Latin Finance - November/December 2010 - 33

Global Depositary Notes: Instant USD Access to Local Currency Sovereign Debt

Demand for international debt securities continues to grow as 2010 projects to be a record year for inflows into emerging-market bond funds, according to EPFR Global, a company that tracks global fund flows. More than half of the $35 billion inflow (through September) can be attributed to local currency bond funds. Investing in the securities that comprise these local currency bond funds may prove difficult for certain investment managers due to limitations in a respective market’s cross-border settlement and clearing infrastructure. As a solution, Citibank has developed Global Depositary Notes (GDNs), local currency-denominated securities that are transacted in U.S. dollars. A debt security version of an American Depositary Receipt (ADR) or Global Depositary Receipt (GDR), a Global Depositary Note is an instrument that represents ownership of underlying local currency-denominated sovereign bonds.

GDNs possess the same terms — interest rate, maturity date, credit quality, etc. — as their respective sovereign debt securities, but trade, settle, pay interest and principal in U.S. dollars, and are DTC/Euroclear/ Clearstream eligible. GDNs are currently available to investors who wish to transact in local currency-denominated sovereign debt from the Dominican Republic and Peru, with other markets expected to follow. Current and prospective GDN investors include institutions that do not have a local account in these markets; have a local account in these markets, but prefer to clear and settle securities in DTC/Euroclear/Clearstream; and/or have incremental capacity to hold debt securities that are specifically held and transacted in U.S. dollar terms. While Citibank functions as the depositary bank for GDNs, establishing and administering the GDN programs, GDNs can only be purchased and sold

directly through any broker-dealers that facilitate markets in local currency-denominated Peruvian or Dominican Republic sovereign bonds.

The Citi Advantage
Citi began offering Depositary Receipt Services in 1928 and is an industry leader in promoting these instruments — now complemented by Global Depositary Notes — as highly effective capital markets tools. As the pioneer of the GDN product and an industry leader in Depositary Receipt Services, Citi provides unparalleled proficiency among all functions associated with GDNs. Want more information? Contact your sales representative or contact Justin Karol at +212-723-5316 or justin.s.karol@citi.com.

Copyright ©2010 Citibank, N.A. All rights reserved. Citi and Arc Design and Citibank are trademarks and service marks of Citigroup Inc. or its affiliates, used and registered throughout the world. The above information is being provided solely for information purposes by Citi. At the time of publication, this information was believed to be accurate, but Citi makes no representation or warranty as to correctness of the information set forth above. The above information does not constitute a recommendation, solicitation or offer by Citi for the purchase or sale of any securities, nor shall this material be construed in any way as investment or legal advice or a recommendation, reference or endorsement by Citi.

Latin Finance - November/December 2010

Table of Contents for the Digital Edition of Latin Finance - November/December 2010