Debt Trading Losses

We have discovered two positions in the Debt Trading book which were not
being marked to market. The current mark of the 2 positions results in
approximately $4.7 million loss. The details are in :

The primary control issues are:
? Trader did not adjust price to reflect the effect of market movements
? Operations did not perform monthly price verification processes
? Desk management failed to recognize that the marks on these two trades had
not moved over the term of the transactions (Q1 '00 - Nov 15th)

The losses have been recognized and a full review of the book is ongoing by
Operations. The trader has been relieved of his responsibilities and we will
implement the steps agreed with Operations to ensure that we have a robust
approach to controls for the Debt Trading book going forward.