1. Stanley Securities September 23, 2010

2. Introduction David Lin, Investment Grade Credit Research Shengbao Luo, Credit Hybrids Sales Casey Wang, Market Risk Management George Wang, Credit Hybrids Trading Peilin Zhang, Quantitative Credit Strategies

3. The Objective Offer counterparty default protection against deeply in the money FX Forward: Counterparty: UJB Financial Notional: 500MM EUR Contractual forward price: $1.024/EUR Time to maturity: 3 years Spot USD/EUR rate: $1.22/EUR Current Exposure: $98MM Need protection against UJB’s gradual financial distress

4. The Solution Rating Contingent Credit Default Swap (RCCDS)

5. Term Sheet Protection Seller: Stanley Securities Protection Buyer: Rauxon Energy Co. Trade Date: 10/1/2010 Expiration Date: 9/30/2013 Reference Entity: UJB Financial Seller Pays: Payoff: (FX Forward Market Value) + × (1 – Recovery) Credit Event: Downgrade, followed by failure to pay Settlement: Cash (USD) Buyer pays: 11 bps on $500MM notional Standardized quarterly schedule

6. Deal Comparison Notional ($MM) Protection PV ($MM) Upfront price points Running Spread (bps) CDS (40% recovery) 981.61.6557.4 CDS (25% recovery) 982.02.0772.0 CDS (25% recovery on spot FX forward MV) 5002.00.4014.1 Full protection on expected FX forward MV 5002.10.4214.7 RCCDS 5001.60.3211.0

7. Cashflow Risk Leg Premium Leg Time UJB downgrades

8. Suitability and Limitations No protection against out of blue default May need to remake the FX Forward trade $500,000 to your bottom line

9. Stanley Securities September 23, 2010 David Lin Shengbao Luo Casey Wang George Wang Peilin Zhang

10. Valuation Overview Hazard rate process calibration Rating transition simulate using hazard FX forward valuation RCCDS valuation

11. Hazard Rate Process Calibration Calculation parameters Calibrated parameters: h 0, θ Fixed parameters: α, v(h t,t) Simulation Parameters Time step Number of paths

12. Rating Transition Simulated using hazard rates

13. Market Risk Risk FactorSensitivity ($K) 1 year Stdev 1 day 95% Loss ($K) EUR appreciate by 10%-72511%-83 Credit spread widens by 10 bps-57725 bps-150 Interest rate increases by 10 bpsn/a120 bpsn/a Recovery increases by 10%196unhedgeable

14. Hedging Dynamic delta hedging as part of the credit hybrids portfolio UJB credit risk FX delta IR PV01 Cross partials Risk Factor Hedged Hedge Instrumen t Bid OfferHedge Notional SensitivityDay one hedging cost FX 10%FX Forward 2 bps$5MM$610K FX 10% $1K Credit 10 bps UJB CDS5 bps$100MM$422K Credit 10 bps $25K

15. Model Risk Structural model OU hazard rate process – rate can be negative, and can be different from the real process Coarseness of time steps Knock in knock out between steps

16. How much $ did we make? Fair market spread: 9.39 bps Offer spread: 11 bps Day one hedging cost: $26K Day one P&L: $174K