Citigroup Inc.

EXPOSURE TO COMMERCIAL REAL ESTATEICG and the SAP, through their business activities and as capital marketsparticipants, incur exposures that are directly or indirectly tied to thecommercial real estate (CRE) market, and LCL and RCB hold loans thatare collateralized by CRE. These exposures are represented primarily by thefollowing three categories:(1) Assets held at fair value include approximately $5.7 billion, of whichapproximately $4.5 billion are securities, loans and other items linked toCRE that are carried at fair value as trading account assets, approximately$0.7 billion are securities backed by CRE carried at fair value as availablefor-sale(AFS) investments, and approximately $0.5 billion are loans heldfor-sale.Changes in fair value for these trading account assets are reportedin current earnings, while AFS investments are reported in Accumulatedother comprehensive income with credit-related other-than-temporaryimpairments reported in current earnings.The majority of these exposures are classified as Level 3 in the fair valuehierarchy. Over the last several years, weakened activity in the tradingmarkets for some of these instruments resulted in reduced liquidity, therebydecreasing the observable inputs for such valuations, and could continue tohave an adverse impact on how these instruments are valued in the future.See Note 25 to the Consolidated Financial Statements.(2) Assets held at amortized cost include approximately $1.6 billionof securities classified as held-to-maturity (HTM) and approximately$29.3 billion of loans and commitments. HTM securities are accounted forat amortized cost, subject to other-than-temporary impairment. Loans andcommitments are recorded at amortized cost, less loan loss reserves. Theimpact from changes in credit is reflected in the calculation of the allowancefor loan losses and in net credit losses.(3) Equity and other investments include approximately $3.7 billion ofequity and other investments, such as limited partner fund investments, thatare accounted for under the equity method, which recognizes gains or lossesbased on the investor’s share of the net income of the investee.The following table provides a summary of Citigroup’s global CRE fundedand unfunded exposures at December 31, 2010:In billions of dollarsDecember 31,2010Institutional Clients GroupCRE exposures carried at fair value (including AFS securities) $ 4.4Loans and unfunded commitments 17.5HTM securities 1.5Equity method investments 3.5Total ICG $26.9Special Asset PoolCRE exposures carried at fair value (including AFS) $ 0.8Loans and unfunded commitments 5.1HTM securities 0.1Equity method investments 0.2Total SAP $ 6.2Regional Consumer BankingLoans and unfunded commitments $ 2.7Local Consumer LendingLoans and unfunded commitments $ 4.0Brokerage and Asset ManagementCRE exposures carried at fair value $ 0.5Total Citigroup $40.3The above table represents the vast majority of Citi’s direct exposure toCRE. There may be other transactions that have indirect exposures to CREthat are not reflected in this table.116