Other Disclosures.

Careers in Finance
January 5, 2005

Scott Peng

Citigroup Global Markets

 The Basics

 PhD in Engineering / Science from MIT

 What next?

 What is finance?

 Is finance the right career choice?

 How does one break into a totally different profession?

Page 2
Citigroup Global Markets
 What is Finance?

 Finance involves the selling or buying of investment instruments on behalf

of either oneself or customers

 Aspects of finance includes (but is not limited to)

– Interest rate analysis

– Credit analysis

– Risk management

– Portfolio theory and application

– Financial engineering

– Psychology

Page 3
Citigroup Global Markets
 What is Finance?

 When one says finance, one usually thinks of …

– Salomon Brothers (Now Citigroup Global Markets)

– Goldman Sachs

– Lehman Brothers

– Etc, etc

 But … there is a lot more to finance than just those names

 Finance companies can be broadly grouped into

– Buy side

– Sell side

Page 4
Citigroup Global Markets
 Financial Institutions: The Old Days (Mid 90s)

 Sell side

– Investment Banks

 Buy side

– Commercial banks

– Mutual funds & Money managers

– Insurance companies

Page 5
Citigroup Global Markets
 Financial Institutions: Now

 Sell side

– Investment banks

– Commercial banks

 Buy side

– Finance entities

– Commercial banks

– Mutual funds & Money Managers

– Insurance companies

– Hedge funds

 There’s a lot more to finance than just investment banks

Page 6
Citigroup Global Markets
 Buy Side
 Finance Entities

– Government sponsored enterprises – Fannie Mae, Freddie Mac

– Finance subsidiaries – GECC, GMAC, FMCC

– REITs

 Commercial banks – Citibank, Chase, BankAmerica

 Mutual funds & Money managers – Fidelity, Putnam, Alliance, PIMCO

 Insurance company – MetLife, Mass Mutual, Aetna

 Hedge funds – new kids on the block

Page 7
Citigroup Global Markets
 Buy Side
 Invest client assets

 Performance judged against benchmarks

– Equity funds: S&P 500

– Bond funds: Lehman Aggregate Index of Citigroup Broad Investment Grade

(BIG)

– Hedge funds: Pure “alpha”

 Key roles

– Credit analyst

– Risk manager

– Portfolio manager / Trader

– Client relationship manager

Page 8
Citigroup Global Markets
 Buy Side: Finance Companies
 Examples:

– Fannie Mae & Freddie Mac

– GECC, GMAC

– REITs

 Invest assets versus borrowed capital to maximize return or dividend in a risk

controlled fashion

 Risks

– Asset-Liability Mismatch

– Credit risk

– Structural

Page 9
Citigroup Global Markets
 Buy Side: Commercial Banks
 Invest cash from

– Checking accounts

– Saving accounts and CDs

– Ongoing operations and investments

 Invest to maximize return while managing risk subject to regulations

 Regulation

– May invest only in bank eligible securities

– Investments subject to risk-based weighting

 Risks

– Asset-Liability Mismatch

– Credit risk

– Structural
Page 10
Citigroup Global Markets
 Buy Side: Mutual Funds and Money Managers
 Mutual fund managers and money managers (institutional) are not necessarily
one and the same

 Mutual funds: manage assets for retail investors

 Money managers: Manage assets for institutional investors such as pension

funds, insurance companies, universities

 Major funds and money managers include (but is not limited to)

– Equity: Fidelity, Alliance Capital, Vanguard, Putnam, etc

– Bonds: Federated, Nuveen, PIMCO, BlackRock, WAMCO, etc

 Manage assets versus benchmarks

– Volatility of return versus gains, slippage versus index

– Credit risk
Page 11
Citigroup Global Markets
 Buy Side: Insurance Companies
 Invest cash from

– Insurance policies and annuities

 Goal: maximize returns while managing risk subject to regulatory and accounting issues

 Regulatory and accounting

– Capital standards and adequacy subject to state insurance commissions and NAIC

– Myriads of accounting standards and issues

– Investments subject to risk-based weighting

 Risks

– Asset-Liability Mismatch (biggest)

– Credit risk

– Structural
Page 12
Citigroup Global Markets
 Buy Side: Hedge Funds
 Been around since 1950s, exploded in popularity in last five years

 Now over 7,000 hedge funds in existence

 Hedge funds are grouped by their investment strategy types such as:

– Equity long/short

– Fixed income arbitrage

– Convertible bond arbitrage

– Global macro

– Managed futures

– Event driven

– Emerging market

– Private equity, venture capital and buyout (not strictly hedge fund, per se)
Page 13
Citigroup Global Markets
 Buy Side: Hedge Funds
 Goal: Manage return versus risk (Sharpe Ratio) and minimize correlation to
other asset classes

 Advantages

– Work on a variety of tasks

– Relaxed, academic-like atmosphere

 Disadvantages

– Relatively narrow window of expertise

– View of world is very different from non-hedge fund entities

– A lot of new hedge funds out there

 Understand style and riskiness of hedge funds. Do your own research

Page 14
Citigroup Global Markets
 Sell Side: Investment & Commercial Banks
 Commercial banks with securities subsidiaries now perform virtually the same function
as investment banks

 Sell side firms are generally considered as either large “bulge-bracket” or smaller niche
firms

 Bulge bracket: Largest investment banks

– Broadest array of equity and fixed income products

– Usually involved in most institutional trades

 Niche – banks which focus on some specialties

– Mortgage-backed securities

– High yield bonds

– Equity IPO

– Financial futures

Page 15
Citigroup Global Markets
 Sell Side Functions
 Investment banking

– Investment banking

– Mergers & Acquisitions

 Sales & Trading

– Trading

– Sales

– Strategy / Analyst

– Research

 Product types: Equity and Fixed Income

Page 16
Citigroup Global Markets
 Sell Side Functions: I-Banking
 Investment banking

– Grouped along industry lines – technology, insurance, finance, etc

– Understand financing needs of clients

– Work on debt and equity issuance to raise capital

– A lot of presentations and long nights

 M&A

– Understand growth and longer term needs of clients

– Work on finding acquisition targets or sell unnecessary parts of firm

– A lot of presentations and long nights

 These jobs mainly filled by MBA’s

Page 17
Citigroup Global Markets
 Sell Side Functions: Sales & Trading

 Trading
– Make markets on securities – generally a small segment of market

– Make money trading with customers and taking positions

– Specialization: Know a lot about a relatively small segment of market

– Smoke big cigars if you’re right

 Sales
– Understand client goals

– Discuss and propose trades

– Know something about a broad segment of market

Page 18
Citigroup Global Markets
 Sell Side Functions: Strategy & Research

 Bond Strategy / Equity Analyst

– Understand markets & investors

– Discuss trades and market conditions

– Must have good communications skills – writing and speaking

 Research: Most PhD’s start their careers on Wall Street here

– Quantitative bent

– Work on implementation of trading models and simulations

– Come up with new models and ways of looking at the world

– Excellent training ground for future traders/salespeople

– Can have long term career in research

Page 19
Citigroup Global Markets
 Sell Side: Strategy & Research at Citigroup

 Citigroup, Inc. is the world’s biggest financial services firm

 Citigroup Global Markets, Inc. is the investment banking unit

 Citigroup Fixed Income Quantitative Research

– Approximately 100 in the U.S.

– Approximately 250 in Global Fixed Income Research

– 40% PhDs

– Strong emphasis on quantitative aspects of fixed income

Page 20
Citigroup Global Markets
 What Makes You A Good Wall Street Candidate?
 Knowledge
– No, not about solving nonlinear fifth order coupled pde’s

– Read and understand the product and role for which you’re interviewing

– For example, Fabozzi’s “Handbook of Fixed Income Securities” (1373 pages)

is a must-read for bond prospects
 Teamwork: Show you can operate in a team environment as both a follower and a
leader
– Student government

– Intramural sports

– Volunteer

 Communications: Must be a good communicator

 Well rounded: Have interest outside of the lab

 Take business school classes to achieve a basic understanding of finance

Page 21
Citigroup Global Markets
 It Is Not Easy for PhD’s (Non-Econ) to Break In
 Added burden of proof
– Why do you want to do this?

– Why leave science / engineering?

– How do you think what you know applies to finance?

– What do you know about what we do?

 Need to demonstrate basic understanding of product

 Work on having the qualifications that would make you an attractive
candidate (see previous page)
 Think of ways of applying the combination of technical skills and finance
– Develop a business plan for a potential new venture

– Read technical finance literature

• Journal of Fixed Income, Journal of Finance

• Risk Magazine
Page 22
Citigroup Global Markets
 Disclaimer
ANALYST CERTIFICATION

I, Scott Peng, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any and all of the subject issuer(s) or securities. I also certify that no part of my
compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views in this report.

ADDITIONALINFORMATION AVAILABLE UPON REQUEST

Citibank, N.A., London Branch and Citigroup Global Markets Inc, including its parent, subsidiaries and/or affiliates (“the Firm”), may make a market in the securities discussed in this report and may sell to or buy from
customers, as principal, securities recommended in this report. The Firm may have a position in securities or options of any is suer recommended in this report. An employee of the Firm may be a director of an issuer
recommended in this report. The Firm may perform or solicit investment banking or other services from any issuer recommended in this report.

Within the past three years, the Firm may have acted as manager or co-manager of a public offering of the securities of any issuer recommended in this report. Securities recommended, offered, or sold by the Firm : (i)
are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the
possible loss of the principal amount invested. The Firm are regular issuers of, and trade in including position taking), traded financial instruments linked to securities which may have been reported on in the preceding
research report

Investing in non-U.S. securities, including ADR’s entails certain risks. The securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange
Commission. There may be limited information available on foreign securities. Foreign companies are generally not subject to uniform audit and reporting standards, practices and requirements comparable to those in
the U.S. Securities of some foreign companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. In addition, exchange rate movements may have an adverse effect on the
value of an investment in a foreign stock and its corresponding dividend payment for U.S. investors. Net dividends to ADR investors are estimated, using withholding tax rates conventions, deemed accurate, but
investors are urged to consult their tax advisor for exact dividend computations.

Although information has been obtained from and is based upon sources the Firm believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute
the Firm 's judgement as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. This research report does not constitute an offer of securities. Any decision to purchase securities mentioned in this research must take into account existing public information on such security or any
registered prospectus

Investing in non-US securities by US persons may entail certain risks. Investors who have received this report from the Firm may be prohibited in certain US States from purchasing securities mentioned in this report
from the Firm; please ask your Financial Consultant for additional details.
This report is distributed in the United Kingdom by Citibank, N.A. London Branch or Citigroup Global Markets Limited, Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, UK. This material is directed
exclusively at market professional and institutional investor customers and is not for distribution to private customers, as defined by the rules of the Financial Services Authority, who should not rely on this material.
Moreover, any investment or service to which the material may relate will not be made available to such private customers. This material may relate to investments or services of a person outside of the United Kingdom or
to other matters which are not regulated by the Financial Services Authority and further details as to where this may be the case are available upon request in respect of this material. If this publication is being made
available in certain provinces of Canada by Citigroup Global Markets (Canada) Inc. ("The Firm Canada"), the Firm Canada has approved this publication. If this report was prepared by the Firm (excluding Nikko Citigroup
Limited) and distributed in Japan by Nikko Citigroup Limited, it is being so distributed under license. This report is made available in Australia, to non-retail clients through Citigroup Global Markets Australia Pty Limited
(ABN 64 003 114 832), and to retail clients through Smith Barney Citigroup Australia Pty Ltd (ABN 10 009 145 555), Licensed Securities Dealers. In New Zealand it is made available through Citigroup Global Markets New
Zealand Limited, a member firm of the New Zealand Stock Exchange. This report does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should
obtain advice based on their own individual circumstances before making an investment decision. Citigroup Global Markets (Pty) Limited is incorporated in the Republic of South Africa (company registration number
2000/025866/07) and its registered office is at Citibank Plaza, 145 West Street, Sandown, Sandton, 2196, Republic of South Africa. The investments and services contained herein are not available to private customers in
South Africa. This publication is made available in Singapore through Citigroup Global Markets Singapore Holdings Pte Ltd, a licensed Dealer and Investment Advisor. This report is being distributed in Hong Kong by or on
behalf of, and is attributable to Citigroup Global Markets Asia Limited, 20th Floor, Three Exchange Square, Hong Kong.

Citigroup Global Markets Inc. is a member of the Securities Investor Protection Corporation (SIPC). © Citigroup Global Markets Inc., 2003. All rights reserved Smith Barney is a division and service mark of Citigroup
Global Markets Inc. and its affiliates and is used and registered throughout the world. Citigroup and the Umbrella Device are trademarks and service marks of Citicorp and its affiliates and are used and registered
throughout the world. CitiFx  is a service mark of Citicorp. Any unauthorized use, duplication or disclosure is prohibited by law and may result in prosecution. Nikko is a service mark of Nikko Cordial Corporation. . .

Page 23
Citigroup Global Markets