Bank One Corporation - Page 28

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          between the administrative costs adjustments for the current                
          quarter and the previous quarter was the amount that FNBC claimed           
          on its books as a portfolio adjustment for the current quarter’s            
          deferral.                                                                   
               C.  Preparation for the Adjustment                                     
               The starting point in calculating the administrative costs             
          adjustment was the swap department’s annual budget, as approved             
          by the swap department’s senior management.  In order to arrive             
          at the amount of salaries, bonuses, and benefits (collectively,             
          personnel costs) to allocate to its administrative costs                    
          adjustment calculation, FNBC multiplied its personnel costs by a            
          fraction.  The fraction’s numerator equaled the number of                   
          full-time equivalent employees (FTEs) estimated to be required to           
          maintain the portfolio to maturity.37  The fraction’s denominator           
          equaled the total budgeted trading department FTEs.  FNBC also              
          allocated to the management of the existing swap portfolio the              
          same percentage of direct costs.                                            
               The number of FTEs estimated necessary to maintain the                 
          current portfolio to maturity changed during the relevant years             
          as shown below:                                                             





          37 The finance department ascertained the level of staffing                 
          needed to manage the existing portfolio by interviewing primarily           
          the head of the trading desk.                                               




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Last modified: May 25, 2011