Citibank 2009 Annual Report Download - page 224

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Structured Investment Vehicles
Structured Investment Vehicles (SIVs) are SPEs that issue junior notes and
senior debt (medium-term notes and short-term commercial paper) to fund
the purchase of high quality assets. The Company acts as manager for the
SIVs.
In order to complete the wind-down of the SIVs, the Company purchased
the remaining assets of the SIVs in November 2008. The Company funded the
purchase of the SIV assets by assuming the obligation to pay amounts due
under the medium-term notes issued by the SIVs, as the medium-term notes
mature.
Investment Funds
The Company is the investment manager for certain investment funds that
invest in various asset classes including private equity, hedge funds, real
estate, fixed income and infrastructure. The Company earns a management
fee, which is a percentage of capital under management, and may earn
performance fees. In addition, for some of these funds the Company has an
ownership interest in the investment funds.
The Company has also established a number of investment funds as
opportunities for qualified employees to invest in private equity investments.
The Company acts as investment manager to these funds and may provide
employees with financing on both recourse and non-recourse bases for a
portion of the employees’ investment commitments.
Trust Preferred Securities
The Company has raised financing through the issuance of trust preferred
securities. In these transactions, the Company forms a statutory business trust
and owns all of the voting equity shares of the trust. The trust issues preferred
equity securities to third-party investors and invests the gross proceeds in
junior subordinated deferrable interest debentures issued by the Company.
These trusts have no assets, operations, revenues or cash flows other than
those related to the issuance, administration and repayment of the preferred
equity securities held by third-party investors. These trusts’ obligations are
fully and unconditionally guaranteed by the Company.
Because the sole asset of the trust is a receivable from the Company and
the proceeds to the Company from the receivable exceed the Company’s
investment in the VIE’s equity shares, the Company is not permitted to
consolidate the trusts, even though the Company owns all of the voting
equity shares of the trust, has fully guaranteed the trusts’ obligations, and
has the right to redeem the preferred securities in certain circumstances. The
Company recognizes the subordinated debentures on its balance sheet as
long-term liabilities.