Citigroup (C)

Client revenues

        CAI's client portfolio is comprised of single- and multi-manager hedge funds, real estate, managed futures, private equity, and a variety of leveraged fixed income products (credit structures). Clients include both institutions and high-net-worth individuals. Products are distributed directly to investors and through Citigroup's Private Bank and Smith Barney businesses. Prior to 2005, the pretax profits of CAI were recorded in the respective Citigroup distributor's income statement as a component of revenues.

        Total client revenues, net of interest expense, of $81 million in the 2005 third quarter increased $13 million over the third quarter of 2004. For the 2005 nine months, total client revenues, net of interest expense, of $226 million increased $40 million from the 2004 nine-month period. Higher performance fees drove the higher client revenues.

        CAI managed $24.8 billion in unlevered client capital as of September 30, 2005, an increase of $4.6 billion from September 30, 2004, driven by inflows from institutional and high-net-worth clients, as well as $1.4 billion in assets for the former Travelers Life & Annuities business, which have been reflected as client capital following the July 1, 2005 sale to MetLife.

        Operating expenses of $167 million in the third quarter of 2005 increased $55 million from the third quarter of 2004. For the 2005 nine months, operating expenses of $431 million in the third quarter 2005 increased $109 million from the 2004 nine-month period. The higher operating expenses were due primarily to higher investment spending in hedge funds and real estate, and increased performance-driven compensation.

        Minority interest, net of tax, of $35 million in the third quarter 2005 increased $25 million from the third quarter of 2004. For the 2005 nine months, minority interest, net of tax, of $401 million increased $348 million from the 2004 nine-month period. The increase in minority interest was primarily due to private equity gains related to underlying investments held by consolidated legal entities. The impact of minority interest is reflected in both net realized and net changes in unrealized gains and losses consistent with cash proceeds received by minority interest.

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Client revenues

        CAI has a growing client portfolio comprised of single- and multi-manager hedge funds, real estate, managed futures, private equity, and a variety of leveraged fixed income products (credit structures). Clients include both institutions and high-net-worth individuals. Products are distributed directly to investors and through Citigroup's Private Bank and Smith Barney businesses. Prior to 2005, the pretax profits of CAI were recorded in the respective Citigroup distributor's income statement as a component of revenues.

        Total client revenues, net of interest expense, of $83 million in the second quarter 2005 increased $25 million over the second quarter of 2004. For the 2005 six months, total client revenues, net of interest expense, of $145 million increased $27 million from the 2004 six-month period. The higher client revenues were primarily driven by higher performance fees earned and the absence of the profit-sharing arrangements that were in place in 2004.

        CAI managed $21.7 billion in unlevered client capital as of June 30, 2005, an increase of $2 billion from June 30, 2004.

        Operating expenses of $159 million in the 2005 second quarter increased $36 million from the second quarter of 2004. For the 2005 six months, operating expenses of $264 million increased $54 million from the 2004 six-month period. The higher operating expenses were primarily due to higher employee-related expenses and an increase in the operating expenses from hedge funds and real estate.

        Minority interest, net of tax, of $234 million in the second quarter 2005, increased $227 million from the second quarter of 2004. For the 2005 six months, minority interest, net of tax, of $366 million increased $323 million from the 2004 six-month period. The increase in minority interest was primarily due to net unrealized gains related to underlying investments held by consolidated legal entities.

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