Training for IT March 1, 2006

1. CLIENT Cost Transparency Operating Model Training for IT March 1, 2006

2. Objectives • Scope of the cost transparency operating model • Changes to the cost transparency reports • Overview of the operating model • Flow of chargeback information • Impact to IT • Calendar of Activities • Ground Rules • Expectations for the initial release • Product pricing process overview • The objective of today’s discussion is to help you understand…

3. Scope of the IT CT Operating Model • The cost transparency reports are currently being distributed to our customers. Initially we will focus on legacy Client Organization. Moving forward we will evaluate additional businesses. Scope Future Scope For the initial release the following legacy Client business units are in scope: • Fixed Income • Equities • Investment Banking • Division A • Division B • Shared Services • Operations • Product Control • Credit Risk / Market Risk • Financial Control • Financial Control (BASEL II) • Legal and Compliance division (LCD) • Human Resources (HR) As the impact of the bank integration initiative is determined, the following business units will be evaluated for future action: • Legacy Private Bank • Legacy Asset Management

4. Background On IT Cost Transparency • IT Cost Transparency chargeback reports have been modified to give the business a better understanding of their consumption of IT products and services. Reports will enable constructive dialogue and rational choices to be made by both the business and IT. What Is Changing? What Are The Benefits? • Billing Methodology: Chargeback reports will provide more comprehensive application charges (e.g. infrastructure charges will be incorporated into application costs) • Report Presentation Process:The Application Development Group (ADG) RM will present chargeback reports with support from the Financial reporting RM • Inquiry Process: The report inquiry process has been streamlined to direct all inquiries through a central point of contact • Broader Audience: Chargeback reports will be presented to the Desk COOs and shared services • Greater Transparency: Business will have a greater understanding of technology consumption and cost • Improved Attribution and Accuracy of Consumption: IT charges are directly linked to Application-Infrastructure and End-User Technology consumption • Improved Planning: Business and IT will have the ability to better plan consumption of IT products and services • Competitiveness: Migrating IT from a support organization to a service model • Improved Customer Support: Inquiries will be tracked and the cost transparency operating model will be continually improved • Upstream Costs: Application Development Group (ADG) and Infrastructure Technology Group (ITG) will approach the business with a picture of total application costs that are inclusive of labor and infrastructure expenses • Improved Governance: IT will be accountable for all technology related costs pertaining to their business partners

5. Overview of the Operating Model • The chart below outlines the operating model for the IT Cost Transparency process. This new process will minimize confusion and overlap of roles and ultimately result in a faster resolution of billing issues, improved customer satisfaction and ultimately improved control of costs. Report Production Report Analysis Report Presentation Report Inquiry ReportCorrection Objectives Develop an itemized report of IT products and services consumed by the business during the previous fiscal month Perform analysis of consumption trends, significant deviations on the chargeback reports Present report and analysis to the business Provide a mechanism for clients to raise questions about the report and to request correction Determine and implement appropriate action to reports that require adjustment Key Activities • Consolidate end user and infrastructure consumption data • Apply appropriate unit cost /rate card to consumption • Allocate charges to cost centers • Generate itemized report • Analyze report and determine cost saving opportunities • Validate findings • Append report with analysis and status of previous inquiries • Generate predefined views of report • Review report with ADG RM • Send monthly high level view to Business COOs • Present detailed report to the Desk COOs • Send detailed report to business accounting • Forward inquiries to “Central Inquiry Tracker” • Capture inquiries • Communicate status to the business • Forward inquiries to appropriate ADG RM or ITG RM • Investigate inquiries and determine action • Make corrections and update the Central Inquiry Tracker • Track issue and close the loop with business

6. IT Chargeback Information Flow in Equities Chargeback information flow will be standardized across other divisions to ensure consistent chargeback report production and presentation. 1 Inventory Manager Consolidates end-user technology and application infrastructure consumption data. 2 Cost Transparency Group sends an interim chargeback report to the Financial Reporting RM Group. ITG RM Equities Division ITG Inventory Manager Person… Cost Transparency GroupPerson… Financial Reporting RM GroupPerson… Support as needed Equities Controllers – Person… Equities COOPerson… 1 • PART A Calculate end-user product costs • PART B Calculate infrastructure costs • PART C Allocate costs in PART B to the divisions. • PART D Allocate labor costs to the divisions. • PART E Perform trend and anomaly analysis • Generate report from PARTS A,C,D,E ADG RM End User Technology EUTconsumption Prime Services COO 4 2 Cash COO Market Data Financial Reporting RM Group Derivatives COO Other IT Towers (App driven) Application-Infrastructure consumption Other Desk COOs Validate report Recommend changes 3 Client Coverage Team 3 Financial Reporting RM Group presents the bill to the IT Coverage Team for validation. 4 ADG RM and the Financial Reporting RM Group present the chargeback report to the business (ITG RM joins as needed).

7. IT Chargeback Inquiry Flow in Equities There will be a Central Inquiry Tracker function that would be responsible for tracking and forwarding the different inquiry types. Equities Division IT 1,2 2 Business and Desk COOs forward all other inquiries (IT 3,4,5) to the Central Inquiry Tracker. Financial Reporting RM Group Person… Equities COOPerson… Equities Controllers – Person… Prime Services COO ADG RM Person… ADG Application Managers IT 4,5 IT 4,5 2 Cash COO IT 4,5 IT 3,4,5 4 Central Inquiry Tracker ITG RM Person… ITG Inventory Manager Person… IT 3 IT 3,4,5 Derivatives COO IT 1,2,3,4,5 1 Other Desk COOs 3 1 Business COOS and Desk COOs forward allocation related inquiries (IT 1, 2) to the Business Controller. 3 Business Controllers forwards progress of allocation inquiries (IT 1, 2), and any additional inquiries to the Central Inquiry Tracker. 4 Central Inquiry Tracker logs inquiries and forwards them to the correct contact

8. The Impact on IT • Understanding and acting in your roles assures better coordination, improved interaction, and ultimately better service to the business.

9. Calendar of Activities: Targeted BAU Process for March and onward Cost Transparency Group and Financial Reporting RM Group develop an itemized report of IT products and services consumed by the business during the previous fiscal month Accounting books are closed for prior month Report Production Reports are released to Financial Reporting RM Group Financial Reporting RM Group begin to meet with ADG RM Financial Reporting RM Group and the ADG RM meet to vet analysis of business consumption trends, and of significant deviations on the chargeback reports Report Production Report Analysis Chargeback Reports begin to be released to the business client Presentations of reports to the business begin Client Coverage Team presents the report and analysis to the business. The business clients can then formally raise questions about the report. Finally, the Inquiry Coverage Team determines and implements appropriate action to items that require adjustment. Report Presentations, Report Inquiry, Report Correction NOTE: The units are business days. The BAU process will take several cycles to reach target dates.

10. Ground Rules • The IT COO has setup some ground rules to streamline the operating model across all divisions and ensure a consistent service level. Areas Where We Can Help • Supply application usage metrics to the business controller for making allocation decisions • End User Product (desktops, Blackberry) consumption • Application-related infrastructure charges • Application labor costs • IT Chargeback trend analysis Areas Out Of Scope • Request to upgrade or downgrade application infrastructure (i.e. IT Standards and Architecture are the purview of IT) • Financial data without review in the Cost Transparency process • Request to change rate card; current rate card is consistent with the Global Allocation Committee (GAC) guidelines Initiating Inquiries • Triage issues within your own division before escalating to IT • All allocation inquiries will be forwarded to the business controller; business controller will address the inquiry and update the Central Inquiry Tracker • All other inquiries will be forwarded to the Central Inquiry Tracker

11. What to expect from the initial release? • The expectation has been set with the business that the initial roll out will have limited capacity to address inquiry requests. All inquiries will be captured, but not all inquires will be responded to.

12. Expectations set with the business • Our goal is to continually improve the process and incorporate lessons learned from this initial release.

13. Product Pricing Process Overview

14. Overview of Current Product Pricing Process • ITG uses a rate card to charge the business for the consumption of infrastructure and technology services. The product prices in this rate card are reviewed on a periodic basis and updated to reflect changes to costs and inventory. Timing Drivers Key Activities • Cost Recovery: As a cost center, IT aims to minimize under (over) recovery for costs that are charged to the business • Estimate the inventory of “billable” products • Determine direct, centrally planned and indirect expenses for each product • Calculate unit price per product • In 2006, product pricing will occur in Q1 and Q2, and can conceivably result in lower unit prices for the year • Beginning with 2007, product pricing will occur annually at the beginning of the year

15. Steps in the Product Pricing Process • Product Pricing entails three high level activities.

16. Product Pricing Process flow Provide product Inventory ITG Product Owners Calculate estimated volume of products with billing target Verify volume discrepancy ITG Inventory Manager S S Y Verify direct, centrally planned, pass through expenses Verify the application, direct infrastructure, and indirect infrastructureexpenses Calculate unit price by dividing the Total Product Cost by the product volume Run volume through financial model N Inventory volumediscrepancy? Cost Transparency Group

17. Total Product Cost Breakdown • Total product cost consists of three types of expenses that are each made up of different components. Direct and centrally planned expenses are accounted as operating expenses, while indirect expenses are allocations of internal costs. Direct Expense Labor Cost: Costs for FTEs that book time to support a product Telecommunication: Communication and WAN usage (provided by external vendor) required for a product Operating Expenses Centrally Planned Depreciation: Software and hardware depreciation required for a product TOTAL PRODUCT COST Machinery / Expenses: Costs for software, hardware and service vendors that are required for a product Application: Costs associated with applications that are used by the product Indirect Expense NOTE: These are all of the possible components that can go into a product’s cost, but not all of them are necessarily included. Infrastructure: Infrastructure costs consumed by the product Allocations GTI Personal Consumption: Infrastructure costs consumed by direct labor

18. Appendix Report Presentation Process Flow Report Inquiry & Correction Process Flow Inquiry Type Framework Coverage Teams (Inquiry Response Coverage Teams, Client Coverage Teams) Roles and Responsibilities for the Operating Model Participants in the Cost Transparency Process Example: Calculation of the unit price for “Email” Roles and Responsibilities in the Product Pricing Process For more information:

19. Report Presentation Process flow Business COO or Desk COO Business Controller S S Central Inquiry Tracker (CIT) Create Report Present report to clients Make changes to the report Financial Reporting RM Group IT PL Community Review and verify the report ADG RM N Review and verify the report ADG Application Manager Recommend changes Y Review and verify the report (as needed) ITG RM ITG Inventory Manager

20. Report Inquiry & Correction Process flow Report Inquiry Signs off on re-allocation requests Business COO or Desk COO Forwards updated allocation to Financial reporting RM via CIT Forwards to the desk or business COOs for signoffs Business Controller Report Inquiry Allocations Application Logs and closes inquiry Logs and closes inquiry Logs and closes inquiry Logs Inquiry Logs and closes inquiry Inquiry Type Central Inquiry Tracker (CIT) EUT Financial Reporting RM Group Updates allocations table IT PL Community Reviews and forwards to ADG Application Manager Updates business on inquiry status Updates business on inquiry status ADG RM ADG Application Manager Updates ADG RM Updates ADG RM N Infrastructure related Y Reviews and forwards to ITG Inventory Manager Reviews and forwards to ITG Inventory Manager Updates business on inquiry status ITG RM ITG Inventory Manager Updates database & ITG RM Updates ITG RM Y Inquiry Valid ? N

21. Inquiry Type Framework

22. Coverage Teams:Inquiry Response Coverage Teams for Equities

23. Coverage Teams:Inquiry Response Coverage Teams for Fixed Income

24. Coverage Teams:Client Coverage Teams for Equities MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

25. Coverage Teams:Client Coverage Teams for Fixed Income MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

26. Coverage Teams:Client Coverage Teams for IB, Division B and Division A MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

27. Coverage Teams:Client Coverage Teams for IB Support and CFO MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

28. Coverage Teams:Client Coverage Teams for COO and CRO MEETING 1 - Monthly validation of application data in chargeback MEETING 2 - Presentation of chargeback report to the business at various levels: Business COO, Business Controller, Desk COO NA – Not applicable

29. Roles and Responsibilities in the IT Cost Transparency Process Business/Desk COO Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business Head Cost Transparency Group ADG Application Manager ITG RM Global Division RM A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

30. Roles and Responsibilities in the IT Cost Transparency Process - 2 Business/Desk COO Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business Head Cost Transparency Group ADG Application Manager ITG RM Global Division RM A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

31. Roles and Responsibilities in the IT Cost Transparency Process - 3 Business/Desk COO Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business Head Cost Transparency Group ADG Application Manager ITG RM IT PL Community A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision) Note: Activities and roles in bold italics are proposed

32. Key Contacts Involved in the Cost Transparency Process for Equity Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business/Desk COO Cost Transparency Group ADG Application Manager* ITG RM Global Division RM * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

33. Key Contacts Involved in the Cost Transparency Process for Fixed Income Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business/Desk COO Cost Transparency Group ADG Application Manager* ITG RM Global Division RM * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

34. Key Contacts Involved in the Cost Transparency Process for IBD, Division B and Division A Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business/Desk COO Cost Transparency Group ADG Application Manager* ITG RM Global Division RM * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

35. Key Contacts Involved in the Cost Transparency Process for IB Support and CFO Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business/Desk COO Cost Transparency Group ADG Application Manager* ITG RM Global Division RM * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

36. Key Contacts Involved in the Cost Transparency Process for COO and CRO Business Controller Financial Reporting RM Group Central Inquiry Tracker ADG RM ITG Inventory Manager Business/Desk COO Cost Transparency Group ADG Application Manager* ITG RM Global Division RM * The ADG Application Manager will depend on the application that is in question. The ADG RM will be able to route the issue to the appropriate ADG Application Manager.

37. Example: Calculation of the unit price for “Email” • The total product cost is composed of direct expenses, centrally planned expenses, and indirect expenses. NOTE: The figures in this chart are for illustrative purposes only.

38. Roles and Responsibilities in the Product Pricing process A = Accountable (makes decision) R = Responsible (does the work) C = Consulted (provides input) I = Informed (told of decision)