SUBSEQUENT EVENT

6 Months Ended

Jun. 30, 2012

SUBSEQUENT EVENT

SUBSEQUENT EVENT

24.    SUBSEQUENT EVENT

MSSB JV

        Pursuant to the Amended and Restated Limited Liability Company Agreement, dated May 31, 2009 (JV Agreement), of the MSSB JV, Morgan Stanley has the right to exercise options over time to purchase Citi's 49% interest in the MSSB JV. Generally, Morgan Stanley may exercise its options to purchase the remaining 49% interest of the MSSB JV from Citi in the following amounts and at the following times: (i) following the third anniversary of the closing of the MSSB JV (May 31, 2012), 14% of the total outstanding interest; (ii) following the fourth anniversary of the closing of the MSSB JV (May 31, 2013), an additional 15% of the remaining outstanding interest; and (iii) (May 31, 2014) following the fifth anniversary of the closing of the MSSB JV, the remaining outstanding interest in the MSSB JV.

        On June 1, 2012, Morgan Stanley exercised its initial option for the purchase from Citi of an additional 14% interest in the MSSB JV (14% Interest). As previously disclosed and as provided pursuant to the terms of the JV Agreement, the purchase price for the 14% Interest is to be determined pursuant to an appraisal process which included the exchange between Morgan Stanley and Citi of each respective firm's fair market valuation (as defined under the provisions of the JV Agreement) of the full MSSB JV, and if the two firms' valuations differ by more than 10%, a third party appraisal process.

        As announced on July 19, 2012, Citi and Morgan Stanley exchanged their respective fair market valuations for the full MSSB JV on July 16, 2012, as required pursuant to the JV Agreement. (For additional information, see Citi's Form 8-K filed with the U.S. Securities and Exchange Commission on July 19, 2012.) Citi's fair market valuation of the full MSSB JV reflected a value for Citi's 49% interest in the MSSB JV that slightly exceeded Citi's carrying value of approximately $11 billion for that 49% interest as of June 30, 2012 (for additional information on Citi's carrying value of its equity investment in the MSSB JV as of June 30, 2012, see Note 11 to the Consolidated Financial Statements). Morgan Stanley's valuation for the full MSSB JV reflected a value that was approximately 40% of Citi's fair market valuation for the full MSSB JV.

        Because the two firms were more than 10% apart, the fair market value of the full MSSB JV, and thus the purchase price for the 14% Interest, will be determined by a third party appraiser. Pursuant to the terms of the JV Agreement, the fair market value of the full MSSB JV will be determined as follows: (i) if the fair market value as determined by the third party appraiser is in the middle third of the range established by Citi and Morgan Stanley's valuations, the fair market valuation determined by the third party appraiser will be the valuation of the full MSSB JV; (ii) if the fair market value as determined by the third party appraiser is in the top third of the range, the fair market value of the full MSSB JV will be the average of the third party appraiser's value and Citi's valuation; and (iii) if the fair market value as determined by the third party appraiser is in the bottom third of the range, the fair market value of the full MSSB JV will be the average of the third party appraiser's value and Morgan Stanley's valuation. The third party appraisal process is to be concluded by August 30, 2012, with the closing of the sale of the 14% Interest to occur by September 7, 2012.

        Given the wide disparity between the two firms' valuations, as previously disclosed, depending on the ultimate fair market value determined by the third party appraisal, Citi could have a significant non-cash charge to its net income in the third quarter of 2012, representing other-than-temporary impairment of the carrying value of its 49% interest in the MSSB JV.

LEGAL PROCEEDINGS

        For a discussion of Citigroup's litigation and related matters, see Note 22 to the Consolidated Financial Statements.