Base Listing Document Relating to Offers of Non-Collateralised Structured Products to Be Issued by CITIGROUP GLOBAL MARKETS HOLDINGS INC

FOR INFORMATION ONLY

If you are in any doubt as to any aspect of this document, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited (the Stock Exchange) and Hong Kong Securities Clearing Company Limited (HKSCC) take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. Base Listing Document relating to Offers of Non-Collateralised Structured Products to be issued by CITIGROUP GLOBAL MARKETS HOLDINGS INC. (a corporation duly incorporated and existing under the laws of the State of New York, the United States of America) unconditionally and irrevocably guaranteed by CITIBANK, N.A. (a national banking association organised and existing under the laws of the United States of America)

Citigroup Global Markets Holdings Inc. (the Issuer) has published this document in respect of single equity call warrants, single equity put warrants, index call warrants, index put warrants, commodity call warrants, commodity put warrants, currency call warrants, currency put warrants, unit fund call warrants and unit fund put warrants (each as defined below, and together referred to as the warrants) and Equity CBBCs and Index CBBCs (each as defined below, and together referred to as the CBBCs and, together with the warrants and any other structured products approved by The Stock Exchange of Hong Kong Limited (the Stock Exchange) from time to time, the Structured Products) to be issued by the Issuer in series (each a Series) from time to time and unconditionally and irrevocably guaranteed by Citibank, N.A. (the Guarantor) and listed on the Stock Exchange.

This document includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Rules) for the purpose of giving information with regard to the Issuer and the Guarantor. The Issuer and the Guarantor accept full responsibility for the accuracy of the information contained in this document and confirm, having made all reasonable enquiries, that to the best of the knowledge and belief of the Issuer and the Guarantor, there are no other facts the omission of which would make any statement in this document misleading. Additional terms relating to each Series of the Structured Products will be set out in a supplemental listing document (each a Supplemental Listing Document) which will be supplemental to, and should be read in conjunction with, this document.

The Structured Products involve derivatives. Do not invest in the Structured Products unless you fully understand and are willing to assume the risks associated with the Structured Products. Investors are warned that the prices of the Structured Products may fall in value as rapidly as they may rise and holders may sustain a total loss of their investment. Prospective purchasers should therefore ensure that they understand the nature of the Structured Products and carefully study the risk factors set out in this Base Listing Document and the relevant Supplemental Listing Document and, where necessary, seek professional advice, before they invest in the Structured Products.

The Structured Products constitute general unsecured contractual obligations of the Issuer and of no other person and if you purchase the Structured Products you are relying upon the creditworthiness of the Issuer and the Guarantor, and have no rights under the Structured Products against, as applicable, the underlying, any company which has issued the underlying or any company which sponsors the underlying or whose securities are comprised in the underlying.

19 June 2012 IMPORTANT

If you are in any doubt as to any of the contents of this document, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

This Base Listing Document may be updated from time to time, in which case the Issuer will publish an addendum.

You should read this document, together with any addendum to it and the relevant supplemental listing document, before deciding whether to invest in the Structured Products.

The Issuer and the Guarantor cannot give you investment advice. You must decide for yourself whether the Structured Products meet your investment needs, and take professional advice if appropriate. This document is not intended to be, and should not be considered as, a recommendation or advice by the Issuer or the Guarantor or any of their affiliates that you should purchase any of the structured products, and you must make your own independent investigation of the financial condition and affairs of the Issuer and the Guarantor and your own appraisal of their creditworthiness.

The Structured Products are offered solely on the basis of the information contained in this Base Listing Document and any supplement to it. No action has been taken to permit a public offering of the Structured Products or the distribution of this Base Listing Document in any jurisdiction where action would be required for such purposes. The distribution of this document and the offering of the Structured Products may, in certain jurisdictions, be restricted by law. The Issuer and the Guarantor require you, if in possession of this document, to inform yourself of and observe all such restrictions. This Base Listing Document has not been and will not be filed with the U.S. Securities and Exchange Commission (the U.S. SEC). The U.S. SEC and state securities regulators in the United States have not approved or disapproved these securities, or determined if this Base Listing Document is truthful or complete. Any representation to the contrary is a criminal offence in the United States.

The Structured Products have not been, and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or the securities laws of any state in the United States. Accordingly, the Structured Products may only be offered, sold and delivered outside the United States to non-U.S. persons in reliance upon Regulation S under the Securities Act (Regulation S). You will be deemed to have made certain representations and warranties in connection with purchasing the Structured Products. See “Placing and Sale and Transfer Restrictions”.

Notwithstanding anything herein to the contrary, from the commencement of discussions with respect to any transaction contemplated by this document, all persons may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transaction contemplated by this document and all materials of any kind (including opinions and other tax analyses) that are provided to such persons relating to such tax treatment and tax structure, except to the extent that any such disclosure could reasonably be expected to cause any offering pursuant to this document not to be in compliance with securities laws. For the purposes of this paragraph, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of that transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of that transaction.

2 The Issuer and the Guarantor undertake during the period in which the Structured Products are listed on the Stock Exchange to make available to you for inspection at the office of Citigroup Global Markets Asia Limited, which is presently at 50th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong:

(a) a copy of this document and any addendum that the Issuer publishes to this document (both the English version and the Chinese translation);

(b) a copy of the latest publicly available annual report and interim financial statements (if any) of each of the Issuer and the Guarantor; and

發行人及擔保人承諾下列文件於結構性產品在聯交所上市期間在花旗環球金融亞洲有限公司的辦事處（地址為香港中環花園道3號花旗銀行廣場花旗銀行大廈50樓）可供閣下查閱：

(a) 本文件及發行人就本文件刊發的任何增編（英文版及中文譯本）；

(b) 發行人及擔保人最近期可供查閱的年報及中期財務報表（如有）；及

All references herein to Hong Kong Dollars and to HK$ are to the lawful currency of Hong Kong and to United States Dollars and U.S.$ are to the lawful currency of the United States of America.

All references herein to Hong Kong are to the Hong Kong Special Administrative Region of the People’s Republic of China.

3 TABLE OF CONTENTS

Page

Overview of the Programme ...... 5

Risk Factors ...... 9

Terms and Conditions ...... 19

Terms and Conditions of the Warrants on Single Equities (Cash Settled Call Warrants and Cash Settled Put Warrants) ...... 19

Terms and Conditions of the Index Warrants (Cash Settled Call Warrants and Cash Settled Put Warrants) ...... 30

Terms and Conditions of the Commodity Warrants (Cash Settled Call Warrants and Cash Settled Put Warrants) ...... 39

Terms and Conditions of the Currency Warrants (Cash Settled Call Warrants and Cash Settled Put Warrants) ...... 47

Terms and Conditions of the Unit Fund Warrants (Cash Settled Call Warrants and Cash Settled Put Warrants) ...... 55

Terms and Conditions of the Equity CBBCs (Cash Settled) ...... 66

Terms and Conditions of the Index CBBCs (Cash Settled) ...... 80

Taxation ...... 91

ERISA Matters ...... 94

Placing and Sale and Transfer Restrictions ...... 95

Information Relating to the Issuer ...... 98

Information Relating to the Guarantor ...... 100

Form of Deed of Guarantee ...... 101

General Information ...... 105

Exhibit A Audited Consolidated Annual Financial Statements of the Issuer and Subsidiaries as of and for the Two Years Ended 31 December 2011, Independent Auditors’ Report thereon and Other Information ...... 108

Exhibit B Audited Consolidated Annual Financial Statements of the Guarantor and Subsidiaries as of and for the Two Years Ended 31 December 2011, Independent Auditors’ Report thereon and Other Information ...... 182

Exhibit C Information Relating to Derivative Instruments and Risk Management ...... 297

Exhibit D Legal Proceedings ...... 305

4 OVERVIEW OF THE PROGRAMME

The Issuer has set up this programme for the purpose of offering from time to time to the public in Hong Kong Structured Products listed on the Stock Exchange. The following is an overview of the main features of the programme.

Who issues the Structured Citigroup Global Markets Holdings Inc., is the Issuer of the Products? Structured Products.

Will the Structured Products be Yes. Citibank, N.A. is the Guarantor of the Structured Products. guaranteed?

What types of Structured The Issuer may issue warrants and CBBCs under the Products may the Issuer issue programme, each as described below. The Issuer may also issue under the programme? from time to time under the programme other Structured Products approved by the Stock Exchange.

What types of warrants may be The warrants which the Issuer may issue under the programme issued under the programme? are:

(a) call warrants on single equities (single equity call warrants);

(b) put warrants on single equities (single equity put warrants);

(d) put warrants on a single index (index put warrants);

(e) call warrants on single commodities (commodity call warrants);

(f) put warrants on single commodities (commodity put warrants);

(g) call warrants on a single currency (currency call warrants);

(h) put warrants on a single currency (currency put warrants);

(i) call warrants on a unit fund (unit fund call warrants); and

(j) put warrants on a unit fund (unit fund put warrants).

What types of CBBCs may be The callable bull/bear contracts (the CBBCs) which the Issuer issued under the programme? may issue under the programme are:

(a) callable bull/bear contracts on single equities (Equity CBBCs); and

(b) callable bull/bear contracts on a single index (Index CBBCs).

5 OVERVIEW OF THE PROGRAMME

How are the Structured Products The Structured Products will be issued in one or more Series. issued? Structured Products within a Series will have the same terms, but the terms of one Series of Structured Products may be different from another.

What is the legal status of the The Structured Products are the direct, unconditional, Structured Products? unsubordinated and unsecured obligations of the Issuer, ranking equally (pari passu) among themselves and with all other outstanding, unsecured and unsubordinated obligations of the Issuer.

The obligations of the Guarantor under the deed of guarantee dated 19 June 2012 (the Guarantee) constitute general unsecured contractual obligations of the Guarantor and will rank equally (save for certain obligations required to be preferred by law) with all other unsecured and unsubordinated obligations of the Guarantor.

Will the Structured Products be Yes. The Issuer will apply to the Stock Exchange to list each listed? Series of the Structured Products which the Issuer issues under the programme. This Base Listing Document has been published for the purposes of obtaining a listing of each Series of Structured Products which the Issuer issues under the programme.

Will the Structured Products be Yes. The Issuer will make arrangements to ensure that each admitted to CCASS? Series of Structured Products will be accepted by the HKSCC as eligible securities for deposit, clearance and settlement in the Central Clearing and Settlement System (CCASS). All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time (the CCASS Rules).

What are the listing documents The Issuer has published this Base Listing Document to permit for the Structured Products? the listing of the Structured Products on the Stock Exchange. This Base Listing document sets out the terms and conditions of the Structured Products, common features of the Structured Products, the legal terms relating to the programme and information about the Issuer and the Guarantor. This Base Listing Document includes particulars given in compliance with the Rules for the purpose of giving information with regard to the Issuer, the Guarantor and the Structured Products.

When the Issuer applies to list one or more Series of Structured Products, the Issuer will publish a Supplemental Listing Document, which will include information on the particular Structured Products to be listed. The Supplemental Listing Document will be available in English and Chinese versions (which may be printed together in the same document).

6 OVERVIEW OF THE PROGRAMME

What will a Supplemental Listing The Supplemental Listing Document will, amongst other things, Document specify? summarize the terms of the Series of Structured Products being offered, which will include the following:

Type of Structured Product The Supplemental Listing Document will specify the type of the Series of Structured Products offered.

Exercise Style The Supplemental Listing Document will specify the date on which each Structured Product may be exercised. A Structured Product may be exercised only upon the specified expiry date.

Issue price The Supplemental Listing Document will specify the issue price of the Structured Product.

Underlying The Supplemental Listing Document will specify the underlying for the Structured Product, which may be a share, an index, a currency, a commodity or a unit of a fund.

Expiry Date The Supplemental Listing Document will specify the expiry date for the Series of Structured Products offered.

Liquidity Provider The Supplemental Listing Document will specify the name and contact details of the liquidity provider for each Series of Structured Products offered and the basis on which the liquidity provider will provide liquidity in the relevant Structured Products.

How will the Structured Products The Structured Products of each Series will be represented by be represented? one or more global certificates which will be registered in the name of HKSCC Nominees Limited (or such other nominee company as HKSCC may specify from time to time) and will be deposited with CCASS in accordance with the CCASS Rules.

Will you get any individual No, you will not receive any individual certificates. certificate representing an investment in a Series of the Structured Products?

In the Terms and Conditions for The Registrar will maintain a register showing the details of the Structured Products, there each person who is entitled to a particular number of Structured are references to “holders”. Products of a Series. The person registered will be treated by the Who are they? Issuer, the Guarantor and the Registrar as the absolute owner and holder of that number of Structured Products.

The register for each Series of Structured Products will record at all times that HKSCC Nominees Limited (or such other nominee company as HKSCC may specify for that Series) is the holder of 100 per cent. of the Structured Products of that Series.

7 OVERVIEW OF THE PROGRAMME

Accordingly you will not be recognised by the Issuer, the Guarantor or the Registrar as the holder of the Structured Products in which you invest, and you must refer to the records of CCASS and/or your custodian/broker, and the statements that you receive, to determine your beneficial interest in the Structured Products.

How does the Issuer give notices The Issuer and the Guarantor will give any necessary notices by and make payments under the publishing such notices in English and in Chinese on the website Structured Products? of Hong Kong Exchanges and Clearing Limited or otherwise in accordance with the terms and conditions of the relevant Structured Products.

The Issuer will make all payments that are due under the Structured Products to the registered holder of the Structured Products. The registered holder will be HKSCC Nominees Limited (or such other nominee company as HKSCC may specify for that Series). The payments to which you are entitled will be made to you or to your custodian/broker through CCASS in accordance with the CCASS Rules.

Can the Issuer or the Guarantor Yes, the Issuer, the Guarantor or their affiliates may repurchase repurchase the Structured the Structured Products at any time. The Issuer, the Guarantor or Products? their affiliates may offer for sale any Structured Products which the Issuer, the Guarantor or their affiliates repurchase, and may do so at prevailing market prices or in negotiated transactions at the discretion of the Issuer, the Guarantor or such affiliate (acting in good faith and in a commercially reasonable manner). You should not therefore make any assumptions as to the number of the Structured Products of any Series which may be in issue from time to time.

8 RISK FACTORS

The following risk factors are relevant to any person considering investing in the Structured Products. However, the following summary does not necessarily set out all the risks related to the structured products and you should not rely on it without reference to the relevant conditions of this document. If you have any concerns about the Structured Products you should obtain independent professional advice.

The Structured Products involve a high degree of risk, which may include, among others, stock market, interest rate, foreign exchange, time value, early termination and political risks. You should be experienced with respect to options and option transactions, understand the risks of transactions involving the relevant Structured Products and reach an investment decision only after careful consideration (with professional advice if necessary) of the suitability of such Structured Products in light of your particular financial circumstances and the information set out in the Base Listing Document and the relevant Supplemental Listing Document.

Neither this Base Listing Document nor any other information supplied in connection with the Structured Products is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer or the Guarantor that you should purchase any of the Structured Products. If you contemplate purchasing or holding any of the Structured Products, you should make your own independent investigation of the financial condition and affairs and your own appraisal of the creditworthiness of the Issuer and the Guarantor.

The Issuer may issue several Series of Structured Products relating to various reference indices, securities, currencies, commodities or other bases which may be specified in the relevant Supplemental Listing Document. However, no assurance can be given that the Issuer will issue any Structured Products other than the Structured Products to which a particular Supplemental Listing Document relates. At any given time, the number of Structured Products outstanding may be substantial. Structured Products provide opportunities for investment and pose risks to investors as a result of fluctuations in the value of the underlying.

Non-Collateralised Structured Products

The Structured Products are not secured on any of the assets of the Issuer or the Guarantor or any collateral.

The creditworthiness of the Issuer and the Guarantor

The Structured Products constitute general unsecured contractual obligations of the Issuer and of no other person. If you purchase the Structured Products, you rely on the creditworthiness of the Issuer and the Guarantor and you have no rights under the Structured Products against any company which has issued the shares (in respect of equity-linked Structured Products), any company constituting the index or the index compiler (in respect of index-linked Structured Products) or any underlying fund, fund manager or trustee of the underlying fund (in respect of fund-linked Structured Products). You should note that rating agencies usually receive a fee from the issuers and the guarantors that they rate. When evaluating the creditworthiness of the Issuer and the Guarantor, you should not solely rely on the credit ratings of the Issuer and the Guarantor (which are set out in the section headed “General Information” on page 105 of this Base Listing Document and the section headed “Further Information” of the relevant Supplemental Listing Document) because:

¼ a credit rating is not a recommendation to buy, sell or hold the Structured Products;

¼ ratings of companies may involve difficult-to-quantify factors such as market competition, the success or failure of new products and markets and managerial competence; and

9 RISK FACTORS

¼ a high credit rating is not necessarily indicative of low risk. The credit ratings of the Issuer and the Guarantor as set out in the relevant announcement and Supplemental Listing Document are for reference only. Any downgrading of the ratings of the Issuer and the Guarantor could result in a reduction in the value of the Structured Products.

The price of the Structured Products may fluctuate

The price of the Structured Products may fall or rise rapidly in value and the Structured Products may expire or become worthless, resulting in a total loss of your investment. Assuming all other factors are held constant, the more a Structured Product is “out-of-the-money” and the shorter its remaining term to expiration, the greater the risk that you will lose all or part of your investment. In order to realize a return from an investment in Structured Products, you must generally be correct about the direction, timing and magnitude of an anticipated change in the level or value of the relevant underlying.

The Cash Settlement Amount in respect of any Structured Products (as such term is defined in the applicable Conditions) or the Residual Value (in the case of Category R CBBCs), as the case may be, at any time prior to expiration are typically expected to be less than the trading price of the relevant Warrants or CBBCs, as the case may be, at that time. The difference between the trading price and the Cash Settlement Amount or Residual Value, as the case may be, will reflect, among other things, a “time value” for the Structured Products. The “time value” of the Structured Products will depend partly upon the length of time remaining to expiration and expectations concerning the level or value of the underlying.

Before exercising or selling Structured Products, you should carefully consider, among other things:

(i) the trading price of the Structured Products;

(ii) the value or level and volatility of the underlying;

(iii) the time remaining to expiration (generally, in the case of a warrant, the longer the remaining life of the warrant, the greater its value);

(iv) (in the case of a CBBC) the probable range of cash settlement amount;

(v) any change(s) in interim interest rates and dividend yields;

(vi) any change(s) in foreign exchange rates;

(vii) the depth of the market or liquidity of the underlying as specified in the relevant Supplemental Listing Document;

(viii) any related transaction costs; and

(ix) the creditworthiness of the Issuer and the Guarantor.

The Structured Products constitute the unsecured and unsubordinated contractual obligations of the Issuer and the Guarantor

The Structured Products constitute the direct, general, unsecured and unsubordinated contractual obligations of the Issuer and the Guarantor and of no other person and shall rank equally (pari passu) with the other existing and future unsecured, unsubordinated contractual obligations of the Issuer and the Guarantor (save for certain obligations required to be preferred by law). If you purchase the Structured Products, you rely on the creditworthiness of the Issuer and the Guarantor and you have no

10 RISK FACTORS

rights under the Structured Products against the underlying, any company which has issued the underlying or any company which sponsors the underlying or whose securities are comprised in the underlying. The Issuer and the Guarantor issue a large number of financial instruments on a global basis. The Issuer and the Guarantor have substantially no obligation to you other than to pay amounts in accordance with the terms set out in the relevant Supplemental Listing Document. Whilst the Guarantor guarantees the obligation of the Issuer under each Structured Product, neither the Issuer nor the Guarantor in any respect underwrites or guarantees the performance of any Structured Product. Any profit or loss realised by you in respect of a Structured Product upon exercise or due to the changes in the value of such Structured Products is solely for your own account. The Issuer and the Guarantor shall have the absolute discretion (acting in good faith and in a commercially reasonable manner) to put in place any hedging transaction or arrangement appropriate in connection with any Structured Product or the applicable underlying. A reduction in the rating of the Issuer or the Guarantor by any one of the rating agencies of the Issuer or the Guarantor could result in a reduction in the trading value of the Structured Products.

Trading in the Structured Products may be affected by suspension of trading in the underlying

If trading in the underlying, or in any securities which comprise the underlying, is suspended on the Stock Exchange or any other relevant exchange or market, trading in the Structured Products may be suspended for a similar period. If trading in the underlying, or in any securities which comprise the underlying, is suspended for a prolonged period, trading in the Structured Products will be suspended for a similar prolonged period. The “time value” of the Structured Products will be adversely affected during the prolonged suspension period.

There is a time delay between exercise of the Structured Products and payment to you.

Any delay between the exercise of a Structured Product and payment to you will be specified in the relevant Supplemental Listing Document or in the Conditions. The Issuer and the Guarantor will not compensate you for any loss you suffer as a result of any time delay.

The value of the underlying may fluctuate

An investment in the Structured Products involves risks relating to changes in the level or value of the underlying. The level or value of the underlying will vary over time, including as a result of corporate actions, changes in computation of an index or unit fund or political or macro-economic changes. Certain of such events which affect the level or value of the underlying may require an adjustment to the Structured Products. However, even if such event does not require an adjustment to the Structured Products, the price of the Structured Products or the return on an investment in the Structured Products may be affected.

Changes in the level or value of the underlying can be unpredictable, sudden and large. Such changes may result in the level or value of the underlying falling below the Strike Level or Strike Rate or Exercise Price (in the case of Call Warrants) or rising above the Strike Level or Strike Rate or Exercise Price (in the case of Put Warrants) which will negatively impact the return on your investment and may cause it to expire worthless, in which case you will suffer a complete loss on your investment. See below for similar risks in relation to CBBCs.

Gearing effects

Since the Structured Products are leveraged, the percentage change in the price of a Structured Product is greater compared with that of the underlying. You may suffer higher losses in percentage terms if you expect the price of the underlying to move one way but it moves in the opposite direction.

11 RISK FACTORS

Liquidation of underlying company

In the case of Structured Products linked to shares, in the event of liquidation or dissolution of the company that issues the underlying shares or the appointment of a liquidator, receiver or administrator or analogous person under Hong Kong law in respect of the whole or substantially the whole of its undertaking, property or assets, the relevant Structured Products shall lapse.

Liquidation or termination of underlying trust or fund

In the case of Structured Products linked to units in a fund, in the event of (i) a liquidation, dissolution or termination of the fund or (ii) the appointment of a liquidator, receiver or administrator or analogous person under Hong Kong law in respect of the whole or substantially the whole of its undertaking, property or assets or (iii) the withdrawal of the Securities and Futures Commission’s authorisation of the fund under the Securities and Futures Ordinance, the relevant Structured Products shall lapse.

Risks relating to Structured Products linked to synthetic exchange-traded funds

Some of the Structured Products may be linked to units in an exchange-traded fund (ETF). An ETF is designed to replicate the performance of an underlying index (or in some cases, a group of assets such as commodities). Some ETFs gain exposure to the underlying index by investing in shares, bonds or other assets that make up the index. An increasing number of ETFs, however, adopt a different replication strategy by investing in derivative instruments designed to replicate the performance of the index and such ETFs will face the credit risk of its counterparties issuing such derivative instruments. Accordingly, if you invest in Structured Products the return on which is linked to such synthetic ETFs, you will also be exposed to the credit risk of the counterparties who issued the derivatives in addition to the risks associated with the underlying indices the performance of which the ETFs are designed to replicate.

Investing in CBBCs involves various risks

You should note that there is a risk that the CBBCs can become worthless and that you can lose your entire investment on or before the Expiry Date. This can occur when the level or value of the underlying is equal to or lower (in the case of Bull CBBCs) or equal to or higher (in the case of Bear CBBCs) than the Call Price or Call Level (known as a Mandatory Call Event). If a Mandatory Call Event occurs, the CBBCs will automatically terminate and, in the case of Category R CBBCs only, the Residual Value (if any) will be calculated. You will not be able to benefit under that CBBC from any changes to the price or level of the underlying after the occurrence of a Mandatory Call Event.

A Mandatory Call Event is irrevocable unless it is triggered due to the occurrence of one of the following events (the occurrence of any such event to be agreed between the Issuer and the Stock Exchange on the trading day following the occurrence of the Mandatory Call Event in accordance with procedures prescribed by the Stock Exchange from time to time):

(i) malfunction of the Stock Exchange’s system or other internal issues (for example, if the Call Price or Call Level or other parameters are erroneously set up in the Stock Exchange’s system); or

(ii) manifest errors caused by other relevant price sources (for example, miscalculation of index level by the index compiler (as defined in the relevant Supplemental Listing Document)).

You should pay special attention to CBBCs on shares, as the probability of a Mandatory Call Event occurring is much higher than with CBBCs on indices. The main reason for this is the particular short-term price volatility of shares, which can be caused by corporate actions or market volatility.

12 RISK FACTORS

During the lifetime of the CBBCs, the Issuer and the Guarantor may begin to liquidate their hedging positions when the level or value of the underlying is approaching the Call Price or the Call Level. This liquidation may lead to greater volatility of the level or value of the underlying towards the Call Price or Call Level.

You should note that in respect of CBBCs, when a Mandatory Call Event occurs in the pre-opening session or (if applicable) closing auction session, as the case may be, of the Stock Exchange, all trades in the CBBCs concluded via auction during the order matching period will be cancelled and all manual trades concluded after the determination of the final indicative equilibrium price will not be recognised. If the Mandatory Call Event occurs in the continuous trading session, all trades concluded via auto-matching or manually after the Mandatory Call Event (Post MCE Trades) will be cancelled.

Cancellation of Post MCE Trades will be based on the Stock Exchange’s automatic order matching and execution system time (in the case of Hong Kong shares) or index calculation snapshot time (in the case of the Hang Seng Indices) or the time as specified in the relevant Supplemental Listing Document (in the case of other underlyings).

You should note that announcements relating to a Mandatory Call Event may be delayed due to technical errors or system failures.

You have no rights under the CBBCs against the Stock Exchange or its recognised exchange controller, Hong Kong Exchanges and Clearing Limited (HKEx). None of the Stock Exchange and HKEx, the Issuer, the Guarantor and their respective affiliates shall be liable for any direct, consequential, special, indirect, economic, punitive, exemplary or any other loss or damage suffered or incurred by you arising from or in connection with any Mandatory Call Event or the suspension of trading or the non-recognition of Post MCE Trades (whether based on contract, tort (including, without limitation, negligence), or any other legal or equitable grounds and without regard to the circumstances giving rise to any purported claim except in the case of wilful misconduct).

You should note that a discretionary risk premium (commonly referred to as the Funding Cost)is applied by the Issuer when pricing the CBBCs on the Stock Exchange. The Funding Cost forms part of the purchase price of the CBBCs and is a cost associated with managing the Call Price or Call Level risk. This is not a fixed amount, and may vary depending on, among other factors, the proximity of the level or value of the underlying to the Call Price or Call Level and the time to maturity. The Funding Cost is an amount determined by the Issuer in its sole discretion (acting in good faith and in a commercially reasonable manner). When a Mandatory Call Event occurs, the Residual Value will not contain a refund of any part of the Funding Cost.

There may be certain events relating to an index that affect index linked Structured Products

In the case of index-linked Structured Products, a level for the index may be published by the index compiler at a time when one or more shares comprised in the relevant index are not trading. If this occurs on a Valuation Date and there is no Market Disruption Event under the terms of the relevant index-linked Structured Products, then the closing level of the index will be calculated by reference to the remaining shares comprised in the relevant index. Certain events relating to the index permit the Issuer to determine the level of the index on the basis of the formula or method last in effect prior to such change or formula.

There may be certain events relating to a fund that affect fund linked Structured Products

In the case of Structured Products which relate to units of a fund, none of the Issuer, the Guarantor and their affiliates has the ability to control or predict the actions of the trustee or the manager of the relevant fund. Neither the trustee or the manager of the relevant fund (i) will be involved in the offer of the Structured Products in any way, or (ii) has any obligation to consider the

13 RISK FACTORS

interest of the holders of Structured Products in taking any corporate actions that might affect the value of the Structured Products. Unless otherwise disclosed in the Supplemental Listing Document, the Issuer and the Guarantor have no role in the relevant fund. The trustee or the manager of the relevant fund is responsible for making strategic, investment and other trading decisions with respect to the management of the relevant fund consistent with its investment objectives and/or investment restrictions as set out in its constitutive documents. The manner in which the relevant fund is managed and the timing of such decisions will have a significant impact on the performance of the underlying. Hence, the price which is used to calculate the performance of the fund (and, accordingly, the return on an investment in Structured Products which are linked to such fund) is also subject to these risks.

There may be an exchange rate risk

You should note that there may be an exchange rate risk in the case of warrants where the cash settlement amount is converted from a foreign currency into Hong Kong Dollars, for example, where the underlying is denominated in a currency other than Hong Kong Dollars, or where the underlying of a warrant is a currency.

Changes in the exchange rate(s) between the currency of the underlying, the currency in which the Structured Products settle and/or the currency of your home jurisdiction may adversely affect the return of your investment in the Structured Products. The Issuer and the Guarantor cannot assure that current exchange rates at the issue date of the Structured Products will be representative of the future exchange rates used in computing the value of the Structured Products. Fluctuations in exchange rates may therefore affect the value of the Structured Products.

The secondary market for the Structured Products may be limited

The Issuer intends to apply to list each Series of Structured Products on the Stock Exchange. If a Series of Structured Products is listed on the Stock Exchange, there can be no assurance that any such listing can be maintained. The Issuer or the Guarantor (acting through the Issuer’s appointed liquidity provider) may be the only person quoting prices on the Stock Exchange for the Structured Products and the Issuer, the Guarantor or their affiliates may repurchase Structured Products at any time by tender or by private agreement, subject to the provisions of the Section headed “Information about the Liquidity Provider”. Any Structured Product which is repurchased may be offered from time to time in one or more transactions in the over-the-counter market or otherwise at prevailing market prices or in negotiated transactions, at the discretion of the Issuer, the Guarantor or such affiliate. Therefore, the secondary market may be limited and you should not make any assumption as to the number of Structured Products in issue at any time.

Certain considerations regarding hedging

You may not be able to hedge the market risks associated with your investment or exposure to any underlying shares or underlying indices by purchasing the Structured Products.

Two or more Risk Factors may apply simultaneously

Two or more risk factors may simultaneously have an effect on the value of a Structured Product such that the effect of any individual risk factor may not be predicted. No assurance can be given as to the effect that any combination of risk factors may have on the value of a Structured Product.

14 RISK FACTORS

Investments in the Structured Products are not the same as investments in the underlying

The value of the Structured Products may not correlate directly with the movements of the underlying and may be affected by the expected volatility of the underlying and the time remaining to expiry. Also, where the underlying is a share or a unit in a fund, as holder of the Structured Products you will not have the same rights (including voting rights and rights to dividends) as if you were a direct holder of the underlying.

There could be conflicts of interests which may affect the Structured Products

Various potential and actual conflicts of interest may arise from the overall activities or activities of the Issuer, the Guarantor or their subsidiaries and affiliates. Such actions and conflicts may include, without limitation, the exercise of voting power, the purchase and sale of securities, financial advisory relationships and exercise of creditor rights. In their ordinary course of business, the Issuer, the Guarantor or their subsidiaries and affiliates may effect transactions on the account of the Issuer or the Guarantor or for the account of their customers and hold positions in the underlying.

Neither the Issuer nor the Guarantor is the holding company of the group to which they belong

The Guarantor is neither the immediate holding company nor the ultimate holding company of the Issuer. In addition, neither the Issuer nor the Guarantor is the ultimate holding company of the group to which they belong and with which their name is identified. The ultimate holding company of the group to which they belong is Citigroup Inc.

The Structured Products will be issued in global registered form

The structured products will be issued in global registered form, and accordingly HKSCC Nominees Limited (or such other nominee company as HKSCC may specify from time to time) will be the only legal owner of the Structured Products. You are not entitled to any definitive certificates representing your beneficial interests in the Structured Products. You will have to rely on CCASS and/ or your brokers to (a) determine your beneficial interest in the Structured Products, (b) receive announcements and/or information relating to the Structured Products and (c) receive payments under the Structured Products. The Issuer’s payment obligations or, failing the Issuer meeting such obligations, the Guarantor’s payment obligations to you will be duly performed by payment in accordance with the conditions to HKSCC Nominees Limited as the registered holder of the Structured Products. The amounts will be paid to you through CCASS participants in accordance with the general rules of CCASS and the CCASS operational procedures in effect from time to time.

Illegality or Impracticability

The Issuer is entitled to terminate the Structured Products if it determines in good faith and in a commercially reasonable manner that, for reasons beyond its control, it has become or it will become illegal or impracticable:

(a) for it to perform its obligations under the Structured Products, in whole or in part as a result of: (i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or (ii) the promulgation of, or any change in the interpretation by any court, tribunal, governmental, administrative, legislative, regulatory or judicial authority or power with competent jurisdiction of any relevant law or regulation (including, without limitation, any tax law), (each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Structured Products due to a Change in Law Event.

15 RISK FACTORS

Upon the occurrence of a Change in Law Event, the Issuer will, if and to the extent permitted by applicable law or regulation, pay to you a cash amount that the Issuer determines in good faith and in a commercially reasonable manner to be the fair market value in respect of each Structured Product held by you immediately prior to such termination (ignoring such illegality or impracticability) less the cost to the Issuer of unwinding any related hedging arrangement as determined by the Issuer in its sole and absolute discretion (acting in good faith and in a commercially reasonable manner).

Market Disruption Event

If the Issuer determines that a Market Disruption Event related to certain Structured Products has occurred or exists on a Valuation Date according to the provisions of such Structured Products, any consequential postponement or alternative valuation may have an adverse effect on the value of such Structured Products.

The Issuer may adjust the terms and conditions of the Structured Products upon the occurrence of certain corporate events or extraordinary events affecting the underlying assets

The Issuer and/or the agent may determine that certain corporate events or extraordinary events affecting the underlying assets have occurred and may make corresponding adjustments to the terms and conditions of the Structured Products, including adjustments to the value or level of the underlying or changing the composition of the underlying. Such events and/or adjustment (if any) may have an adverse impact on the value and/or market price of the Structured Products. The Issuer may also in its sole discretion (acting in good faith and in a commercially reasonable manner) adjust the entitlement of the Structured Products for dilution events such as subdivisions and stock dividends.

However, the Issuer has no obligation to make an adjustment for every event that can affect the underlying. The value and/or market price of the Structured Products may be adversely affected by such events in the absence of an adjustment by the Issuer. If adjustments were made, the Issuer does not assure that such adjustments can negate any adverse impact of such events on the value and/or market price of the Structured Products.

Other Adjustments

The Issuer may make such adjustments as the Issuer believes appropriate to account for the occurrence of an event provided the Issuer does not consider such adjustment to be materially prejudicial to holders of the Structured Products without considering any single holders circumstances or the tax or other consequences of such adjustment in a particular jurisdiction.

Recent United States Tax Law Developments

On December 7, 2007, the United States Internal Revenue Service (the IRS) issued a notice (the Notice) that may affect the taxation of holders of certain securities that are not classified as debt for U.S. federal income tax purposes. According to the Notice, the IRS and the United States Treasury Department (the Treasury) are considering whether holders of certain securities sometimes referred to as pre-paid forward contracts should be required to accrue ordinary income on a current basis, and they are seeking taxpayer comments on the subject. The IRS and the Treasury are also considering a list of other issues raised by such securities, including debt characterization, possible look-through to the underlying asset for tax treatment and possible application of withholding tax at source in certain circumstances. The Notice also asks for comments identifying other arrangements that raise similar issues regarding the proper U.S. tax treatment of an investor as are raised by pre-paid forward contracts. It is currently impossible to predict what guidance, if any, will be issued as a result of the Notice, and whether any such guidance could have retroactive effect. Accordingly, it is possible that future guidance could be issued as a result of the Notice that would impact the treatment of the Structured Products for U.S. federal income tax purposes, and that such guidance may require withholding on payments made to a Non-U.S. Holder (as defined below) of a Structured Product.

16 RISK FACTORS

Citi faces significant regulatory changes around the world which could negatively impact its businesses, especially given the unfavorable environment facing financial institutions and the lack of international coordination.

Citigroup Inc. and its consolidated subsidiaries (Citi) continue to be subject to a significant number of new regulatory requirements and changes from numerous sources, both in the U.S. and internationally, which could negatively impact its businesses, revenues and earnings. These reforms and proposals are occurring largely simultaneously and generally not on a coordinated basis. In addition, as a result of the financial crisis in the U.S., as well as the continuing adverse economic climate globally, Citi, as well as other financial institutions, is subject to an increased level of distrust, scrutiny and skepticism from numerous constituencies, including the public, state, federal and foreign regulators, the media and within the political arena. This environment, in which the U.S. and international regulatory initiatives are being debated and implemented, engenders not only a bias towards more regulation, but towards the most prescriptive regulation for financial institutions. As a result of this ongoing negative environment, there could be additional regulatory requirements beyond those already proposed, adopted or even currently contemplated by U.S. or international regulators. It is not clear what the cumulative impact of all of this regulatory reform will be.

The ongoing implementation of the Dodd-Frank Act, as well as international regulatory reforms, continues to create much uncertainty for Citi, including with respect to the management of its businesses, the amount and timing of the resulting increased costs and its ability to compete.

Despite enactment in July 2010, the complete scope and ultimate form of a number of provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), such as the heightened prudential standards applicable to large financial companies, the so-called “Volcker Rule” and the regulation of derivatives markets, are still in developmental stages and significant rulemaking and interpretation remains. Moreover, agencies and offices created by the Dodd-Frank Act, such as the Bureau of Consumer Financial Protection, are in their early stages and the extent and timing of regulatory efforts by these bodies remains to be seen.

This uncertainty is further compounded by the numerous regulatory efforts underway outside the U.S. Certain of these efforts overlap with the substantive provisions of the Dodd-Frank Act, while others, such as proposals for financial transaction and/or bank taxes in particular countries or regions, do not. In addition, even where these U.S. and international regulatory efforts overlap, these efforts generally have not been undertaken on a coordinated basis. Areas where divergence between U.S. regulators and their international counterparts exists or has begun to develop (whether with respect to scope, interpretation, timing, approach or otherwise) includes trading, clearing and reporting requirements for derivatives transactions, higher U.S. capital and margin requirements relating to uncleared derivatives transactions, and capital and liquidity requirements that may result in mandatory “ring-fencing” of capital or liquidity in certain jurisdictions, among others.

Regulatory uncertainty makes future planning with respect to the management of Citi’s businesses more difficult. For example, the cumulative effect of the new derivative rules and sequencing of implementation requirements will have a significant impact on how Citi chooses to structure its derivatives business and its selection of legal entities in which to conduct this business. Until these rules are final and interpretive questions are answered, management’s business planning and proposed pricing for this business necessarily include assumptions based on proposed rules. Incorrect assumptions could impede Citi’s ability to effectively implement and comply with the final requirements in a timely manner. Management’s planning is further complicated by the continual need to review and evaluate the impact to the business of an ongoing flow of rule proposals and interpretations from numerous regulatory bodies, all within compressed timeframes.

In addition, the operational and technological costs associated with implementation of, as well as the ongoing compliance costs associated with, all of these regulations will likely be substantial. Given the continued uncertainty, the ultimate amount and timing of such costs going forward are difficult to

17 RISK FACTORS

predict. In 2011, Citi invested approximately U.S.$1 billion in order to meet various regulatory requirements, and this amount did not include many of the costs likely to be incurred pursuant to the implementation of the Dodd-Frank Act or other regulatory initiatives. For example, the proposed Volcker Rule contemplates a comprehensive internal controls system as well as extensive data collection and reporting duties with respect to “proprietary trading” and rules for registered swap dealers impose extensive recordkeeping requirements and business conduct rules for dealing with customers. All of these costs negatively impact Citi’s earnings. Given Citi’s global footprint, its implementation and compliance risks and costs are more complex and could be more substantial than its competitors. Ongoing compliance with inconsistent, conflicting or duplicative regulations across U.S. and international jurisdictions, or failure to implement or comply with these new regulations on a timely basis, could further increase costs or harm Citi’s reputation generally.

Citi could also be subject to more stringent regulation because of its global footprint. In accordance with the Dodd-Frank Act, in December 2011 the Federal Reserve Board proposed a set of heightened prudential standards that will be applicable to large financial companies such as Citi. The proposal dictates requirements for aggregate counterparty exposure limits and enhanced risk management processes and oversight, among other things. Compliance with these standards could result in restrictions on Citi’s activities. Moreover, other financial institutions, including so-called “shadow banking” financial intermediaries, providing many of the same or similar services or products that Citi makes available to its customers, may not be regulated on the same basis or to the same extent as Citi and consequently may also have certain competitive advantages.

Finally, uncertainty persists as to the extent to which Citi will be subject to more stringent regulations than its foreign competitors with respect to several of the regulatory initiatives, particularly in its non-U.S. operations, including certain aspects of the proposed restrictions under the Volcker Rule and derivatives clearing and margin requirements. Differences in substance or severity of regulations across jurisdictions could significantly reduce Citi’s ability to compete with foreign competitors, in a variety of businesses and geographic areas, and thus further negatively impact Citi’s earnings.

18 TERMS AND CONDITIONS

The relevant Conditions will, together with the supplemental provisions contained in the relevant Supplemental Listing Document and subject to completion and amendment, be endorsed on the Global Certificate. The applicable Supplemental Listing Document in relation to the issue of any Series of Warrants may specify additional terms and conditions which shall, to the extent so specified or to the extent inconsistent with the relevant Conditions, replace or modify the relevant Conditions for the purpose of such Series of Warrants.

TERMS AND CONDITIONS OF THE WARRANTS ON SINGLE EQUITIES (CASH SETTLED CALL WARRANTS AND CASH SETTLED PUT WARRANTS)

1. Form, Status, Transfer and Title

(a) Form. The Warrants (which expression shall, unless the context otherwise requires, include any further warrants issued pursuant to Condition 12) relating to the Shares of the Company are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date, made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the Warrants made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the Warrants (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The Warrant Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

(b) Status. The Warrants represent general, unsecured, contractual obligations of the Issuer and of no other person and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations of the Issuer. The obligations of the Guarantor under the Guarantee represent general, unsecured, contractual obligations of the Guarantor and of no other person and rank pari passu (save for certain obligations required to be preferred by law) with all other unsecured and unsubordinated obligations of the Guarantor.

(c) Transfer. Transfers of beneficial interests in the Warrants may be effected only in Board Lots or integral multiples thereof in CCASS (as defined below) in accordance with the CCASS Rules (as defined below). Warrants may be offered, sold, resold or otherwise transferred only to a non-U.S. person in an offshore transaction in reliance upon Regulation S under the Securities Act (Regulation S). Each Warrant Holder and each beneficial owner of a Warrant hereby represents as a condition to purchasing or owning such Warrant or any beneficial interest therein that it is not located in the United States nor is a U.S. Person nor was solicited to purchase the Warrants while present in the United States. The term U.S. Person shall have the meaning ascribed to it in Regulation S.

(d) Title. Each person who is for the time being shown in the register kept by the Registrar as entitled to a particular number of Warrants shall be treated by the Issuer, the Guarantor and the Registrar as the absolute owner and holder of such number of Warrants. The expression Warrant Holder shall be construed accordingly.

(e) Type of Warrant. The applicable Supplemental Listing Document will specify whether the Warrant is a call warrant (a Call Warrant) or a put warrant (a Put Warrant). The Warrants are European style warrants.

19 TERMS AND CONDITIONS

2. Warrant Rights and Exercise Expenses

(a) Warrant Rights. Every Board Lot entitles each Warrant Holder, upon due exercise and compliance with Condition 4, the right to receive payment of the Cash Settlement Amount (as defined below), if any, less any determined Exercise Expenses as provided in Condition 2(b) below.

(b) Exercise Expenses. Upon automatic exercise of the Warrants, each Warrant Holder is obliged to pay to the Issuer the relevant Exercise Expenses. In lieu of payment by the Warrant Holder, an amount equal to Exercise Expenses shall be deducted by the Issuer from the applicable Cash Settlement Amount. If the Cash Settlement Amount is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Expiry Date shall be notified to the Warrant Holder as soon as practicable after determination thereof by the Registrar and shall be paid by the Warrant Holder immediately upon demand.

Capitalised terms used and not otherwise defined herein shall have the meaning given to them in the relevant Supplemental Listing Document.

Average Price shall be the arithmetic mean of the closing price of one Share (as derived from the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments as may be determined by the Issuer in accordance with these Conditions to such closing price as may be necessary to reflect any capitalisation, rights issue, distribution or the like) in respect of each Valuation Date;

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

Cash Settlement Amount means, in respect of every Board Lot, an amount payable in the Settlement Currency calculated by the Issuer in accordance with the following formula as equal to the greater of (a) zero; and (b) an amount equal to:

(i) in the case of a Call Warrant:

Cash Settlement Entitlement x (Average Price – Exercise Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

(ii) in the case of a Put Warrant:

Cash Settlement Entitlement x (Exercise Price – Average Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited (HKSCC);

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

20 TERMS AND CONDITIONS

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Company means the company specified as such in the relevant Supplemental Listing Document;

Designated Bank Account means the bank account of the Warrant Holder advised to the Issuer or the Registrar for the purposes of payment of the Cash Settlement Amount;

Entitlement means the number specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

Exchange Rate means the rate specified in the relevant Supplemental Listing Document (subject to any adjustment in accordance with Condition 6);

Exercise Expenses means any charges or expenses including any taxes or duties which are incurred in respect of the exercise of the Warrants;

Exercise Price means the amount specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

Expiry Date means the date specified as such in the relevant Supplemental Listing Document or, if such date is not a Business Day, the immediately succeeding Business Day;

Market Disruption Event means:

(1) the occurrence or existence on any Valuation Date during the one-half hour period that ends at the close of trading of any suspension of or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the Stock Exchange or otherwise) on the Stock Exchange in (a) the Shares; or (b) any options or futures contracts relating to the Shares if, in any such case, such suspension or limitation is, in the determination of the Issuer, material; or

(2) the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal on any day which either (a) results in the Stock Exchange being closed for trading for the entire day or (b) results in the Stock Exchange being closed prior to its regular time for close of trading for the relevant day (for the avoidance of doubt, in the case when the Stock Exchange is scheduled to open for the morning trading session only, closed prior to its regular time for close of trading for the morning session), PROVIDED THAT there shall be no Market Disruption Event solely by reason of the Stock Exchange opening for trading later than its regular time for opening of trading on any day as a result of the tropical cyclone warning signal number 8 or above or the “BLACK” rainstorm signal having been issued; or

(3) a limitation or closure of the Stock Exchange due to any other unforeseen circumstances;

Nominee means HKSCC Nominees Limited, or such other person, firm or company for the time being appointed by HKSCC as a nominee;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

21 TERMS AND CONDITIONS

Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Shares means the shares of the Company specified as such in the relevant Supplemental Listing Document;

Stock Exchange means The Stock Exchange of Hong Kong Limited; and

Valuation Date means, subject as provided in Condition 4(d) below in relation to a Market Disruption Event, each of the five Business Days immediately preceding the Expiry Date.

3. Exercise of Warrants, Automatic Exercise and Expiry

(a) Exercise of Warrants. The Warrants may be exercised only on the Expiry Date.

(b) Automatic Exercise. Each Warrant will be deemed to be automatically exercised if the Cash Settlement Amount on the Expiry Date is greater than zero (without notice being given to the Warrant Holders). The Warrant Holders will not be required to deliver any exercise notice and the Issuer or its agent will pay to the Warrant Holders the Cash Settlement Amount (if any) in respect of each Board Lot in accordance with Condition 4(d) less any Exercise Expenses (which shall be deducted in accordance with the provisions of Condition 2(b)).

(c) Expiry. Any Warrant which has not been automatically exercised in accordance with Condition 3(b) shall expire immediately without value thereafter and all rights of the Warrant Holder and obligations of the Issuer with respect to such Warrant shall cease.

4. Exercise of Warrants

(a) Board Lots. Warrants may only be exercised in Board Lots or integral multiples thereof.

(b) No requirement to deliver an exercise notice. The Warrant Holder will not be required to deliver an exercise notice for any purpose in relation to the Warrants.

(c) Cancellation. The Issuer will procure that the Registrar or the Agent will, with effect from the first Business Day following the Expiry Date, remove from its register the name of the person in respect of the Warrants which (i) are the subject of an automatic exercise in accordance with these Conditions; or (ii) have expired worthless, and thereby cancel the relevant Warrants.

(d) Cash Settlement.

(i) Subject to an automatic exercise of Warrants in accordance with these Conditions, the Issuer will pay, in respect of every Board Lot of Warrants, to the relevant Warrant Holder an amount in the Settlement Currency equal to the Cash Settlement Amount less any Exercise Expenses as provided in Condition 2(b) above.

(ii) The Cash Settlement Amount less determined Exercise Expenses shall be despatched not later than three CCASS Settlement Days following the Expiry Date (the Settlement Date) by crediting that amount in accordance with the CCASS Rules, to the Designated Bank Account.

22 TERMS AND CONDITIONS

event, a Settlement Disruption Event), the Issuer shall use its reasonable endeavours to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the Warrant Holder as soon as reasonably practicable after the original Settlement Date. The Issuer will not be liable to the Warrant Holder for any interest in respect of the amount due or any loss or damage that such Warrant Holder may suffer as a result of the existence of the Settlement Disruption Event.

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on any Valuation Date, then that Valuation Date shall be postponed until the first succeeding Business Day on which there is no Market Disruption Event, irrespective of whether that postponed Valuation Date would fall on a Business Day that is already or is deemed to be a Valuation Date. For the avoidance of doubt, in the event that a Market Disruption Event has occured and a Valuation Date is postponed as aforesaid, the closing price of the Shares on the first succeeding Business Day will be used more than once in determining the Average Price, so that in no event shall there be less than five closing prices used to determine the Average Price.

If the postponement of a Valuation Date as aforesaid would result in the Valuation Date falling on or after the Expiry Date, then:

(A) the Business Day immediately preceding the Expiry Date (the Last Valuation Date) shall be deemed to be the relevant Valuation Date, notwithstanding the Market Disruption Event; and

(B) the Issuer shall determine the closing price of the Shares for such Valuation Date on the basis of its good faith estimate of the price that would have prevailed on the Last Valuation Date but for the Market Disruption Event.

5. Registrar and Transfer Office

(a) The initial Registrar and the Transfer Office for the Warrants are set out below. The Issuer reserves the right, subject to the appointment of a successor, at any time to vary or terminate the appointments of the Registrar under the Registrar’s Agreement provided that it will at all times maintain a Registrar. Notice of any such termination or appointment and of any change in the Transfer Office or the specified office of the Registrar will be given to the Warrant Holders in accordance with Condition 10.

(b) The Registrar will be acting as agent of the Issuer in respect of any Warrants and will not assume any obligation or duty to or any relationship of agency or trust for the Warrant Holders.

6. Adjustments

(a) Rights Issues. If and whenever the Company shall, by way of Rights (as defined below), offer new Shares for subscription at a fixed subscription price to the holders of existing Shares pro rata to existing holdings (a Rights Offer), the Entitlement will be adjusted to take effect on the Business Day on which trading in the Shares of the Company becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

Where: 1+M Adjustment Component = 1 + (R/S) x M

23 TERMS AND CONDITIONS

E : Existing Entitlement immediately prior to the Rights Offer

S : Cum-Rights Share price being the closing price of an existing Share as derived from the Daily Quotation Sheet of the Stock Exchange on the last Business Day on which the Shares are traded on a cum-Rights basis

R : Subscription price per new Share as specified in the Rights Offer plus an amount equal to any dividends or other benefits foregone to exercise the Right

M : Number of new Share(s) (whether a whole or a fraction) per existing Share that each holder thereof is entitled to subscribe for

Provided that if the adjustment to be made would result in the Entitlement being changed by one per cent. or less, then no adjustment will be made to the Entitlement. In addition, the Issuer shall adjust the Exercise Price in accordance with the following formula: 1 Adjusted Exercise Price = Exercise Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

For the purposes of these Conditions:

Rights means the right(s) attached to each existing Share or needed to acquire one new Share (as the case may be) which are given to the holders of existing Shares to subscribe at a fixed subscription price for new Shares pursuant to the Rights Offer (whether by the exercise of one Right, a part of a Right or an aggregate number of Rights).

(b) Bonus Issues. If and whenever the Company shall make an issue of Shares credited as fully paid to the holders of Shares generally by way of capitalisation of profits or reserves (other than pursuant to a scrip dividend or similar scheme for the time being operated by the Company or otherwise in lieu of a cash dividend and without any payment or other consideration being made or given by such holders) (a Bonus Issue) the Entitlement will be increased on the Business Day on which trading in the Shares of the Company becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

Where:

Adjustment Component = (1 + N)

E : Existing Entitlement immediately prior to the Bonus Issue

N : Number of additional Shares (whether a whole or a fraction) received by a holder of existing Shares for each Share held prior to the Bonus Issue

24 TERMS AND CONDITIONS

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

(c) Subdivision or Consolidations. If and whenever the Company shall subdivide its Shares or any class of its outstanding share capital comprised of the Shares into a greater number of shares (a Subdivision) or consolidate the Shares or any class of its outstanding share capital comprised of the Shares into a smaller number of shares (a Consolidation), the Entitlement in effect immediately prior thereto will be increased (in the case of a Subdivision) or decreased (in the case of a Consolidation) accordingly in each case on the day on which the relevant Subdivision or Consolidation shall have taken effect. In addition, the Exercise Price (which shall be rounded to the nearest Hong Kong dollar 0.001) will be decreased (in the case of a Subdivision) or increased (in the case of a Consolidation) accordingly.

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

(d) Restructuring Events. If it is announced that the Company is to or may merge or consolidate with or into any other corporation (including becoming, by agreement or otherwise, a subsidiary of any corporation or controlled by any person or corporation) (except where the Company is the surviving corporation in a merger) or that it is to or may sell or transfer all or substantially all of its assets, the rights attaching to the Warrants may in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner) be amended no later than the Business Day preceding the consummation of such merger, consolidation, sale or transfer (each a Restructuring Event) (as determined by the Issuer in its absolute discretion (acting in good faith and in a commercially reasonable manner)).

The rights attaching to the Warrants after the adjustment shall, after such Restructuring Event, relate to the number of shares of the corporation(s) resulting from or surviving such Restructuring Event or other securities (Substituted Securities) and/or cash offered in substitution for the affected Shares, as the case may be, to which the holder of such number of Shares to which the Warrants related immediately before such Restructuring Event would have been entitled upon such Restructuring Event. Thereafter the provisions hereof shall apply to such Substituted Securities, provided that any Substituted Securities may, in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner), be deemed to be replaced by an amount in the Settlement Currency equal to the market value or, if no market value is available, fair value, of such Substituted Securities in each case as determined by the Issuer as soon as practicable after such Restructuring Event is effected.

For the avoidance of doubt, any remaining Shares shall not be affected by this paragraph (d) and, where cash is offered in substitution for Shares or is deemed to replace Substituted Securities as described above, references in these Conditions to the Shares shall include any such cash.

25 TERMS AND CONDITIONS

special dividend or extraordinary dividend, no adjustment will be made unless the value of the Cash Distribution accounts for two per cent. or more of the Share’s closing price on the day of announcement by the Company.

If and whenever the Company shall make a Cash Distribution credited as fully paid to the holders of Shares generally, the Entitlement will be adjusted to take effect on the Business Day on which trading in the Shares of the Company becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

Where: X–B Adjustment Component = X–B–C provided that B shall be deducted from X only if the Business Day on which trading in the Shares of the Company becomes ex-entitlement with respect to the Cash Distribution and the distribution of the ordinary cash dividend by the Company falls on the same date.

B: Amount of the relevant ordinary cash dividend per Share

C: Amount of the relevant Cash Distribution per Share

E: Existing Entitlement immediately prior to the Cash Distribution

X: Cum-Cash Distribution Share price being the closing price of a Share on the Stock Exchange on the last Business Day on which the Shares of the Company are traded on a cum-Cash Distribution basis

In addition, the Issuer shall adjust the Exercise Price in accordance with the following formula: 1 Adjusted Exercise Price = Exercise Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

(f) Other Adjustments. Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the Warrants as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(i) not materially prejudicial to the interests of the Warrant Holders generally (without considering the circumstances of any individual Warrant Holder or the tax or other consequences of such adjustment in any particular jurisdiction); or

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

26 TERMS AND CONDITIONS

(g) Notice of Adjustments. All determinations made by the Issuer pursuant hereto will be conclusive and binding on the Warrant Holders. The Issuer will give, or procure that there is given, notice as soon as practicable of any adjustment and of the date from which such adjustment is effective by publication in accordance with Condition 10.

7. Purchases

The Issuer, the Guarantor and/or any of their affiliates may at any time purchase Warrants at any price in the open market or by tender or by private treaty. Any Warrants so purchased may be held or resold or surrendered for cancellation. Any resales by the Issuer, the Guarantor or the relevant affiliate (as the case may be) will be made to non-U.S. persons in offshore transactions in reliance upon Regulation S.

8. Global Certificate

The Warrants are represented by the Global Certificate registered in the name of HKSCC Nominees Limited and deposited with CCASS in accordance with the CCASS Rules. Warrant Holders will not be entitled to definitive certificates in respect of any Warrants issued or transferred to them.

9. Meetings of Warrant Holders and Modification

(a) Meetings of Warrant Holders. The Registrar’s Agreement contains provisions for convening meetings of the Warrant Holders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Registrar’s Agreement) of a modification of the provisions of the Warrants or of the Global Certificate.

Any resolution to be passed in a meeting of the Warrant Holders shall be decided by poll. Such a meeting may be convened by the Issuer or by Warrant Holders holding not less than 10 per cent. of the Warrants for the time being remaining unexercised. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 25 per cent. of the Warrants for the time being remaining unexercised, or at any adjourned meeting two or more persons being or representing Warrant Holders whatever the number of Warrants so held or represented.

A resolution will be an Extraordinary Resolution when it has been passed at a duly convened meeting by not less than three-quarters of the votes cast by such Warrant Holders who, being entitled to do so, vote in person or by proxy.

An Extraordinary Resolution passed at any meeting of the Warrant Holders shall be binding on all the Warrant Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the Warrant Holders being held if passed unanimously.

(b) Modification. The Issuer may, without the consent of the Warrant Holders, effect any modification of the terms and conditions of the Warrants or the Global Certificate which, in the opinion of the Issuer, is:

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

27 TERMS AND CONDITIONS

(iv) necessary in order to comply with mandatory provisions of the laws or regulations of Hong Kong (as defined below).

Any such modification shall be binding on the Warrant Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 10.

10. Notices

All notices to Warrant Holders will be validly given if published in English and in Chinese on the website of Hong Kong Exchanges and Clearing Limited. Such notices shall be deemed to have been given on the date of the first such publication. If publication is not practicable, notice will be given in such other manner as the Issuer may determine.

11. Liquidation

In the event of a liquidation or dissolution of the Company or the appointment of a liquidator, receiver or administrator or analogous person under Hong Kong law in respect of the whole or substantially the whole of its undertaking, property or assets, all unexercised Warrants will lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the effective date of the relevant resolution and, in the case of an involuntary liquidation or dissolution, on the date of the relevant court order or, in the case of the appointment of a liquidator or receiver or administrator or analogous person under any applicable law in respect of the whole or substantially the whole of its undertaking, property or assets, on the date when such appointment is effective but subject (in any such case) to any contrary mandatory requirement of law.

12. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the Warrant Holders, to create and issue further warrants so as to form a single series with the Warrants.

13. Delisting

(a) If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give effect to these Conditions in such manner and make such adjustments to the rights attaching to the Warrants as it shall, in its absolute discretion (acting in good faith and in a commercially reasonable manner), consider appropriate to ensure, so far as it is reasonably able to do so, that the interests of the Warrant Holders generally are not materially prejudiced as a consequence of such delisting (without considering the individual circumstances of any Warrant Holder or the tax or other consequences that may result in any particular jurisdiction).

(b) Without prejudice to the generality of Condition 13(a), where the Shares are, or, upon the delisting, become, listed on any other stock exchange, these Conditions may, in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner), be amended to the extent necessary to allow for the substitution of that other stock exchange in place of the Stock Exchange and the Issuer may, without the consent of the Warrant Holders, make such adjustments to the entitlements of Warrant Holders on exercise (including, if appropriate, by converting foreign currency amounts at prevailing market rates into Hong Kong currency) as may be appropriate in the circumstances.

(c) The Issuer shall determine, in its absolute discretion (acting in good faith and in a commercially reasonable manner), any adjustment or amendment and its determination shall be conclusive and binding on the Warrant Holders save in the case of manifest error. Notice of any adjustments or amendments shall be given to the Warrant Holders in accordance with Condition 10 as soon as practicable after they are determined.

28 TERMS AND CONDITIONS

14. Illegality or Impracticability

The Issuer is entitled to terminate the Warrants if it determines in good faith and in a commercially reasonable manner that, for reasons beyond its control, it has become or it will become illegal or impracticable:

(a) for it to perform its obligations under the Warrants, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or

(ii) the promulgation of, or any change in the interpretation by any court, tribunal, governmental, administrative, legislative, regulatory or judicial authority or power with competent jurisdiction of any relevant law or regulation (including, without limitation, any tax law),

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Warrants due to a Change in Law Event.

Upon the occurrence of a Change in Law Event, the Issuer will, if and to the extent permitted by applicable law or regulation, pay to each Warrant Holder a cash amount that the Issuer determines in good faith and in a commercially reasonable manner to be the fair market value in respect of each Warrant held by such Warrant Holder immediately prior to such termination (ignoring such illegality or impracticability) less the cost to the Issuer of unwinding any related hedging arrangement as determined by the Issuer in its sole and absolute discretion (acting in good faith and in a commercially reasonable manner). Payment will be made in such manner as shall be notified to the Warrant Holders in accordance with Condition 10.

15. Governing Law

The Warrants, the Global Certificate, the Guarantee and the Registrar’s Agreement will be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong). The Issuer, the Guarantor and each Warrant Holder (by its purchase of the Warrants) as applicable, shall be deemed to have submitted for all purposes in connection with the Warrants, the Global Certificate, the Guarantee and the Registrar’s Agreement to the non-exclusive jurisdiction of the courts of Hong Kong.

16. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

29 TERMS AND CONDITIONS

TERMS AND CONDITIONS OF THE INDEX WARRANTS (CASH SETTLED CALL WARRANTS AND CASH SETTLED PUT WARRANTS)

1. Form, Status, Transfer and Title

(a) Form. The Warrants (which expression shall, unless the context otherwise requires, include any further warrants issued pursuant to Condition 11) relating to the Index as published by the Index Compiler are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date, made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement)as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the Warrants made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the Warrants (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The Warrant Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

30 TERMS AND CONDITIONS

2. Warrant Rights and Exercise Expenses

(b) Exercise Expenses. Upon automatic exercise of the Warrants, each Warrant Holder is obliged to pay to the Issuer the relevant Exercise Expenses. In lieu of payment by the Warrant Holder, an amount equal to the Exercise Expenses shall be deducted by the Issuer from the applicable Cash Settlement Amount. If the Cash Settlement Amount is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Expiry Date shall be notified to the Warrant Holder as soon as practicable after determination thereof by the Registrar and shall be paid by the Warrant Holder immediately upon demand.

Capitalised terms used and not otherwise defined herein shall have the meaning given to them in the relevant Supplemental Listing Document.

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

Cash Settlement Amount means in respect of every Board Lot, an amount, converted (if applicable) into the Settlement Currency at the Exchange Rate, calculated by the Issuer in accordance with the following formula as equal to the greater of (a) zero; and (b) an amount equal to

(i) in the case of Call Warrants,

Cash Settlement (Closing Level – Strike Level) x one Board Lot x Index Currency Amount Amount per = Board Lot Divisor

(ii) in the case of Put Warrants,

Cash Settlement (Strike Level – Closing Level) x one Board Lot x Index Currency Amount Amount per = Board Lot Divisor

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Closing Level has the meaning specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

31 TERMS AND CONDITIONS

Designated Bank Account means the bank account of the Warrant Holder advised to the Issuer or the Registrar for the purposes of payment of the Cash Settlement Amount;

Divisor means the number specified in the relevant Supplemental Listing Document;

Exchange Rate means the rate specified in the relevant Supplemental Listing Document (if applicable);

Exercise Expenses means any charges or expenses including any taxes or duties which are incurred in respect of the exercise of the Warrants;

Expiry Date means the date specified as such in the relevant Supplemental Listing Document;

Index means the index specified as such in the relevant Supplemental Listing Document;

Index Compiler has the meaning given to it in the relevant Supplemental Listing Document;

Index Currency Amount has the meaning given to it in the relevant Supplemental Listing Document;

Market Disruption Event means:

(1) the occurrence or existence, on the Valuation Date during the one-half hour period that ends at the close of trading on the Relevant Exchange, of any of:

(i) the suspension or material limitation of the trading of a material number of constituent securities, that comprise the Index; or

(ii) the suspension or material limitation of the trading of options or futures contracts relating to the Index on any exchanges on which such contracts are traded; or

(iii) the imposition of any exchange controls in respect of any currencies involved in determining the Cash Settlement Amount.

For the purposes of paragraph (1), (A) the limitation of the number of hours or days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of any exchange, and (B) a limitation on trading imposed by reason of the movements in price exceeding the levels permitted by any relevant exchange will constitute a Market Disruption Event; or

(2) where the Relevant Exchange is the Stock Exchange, the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal on any day which either (a) results in the Stock Exchange being closed for trading for the entire day or (b) results in the Stock Exchange being closed prior to its regular time for close of trading for the relevant day (for the avoidance of doubt, in the case when the Stock Exchange is scheduled to open for the morning trading session only, closed prior to its regular time for close of trading for the morning session), PROVIDED THAT there shall be no Market Disruption Event solely by reason of the Stock Exchange opening for trading later than its regular time for opening of trading on any day as a result of the tropical cyclone warning signal number 8 or above or the “BLACK” rainstorm signal having been issued; or

(3) a limitation or closure of the Relevant Exchange due to any unforeseen circumstances; or

32 TERMS AND CONDITIONS

(4) any circumstances beyond the control of the Issuer as a result of which the Closing Level or the Exchange Rate (as the case may be) cannot be determined by the Issuer in the manner set out in these Conditions or in such other manner as the Issuer considers appropriate at such time after taking into account all the relevant circumstances;

Reference Currency means the currency specified in the relevant Supplemental Listing Document.

Relevant Exchange means the exchange specified as such in the relevant Supplemental Listing Document;

Relevant Futures Exchange means Hong Kong Futures Exchange Limited (or its successor or assign), or as otherwise specified in the relevant Supplemental Listing Document;

Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Strike Level has the meaning specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

Stock Exchange means The Stock Exchange of Hong Kong Limited; and

Valuation Date means the date specified as such in the relevant Supplemental Listing Document.

3. Exercise of Warrants, Automatic Exercise and Expiry

(a) Exercise of Warrants. The Warrants may be exercised only on the Expiry Date.

4. Exercise of Warrants

(a) Board lots. Warrants may only be exercised in Board Lots or integral multiples thereof.

(b) No requirement to deliver an exercise notice. The Warrant Holder will not be required to deliver an exercise notice for any purpose in relation to the Warrants.

(c) Cancellation. The Issuer will procure that the Registrar will, with effect from the first Business Day following the Expiry Date, remove from its register the name of the person in respect of the Warrants which (i) are the subject of an automatic exercise in accordance with these Conditions; or (ii) have expired worthless, and thereby cancel the relevant Warrants.

(d) Cash Settlement.

33 TERMS AND CONDITIONS

(ii) The Cash Settlement Amount less determined Exercise Expenses shall be despatched not later than three CCASS Settlement Days following the Valuation Date (the Settlement Date) by crediting that amount in accordance with the CCASS Rules, to the Designated Bank Account.

(iii) If as a result of an event beyond the control of the Issuer, it is not possible for the Issuer to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the Warrant Holder on the original Settlement Date (such event, a Settlement Disruption Event), the Issuer shall use its reasonable endeavours to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the Warrant Holder as soon as reasonably practicable after the original Settlement Date. The Issuer will not be liable to the Warrant Holder for any interest in respect of the amount due or any loss or damage that such Warrant Holder may suffer as a result of the existence of the Settlement Disruption Event.

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that on the Valuation Date a Market Disruption Event has occurred, then the Issuer shall determine the Closing Level or, if applicable, the Exchange Rate on the basis of its good faith estimate of the Closing Level or, if applicable, the Exchange Rate that would have prevailed on that day but for the occurrence of the Market Disruption Event provided that in the case of determining the Closing Level, the Issuer, if applicable, may, but shall not be obliged to, determine such Closing Level by having regard to the manner in which futures contracts relating to the Index are calculated.

5. Registrar and Transfer Office

(b) Both the Registrar and the Agent will be acting as agents of the Issuer in respect of any Warrants and will not assume any obligation or duty to or any relationship of agency or trust for the Warrant Holders.

6. Adjustments to the Index

(a) Successor Index Compiler Calculates and Reports Index. If the Index is (i) not calculated and announced by the Index Compiler but is calculated and published by a successor to the Index Compiler (the Successor Index Compiler) acceptable to the Issuer or (ii) replaced by a successor index using, in the determination of the Issuer, the same or a substantially similar formula for and method of calculation as used in the calculation of the Index, then the Index will be deemed to be the index so calculated and announced by the Successor Index Compiler or that successor index, as the case may be.

(b) Modification and Cessation of Calculation of Index. If:

34 TERMS AND CONDITIONS

(i) on or prior to a Valuation Date the Index Compiler or (if applicable) the Successor Index Compiler makes a material change in the formula for or the method of calculating the Index or in any other way materially modifies the Index (other than a modification prescribed in that formula or method to maintain the Index in the event of changes in constituent stock, contracts or commodities and other routine events); or

(ii) on a Valuation Date the Index Compiler or (if applicable) the Successor Index Compiler fails to calculate and publish the Index (other than as a result of a Market Disruption Event),

then the Issuer shall determine the Closing Level using, in lieu of a published level for the Index, the level for the Index as at that Valuation Date as determined by the Issuer in accordance with the formula for and method of calculating the Index last in effect prior to that change or failure, but using only those constituent securities, contracts, commodities or currencies that comprised the Index immediately prior to that change or failure.

(c) Foreign Currency Controls. If exchange control or other laws, regulations, directives or guidelines are imposed by any central banking authority or other governmental or regulatory body which (i) requires the Issuer to obtain permission from such authority or body to purchase the Settlement Currency; (ii) otherwise restricts the Issuer’s ability to obtain the Settlement Currency; or (iii) otherwise adversely regulates the purchase or holding of the Settlement Currency such that additional costs are imposed in obtaining the Settlement Currency which would not be imposed in the absence of such laws, regulations, directives or guidelines, or if the cost of obtaining the Settlement Currency at the Exchange Rate is determined by the Issuer to be excessive because of a disruption in the foreign exchange market relating to the Settlement Currency, then, upon notice from the Issuer to Warrant Holders in accordance with Condition 10 to such effect, Warrant Holders who have exercised their Warrants in accordance with Condition 4 shall receive, at the option of the Issuer, in lieu of the Settlement Currency, an amount equal to the Cash Settlement Amount in any other currency as determined by the Issuer.

(d) Other Adjustments. Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the Warrants as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

(e) Notice of Adjustments. All determinations made by the Issuer pursuant hereto will be conclusive and binding on the Warrant Holders. The Issuer will give, or procure that there is given, notice as soon as practicable of any determinations by publication in accordance with Condition 10.

35 TERMS AND CONDITIONS

7. Purchases

8. Global Certificate

9. Meetings of Warrant Holders and Modification

An Extraordinary Resolution passed at any meeting of the Warrant Holders shall be binding on all the Warrant Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the Warrant Holders being held if passed unanimously.

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

(iv) necessary in order to comply with mandatory provisions of the laws or regulations of Hong Kong (as defined below).

36 TERMS AND CONDITIONS

Any such modification shall be binding on the Warrant Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 10.

10. Notices

11. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the Warrant Holders, to create and issue further warrants so as to form a single series with the Warrants.

12. Illegality or Impracticability

(a) for it to perform its obligations under the Warrants, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Warrants due to a Change in Law Event.

13. Governing Law

37 TERMS AND CONDITIONS

14. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

38 TERMS AND CONDITIONS

TERMS AND CONDITIONS OF COMMODITY WARRANTS (CASH SETTLED CALL WARRANTS AND CASH SETTLED PUT WARRANTS)

1. Form, Status, Transfer, Title and Additional Costs and Expenses

(a) Form. The Warrants (which expression shall, unless the context otherwise requires, include any further warrants issued pursuant to Condition 12) relating to the Commodity are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the Warrants made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the Warrants (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The Warrant Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

(b) Status. The Warrants represents general unsecured contractual obligations of the Issuer and of no other person and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations of the Issuer. The obligations of the Guarantor under the Guarantee represent general, unsecured, contractual obligations of the Guarantor and of no other person and rank pari passu (save for certain obligations required to be preferred by law) with all other unsecured and unsubordinated obligations of the Guarantor.

39 TERMS AND CONDITIONS

(e) Warrant Holders shall note that they shall be responsible for additional costs and expenses in connection with any exercise of the Warrants including the Exercise Expenses (as defined below) which amount shall, subject to Condition 2(b) and to the extent necessary, be payable to the Issuer and collected from the Warrant Holders.

(f) Type of Warrant. The applicable Supplemental Listing Document will specify whether the Warrant is a call warrant (a Call Warrant) or a put warrant (a Put Warrant). The Warrants are European style warrants.

2. Warrant Rights, Exercise Price and Exercise Expenses

(a) Warrant Rights. Every Board Lot initially entitles the Warrant Holder, upon due exercise and upon compliance with Condition 4, the right to receive payment of the Cash Settlement Amount (as defined below), if any, less any determined Exercise Expenses as provided in Condition 2(b) below.

(b) Exercise Expenses. Upon automatic exercise of the Warrants, each Warrant Holder is obliged to pay to the Issuer the relevant Exercise Expenses. In lieu of payment by the Warrant Holder, an amount equal to the Exercise Expenses shall be deducted by the Issuer from the Cash Settlement Amount. If the Cash Settlement Amount is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Expiry Date shall be notified to the Warrant Holder as soon as practicable after determination thereof by the Registrar and shall be paid by the Warrant Holder immediately upon demand.

Capitalised terms used in the relevant Conditions and not otherwise defined therein shall have the meaning given to them in the relevant Supplemental Listing Document.

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

Cash Settlement Amount means in respect of each Board Lot an amount payable in the Settlement Currency calculated by the Issuer in accordance with the following formula as equal to the greater of (a) zero; and (b) an amount equal to:

(i) In the case of Call Warrants:

Cash Settlement Entitlement x (Closing Price – Exercise Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

(ii) In the case of Put Warrants:

Cash Settlement Entitlement x (Exercise Price – Closing Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

40 TERMS AND CONDITIONS

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Closing Price has the meaning given to it in the relevant Supplemental Listing Document;

Commodity means the commodity specified as such in the relevant Supplemental Listing Document;

Designated Bank Account means the bank account of the Warrant Holder advised to the Issuer or the Registrar for the purposes of payment of the Cash Settlement Amount;

Entitlement means the number specified as such in the relevant Supplemental Listing Document, (subject to any adjustment in accordance with Condition 6);

Exchange Rate means the rate specified as such in the relevant Supplemental Listing Document, (subject to any adjustment in accordance with Condition 6);

Exercise Expenses means any charges or expenses including any taxes or duties which are incurred in respect of the exercise of the Warrants;

Exercise Price means the price specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

Expiry Date means the date specified as such in the relevant Supplemental Listing Document or, if such date is not a Business Day, the immediately following Business Day;

Market Disruption Event means any of the following:

(1) the occurrence or existence on a Valuation Date of any suspension of or material limitation imposed on trading (by reason of movements in price exceeding limits permitted by the Stock Exchange or any Related Exchange or otherwise) on the Stock Exchange or any Related Exchange in the Commodity or any warrants, options or futures contracts relating to the Commodity if, in any such case, such suspension or limitation is, in the determination of the Issuer, material; or

(2) a limitation or closure of any Related Exchange or the Stock Exchange due to any other unforeseen circumstances; or

(3) the disappearance of, or disappearance of trading in, the Commodity; or

(4) a Price Source Disruption Event; or

(5) any circumstances beyond the control of the Issuer in which the Closing Price or the Exchange Rate cannot be determined by the Issuer in the manner set out in these Conditions or in such other manner as the Issuer considers appropriate at such time after taking into account all the relevant circumstances;

Price Source means the publication or such other origin of price source reference (if any) specified as such in the relevant Supplemental Listing Document;

41 TERMS AND CONDITIONS

Price Source Disruption Event means:

(a) the failure of the Price Source to announce or publish any relevant level, value or price in relation to the Commodity (or the information necessary for determining the Closing Price); or

(b) the temporary or permanent discontinuance or unavailability of the Price Source;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

Related Exchange means any exchange or quotation system in a major international market (including but not limited to New York, Chicago, London, Australia and Frankfurt) on which options contracts or futures contracts or other derivatives contracts relating to the Commodity are traded, as determined by the Issuer;

Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Stock Exchange means The Stock Exchange of Hong Kong Limited; and

Valuation Date means the date specified as such in the relevant Supplemental Listing Document.

3. Exercise of Warrants, Automatic Exercise and Expiry

(a) Exercise of Warrants. The Warrants may be exercised only on the Expiry Date.

4. Exercise of Warrants

(a) Board Lots. Warrants may only be exercised in Board Lots or integral multiples thereof.

(b) No requirement to deliver an exercise notice. The Warrant Holder will not be required to deliver an exercise notice for any purpose in relation to the Warrants.

42 TERMS AND CONDITIONS

(d) Cash Settlement.

(ii) The Cash Settlement Amount less determined Exercise Expenses shall be despatched no later than three CCASS Settlement Days following the Valuation Date (the Settlement Date) by crediting that amount in accordance with the CCASS Rules, to the Designated Bank Account.

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on a Valuation Date, then the Issuer shall determine the closing price of the Commodity for the Valuation Date on the basis of its good faith estimate of the closing price that would have prevailed on that day but for the occurrence of the Market Disruption Event.

5. Registrar and Transfer Office

(a) The initial Registrar and the Transfer Office for the Warrants are set out below. The Issuer reserves the right, subject to the appointment of a successor, at any time to vary or terminate the appointment of the Registrar under the Registrar’s Agreement provided that it will at all times maintain a Registrar. Notice of any such termination or appointment and of any change in the Transfer Office or the specified office of the Registrar will be given to the Warrant Holders in accordance with Condition 10.

(b) The Registrar and Agent will be acting as agent of the Issuer in respect of any Warrants and will not assume any obligation or duty to or any relationship or agency or trust for the Warrant Holder.

6. Adjustments

(a) Market Disruption Events. Without limiting Condition 4(d), if a Market Disruption Event occurs, the Issuer has the right to adjust the Price Source, the Entitlement, the Exercise Price, the Exchange Rate and/or any other relevant variables accordingly. Such adjustments shall be determined by the Issuer in its sole discretion acting in good faith and in a commercially reasonable manner, and shall not be (in the opinion of the Issuer) materially prejudicial to the interests of the Warrant Holders generally (without considering the circumstances of any individual Warrant Holder or the tax or other consequences of such modification in any particular jurisdiction). The Issuer shall as soon as reasonably practicable under the circumstances notify the Warrant Holders in accordance with Condition 10 if it determines that a Market Disruption Event has occurred.

43 TERMS AND CONDITIONS

(b) Foreign Currency Controls. If exchange controls or other laws, regulations, directives or guidelines are imposed by any central banking authority or other governmental or regulatory body which (i) require the Issuer to obtain permission from such authority or body to purchase the Settlement Currency; (ii) otherwise restrict the Issuer’s ability to obtain the Settlement Currency; or (iii) otherwise adversely regulate the purchase or holding of the Settlement Currency such that additional costs are imposed in obtaining the Settlement Currency which would not be imposed in the absence of such laws, regulations, directives or guidelines, or if the cost of obtaining the Settlement Currency at the Exchange Rate is determined by the Issuer to be excessive because of a disruption in the foreign exchange market relating to the Settlement Currency, then, upon notice from the Issuer to Warrant Holders in accordance with Condition 10 to such effect, Warrant Holders who have exercised their Warrants in accordance with Condition 4 shall receive, at the option of the Issuer, in lieu of the Settlement Currency, an amount in the Settlement Currency equal to the Cash Settlement Amount in any other currency as determined by the Issuer converted, if applicable, into such currency at an exchange rate determined by the Issuer.

(c) Other Adjustments. Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the Warrants as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

(d) Notice of Adjustments. All determinations made by the Issuer pursuant hereto will be conclusive and binding on the Warrant Holder. The Issuer will give, or procure that there is given, notice as soon as practicable of any adjustment and of the date from which such adjustment is effective by publication in accordance with Condition 10.

7. Purchase

8. Global Certificate

9. Meetings of Warrant Holders and Modification

44 TERMS AND CONDITIONS

An Extraordinary Resolution passed at any meeting of the Warrant Holders shall be binding on all the Warrant Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the Warrant Holders being held if passed unanimously.

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

(iv) necessary in order to comply with mandatory provisions of the laws or regulations of Hong Kong (as defined below).

Any such modification shall be binding on the Warrant Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 10.

10. Notices

11. Liquidation

In the event of a liquidation or dissolution of the Issuer or the appointment of a liquidator, receiver or administrator or analogous person under Hong Kong law in respect of the whole or substantially the whole of its undertaking, property or assets, all unexercised Warrants will lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the effective date of the relevant resolution and, in the case of an involuntary liquidation or dissolution, on the date of the relevant court order or, in the case of the appointment of a liquidator or receiver or administrator or analogous person under any applicable law in respect of the whole or substantially the whole of its undertaking, property or assets, on the date when such appointment is effective but subject (in any such case) to any contrary mandatory requirement of law.

45 TERMS AND CONDITIONS

12. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the Warrant Holder, to create and issue further warrants so as to form a single series with the Warrants.

13. Illegality or Impracticability

(a) for it to perform its obligations under the Warrants, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Warrants due to a Change in Law Event.

14. Governing Law

15. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

46 TERMS AND CONDITIONS

TERMS AND CONDITIONS OF THE CURRENCY WARRANTS (CASH SETTLED CALL WARRANTS AND CASH SETTLED PUT WARRANTS)

1. Form, Status, Transfer and Title

(a) Form. The Warrants (which expression shall, unless the context otherwise requires, include any further warrants issued pursuant to Condition 12) are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the Warrants made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the Warrants (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The Warrant Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

47 TERMS AND CONDITIONS

2. Warrant Rights and Exercise Expenses

(a) Warrant Rights. Every Board Lot entitles each Warrant Holder, upon due exercise and compliance with Condition 4, the right as the case may be, the right to receive the payment of the Cash Settlement Amount (as defined below) if any, less any determined Exercise Expenses as provided in Condition 2(b) below.

(b) Exercise Expenses. Upon automatic exercise of the Cash Settled Warrants, each Warrant Holder is obliged to pay to the Issuer the relevant Exercise Expenses. In lieu of payment by the Warrant Holder, an amount equal to the relevant Exercise Expenses shall be deducted from the applicable Cash Settlement Amount as provided below. If the Cash Settlement Amount is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Expiry Date shall be notified to the Warrant Holder as soon as practicable after determination thereof by the Registrar and shall be paid by the Warrant Holder immediately upon demand.

Capitalised terms used in the relevant Conditions and not otherwise defined therein shall have the meaning given to them in the relevant Supplemental Listing Document.

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business and for carrying on foreign exchange transactions in Hong Kong;

Currency Business Day has the meaning specified in the relevant Supplemental Listing Document;

Cash Settlement Amount means in respect of each Board Lot an amount, converted (if applicable) (i) into the Settlement Currency at the Exchange Rate or, as the case may be, (ii) into the Interim Currency at the First Exchange Rate and then converted into the Settlement Currency at the Second Exchange Rate, calculated by the Issuer in accordance with the following formula as equal to the greater of (a) zero; and (b) an amount equal to:

(i) In the case of Call Warrants:

Cash Settlement Entitlement x (Reference Rate – Strike Rate) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

(ii) In the case of Put Warrants:

Cash Settlement Entitlement x (Strike Rate – Reference Rate) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

48 TERMS AND CONDITIONS

Designated Bank Account means the bank account of the Warrant Holder advised to the Issuer or the Registrar for the purposes of payment of the Cash Settlement Amount;

Entitlement means the number specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6);

Exchange Rate means the rate specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6);

Exercise Expenses means any charges or expenses including any taxes or duties which are incurred in respect of the exercise of the Warrants;

Exercise Price means the price specified in the relevant Supplemental Listing Document.

Expiry Date means the date specified in the relevant Supplemental Listing Document or, if such date is not a Business Day the immediately following Business Day;

First Exchange Rate means the rate specified in the relevant Supplemental Listing Document (if applicable);

Interim Currency means the currency specified in the relevant Supplemental Listing Document (if applicable);

Market Disruption Event means the occurrence or existence, on the Valuation Date of any event, of a circumstance or cause which would result in:

(1) the occurrence or existence on a Valuation Date of any suspension of or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the Stock Exchange or any Related Exchange or otherwise) on the Stock Exchange or any Related Exchange in any securities, options or futures contracts relating to the Currency if, in any such case, such suspension or limitation is, in the determination of the Issuer, material; or

(2) a limitation or closure of any Related Exchange or the Stock Exchange due to any unforeseen circumstances; or

(3) the Issuer being unable to determine the Reference Rate or the Exchange Rate in the manner set out in the relevant Supplemental Listing Document or in such other manner as the Issuer may believe appropriate at such time after taking into account all the relevant circumstances; or

(4) the Settlement Currency not being freely available to the Issuer for any reason, provided that if the Settlement Currency is not freely available the Issuer may express and pay the Cash Settlement Amount in any currency which is freely available and convertible on the international foreign exchange market;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

Reference Rate has the meaning given to it in the relevant Supplemental Listing Document;

Second Exchange Rate means the rate specified in the relevant Supplemental Listing Document (if applicable);

49 TERMS AND CONDITIONS

Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Stock Exchange means The Stock Exchange of Hong Kong Limited;

Strike Rate means the price specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6; and

Valuation Date has the meaning specified in the relevant Supplemental Listing Document.

3. Exercise of Warrants, Automatic Exercise and Expiry

(a) Exercise of Warrants. The Warrants may be exercised only on the Expiry Date.

4. Exercise of Warrants

(a) Board Lots. Warrants may only be exercised in a Board Lot or integral multiples thereof.

(b) No requirement to deliver an exercise note. The Warrant Holder will not be required to deliver an exercise notice for any purpose in relation to the Warrants.

(d) Cash Settlement.

(ii) The Cash Settlement Amount less determined Exercise Expenses shall be despatched not later than three CCASS Settlement Days following the Expiry Date (Settlement Date) by crediting that amount in accordance with the CCASS Rules, to the Designated Bank Account.

50 TERMS AND CONDITIONS

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on the Valuation Date, then the Issuer shall determine the Reference Rate or the Exchange Rate on the basis of its good faith estimate of the Reference Rate or the Exchange Rate, as the case may be, that would have prevailed on that day but for the occurrence of the Market Disruption Event.

5. Registrar and Transfer Office

(a) The initial Registrar and the Transfer Office for the Warrants are set out below. The Issuer reserves the right, subject to the appointment of a successor, at any time to vary or terminate the appointment of the Registrar under the Registrar’s Agreement provided that it will at all times maintain a Registrar. Notice of any such termination or appointment and of any change in the Transfer Office or the specified office of the Registrar will be given to the Warrant Holders in accordance with Condition 10.

(b) The Registrar and the Agent will be acting as agent of the Issuer in respect of any Warrants and will not assume any obligation or duty to or any relationship of agency or trust for the Warrant Holders.

6. Adjustments

(a) Market Disruption Events. Without limiting Condition 4(e), if a Market Disruption Event occurs, the Issuer has the right to adjust the Entitlement, the Strike Rate, the Exchange Rate and/or any other relevant variables accordingly. Such adjustments shall be determined by the Issuer in its sole discretion acting in good faith and in a commercially reasonable manner, and shall not be (in the opinion of the Issuer) materially prejudicial to the interests of the Warrant Holders generally (without considering the circumstances of any individual Warrant Holder or the tax or other consequences of such modification in any particular jurisdiction). The Issuer shall as soon as reasonably practicable under the circumstances notify the Warrant Holder in accordance with Condition 10 if it determines that a Market Disruption Event has occurred.

(b) Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the Warrants as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

(c) Notice of Adjustments. All determinations made by the Issuer pursuant hereto will be conclusive and binding on the Warrant Holders. The Issuer will give, or procure that there is given, notice as soon as practicable of any adjustment and of the date from which such adjustment is effective by publication in accordance with Condition 10.

7. Purchases

51 TERMS AND CONDITIONS

8. Global Certificate

9. Meetings of Warrant Holders and Modification

(a) Meetings of Warrant Holders. The Registrar’s Agreement contains provisions for the convening of meetings of the Warrant Holders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Registrar’s Agreement) of a modification of the provisions of the Warrants or of the Global Certificate.

An Extraordinary Resolution passed at any meeting of the Warrant Holders shall be binding on all the Warrant Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the Warrant Holders being held if passed unanimously.

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

(iv) necessary in order to comply with mandatory provisions of the laws of Hong Kong (as defined below).

Any such modification shall be binding on the Warrant Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 10.

10. Notices

52 TERMS AND CONDITIONS

11. Liquidation

12. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the Warrant Holders, to create and issue further warrants so as to form a single series with the Warrants.

13. Foreign Currency Controls

If exchange control or other laws, regulations, directives or guidelines imposed by the central banking authority or other governmental or regulatory body (a) require the Issuer to obtain permission from such authority or regulatory body to purchase the Settlement Currency, (b) otherwise restrict the Issuer’s ability to obtain the Settlement Currency or (c) otherwise adversely regulates the purchase or holding of the Settlement Currency such that additional costs are imposed in obtaining the Settlement Currency which would not be imposed in the absence of such laws, regulations, directives or guidelines or if the cost of obtaining the Settlement Currency is determined by the Issuer to be excessive because of a disruption in the foreign exchange market relevant to the Settlement Currency, then, upon notice from the Issuer to Warrant Holders in accordance with Condition 10 to such effect, Warrant Holders who have exercised their Warrants in accordance with Condition 3(a) (or who are deemed to have exercised their Warrants in accordance with Condition 3(b)) shall receive, at the option of the Issuer, in lieu of the Settlement Currency, an amount in the Settlement Currency equal to the Cash Settlement Amount in any currency which is freely available and convertible on the international foreign exchange market.

14. Illegality or Impracticability

(a) for it to perform its obligations under the Warrants, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Warrants due to a Change in Law Event.

53 TERMS AND CONDITIONS

15. Governing Law

16. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

54 TERMS AND CONDITIONS

TERMS AND CONDITIONS OF THE UNIT FUND WARRANTS (CASH SETTLED CALL WARRANTS AND CASH SETTLED PUT WARRANTS)

1. Form, Status, Transfer and Title

(a) Form. The Warrants (which expression shall, unless the context otherwise requires, include any further warrants issued pursuant to Condition 12) relating to the Units of the Fund are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date, made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the Warrants made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the Warrants (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The Warrant Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice, of all the provisions of the Global Certificate and the Registrar’s Agreement.

55 TERMS AND CONDITIONS

2. Warrant Rights and Exercise Expenses

(b) Exercise Expenses. Upon automatic exercise of the Warrants, each Warrant Holder is obliged to pay to the Issuer the relevant Exercise Expenses. In lieu of payment by the Warrant Holder, an amount equal to Exercise Expenses shall be deducted by the Issuer from the applicable Cash Settlement Amount. If the Cash Settlement Amount is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Exercise Date or Expiry Date shall be notified to the Warrant Holder as soon as practicable after determination thereof by the Registrar and shall be paid by the Warrant Holder immediately upon demand.

Capitalised terms used and not otherwise defined herein shall have the meaning given to them in the relevant Supplemental Listing Document.

Average Price shall be the arithmetic mean of the closing price of one Unit (as derived from the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments as may be determined by the Issuer in accordance with these Conditions to such closing price as may be necessary to reflect any capitalisation, rights issue, distribution or the like) in respect of each Valuation Date;

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

(i) in the case of a Call Warrant:

Cash Settlement Entitlement x (Average Price – Exercise Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

(ii) in the case of a Put Warrant:

Cash Settlement Entitlement x (Exercise Price – Average Price) x one Board Lot Amount per = Board Lot Number of Warrants per Entitlement

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited (HKSCC);

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

56 TERMS AND CONDITIONS

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Designated Bank Account means the bank account of the Warrant Holder advised to the Issuer or the Registrar for the purposes of payment of the Cash Settlement Amount;

Entitlement means the number specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

Exchange Rate means the rate specified in the relevant Supplemental Listing Document (subject to any adjustment in accordance with Condition 6);

Exercise Expenses means, any charges or expenses including any taxes or duties which are incurred in respect of the exercise of the Warrants;

Exercise Price means the amount specified in the relevant Supplemental Listing Document (subject to any adjustment as provided in Condition 6);

Expiry Date means the date specified as such in the relevant Supplemental Listing Document or, if such date is not a Business Day, the immediately succeeding Business Day;

Fund means the fund specified as such in the relevant Supplemental Listing Document;

Market Disruption Event means:

(1) the occurrence or existence on any Valuation Date during the one-half hour period that ends at the close of trading of any suspension of or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the Stock Exchange or otherwise) on the Stock Exchange in (a) the Units; or (b) any securities, options or futures contracts relating to the Units if, in any such case, such suspension or limitation is, in the determination of the Issuer, material; or

(3) a limitation or closure of the Stock Exchange due to any other unforeseen circumstances.

Nominee means HKSCC Nominees Limited, or such other person, firm or company for the time being appointed by HKSCC as a nominee;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Stock Exchange means The Stock Exchange of Hong Kong Limited;

57 TERMS AND CONDITIONS

Units means the units of the Fund specified as such in the relevant Supplemental Listing Document; and

Valuation Date means, subject as provided in Condition 4(d) below in relation to a Market Disruption Event, each of the five Business Days immediately preceding the Expiry Date.

3. Exercise of Warrants, Automatic Exercise and Expiry

(a) Exercise of Warrants. The Warrants may be exercised only on the Expiry Date.

4. Exercise of Warrants

(a) Board Lots. Warrants may only be exercised in Board Lots or integral multiples thereof.

(b) No requirement to deliver an exercise notice. The Warrant Holder will not be required to deliver an exercise notice for any purpose in relation to the Warrants.

(d) Cash Settlement.

58 TERMS AND CONDITIONS

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on any Valuation Date, then that Valuation Date shall be postponed until the first succeeding Business Day on which there is no Market Disruption Event, irrespective of whether that postponed Valuation Date would fall on a Business Day that is already or is deemed to be a Valuation Date. For the avoidance of doubt, in the event that a Market Disruption Event has occured and a Valuation Date is postponed as aforesaid, the closing price of the Units on the first succeeding Business Day will be used more than once in determining the Average Price, so that in no event shall there be less than five closing prices used to determine the Average Price.

If the postponement of a Valuation Date as aforesaid would result in the Valuation Date falling on or after the Expiry Date, then:

(A) the Business Day immediately preceding the Expiry Date (the Last Valuation Date) shall be deemed to be the relevant Valuation Date, notwithstanding the Market Disruption Event; and

(B) the Issuer shall determine the closing price of the Units for such Valuation Date on the basis of its good faith estimate of the price that would have prevailed on the Last Valuation Date but for the Market Disruption Event.

5. Registrar and Transfer Office

(a) The initial Registrar and the Transfer Office for the Warrants are set out below. The Issuer reserves the right, subject to the appointment of a successor, at any time to vary or terminate the appointment of the Registrar under the Registrar’s Agreement provided that it will at all times maintain a Registrar. Notice of any such termination or appointment and of any change in the Transfer Office or the specified office of the Registrar will be given to the Warrant Holders in accordance with Condition 10.

(b) The Registrar will be acting as agent of the Issuer in respect of any Warrants and will not assume any obligation or duty to or any relationship of agency or trust for the Warrant Holders.

6. Adjustments

(a) Rights Issues. If and whenever the Fund shall, by way of Rights (as defined below), offer new Units for subscription at a fixed subscription price to the holders of existing Units pro rata to existing holdings (a Rights Offer), the Entitlement will be adjusted to take effect on the Business Day on which trading in the Units of the Fund becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

Where: 1+M Adjustment Component = 1 + (R/S) x M E : Existing Entitlement immediately prior to the Rights Offer

S : Cum-Rights Unit price being the closing price on the Stock Exchange on the last Business Day on which the Units are traded on a cum-Rights basis

59 TERMS AND CONDITIONS

R : Subscription price per new Unit as specified in the Rights Offer plus an amount equal to any dividends, distributions or other benefits foregone to exercise the Right

M : Number of new Unit(s) (whether a whole or a fraction) per existing Unit each holder thereof is entitled to subscribe for

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

For the purposes of these Conditions:

Rights means the right(s) attached to each existing Unit or needed to acquire one new Unit (as the case may be) which are given to the holders of existing Units to subscribe at a fixed subscription price for new Units pursuant to the Rights Offer (whether by the exercise of one Right, a part of a Right or an aggregate number of Rights).

(b) Bonus Issues. If and whenever the Fund shall make an issue of Units credited as fully paid to the holders of Units generally (other than pursuant to a scrip dividend or distribution or similar scheme for the time being operated by the Fund or otherwise in lieu of a cash dividend or distribution and without any payment or other consideration being made or given by such holders) (a Bonus Issue) the Entitlement will be increased on the Business Day on which trading in the Units of the Fund becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

Where:

Adjustment Component = (1 + N)

E : Existing Entitlement immediately prior to the Bonus Issue

N : Number of additional Units (whether a whole or a fraction) received by a holder of existing Units for each Unit held prior to the Bonus Issue

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

60 TERMS AND CONDITIONS

(c) Subdivisions or Consolidations. If and whenever the Fund shall subdivide its Units or any class of its outstanding units into a greater number of units (a Subdivision) or consolidate the Units or any class of its outstanding units into a smaller number of units (a Consolidation), the Entitlement in effect immediately prior thereto will be increased (in the case of a Subdivision) or decreased (in the case of a Consolidation) accordingly in each case on the day on which the relevant Subdivision or Consolidation shall have taken effect. In addition, the Exercise Price (which shall be rounded to the nearest Hong Kong dollar 0.001) will be decreased (in the case of a Subdivision) or increased (in the case of a Consolidation) accordingly.

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

(d) Restructuring Events. If it is announced that the Fund is to or may merge or consolidate with or into any other fund or corporation (including becoming, by agreement or otherwise a subsidiary of any corporation or, controlled by any person or corporation) (except where the Fund is the surviving entity in a merger) or that it is to or may sell or transfer all or substantially all of its assets, the rights attaching to the Warrants may in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner) be amended no later than the Business Day preceding the consummation of such merger, consolidation, sale or transfer (each a Restructuring Event) (as determined by the Issuer in its absolute discretion (acting in good faith and in a commercially reasonable manner)).

The rights attaching to the Warrants after the adjustment shall, after such Restructuring Event, relate to the number of units of the fund(s) resulting from or surviving such Restructuring Event or other securities (Substituted Securities) and/or cash offered in substitution for the affected Units, as the case may be, to which the holder of such number of Units to which the Warrants related immediately before such Restructuring Event would have been entitled upon such Restructuring Event. Thereafter the provisions hereof shall apply to such Substituted Securities, provided that any Substituted Securities may, in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner), be deemed to be replaced by an amount in the Settlement Currency equal to the market value or, if no market value is available, fair value, of such Substituted Securities in each case as determined by the Issuer as soon as practicable after such Restructuring Event is effected.

For the avoidance of doubt, any remaining Units shall not be affected by this paragraph (d) and, where cash is offered in substitution for Units or is deemed to replace Substituted Securities as described above, references in these Conditions to the Units shall include any such cash.

(e) Cash Distributions. Generally, no adjustment will be made for an ordinary cash dividend (whether or not it is offered with a script alternative). For any other forms of cash distribution (each a Cash Distribution) announced by the Fund, such as a cash bonus, special dividend or extraordinary dividend, no adjustment will be made unless the value of the Cash Distribution accounts for two per cent. or more of the Unit’s closing price on the day of announcement by the Fund.

If and whenever the Fund shall make a Cash Distribution credited as fully paid to the holders of Units generally, the Entitlement will be adjusted to take effect on the Business Day on which trading in the Units of the Fund becomes ex-entitlement in accordance with the following formula:

Adjusted Entitlement = Adjustment Component x E

61 TERMS AND CONDITIONS

Where: X–B Adjustment Component = X–B–C provided that B shall be deducted from X only if the Business Day on which trading in the Units of the Fund becomes ex-entitlement with respect to the Cash Distribution and the distribution of the ordinary cash dividend by the Fund falls on the same date.

B: Amount of the relevant ordinary cash dividend per Unit

C: Amount of the relevant Cash Distribution per Unit

E: Existing Entitlement immediately prior to the Cash Distribution

X: Cum-Cash Distribution Unit price being the closing price of a Unit on the Stock Exchange on the last Business Day on which the Units of the Fund are traded on a cum-Cash Distribution basis

Adjustment to the Exercise Price shall take effect on the same day that the Entitlement is adjusted.

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

7. Purchases

62 TERMS AND CONDITIONS

8. Global Certificate

9. Meetings of Warrant Holders and Modification

An Extraordinary Resolution passed at any meeting of the Warrant Holders shall be binding on all the Warrant Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the Warrant Holders being held if passed unanimously.

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

(iv) necessary in order to comply with mandatory provisions of the laws or regulations of Hong Kong (as defined below).

Any such modification shall be binding on the Warrant Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 10.

10. Notices

63 TERMS AND CONDITIONS

11. Liquidation

In the event of (a) dissolution or termination of the Fund or (b) the withdrawal of the Securities and Futures Commission’s authorisation of the Fund under the Securities and Futures Ordinance (Cap. 571) of Hong Kong, all unexercised Warrants will lapse and shall cease to be valid for any purpose, in the case of (i) dissolution or termination, on and from the effective date of such dissolution or termination or (ii) withdrawal of authorisation, on the date on which such withdrawal becomes effective, but subject (in any such case) to any contrary mandatory requirement of law.

12. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the Warrant Holders, to create and issue further warrants so as to form a single series with the Warrants.

13. Delisting

(a) If at any time the Units cease to be listed on the Stock Exchange, the Issuer shall give effect to these Conditions in such manner and make such adjustments to the rights attaching to the Warrants as it shall, in its absolute discretion (acting in good faith and in a commercially reasonable manner), consider appropriate to ensure, so far as it is reasonably able to do so, that the interests of the Warrant Holders generally are not materially prejudiced as a consequence of such delisting (without considering the individual circumstances of any Warrant Holder or the tax or other consequences that may result in any particular jurisdiction).

(b) Without prejudice to the generality of Condition 13(a), where the Units are, or, upon the delisting, become, listed on any other stock exchange, these Conditions may, in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner), be amended to the extent necessary to allow for the substitution of that other stock exchange in place of the Stock Exchange and the Issuer may, without the consent of the Warrant Holders, make such adjustments to the entitlements of Warrant Holders on exercise (including, if appropriate, by converting foreign currency amounts at prevailing market rates into Hong Kong currency) as may be appropriate in the circumstances.

14. Illegality or Impracticability

(a) for it to perform its obligations under the Warrants, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including, without limitation, any tax law); or

64 TERMS AND CONDITIONS

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the Warrants due to a Change in Law Event.

15. Governing Law

16. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

65 TERMS AND CONDITIONS

The relevant Conditions will, together with the supplemental provisions contained in the relevant Supplemental Listing Document and subject to completion and amendment, be endorsed on the Global Certificate. The applicable Supplemental Listing Document in relation to the issue of any Series of CBBCs may specify additional terms and conditions which shall, to the extent so specified or to the extent inconsistent with the relevant Conditions, replace or modify the relevant Conditions for the purpose of such Series of CBBCs.

TERMS AND CONDITIONS OF THE EQUITY CBBCS (CASH SETTLED)

1. Form, Status, Transfer and Title

(a) Form. The Callable Bull/Bear Contracts (the CBBCs) (which expression shall, unless the context otherwise requires, include any further CBBCs issued pursuant to Condition 13) relating to the Shares of the Company are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date, made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated as of 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the CBBCs made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the CBBCs (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The CBBC Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

(b) Status. The CBBCs represent general, unsecured, contractual obligations of the Issuer and of no other person and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations of the Issuer. The obligations of the Guarantor under the Guarantee represent general, unsecured, contractual obligations of the Guarantor and of no other person and rank pari passu (save for certain obligations required to be preferred by law) with all other unsecured and unsubordinated obligations of the Guarantor.

(c) Transfer. Transfers of beneficial interests in the CBBCs may be effected only in Board Lots or integral multiples thereof in CCASS (as defined below) in accordance with the CCASS Rules (as defined below). CBBCs may be offered, sold, resold or otherwise transferred only to a non-U.S. person in an offshore transaction in reliance upon Regulation S under the Securities Act (Regulation S). Each CBBC Holder and each beneficial owner of a CBBC hereby represents as a condition to purchasing or owning such CBBC or any beneficial interest therein that it is not located in the United States nor is a U.S. Person nor was solicited to purchase the CBBCs while present in the United States. The term U.S. Person shall have the meaning ascribed to it in Regulation S.

(d) Title. Each person who is for the time being shown in the register kept by the Registrar as entitled to a particular number of CBBCs shall be treated by the Issuer, the Guarantor and the Registrar as the absolute owner and holder of such number of CBBCs. The expression CBBC Holder shall be construed accordingly.

2. CBBC Rights and Expenses

66 TERMS AND CONDITIONS

receive payment of the Residual Value (in respect of Category R CBBCs only) (if any) less any Exercise Expenses following the occurrence of a Mandatory Call Event (all as defined below).

(b) Exercise Expenses. On expiry of the CBBCs or upon the occurrence of a Mandatory Call Event, CBBC Holders will be deemed to give an irrevocable authorisation to the Issuer to deduct all Exercise Expenses from the Cash Settlement Amount or Residual Value, as the case may be. In lieu of payment by the CBBC Holder, an amount equal to the relevant Exercise Expenses shall be deducted by the Issuer from the applicable Cash Settlement Amount or Residual Value. If the Cash Settlement Amount or Residual Value is equal to, or less than, the determined Exercise Expenses, no Cash Settlement Amount or Residual Value shall be payable by the Issuer. Any Exercise Expenses which have not been determined on the Expiry Date or following the Mandatory Call Event shall be notified to the CBBC Holder as soon as practicable after determination thereof and shall be paid by the CBBC Holder immediately upon demand.

Capitalised terms used and not otherwise defined herein shall have the meaning given to them in the relevant Supplemental Listing Document.

Bear CBBCs means each CBBC specified as such in the relevant Supplemental Listing Document;

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Bull CBBCs means each CBBC specified as such in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

Call Price means the price specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

(i) in the case of a series of Bear CBBCs:

Cash Settlement Entitlement x (Strike Price – Closing Price) x one Board Lot Amount per = Board Lot Number of CBBCs per Entitlement

67 TERMS AND CONDITIONS

(ii) in the case of a series of Bull CBBCs:

Cash Settlement Entitlement x (Closing Price – Strike Price) x one Board Lot Amount per = Board Lot Number of CBBCs per Entitlement

Category N CBBC means each CBBC specified as such in the relevant Supplemental Listing Document;

Category R CBBC means each CBBC specified as such in the relevant Supplemental Listing Document;

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

CCASS Participant means a person admitted for the time being by HKSCC as participant of CCASS;

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Closing Price means the closing price of one Share (as derived from the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments as may be determined by the Issuer in accordance with these Conditions to such closing price as may be necessary to reflect any capitalisation, rights issue, distribution or the like);

Company means the company specified as such in the relevant Supplemental Listing Document;

Designated Bank Account means the relevant bank account designated by the relevant CBBC Holder for the purpose of procuring payment of the Cash Settlement Amount or Residual Value, as the case may be, electronically through CCASS;

Entitlement means the number specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

Exchange Rate means the rate specified in the relevant Supplemental Listing Document, (subject to any adjustment in accordance with Condition 6);

Exercise Expenses means any charges or expenses including any taxes or duties which are incurred in respect of the expiry of the CBBCs or automatic termination of the CBBCs upon the occurrence of a Mandatory Call Event, as the case may be;

Expiry Date means the date specified as such in the relevant Supplemental Listing Document, or, if such day is not a Business Day, the immediately succeeding Business Day;

HKSCC means Hong Kong Securities Clearing Company Limited including, where the context so requires, its agents, nominees, representatives, officers and employees;

68 TERMS AND CONDITIONS

Mandatory Call Event occurs:

(i) in the case of Bear CBBCs, if the Spot Price is at or above the Call Price at any time during a Trading Day in the Observation Period; or

(ii) in the case of Bull CBBCs, if the Spot Price is at or below the Call Price at any time during a Trading Day in the Observation Period; for the avoidance of doubt, a Mandatory Call Event may occur in a pre-opening session or (if applicable) a closing auction session, as the case may be, of a Business Day;

Market Disruption Event means:

(1) (i) with respect to exercise of the CBBCs, the occurrence or existence during the one-half hour period that ends at the close of trading on the Valuation Date, or

(ii) with respect to the determination of the Residual Value and in respect of a MCE Valuation Period (as defined below), the occurrence or existence during such MCE Valuation Period,

of any suspension of or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the Stock Exchange or otherwise) on the Stock Exchange in (a) the Shares; or (b) any options or futures contracts relating to the Shares if, in any such case, such suspension or limitation is, in the determination of the Issuer, material or

(2) (i) with respect to exercise of the CBBCs, the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal on any day which either (a) results in the Stock Exchange being closed for trading for the entire day or (b) results in the Stock Exchange being closed prior to its regular time for close of trading for the relevant day (for the avoidance of doubt, in the case when the Stock Exchange is scheduled to open for the morning trading session only, closed prior to its regular time for close of trading for the morning session), PROVIDED THAT there shall be no Market Disruption Event solely by reason of the Stock Exchange opening for trading later than its regular time for opening of trading on any day as a result of the tropical cyclone warning signal number 8 or above or the “BLACK” rainstorm signal having been issued; or

(ii) with respect to the determination of the Residual Value and in respect of a MCE Valuation Period, the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal which results in the Stock Exchange being closed for dealings; or

(3) a limitation or closure of the Stock Exchange due to any other unforeseen circumstances;

Maximum Trade Price means the highest Spot Price during the MCE Valuation Period;

69 TERMS AND CONDITIONS

trading session following the Second Session during which trading in the Shares is permitted on the Stock Exchange with no limitation imposed for a continuous period of at least one hour notwithstanding the existence or continuance of a Market Disruption Event in such postponed trading session, unless the Issuer determines in good faith that each trading session on each of the four Trading Days immediately following the date on which the Mandatory Call Event occurs does not contain any continuous period of one hour or more than one hour during which trading in the Shares is permitted on the Stock Exchange with no limitation imposed. In that case:

(i) the period commencing from the First Session up to, and including, the last trading session on the Stock Exchange of the fourth Trading Day immediately following the date on which the Mandatory Call Event occurs shall be deemed to be the MCE Valuation Period; and

(ii) the Issuer shall determine the Maximum Trade Price or the Minimum Trade Price (as the case may be) having regard to the then prevailing market conditions, the last reported Spot Price and such other factors as the Issuer may determine to be relevant in good faith.

For the avoidance of doubt, all Spot Prices available throughout the extended MCE Valuation Period shall be taken into account to determine the Maximum Trade Price or the Minimum Trade Price (as the case may be) for the calculation of the Residual Value.

For the purposes of this definition,

(a) the pre-opening session, the morning session and, in the case of half day trading, the closing auction session (if any) of the same day; and

(b) the afternoon session and the closing auction session (if any) of the same day, shall each be considered as one trading session only;

Minimum Trade Price means the lowest Spot Price during the MCE Valuation Period;

Observation Commencement Date has the meaning specified in the relevant Supplemental Listing Document;

Observation Period means the period from the Observation Commencement Date to the Trading Day immediately preceding the Expiry Date (both dates inclusive);

Post MCE Trades mean, in respect of the CBBCs, if the Mandatory Call event occurs in the:

(1) pre-opening session or (if applicable) closing auction session, as the case may be, of the Stock Exchange, all trades in the CBBCs concluded via auction during the order matching period and all manual trades concluded after the determination of the final indicative equilibrium price; or

(2) continuous trading session, all trades concluded via auto-matching or manually after the Mandatory Call Event;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

70 TERMS AND CONDITIONS

Residual Value means per Board Lot in respect of Category R CBBCs (subject to any adjustment as provided in Condition 6), the greater of (a) zero; and (b) an amount payable in the Settlement Currency calculated by the Issuer in accordance with the following formula:

(1) in the case of a series of Bear Contracts: Entitlement x (Strike Price – Maximum Trade Price) x one Board Lot Number of CBBCs per Entitlement (2) in the case of a series of Bull Contracts: Entitlement x (Minimum Trade Price – Strike Price) x one Board Lot Number of CBBCs per Entitlement Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Shares mean the shares of the Company specified as such in the relevant Supplemental Listing Document;

Spot Price means:

(1) in respect of a continuous trading session of the Stock Exchange, the price per Share concluded by means of automatic order matching on the Stock Exchange as reported in the official real-time dissemination mechanism for the Stock Exchange during such continuous trading session in accordance with the Rules of the Exchange (the Trading Rules), excluding direct business (as defined in the Trading Rules); and

(2) in respect of a pre-opening session or a closing auction session (if applicable) of the Stock Exchange (as the case may be), the final indicative equilibrium price (IEP)of the Share (if any) calculated at the end of the pre-order matching period of such pre-opening session or closing auction session (if applicable) (as the case may be) in accordance with the Trading Rules, excluding direct business (as defined in the Trading Rules),

subject to such modification and amendment prescribed by the Stock Exchange from time to time;

Stock Exchange means The Stock Exchange of Hong Kong Limited;

Strike Price has the meaning given to it in the relevant Supplemental Listing Document;

Trading Day means a day on which the Stock Exchange is scheduled to open for trading for its regular trading sessions; and

Valuation Date means, with respect to the exercise of CBBCs, and subject as provided below in relation to a Market Disruption Event, the Trading Day immediately preceding the Expiry Date.

3. Mandatory Call Event, Automatic Exercise and Expiry

(a) Mandatory Call Event. The CBBCs will automatically terminate upon the occurrence of a Mandatory Call Event and (i) in the case of Category N CBBCs, will expire worthless, or (ii) in the case of Category R CBBCs, will entitle the CBBC Holder to receive the Residual Value (if any) less any Exercise Expenses on the Settlement Date in accordance with Condition 4(e) below.

71 TERMS AND CONDITIONS

(b) Automatic Exercise. Any CBBC which has not automatically expired upon the occurrence of a Mandatory Call Event will be deemed to be automatically exercised if, on the Expiry Date, the value of the Cash Settlement Amount is greater than zero (without prior notice being given to the CBBC Holders). The CBBC Holders will not be required to deliver any exercise notice and the Issuer or its agent will pay to the CBBC Holders the Cash Settlement Amount (if any) less any Exercise Expenses in accordance with Condition 4(e).

(c) Issuer’s Obligations. For the avoidance of doubt, where the CBBCs have been exercised on the Expiry Date or have automatically expired upon the occurrence of a Mandatory Call Event (as the case may be), payment in respect of each Board Lot of CBBCs of the Cash Settlement Amount or the Residual Value (if any) (as the case may be) less any Exercise Expenses (which shall be deducted in accordance with Condition 2(b)) shall constitute full and final settlement of the obligations of the Issuer with respect to the CBBCs. Subject to such payment having been made, the Issuer shall have no obligation towards the relevant CBBC Holder under the CBBCs subsequent to such Expiry Date or the date on which a Mandatory Call Event occurs (as the case may be).

(d) Expiry. Any CBBC which does not automatically terminate or which has not been automatically exercised in accordance with Condition 3(a) or Condition 3(b) (as the case may be) shall expire immediately without value thereafter and all rights of the CBBC Holder and obligations of the Issuer with respect to such CBBC shall cease.

4. Exercise of CBBCs, Cancellation and Settlement

(a) Exercise of CBBCs. The CBBCs are exercisable on the Expiry Date, provided that a Mandatory Call Event has not occurred.

(b) Board Lots. CBBCs may only be exercised in Board Lots or integral multiples thereof.

(c) No requirement to deliver an exercise notice. The CBBC Holders will not be required to deliver an exercise notice for any purpose in relation to the CBBCs.

(d) Cancellation. The Issuer will procure that the Registrar will, with effect from the first Business Day following the date on which a Mandatory Call Event occurs or the Expiry Date (as the case may be), remove from its register the name of the person in respect of the CBBCs which (i) are the subject of an occurrence of a Mandatory Call Event; (ii) are the subject of an exercise pursuant to automatic exercise in accordance with these Conditions; or (iii) have expired worthless, and thereby cancel the relevant CBBCs.

(e) Cash Settlement.

(i) Subject to an automatic exercise of CBBCs or the occurrence of a Mandatory Call Event in accordance with these Conditions, the Issuer will pay, in respect of every Board Lot of CBBCs, to the relevant CBBC Holder an amount in the Settlement Currency equal to the Residual Value or the Cash Settlement Amount (as the case may be) less any Exercise Expenses (which shall be deducted in accordance with Condition 2(b)).

(ii) The Residual Value or the Cash Settlement Amount less determined Exercise Expenses shall be despatched not later than three CCASS Settlement Days following the expiry of the MCE Valuation Period or the Valuation Date, as the case may be (Settlement Date), by crediting that amount in accordance with the CCASS Rules, to the Designated Bank Account. If as a result of an event beyond the control of the Issuer, it is not possible for the Issuer to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the CBBC Holder on the original Settlement Date (such event, a Settlement Disruption Event), the Issuer shall use its reasonable endeavours to procure payment electronically through CCASS by crediting

72 TERMS AND CONDITIONS

the relevant Designated Bank Account of the CBBC Holder as soon as reasonably practicable after the original Settlement Date. The Issuer will not be liable to the CBBC Holder for any interest in respect of the amount due or any loss or damage that such CBBC Holder may suffer as a result of the existence of the Settlement Disruption Event, nor shall the Issuer be under any circumstances be liable for any acts or defaults of CCASS in relation to the performance of its duties in relation to the CBBCs.

(iii) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on the Valuation Date, then that Valuation Date shall be postponed to the first succeeding Trading Day on which the Issuer determines that there is no Market Disruption Event unless the Issuer determines that there is a Market Disruption Event on each of the four Trading Days immediately following the original date that, but for the Market Disruption Event, would have been the Valuation Date. In that case:

(i) the fourth Trading Day immediately following the original date shall be deemed to be the Valuation Date, notwithstanding the Market Disruption Event, and

(ii) the Issuer shall determine the closing price of the Shares having regard to the then prevailing market conditions, the last reported Spot Price and such other factors as the Issuer determines to be relevant in good faith.

5. Registrar and Transfer Office

(a) The initial Registrar and the Transfer Office are set out below. The Issuer reserves the right, subject to the appointment of a successor, at any time to vary or terminate the appointment of the Registrar and to appoint another Registrar provided that it will at all times maintain a Registrar which, so long as the CBBCs are listed on the Stock Exchange, shall be in Hong Kong. Notice of any such termination or appointment and of any change in the Transfer Office or the specified office of the Registrar will be given to the CBBC Holders in accordance with Condition 11.

(b) The Registrar will be acting as agent of the Issuer in respect of any CBBCs and will not assume any obligation or duty to or any relationship of agency or trust for the CBBC Holders.

6. Adjustments

Adjusted Entitlement = Adjustment Component x E

Where: 1+M Adjustment Component = 1 + (R/S) x M E : Existing Entitlement immediately prior to the Rights Offer

S : Cum-Rights Share price being the closing price of an existing share as derived from the Daily Quotation Sheet of the Stock Exchange on the last Business Day on which the Shares are traded on a cum-Rights basis

73 TERMS AND CONDITIONS

R : Subscription price per new Share as specified in the Rights Offer plus an amount equal to any dividends or other benefits foregone to exercise the Right

M : Number of new Share(s) (whether a whole or a fraction) per existing Share each holder thereof is entitled to subscribe

Provided that if the adjustment to be made would result in the Entitlement being changed by one per cent. or less, then no adjustment will be made to the Entitlement. In addition, the Issuer shall adjust the Strike Price and/or Call Price in accordance with the following formulas: 1 Adjusted Strike Price = Strike Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001) 1 Adjusted Call Price = Call Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

Adjustment to the Strike Price and/or Call Price shall take effect on the same day that the Entitlement is adjusted.

For the purposes of these Conditions:

Adjusted Entitlement = Adjustment Component x E

Where:

Adjustment Component = (1 + N)

E : Existing Entitlement immediately prior to the Bonus Issue

N : Number of additional Shares (whether a whole or a fraction) received by a holder of existing Shares for each Share held prior to the Bonus Issue

Provided that if the adjustment to be made would result in the Entitlement being changed by one per cent. or less, then no adjustment will be made to the Entitlement. In addition, the Issuer shall adjust the Strike Price and/or Call Price in accordance with the following formulas: 1 Adjusted Strike Price = Strike Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

74 TERMS AND CONDITIONS

1 Adjusted Call Price = Call Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

Adjustment to the Strike Price and/or Call Price shall take effect on the same day that the Entitlement is adjusted.

(c) Subdivision or Consolidations. If and whenever the Company shall subdivide its Shares or any class of its outstanding share capital comprised of the Shares into a greater number of shares (a Subdivision) or consolidate the Shares or any class of its outstanding share capital comprised of the Shares into a smaller number of shares (a Consolidation), the Entitlement in effect immediately prior thereto will be increased (in the case of a Subdivision) or decreased (in the case of a Consolidation) accordingly in each case on the day on which the relevant Subdivision or Consolidation shall have taken effect. In addition, the Strike Price and/or Call Price (each of which shall be rounded to the nearest Hong Kong dollar 0.001) will be decreased (in the case of a Subdivision) or increased (in the case of a Consolidation) accordingly.

Adjustment to the Strike Price and/or Call Price shall take effect on the same day that the Entitlement is adjusted.

(d) Restructuring Events. If it is announced that the Company is to or may merge or consolidate with or into any other corporation (including becoming, by agreement or otherwise, a subsidiary of any corporation or controlled by any person or corporation) (except where the Company is the surviving corporation in a merger) or that it is to or may sell or transfer all or substantially all of its assets, the rights attaching to the CBBCs may in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner) be amended no later than the Business Day preceding the consummation of such merger, consolidation, sale or transfer (each a Restructuring Event) (as determined by the Issuer in its absolute discretion (acting in good faith and in a commercially reasonable manner)).

The rights attaching to the CBBCs after the adjustment shall, after such Restructuring Event, relate to the number of shares of the corporation(s) resulting from or surviving such Restructuring Event or other securities (Substituted Securities) and/or cash offered in substitution for the affected Shares, as the case may be, to which the holder of such number of Shares to which the CBBCs related immediately before such Restructuring Event would have been entitled upon such Restructuring Event. Thereafter the provisions hereof shall apply to such Substituted Securities, provided that any Substituted Securities may, in the absolute discretion of the Issuer (acting in good faith and in a commercially reasonable manner), be deemed to be replaced by an amount in the Settlement Currency equal to the market value or, if no market value is available, fair value, of such Substituted Securities in each case as determined by the Issuer as soon as practicable after such Restructuring Event is effected. For the avoidance of doubt, any remaining Shares shall not be affected by this paragraph (d) and, where cash is offered in substitution for Shares or is deemed to replace Substituted Securities as described above, references in these Conditions to the Shares shall include any such cash.

(e) Cash Distributions. Generally, no adjustment will be made for an ordinary cash dividend (whether or not it is offered with a script alternative). For any other forms of cash distribution (each a Cash Distribution) announced by the Company, such as a cash bonus, special dividend or extraordinary dividend, no adjustment will be made unless the value of the Cash Distribution accounts for two per cent. or more of the Share’s closing price on the day of announcement by the Company.

75 TERMS AND CONDITIONS

Adjusted Entitlement = Adjustment Component x E

B: Amount of the relevant ordinary cash dividend per Share

C: Amount of the relevant Cash Distribution per Share

E: Existing Entitlement immediately prior to the Cash Distribution

X: Cum-Cash Distribution Share price being the closing price of a Share on the Stock Exchange on the last Business Day on which the Shares of the Company are traded on a cum-Cash Distribution basis

In addition, the Issuer shall adjust the Strike Price and/or Call Price in accordance with the following formulas: 1 Adjusted Strike Price = Strike Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001) 1 Adjusted Call Price = Call Price x (rounded to the nearest Adjustment Component Hong Kong dollar 0.001)

Adjustment to the Strike Price and/or Call Price shall take effect on the same day that the Entitlement is adjusted.

(f) Other Adjustments. Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the CBBCs as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(i) not materially prejudicial to the interests of the CBBC Holders generally (without considering the circumstances of any individual CBBC Holder or the tax or other consequences of such adjustment in any particular jurisdiction); or

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

For the avoidance of doubt, such adjustments may, but need not, be determined by reference to the adjustment(s) made in respect of such event or events by an options exchange to options on the relevant Shares traded on such options exchange.

76 TERMS AND CONDITIONS

(g) Notice of Determinations and/or Adjustments. All determinations and adjustments made by the Issuer pursuant hereto will be conclusive and binding on the CBBC Holders. The Issuer will give, or procure that there is given, notice as soon as practicable of any determinations or adjustments (as the case may be) by publication in accordance with Condition 11.

7. Illegality or Impracticability

The Issuer is entitled to terminate the CBBCs if it determines in good faith and in a commercially reasonable manner that, for reasons beyond its control, it has become or it will become illegal or impracticable:

(a) for it to perform its obligations under the CBBCs, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including any tax law); or

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the CBBCs due to a Change in Law Event.

Upon the occurrence of a Change in Law Event, the Issuer will, if and to the extent permitted by applicable law or regulation, pay to each CBBC Holder a cash amount that Issuer determines in good faith and in a commercially reasonable manner to be the fair market value in respect of each CBBC held by such CBBC Holder immediately prior to such termination (ignoring such illegality or impracticability) less the cost to the Issuer of unwinding any related hedging arrangement as determined by the Issuer in its sole and absolute discretion (acting in good faith and in a commercially reasonable manner). Payment will be made in such manner as shall be notified to the CBBC Holders in accordance with Condition 11.

8. Purchases

The Issuer, the Guarantor and/or any of their affiliates may at any time purchase CBBCs at any price in the open market or by tender or by private treaty. Any CBBCs so purchased may be held or resold or surrendered for cancellation. Any resales by the Issuer, the Guarantor or the relevant affiliate (as the case may be) will be made to non-U.S. persons in offshore transactions in reliance upon Regulation S.

9. Global Certificate

The CBBCs are represented by the Global Certificate registered in the name of HKSCC Nominees Limited and deposited with CCASS in accordance with the CCASS Rules. CBBC Holders will not be entitled to definitive certificates in respect of any CBBCs issued or transferred to them.

10. Meetings of CBBC Holders and Modification

(a) Meetings of CBBC Holders. The Registrar’s Agreement contains provisions for convening meetings of the CBBC Holders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Registrar’s Agreement) of a modification of the provisions of the CBBCs or of the Global Certificate.

77 TERMS AND CONDITIONS

Any resolution to be passed in a meeting of the CBBC Holders shall be decided by poll. Such a meeting may be convened by the Issuer or by CBBC Holders holding not less than 10 per cent. of the CBBCs for the time being remaining unexercised. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 25 per cent. of the CBBCs for the time being remaining unexercised, or at any adjourned meeting two or more persons being or representing CBBC Holders whatever the number of CBBCs so held or represented. A resolution will be an Extraordinary Resolution when it has been passed at a duly convened meeting by not less than three-quarters of the votes cast by such CBBC Holders who, being entitled to do so, vote in person or by proxy. An Extraordinary Resolution passed at any meeting of the CBBC Holders shall be binding on all the CBBC Holders, whether or not they are present at the meeting.

Resolutions can be passed in writing without a meeting of the CBBC Holders being held if passed unanimously.

(b) Modification. The Issuer may, without the consent of the CBBC Holders, effect any modification of the terms and conditions of the CBBCs or the Global Certificate which, in the opinion of the Issuer, is:

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error; or

(iv) necessary in order to comply with mandatory provisions of the laws or regulations of Hong Kong (as defined below).

Any such modification shall be binding on the CBBC Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 11.

11. Notices

All notices to CBBC Holders will be validly given if published in English and in Chinese on the website of Hong Kong Exchanges and Clearing Limited. Such notices shall be deemed to have been given on the date of the first such publication. If publication is not practicable, notice will be given in such other manner as the Issuer may determine.

12. Liquidation

In the event of a liquidation or dissolution of the Company or the appointment of a liquidator, receiver or administrator or analogous person under the laws of its jurisdiction of incorporation in respect of the whole or substantially the whole of its undertaking, property or assets, all unexercised CBBCs will lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the effective date of the relevant resolution and, in the case of an involuntary liquidation or dissolution, on the date of the relevant court order or, in the case of the appointment of a liquidator or receiver or administrator or analogous person under any applicable law in respect of the whole or substantially the whole of its undertaking, property or assets, on the date when such appointment is effective but subject (in any such case) to any contrary mandatory requirement of law.

13. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the CBBC Holders, to create and issue further CBBCs so as to form a single series with the CBBCs.

78 TERMS AND CONDITIONS

14. Delisting

(a) If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give effect to these Conditions in such manner and make such adjustments to the rights attaching to the CBBCs as it shall, in its absolute discretion (acting in good faith and in a commercially reasonable manner), consider appropriate to ensure, so far as it is reasonably able to do so, that the interests of the CBBC Holders generally are not materially prejudiced as a consequence of such delisting (without considering the individual circumstances of any CBBC Holder or the tax or other consequences that may result in any particular jurisdiction).

(b) Without prejudice to the generality of Condition 14(a), where the Shares are, or, upon the delisting, become, listed on any other stock exchange, these Conditions may, in the absolute discretion of the Issuer, be amended to the extent necessary to allow for the substitution of that other stock exchange in place of the Stock Exchange and the Issuer may, without the consent of the CBBC Holders, make such adjustments to the entitlements of CBBC Holders on automatic expiry or exercise (including, if appropriate, by converting foreign currency amounts at prevailing market rates into Hong Kong currency) as may be appropriate in the circumstances.

(c) The Issuer shall determine, in its absolute discretion (acting in good faith and in a commercially reasonable manner), any adjustment or amendment and its determination shall be conclusive and binding on the CBBC Holders save in the case of manifest error. Notice of any adjustments or amendments shall be given to the CBBC Holders in accordance with Condition 11 as soon as practicable after they are determined.

15. Governing Law

The CBBCs, the Global Certificate, the Guarantee and the Registrar’s Agreement will be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong). The Issuer, the Guarantor and each CBBC Holder (by its purchase of the CBBCs) as applicable, shall be deemed to have submitted for all purposes in connection with the CBBCs, the Global Certificate, the Guarantee and the Registrar’s Agreement to the non-exclusive jurisdiction of the courts of Hong Kong.

16. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

79 TERMS AND CONDITIONS

The relevant Conditions will, together with the supplemental provisions contained in the relevant Supplemental Listing Document and subject to completion and amendment, be endorsed on the Global Certificate. The applicable Supplemental Listing Document in relation to the issue of any Series of CBBCs may specify additional terms and conditions which shall, to the extent so specified or to the extent inconsistent with the relevant Conditions, replace or modify the relevant Conditions for the purpose of such Series of CBBCs.

TERMS AND CONDITIONS OF THE INDEX CBBCS (CASH SETTLED)

1. Form, Status, Transfer and Title

(a) Form. The Callable Bull/Bear Contracts (the CBBCs) (which expression shall, unless the context otherwise requires, include any further CBBCs issued pursuant to Condition 12) relating to the Index as published by the Index Compiler are issued in registered form subject to and with the benefit of a global certificate by way of deed poll (the Global Certificate) dated the Issue Date, made by Citigroup Global Markets Holdings Inc. (the Issuer), a deed of guarantee (the Guarantee) dated 19 June 2012 and made by Citibank, N.A. (the Guarantor) and a base registrar’s and structured product agency agreement dated as of 19 June 2012 (as amended, varied or supplemented from time to time or any successor document, the Registrar’s Agreement) as supplemented by a Confirmation (as defined in the Registrar’s Agreement) relating to the CBBCs made between the Issuer, the Guarantor and Citigroup Global Markets Asia Limited as registrar and agent for the CBBCs (the Registrar and Agent, which expression shall include any successors). Copies of the Global Certificate, the Guarantee and the Registrar’s Agreement are available for inspection at the specified office of the Registrar (the Transfer Office). The initial Transfer Office is set out below. The CBBC Holders (as defined below) are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Global Certificate and the Registrar’s Agreement.

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2. CBBC Rights and Expenses

(a) CBBC Rights. Every Board Lot gives each CBBC Holder, (i) upon automatic exercise and compliance with Condition 4, the right to receive payment of the Cash Settlement Amount, if any, or (ii) upon compliance with Condition 4, the right to receive payment of the Residual Value (in respect of Category R CBBCs only) (if any) following the occurrence of a Mandatory Call Event (all as defined below).

Capitalised terms used and not otherwise defined herein shall have the meaning given to them in the relevant Supplemental Listing Document.

Bear CBBCs means each CBBC specified as such in the relevant Supplemental Listing Document;

Board Lot has the meaning given to it in the relevant Supplemental Listing Document;

Bull CBBCs means each CBBC specified as such in the relevant Supplemental Listing Document;

Business Day means a day (excluding Saturdays) on which the Stock Exchange is scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

Call Level means the level of the Index specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

(i) in the case of a series of Bear CBBCs:

Cash Settlement (Strike Level – Closing Level) x one Board Lot x Index Currency Amount Amount per = Board Lot Divisor

(ii) in the case of a series of Bull CBBCs:

Cash Settlement (Closing Level – Strike Level) x one Board Lot x Index Currency Amount Amount per = Board Lot Divisor

Category N CBBC means each CBBC specified as such in the relevant Supplemental Listing Document;

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Category R CBBC means each CBBC specified as such in the relevant Supplemental Listing Document;

CCASS means the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

CCASS Participant means a person admitted for the time being by HKSCC as participant of CCASS;

CCASS Rules means the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time;

CCASS Settlement Day has the meaning ascribed to the term “Settlement Day” in the General Rules of CCASS, subject to such modification and amendment prescribed by HKSCC from time to time;

Closing Level means the level specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

Divisor means the number specified as such in the relevant Supplemental Listing Document;

Exchange Rate means the rate specified in the relevant Supplemental Listing Document (subject to any adjustment in accordance with Condition 6);

Expiry Date means the date specified as such in the relevant Supplemental Listing Document;

HKSCC means Hong Kong Securities Clearing Company Limited including, where the context so requires, its agents, nominees, representatives, officers and employees;

HSIC means Hang Seng Indexes Company Limited;

Index means the index specified as such in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

Index Business Day means a day on which the Index is scheduled to be published by the Index Compiler or as the case may be, the Successor Index Compiler;

Index Compiler has the meaning given to it in the relevant Supplemental Listing Document;

Index Currency Amount has the meaning given to it in the relevant Supplemental Listing Document;

Index Sponsor means HSIC or such other sponsor of the Index specified in the relevant Supplemental Listing Document;

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Mandatory Call Event occurs:

(i) in the case of a series of Bear CBBCs, if the Spot Level is at or above the Call Level at any time during an Index Business Day in the Observation Period; or

(ii) in the case of a series of Bull CBBCs if the Spot Level is at or below the Call Level at any time during an Index Business Day in the Observation Period;

Market Disruption Event means:

(1) (a) with respect to exercise of the CBBCs the occurrence or existence, during the one-half hour period that ends at the close of trading on the Relevant Exchange on the Valuation Date, or

(b) with respect to the determination of the Residual Value and in respect of a MCE Valuation Period, the occurrence or existence during such MCE Valuation Period;

of any of:

(i) the suspension or material limitation of the trading of a material number of securities that comprise the Index; or

(ii) the suspension or material limitation of the trading of options or futures contracts relating to the Index on any exchanges on which such contracts are traded; or

(iii) the imposition of any exchange controls in respect of any currencies involved in determining the Cash Settlement Amount or the Residual Value (as the case may be).

For the purposes of this paragraph (1), (x) the limitation of the number of hours or days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of any exchange, and (y) a limitation on trading imposed by reason of the movements in price exceeding the levels permitted by any relevant exchange will constitute a Market Disruption Event; or

(2) where the Relevant Exchange is the Stock Exchange,

(a) with respect to exercise of the CBBCs, the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal on any day which either (a) results in the Stock Exchange being closed for trading for the entire day or (b) results in the Stock Exchange being closed prior to its regular time for close of trading for the relevant day (for the avoidance of doubt, in the case when the Stock Exchange is scheduled to open for the morning trading session only, closed prior to its regular time for close of trading for the morning session), PROVIDED THAT there shall be no Market Disruption Event solely by reason of the Stock Exchange opening for trading later than its regular time for opening of trading on any day as a result of the tropical cyclone warning signal number 8 or above or the “BLACK” rainstorm signal having been issued; or

(b) with respect to the determination of the Residual Value and in respect of a MCE Valuation Period, the issue of the tropical cyclone warning signal number 8 or above or the issue of a “BLACK” rainstorm signal which results in the Stock Exchange being closed for dealings; or

83 TERMS AND CONDITIONS

(3) a limitation or closure of the Relevant Exchange due to any unforeseen circumstances:

Maximum Index Level means the highest Spot Level during the MCE Valuation Period;

MCE Valuation Period means the period commencing from and including the moment upon which the Mandatory Call Event occurs (the trading session during which the Mandatory Call Event occurs is the First Session) and up to the end of the trading session on the Index Exchange immediately following the First Session (the Second Session) unless, in the determination of the Issuer in good faith, the Second Session for any reason (including, without limitation, a Market Disruption Event occurring and subsisting in the Second Session) does not contain any continuous period of one hour or more than one hour during which Spot Levels are available, in which case the MCE Valuation Period shall be extended to the end of the subsequent trading session on the Index Exchange following the Second Session during which Spot Levels are available for a continuous period of at least one hour notwithstanding the existence or continuance of a Market Disruption Event in such postponed trading session, unless the Issuer determines in good faith that each trading session on each of the four Index Business Days immediately following the date on which the Mandatory Call Event occurs does not contain any continuous period of one hour or more than one hour during which Spot Levels are available. In that case:

(i) the period commencing from the First Session up to, and including, the last trading session of the fourth Index Business Day on the Index Exchange immediately following the date on which the Mandatory Call Event occurs shall be deemed to be the MCE Valuation Period; and

(ii) the Issuer shall determine the Maximum Index Level or the Minimum Index Level (as the case may be) having regard to the then prevailing market conditions, the last reported Spot Level of the Index and such other factors as the Issuer may determine to be relevant in good faith.

For the avoidance of doubt, all Spot Levels available throughout the extended MCE Valuation Period shall be taken into account to determine the Maximum Index Level or the Minimum Index Level (as the case may be) for the calculation of the Residual Value.

For the purposes of this definition,

(a) the pre-opening session, the morning session and, in the case of half day trading, the closing auction session (if any) of the same day; and

(b) the afternoon session and the closing auction session (if any) of the same day, shall each be considered as one trading session only;

Minimum Index Level means the lowest Spot Level during the MCE Valuation Period;

Observation Commencement Date has the meaning specified in the relevant Supplemental Listing Document;

Observation Period means the period from the Observation Commencement Date to the Trading Day immediately preceding the Expiry Date (both dates inclusive);

84 TERMS AND CONDITIONS

Post MCE Trades mean, in respect of the CBBCs, if the Mandatory Call event occurs in the:

(a) pre-opening session or (if applicable) closing auction session, as the case may be, of the Stock Exchange, all trades in the CBBCs concluded via auction during the order matching period and all manual trades concluded after the determination of the final indicative equilibrium price; or

(b) continuous trading session, all trades concluded via auto-matching or manually after the Mandatory Call Event;

Reference Currency means the currency specified in the relevant Supplemental Listing Document;

Relevant Exchange has the meaning given to it in the relevant Supplemental Listing Document;

Relevant Futures Exchange means Hong Kong Futures Exchange Limited (or its successor or assign), or as otherwise specified in the relevant Supplemental Listing Document;

(i) in the case of a series of Bear Contracts:

(Strike Level – Maximum Index Level) x one Board Lot x Index Currency Amount Divisor

(ii) in the case of a series of Bull Contracts:

(Minimum Index level – Strike Level) x one Board Lot x Index Currency Amount Divisor Settlement Currency means Hong Kong Dollars, save as otherwise specified in the relevant Supplemental Listing Document;

Spot Level means the spot level of the Index as compiled and published by the Index Compiler;

Strike Level has the meaning given to it in the relevant Supplemental Listing Document, subject to any adjustment in accordance with Condition 6;

Stock Exchange means The Stock Exchange of Hong Kong Limited;

Trading Day means a day on which the Stock Exchange is scheduled to be open for trading for its regular trading sessions; and

Valuation Date means the date specified as such in the relevant Supplemental Listing Document.

85 TERMS AND CONDITIONS

3. Mandatory Call Event, Automatic Exercise and Expiry

(a) Mandatory Call Event. The CBBCs will automatically terminate upon the occurrence of a Mandatory Call Event and (i) in the case of Category N CBBCs, will expire worthless, or (ii) in the case of Category R CBBCs, will entitle the CBBC Holder to receive the Residual Value (if any) on the Settlement Date in accordance with Condition 4(e) below.

(b) Automatic Exercise. Any CBBC which has not automatically expired upon the occurrence of a Mandatory Call Event will be deemed to be automatically exercised if on the Expiry Date, the value of the Cash Settlement Amount is greater than zero (without prior notice being given to the CBBC Holders). The CBBC Holders will not be required to deliver any exercise notice and the Issuer or its agent will pay to the CBBC Holders the Cash Settlement Amount (if any) in accordance with Condition 4(e).

(c) Issuer’s Obligations. For the avoidance of doubt, where the CBBCs have been exercised on the Expiry Date or have automatically expired upon the occurrence of a Mandatory Call Event (as the case may be), payment in respect of each Board Lot of CBBCs of the Cash Settlement Amount or the Residual Value (as the case may be) less any Exercise Expenses deducted in accordance with Condition 2(b) shall constitute full and final settlement of the obligations of the Issuer with respect to the CBBCs. Subject to such payment having been made, the Issuer shall have no obligation towards the relevant CBBC Holder under the CBBCs subsequent to such Expiry Date or the date on which a Mandatory Call Event occurs (as the case may be).

4. Exercise of CBBCs, Cancellation and Settlement

(a) Exercise of CBBCs. The CBBCs are exercisable on the Expiry Date, provided that a Mandatory Call Event has not occurred.

(b) Board Lots. CBBCs may only be exercised in Board Lots or integral multiples thereof.

(c) No requirement to deliver an exercise notice. The CBBC Holders will not be required to deliver an exercise notice for any purpose in relation to the CBBCs.

(d) Cancellation. The Issuer will procure that the Registrar will, with effect from the first Business Day following the date on which a Mandatory Call Event occurs or the Expiry Date (as the case may be), remove from its register the name of the person in respect of the CBBCs which (i) are the subject of an occurrence of a Mandatory Call Event; (ii) are the subject of an exercise pursuant to automatic exercise in accordance with these Conditions or (iii) have expired worthless, and thereby cancel the relevant CBBCs.

86 TERMS AND CONDITIONS

(e) Cash Settlement.

(i) Subject to automatic exercise of CBBCs or the occurrence of a Mandatory Call Event in accordance with these Conditions, the Issuer will pay, in respect of every Board Lot of CBBCs, to the relevant CBBC Holder an amount in the Settlement Currency equal to the Residual Value or the Cash Settlement Amount (as the case may be) less any Exercise Expenses deducted in accordance with Condition 2(b).

(iii) If, as a result of an event beyond the control of the Issuer, it is not possible for the Issuer to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the CBBC Holder on the original Settlement Date (such event, a Settlement Disruption Event), the Issuer shall use its reasonable endeavours to procure payment electronically through CCASS by crediting the relevant Designated Bank Account of the CBBC Holder as soon as reasonably practicable after the original Settlement Date. The Issuer will not be liable to the CBBC Holder for any interest in respect of the amount due or any loss or damage that such CBBC Holder may suffer as a result of the existence of the Settlement Disruption Event, nor shall the Issuer be under any circumstances be liable for any acts or defaults of CCASS in relation to the performance of its duties in relation to the CBBCs.

(iv) If the Issuer determines, in its sole discretion (acting in good faith and in a commercially reasonable manner), that a Market Disruption Event has occurred on the Valuation Date, then the Issuer shall determine the Closing Level on the basis of its good faith estimate of the Closing Level that would have prevailed on that day but for the occurrence of the Market Disruption Event provided that the Issuer, if applicable, may, but shall not be obliged to, determine such Closing Level by having regard to the manner in which futures contracts relating to the Index are calculated.

5. Registrar and Transfer Office

(b) The Registrar will be acting as agent of the Issuer in respect of any CBBCs and will not assume any obligation or duty to or any relationship of agency or trust for the CBBC Holders.

6. Adjustments to the Index

87 TERMS AND CONDITIONS

similar formula for and method of calculation as used in the calculation of the Index, then the Index will be deemed to be the index so calculated and announced by the Successor Index Compiler or that successor index, as the case may be.

(b) Modification and Cessation of Calculation of Index. If: (i) on or prior to a Valuation Date the Index Compiler or (if applicable) the Successor Index Compiler makes a material change in the formula for or the method of calculating the Index or in any other way materially modifies the Index (other than a modification prescribed in that formula or method to maintain the Index in the event of changes in constituent stock, contracts or commodities and other routine events); or (ii) on a Valuation Date the Index Compiler or (if applicable) the Successor Index Compiler fails to calculate and publish the Index (other than as a result of a Market Disruption Event), then the Issuer shall determine the Closing Level using, in lieu of a published level for the Index, the level for the Index as at that Valuation Date as determined by the Issuer in accordance with the formula for and method of calculating the Index last in effect prior to that change or failure, but using only those securities/ commodities that comprised the Index immediately prior to that change or failure and may make such other adjustments as it deems appropriate including, but not limited to, adjusting the Strike Level and the Call Level.

(c) Other Adjustments. Without prejudice to and notwithstanding any prior adjustment(s) made pursuant to the applicable Condition, the Issuer may (but shall not be obliged to) make such other adjustments to the terms and conditions of the CBBCs as appropriate where any event (including the events as contemplated in the applicable Conditions) occurs and irrespective of, in substitution for, or in addition to the provisions contemplated in the applicable Conditions, provided that such adjustment is:

(ii) determined by the Issuer in good faith to be appropriate and commercially reasonable.

(d) Notice of Determinations and/or Adjustments. All determinations and adjustments made by the Issuer pursuant hereto will be conclusive and binding on the CBBC Holders. The Issuer will give, or procure that there is given, notice as soon as practicable of any determinations or adjustments (as the case may be) by publication in accordance with Condition 11.

7. Illegality or Impracticability

(a) for it to perform its obligations under the CBBCs, or for the Guarantor to perform its obligations under the Guarantee, in whole or in part as a result of:

(i) the adoption of, any change in, any relevant law or regulation (including any tax law); or

88 TERMS AND CONDITIONS

(each of (i) and (ii), a Change in Law Event); or

(b) for it or any of its affiliates to maintain the Issuer’s hedging arrangements with respect to the CBBCs due to a Change in Law Event.

8. Purchases

9. Global Certificate

10. Meetings of CBBC Holders and Modification

A resolution will be an Extraordinary Resolution when it has been passed at a duly convened meeting by not less than three-quarters of the votes cast by such CBBC Holders who, being entitled to do so, vote in person or by proxy.

An Extraordinary Resolution passed at any meeting of the CBBC Holders shall be binding on all the CBBC Holders, whether or not they are present at the meeting.

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Resolutions can be passed in writing without a meeting of the CBBC Holders being held if passed unanimously.

(ii) of a formal, minor or technical nature;

(iii) made to correct a manifest error or

(iv) necessary in order to comply with mandatory provisions of the laws of Hong Kong (as defined below).

Any such modification shall be binding on the CBBC Holders and shall be notified to them by the Issuer as soon as practicable in accordance with Condition 11.

11. Notices

12. Further Issues

The Issuer shall be at liberty from time to time, without the consent of the CBBC Holders, to create and issue further CBBCs so as to form a single series with the CBBCs.

13. Governing Law

14. Language

In the event of any inconsistency between the Chinese translation of these Conditions and the English version of these Conditions, the English version of these Conditions shall prevail.

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

90 TAXATION

The comments below are of a general nature and are only a summary of the tax laws and practice currently applicable in Hong Kong. The comments relate to the position of persons who are the absolute beneficial owners of the Structured Products and may not apply equally to all persons. If you are in any doubt as to your tax position on purchase, ownership, transfer or exercise of any Structured Products, you should consult your own tax adviser.

General

You may be required to pay stamp duties, taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the issue price of each Structured Product.

Taxation in Hong Kong

Profits Tax

No tax is payable in Hong Kong by withholding or otherwise in respect of dividends of any company or in respect of any capital gains arising on the sale of the underlying shares or Structured Products, except that Hong Kong profits tax may be chargeable on any such gains in the case of certain persons carrying on a trade, profession or business in Hong Kong.

Stamp duty upon transfer of structured products

Transfers of warrants or CBBCs are not chargeable to Hong Kong stamp duty.

Estate duty

No estate duty is payable on any payment under the Structured Products in Hong Kong.

United States Federal Income Tax Considerations

General

Any U.S. federal tax discussion in this Base Listing Document was not intended or written to be used, and cannot be used, by any taxpayer for purposes of avoiding U.S. federal income tax penalties that may be imposed on the taxpayer. Any such tax discussion was written to support the promotion or marketing of Structured Products to be issued or sold pursuant to this Base Listing Document. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.

The following is a general summary of certain principal U.S. federal income tax consequences that may be relevant with respect to the purchase, ownership and disposition of the Structured Products. In general, this summary assumes that holders acquire the Structured Products at original issuance and will hold the Structured Products as capital assets. It does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase the Structured Products. In particular, it does not discuss special tax considerations that may apply to certain types of taxpayers, including, without limitation, the following: (i) financial institutions; (ii) insurance companies; (iii) dealers or traders in stocks, securities, notional principal contracts or currencies; (iv) tax-exempt entities; (v) real estate investment trusts; (vi) regulated investment companies; (vii) persons that will hold the Structured Products as part of a “hedging” or “conversion” transaction or as a position in a “straddle” or as part of a “synthetic security” or other integrated transaction for U.S. federal income tax purposes; (viii) persons that own (or are deemed to own) 10 per cent. or more of the voting shares (or interests treated as equity) of the Issuer; (ix) partnerships, pass-through entities, or persons that hold the Structured Products through partnerships or pass-through entities; and (x) persons that have a “functional currency” other than the U.S. dollar. In addition, this summary does not address

91 TAXATION

alternative minimum tax consequences or the indirect effects on the holders of interests in a holder of the Structured Products. This summary also does not describe any tax consequences arising under the laws of any taxing jurisdiction other than the U.S. federal government.

This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury regulations and judicial and administrative interpretations thereof, in each case as in effect or available on the date of this Base Listing Document. All of the foregoing is subject to change, and any such change may apply retroactively and could affect the tax consequences described below.

As used in this section, the term Non-U.S. Holder means a beneficial owner of the Structured Products that is not for U.S. federal income tax purposes: (i) a citizen or individual resident of the United States; (ii) a corporation (or other entity treated as a corporation) created or organised in or under the laws of the United States or any state thereof (including the District of Columbia); (iii) any estate the income of which is subject to U.S. federal income tax regardless of its source; or (iv) any trust if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust. If a partnership holds the Structured Products, the tax treatment of a partner generally will depend upon the status of the partner and upon the activities of the partnership. Partners of partnerships holding the Structured Products should consult their own tax advisers.

Prospective purchasers of the Structured Products are urged to consult their own tax advisers concerning the U.S. federal, state, local and foreign tax consequences of owning the Structured Products in light of their own particular circumstances (including whether the Non-U.S. Holder would be treated as a dealer for U.S. federal income tax purposes).

Taxation of Non-U.S. Holders

Subject to the backup withholding rules discussed below, a Non-U.S. Holder generally should not be subject to U.S. federal income or withholding tax on any payments on the Structured Products or gain from the sale, exchange or other disposition of the Structured Products unless: (i) that payment or gain is effectively connected with the conduct by that Non-U.S. Holder of a trade or business within the United States; (ii) in the case of any gain realised on the sale, exchange or other disposition of a Structured Product by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition and certain other conditions are met; (iii) the Non-U.S. Holder is subject to tax pursuant to provisions of the Code applicable to certain U.S. expatriates; or (iv) in the case of payments made after 31 December 2013 on Structured Products issued after 31 December 2012 or any gain from the sale, exchange or other disposition after 31 December 2014 of such Structured Products, the Non-U.S. Holder has not provided to the Issuer or the Paying Agent all required information with respect to its direct and indirect U.S. owners or, if the Structured Products are held through a “foreign financial institution” (as defined under Sections 1471 through 1474 of the Code), such foreign financial institution has not entered into an agreement with the U.S. government to collect and provide to the IRS information about its direct and indirect U.S. accountholders and investors, or such foreign financial institution has entered into such an agreement and the Non-U.S. Holder has not provided all required information to such foreign financial institution.

Non-U.S. Holders should consult their own tax advisers regarding the U.S. federal income and other tax consequences of purchasing, owning and disposing of the Structured Products.

On 7 December 2007, the United States Internal Revenue Service (the IRS) issued a notice (the Notice) that may affect the taxation of holders of certain securities that are not classified as debt for U.S. federal income tax purposes. According to the Notice, the IRS and the United States Treasury Department (the Treasury) are considering whether holders of certain securities sometimes referred to as pre-paid forward contracts should be required to accrue ordinary income on a current basis, and they are seeking taxpayer comments on the subject. The IRS and the Treasury are also considering a list of other issues raised by such securities, including debt characterisation, possible look-through to the

92 TAXATION

underlying asset for tax treatment and possible application of withholding tax at source in certain circumstances. The Notice also asks for comments identifying other arrangements that raise similar issues regarding the proper U.S. tax treatment of an investor as are raised by pre-paid forward contracts. It is currently impossible to predict what guidance, if any, will be issued as a result of the Notice, and whether any such guidance could have retroactive effect. Accordingly, it is possible that future guidance could be issued as a result of the Notice that would impact the treatment of the Structured Products for U.S. federal income tax purposes, and that such guidance may require withholding on payments made to a Non-U.S. Holder of a Structured Product.

Backup Withholding and Information Reporting

Backup withholding and information reporting requirements may apply to certain payments on the Structured Products and proceeds of the sale, exchange or other disposition of the Structured Products. Non-U.S. Holders may be required to comply with applicable certification procedures (usually on IRS Form W-8BEN) in order to avoid the application of such information reporting requirements and backup withholding. Prospective investors in the Structured Products should consult their own tax advisers as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.

THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER’S PARTICULAR SITUATION. PROSPECTIVE INVESTORS IN THE STRUCTURED PRODUCTS SHOULD CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE STRUCTURED PRODUCTS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.

93 ERISA MATTERS

The United States Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975 of the Code, impose certain restrictions on (a) employee benefit plans (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (b) plans described in and subject to Section 4975 of the Code, including individual retirement accounts and Keogh plans, (collectively, Plans), (c) any entities whose underlying assets include plan assets by reason of a plan’s investment in such entities (together with Plans, the Benefit Plan Investors) and (d) persons who have certain specified relationships to such Plans (“parties in interest” under ERISA and “disqualified persons” under the Code; collectively, Parties in Interest). Section 406 of ERISA and Section 4975 of the Code prohibit Plans from, among other things, engaging in certain transactions involving “plan assets” with persons who are Parties in Interest with respect to such Plan. A violation of these “prohibited transaction” rules may result in the imposition of an excise tax, the recession of the transaction or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption.

Citigroup Global Markets Holdings Inc. and certain affiliates of Citigroup Global Markets Holdings Inc. may each be considered a Party in Interest with respect to many Plans. Consequently, certain transactions that the Citigroup Global Market Holding Inc. and certain affiliates of Citigroup Global Markets Holdings Inc. might enter into, or may have entered into, in the ordinary course of business might constitute or result in non-exempt prohibited transactions under ERISA and Section 4975 of the Code.

Accordingly, the Structured Products may not be acquired by any Benefit Plan Investors.

Certain other employee benefit plans which are not Benefit Plan Investors including governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), and non-U.S. plans (as described in Section 4(b)(4) of ERISA)) may be subject to federal, state, local or non-U.S. laws or regulations which are substantially similar to the prohibited transaction provisions of ERISA or Section 4975 of the Code. Fiduciaries of such plans should consult with their counsel before investment in any of the Structured Products or any interest therein.

94 PLACING AND SALE AND TRANSFER RESTRICTIONS

General

No action has or will be taken by the Issuer that would permit a public offering of the Structured Products or possession or distribution of any offering material in relation to the Structured Products in any jurisdiction where action for that purpose is required (other than in Hong Kong). No offers, sales or deliveries of any Structured Products, or distribution of any offering material relating to the Structured Products, may be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws or regulations and will not impose any obligation on the Issuer. In the event that the Issuer contemplates a placing, placing fees may be payable in connection with any issue and the Issuer may at its discretion allow discounts.

United States

No issue of the Structured Products has been, or will be, registered under the United States Securities Act of 1933, as amended (the Securities Act) or any U.S. State securities laws. Accordingly, the Structured Products may be offered only outside the United States to non-U.S. Persons in reliance upon Regulation S under the Securities Act (Regulation S).

No issue of Structured Products, or interests therein, may at any time be offered, sold, resold or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person or to others for offer, sale, resale or delivery, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person. Offers, sales, resales or deliveries of an issue of Structured Products, or interests therein, directly or indirectly, in the United States or to, or for the account or benefit of, U.S. persons would constitute a violation of United States securities laws unless made in compliance with the registration requirements of the Securities Act or any applicable U.S. State securities laws or pursuant to an exemption therefrom. As used herein, United States means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; and U.S. person has the meaning given in Regulation S under the Securities Act.

Each holder of a Structured Product and each beneficial owner of a Structured Product purchasing Structured Products outside the United States in reliance upon Regulation S, as a condition to purchasing or owning such Structured Products or any beneficial interest therein, will be deemed to (1) acknowledge that such Structured Products will not be registered under the Securities Act or any applicable U.S. State securities laws, and may not be offered, sold or delivered, directly or indirectly, except as set forth herein and (2) represent that it and any person for whose account or benefit the Structured Products are being purchased is not a U.S. Person, that it is located outside the U.S., who was not solicited to purchase the Structured Products while present in the U.S. and (3) agree that if it should resell or otherwise transfer the Structured Products, it will do so only to a non-U.S. person in an offshore transaction in compliance with Rule 903 or 904 under the Securities Act.

The Structured Products in definitive form will bear the following legend:

THE STRUCTURED PRODUCTS EVIDENCED HEREBY REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES AND, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT IN ACCORDANCE WITH THE REGISTRAR’S AGREEMENT AND PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING OR ACCEPTING THE STRUCTURED PRODUCTS EVIDENCED HEREBY, AGREES FOR THE BENEFIT OF THE ISSUER AND THE RELEVANT DEALERS THAT IT WILL RESELL

95 PLACING AND SALE AND TRANSFER RESTRICTIONS

OR OTHERWISE TRANSFER THE STRUCTURED PRODUCTS EVIDENCED HEREBY ONLY TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT.

Each purchaser of Structured Products acknowledges that the Issuer, the Guarantor and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations or agreements deemed to have been made by it by its purchase of Structured Products are no longer accurate, it shall promptly notify the Issuer. If it is acquiring any Structured Products as a fiduciary or agent for one or more accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account.

As used herein, U.S. means the United States of America (including the States and the District of Columbia), its territories and possessions; and U.S. Person has the meaning defined in Regulation S.

Public Offer Selling Restriction under the Prospectus Directive

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) the Structured Products may not be offered to the public in that Relevant Member State, except that, with effect from and including the Relevant Implementation Date, the Structured Products may be offered to the public in that Relevant Member State:

(a) if the final terms in relation to the Structured Products specify that an offer of those Structured Products may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a Non-exempt Offer), following the date of publication of a prospectus in relation to such Structured Products which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the final terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or final terms, as applicable and the Issuer has consented in writing to its use for the purpose of that Non-exempt Offer;

(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(c) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or

(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no Structured Products referred to in (b) to (d) above shall require the Issuer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an offer of Structured Products to the public in relation to any Structured Products in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Structured Products to be offered so as to enable an investor to decide to purchase or subscribe for the Structured Products, as the same may be varied in that Member State by any measure implementing the Prospectus Directive

96 PLACING AND SALE AND TRANSFER RESTRICTIONS

in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.

United Kingdom

All applicable provisions of the Financial Services and Markets Act 2000 (the FSMA) must be complied with in respect of anything done in relation to any Structured Products in, from or otherwise involving the United Kingdom. An invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) may only be communicated or caused to be communicated in connection with the issue or sale of any Structured Products in circumstances in which Section 21(1) of the FSMA would not, if the Issuer was not an authorised person, apply to the Issuer.

Hong Kong

No person has issued or had in its possession for the purposes of issue, or will issue, or have in its possession for the purposes of issue, any advertisement, invitation or document relating to the Structured Products, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Structured Products which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571) and any rules made thereunder.

97 INFORMATION RELATING TO THE ISSUER

Citigroup Global Markets Holdings Inc. (CGMHI), operating through its subsidiaries, engages in full-service investment banking and securities brokerage business. As used in this description, Citigroup Global Markets and the Company refer generally to CGMHI and its consolidated subsidiaries, and where the context requires refer to specific subsidiaries. Citigroup Global Markets operates in two business segments: (i) Institutional Clients Group and (ii) Brokerage and Asset Management.

CGMHI’s parent, Citigroup Inc. (Citigroup), is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services. Citigroup has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citigroup operates, for management reporting purposes, via two primary business segments: (i) Citicorp, consisting of Citigroup’s Regional Consumer Banking businesses and Institutional Clients Group; and (ii) Citi Holdings, consisting of Citigroup’s Brokerage and Asset Management and Local Consumer Lending businesses, and a Special Asset Pool. There is also a third segment, Corporate/Other.

The principal offices of CGMHI are located at 388 Greenwich Street, New York, New York 10013, telephone number (212) 816-6000. CGMHI was incorporated in New York on 23 February 1977 and is the successor to Salomon Smith Barney Holdings Inc., a Delaware corporation, following a statutory merger effective on 1 July 1999, for the purpose of changing its state of incorporation. On 7 April 2003, CGMHI filed a Restated Certificate of Incorporation in the State of New York changing its name from Salomon Smith Barney Holdings Inc. to Citigroup Global Markets Holdings Inc.

Institutional Clients Group

Institutional Clients Group (ICG) includes Securities and Banking. ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of products and services, including cash management, foreign exchange, trade finance and services, securities services, sales and trading, institutional brokerage, underwriting, lending and advisory services.

Securities and Banking offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors and high-net-worth individuals. Securities and Banking transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products. Securities and Banking includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, derivative services and private banking. Securities and Banking revenue is generated primarily from fees and spreads associated with these activities. Securities and Banking earns fee income for assisting clients in clearing transactions, providing brokerage services and other such activities. In addition, as a market maker, Securities and Banking facilitates transactions, including by holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products.

Brokerage and Asset Management

Brokerage and Asset Management consists of Citigroup’s global retail brokerage and asset management businesses. This segment was substantially reduced in size due to the sale in 2009 of Smith Barney to the Morgan Stanley Smith Barney joint venture (MSSB JV) and of Nikko Cordial Securities. Morgan Stanley has options to purchase Citigroup’s remaining stake in the MSSB JV over three years starting in 2012.

98 INFORMATION RELATING TO THE ISSUER

Directors

The directors of CGMHI are as follows:

Name Title

James A. Forese Chairman Chief Executive Officer President John Havens Director

The business address of each director of CGMHI in his capacity as such is 388 Greenwich Street, New York, NY 10013, United States of America.

Information on the Share Capital

The authorised and issued share capital of CGMHI is U.S.$10 divided into 1,000 shares of par value U.S.$0.01. In addition, as at 31 December 2011, CGMHI had additional paid-in capital of U.S.$4,990 million.

99 INFORMATION RELATING TO THE GUARANTOR

The Guarantor was originally organised on 16 June 1812 and now is a national banking association organised under the National Bank Act of 1864 of the United States of America. The Guarantor is an indirect wholly owned subsidiary of Citigroup Inc., a Delaware holding company. As of 31 December 2011, the total assets of the Guarantor and its consolidated subsidiaries represented approximately 60 per cent. of the total assets of Citigroup Inc. and its consolidated subsidiaries.

The Guarantor is a commercial bank that, along with its subsidiaries and affiliates, offers a wide range of banking and trust services to its customers throughout the United States and the world. As a national bank, the Guarantor is a regulated entity permitted to engage only in banking and activities incidental to banking. The Guarantor is regulated by the Office of the Comptroller of the Currency (the Comptroller), which also examines its loan portfolios and reviews the sufficiency of its allowance for credit losses.

The Guarantor’s deposits at its U.S. branches are insured by the Federal Deposit Insurance Corporation (the FDIC) and are subject to FDIC insurance assessments. The Structured Products are not insured by the FDIC or any other regulatory agency of the United States or any other jurisdiction. The Guarantor may, under certain circumstances, be obligated for the liabilities of its affiliates that are FDIC-insured depository institutions.

Under U.S. law, deposits in U.S. offices and certain claims for administrative expenses and employee compensation against a U.S. insured depository institution which has failed will be afforded a priority over other general unsecured claims, including deposits in non-U.S. offices and claims under non-depository contracts in all offices, against such an institution in the “liquidation or other resolution” of such an institution by any receiver. Such priority creditors (including the FDIC, as the subrogee of insured depositors) of such FDIC-insured depository institution will be entitled to priority over unsecured creditors in the event of a “liquidation or other resolution” of such institution.

For further information regarding the Guarantor, reference is made to the Annual Report on Form 10-K of Citigroup Inc. and its subsidiaries for the year ended 31 December 2011, filed by Citigroup Inc. with the U.S. SEC. Copies of Citigroup Inc.’s 10-K may be obtained, upon payment of a duplicating fee, by writing to the U.S. SEC at 100 F Street, N.E., Washington, D.C. 20549. In addition, Citigroup Inc.’s 10-K is available at the U.S. SEC’s web site (http://www.sec.gov).

In addition, the Guarantor submits quarterly to the Comptroller certain reports called “Consolidated Reports of Condition and Income for a Bank With Domestic and Foreign Offices” (Call Reports). The Call Reports are on file with, and publicly available at, the Comptroller’s offices at 250 E Street, SW, Washington, D.C. 20219 and are also available on the web site of the FDIC (http:// www.fdic.gov). Each Call Report consists of a Balance Sheet, Income Statement, Changes in Equity Capital and other supporting schedules at the end of and for the period to which the report relates.

Any of the reports referenced above are available upon request without charge from Citi Document Services by calling toll-free at (877) 936-2737 (outside the United States at (716) 730-8055), by e-mailing a request to [email protected] or by writing to: Citi Document Services, 540 Crosspoint Parkway, Getzville, New York 14068.

100 FORM OF DEED OF GUARANTEE

Date:

Ladies & Gentlemen:

From time to time, Citigroup Global Markets Holdings Inc. (CGMHI) issues warrants or callable bull/bear contracts (each, a Structured Product) that are listed on the Stock Exchange of Hong Kong Limited. Terms defined in the applicable terms and conditions of the Structured Products and not otherwise defined in this Guarantee shall have the same meaning when used in this Guarantee.

This guarantee is given by Citibank, N.A. (Citibank) in favor of each person who is for the time being shown in the register kept by the Registrar (each such person, a Beneficiary) as entitled to a particular number of Guaranteed Structured Products. Guaranteed Structured Products means:

(i) all Structured Products issued before and still outstanding as of the date of this Guarantee; and

(ii) all Structured Products issued or to be issued on or after the date of this Guarantee in relation to which Citibank is shown as the guarantor in the applicable terms and conditions of the Structured Products.

Citibank hereby agrees in accordance with the following:

1. Citibank as primary obligor unconditionally and irrevocably guarantees to the Beneficiaries by way of continuing guarantee the due and punctual payment of the obligations of CGMHI in accordance with the provisions of the Guaranteed Structured Products (Obligations) subject to the terms set forth below (this Guarantee).

2. This Guarantee is a guarantee of payment when due and not of collection.

3. Citibank waives any right to require that any Beneficiary seek recourse to any security held by or on behalf of such Beneficiary for payment of the Obligations, or such Beneficiary make demand, proceed or take any other steps against CGMHI before claiming under this Guarantee, or in the event that CGMHI becomes subject to any bankruptcy, winding-up, administration, reorganization or similar proceedings, that such Beneficiary file any claim relating to the Obligations.

4. The obligations of Citibank under this Guarantee constitute general unsecured contractual obligations of Citibank and will rank equally (save for certain obligations required to be preferred by law) with all other unsecured and unsubordinated obligations of Citibank. The obligations of Citibank under this Guarantee shall in no way be impaired by:

¼ any extension, amendment, modification or renewal of the Guaranteed Structured Products or of the Obligations;

¼ any waiver of any event of default, extension of time, any consent by a Beneficiary or failure or delay to enforce any of the Obligations;

¼ any change in the corporate structure of CGMHI, or any insolvency, bankruptcy, winding-up, liquidation, reorganization or other similar proceeding affecting CGMHI or its assets;

¼ any extension, moratorium or other relief granted to CGMHI pursuant to any applicable law or statute; or

¼ any invalidity, irregularity or unenforceability of the Guaranteed Structured Products,

101 FORM OF DEED OF GUARANTEE

provided, however, that full performance of an Obligation by CGMHI in accordance with the provisions of the Guaranteed Structured Products shall constitute an absolute bar to any claim under this Guarantee by any Beneficiary in respect of such Obligation.

5. This Guarantee and the obligations of Citibank hereunder shall continue in operation for so long as any Guaranteed Structured Product remains outstanding. Citibank further agrees that this Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligations or interest thereon is avoided, reduced, rescinded or must otherwise be restored or returned by such Beneficiary upon the bankruptcy, insolvency, dissolution or reorganisation of CGMHI, and such Beneficiary shall be entitled to recover the amount of any such payment from Citibank subsequently as if such settlement or discharge had not occurred. Furthermore, the obligations of Citibank hereunder are additional to, and not instead of, any security or other guarantee or indemnity at any time existing in favour of a Beneficiary, whether from Citibank or otherwise.

6. Subject to Section 8 and the last paragraph of this Guarantee, all payments by Citibank shall be made in the manner, at the place and in the currency required by the applicable terms and conditions of the Guaranteed Structured Products. Citibank further agrees that all payments to be made hereunder shall be made without setoff or counterclaim and free and clear of, and without deduction for, any taxes, levies, imposts, duties, charges, fees, deductions, withholdings or restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed by any country or by any political subdivision or taxing authority thereof or therein (Taxes). If any Taxes are required to be withheld from any amounts payable to any Beneficiary hereunder, the amounts so payable to such Beneficiary shall be increased to the extent necessary to yield to such Beneficiary (after payment of all Taxes) the amounts payable hereunder in the full amounts so to be paid. Notwithstanding the foregoing, Citibank shall have no liability under this Guarantee for any Taxes imposed, levied, collected, withheld or assessed solely by reason of the failure of a Beneficiary or any other person to comply with applicable certification, identification, documentation or other informational reporting requirements, if such compliance is required by a statute or regulation of the United States or by an income tax treaty to which the United States is a party as a precondition to exemption from such Taxes.

7. Citibank shall as a primary obligation indemnify each Beneficiary as a result of the Obligations being or becoming void, voidable or unenforceable for any reason whatsoever, whether or not known to such Beneficiary, and the amount of such loss shall be the amount which such Beneficiary would have otherwise been entitled to recover from the CGMHI. Any sums of money that are due under this Guarantee and which may not be recoverable from Citibank as a result of legal limitation on or disability or incapacity of Citibank or any other fact or circumstances, whether or not known to Citibank, shall be recoverable from Citibank on an indemnity basis, and Citibank shall for purposes of this Guarantee be deemed to be a principal debtor.

8. If by reason of any applicable law or arbitral award, judicial or administrative decision or judgment, a payment under this Guarantee is paid in a currency (the Other Currency) other than the currency specified in the terms and conditions of the Guaranteed Structured Products (the Contractual Currency), Citibank shall (i) indemnify the Beneficiaries from and against any loss resulting from the difference between the rate of exchange of the Other Currency as of the date of such award, decision or judgment and the rate at which a Beneficiary is actually able to purchase the Contractual Currency upon the actual receipt of payment in the Other Currency and (ii) be entitled to a refund, as promptly as possible, of any excess of the Other Currency over the amount necessary to purchase the requisite amount of the Contractual Currency.

102 FORM OF DEED OF GUARANTEE

9. Citibank shall be subrogated to all rights of the Beneficiary against CGMHI in respect of any amounts paid by or deliveries made by Citibank under this Guarantee, provided that Citibank shall not be entitled to receive any payments or deliveries arising out of, or based upon, such right of subrogation or any right of indemnity or other right until the payment of all moneys payable or delivery of all deliverables under this Guarantee have been made. If upon the bankruptcy, winding-up, administration, reorganization or similar proceedings of CGMHI, any payment or distribution of assets of CGMHI of any kind or character, whether in cash, property or securities, shall be received by Citibank before payment in full of all moneys payable or delivery of all deliverables under this Guarantee shall have been made to such Beneficiary, Citibank will promptly following receipt thereof pay or deliver such payment or distribution to such Beneficiary for application to any Obligations owing to such Beneficiary, whether matured or unmatured.

10. This Guarantee shall take effect as a Deed Poll for the benefit of the Beneficiaries from time to time and for the time being. This Guarantee shall be deposited with and held by the person appointed by CGMHI as agent for the Guaranteed Structured Products until all the obligations of Citibank have been discharged in full.

11. Every Beneficiary has the right to the production of, and to obtain (upon payment of a reasonable charge) a copy of, this Guarantee. Citibank further acknowledges that the obligations binding upon it contained herein are owed to, and shall be for the account of, each and every Beneficiary, and that each Beneficiary shall be entitled severally to enforce the said obligations against Citibank.

12. All notices or communications under this Guarantee to the Beneficiary shall be validly given if published in English and in Chinese on the website of Hong Kong Exchanges and Clearing Limited. Such notices or communications shall be deemed to have been given on the date of the first such publication.

13. This Guarantee and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with Hong Kong law. The courts of Hong Kong are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guarantee (including a dispute relating to any non-contractual obligations arising out of or in connection with it) and accordingly any legal action or proceedings (together referred to as the Proceedings) arising out of or in connection with this Guarantee may be brought in such courts. Nothing contained in this Guarantee shall limit any right to take Proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any other court of competent jurisdiction preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. Citibank shall be obligated to perform or make payment hereunder only in Hong Kong.

14. Citibank irrevocably and unconditionally appoints Citigroup Global Markets Asia Limited at its registered office for the time being as its agent for service of process in Hong Kong in respect of any Proceedings.

Citibank hereby warrants, represents and covenants with each Beneficiary that it has all power, that it has obtained all necessary governmental consents and authorizations, and that it has taken all necessary steps, in each case, to enable it to execute, deliver and perform this Guarantee and that this Guarantee constitutes legal, valid and binding obligations of Citibank in accordance with its terms.

Citibank shall have no obligation to make payment or take action hereunder during any period when payment or performance by CGMHI, in accordance with the provisions of the Guaranteed Structured Products, would constitute a violation of any applicable laws (other than bankruptcy, liquidation, reorganization or similar laws affecting the enforcement of the rights of creditors generally).

103 FORM OF DEED OF GUARANTEE

IN WITNESS WHEREOF, Citibank, N.A. has caused these presents to be executed by its duly authorized officer this day of two thousand twelve.

Very truly yours,

CITIBANK, N.A.

By: Vice President

104 GENERAL INFORMATION

1. Are the Issuer and the Guarantor regulated by any bodies under the rules?

The Issuer has not established a place of business in Hong Kong and is not regulated by any of the bodies referred to in rule 15A.13(2) or (3) of the rules.

The Guarantor is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and also by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB). The foreign branch representative offices and subsidiaries of the Guarantor are subject to regulation and examination by their respective foreign financial regulators as well as by the OCC and the FRB.

The Guarantor is a licensed bank regulated by the Hong Kong Monetary Authority and a registered institution under the Securities and Futures Ordinance (Cap. 571) of Hong Kong to carry on type 1 (Dealing in Securities), type 4 (Advising on Securities), type 6 (Advising on Corporate Finance) and type 9 (Asset Management) regulated activities.

2. Have the Issuer and the Guarantor been rated by any credit rating agency?

As at the date of this document, the senior long term debt of the Issuer was rated A- (negative outlook) by Standard and Poor’s Ratings Group; A3 (ratings under review for possible downgrade) by Moody’s Investors Service, Inc.; and A (stable) by Fitch Ratings Ltd., in each case based on related guarantees issued by Citigroup Inc.

As at the date of this document, the senior long term debt of the Guarantor was rated A (negative outlook) by Standard and Poor’s Ratings Group; A1 (ratings under review for possible downgrade) by Moody’s Investors Service, Inc. and A (stable) by Fitch Ratings Ltd.

Rating agencies usually receive a fee from the issuers and the guarantors that they rate. The structured products to be issued pursuant to this programme will not be rated.

3. How are dealings in the structured products settled?

Dealings in the securities on the Stock Exchange are required to be settled within two trading days from the transaction date. Such settlement must be effected, for so long as the securities are admitted for deposit, clearing and settlement in CCASS, through CCASS. Dealings in the structured products will take place in the relevant Board Lots in the settlement currency specified in the relevant Supplemental Listing Document. You should refer to the terms and conditions of the relevant structured products for further details.

4. Do the Stock Exchange and the Securities and Futures Commission charge any fees?

The Stock Exchange charges a trading fee of 0.005 per cent. and the Securities and Futures Commission charges a transaction levy of 0.003 per cent. in respect of each transaction effected on the Stock Exchange payable by each of the seller and the buyer and calculated on the value of the consideration for the relevant securities. The levy for the investor compensation fund is currently suspended. Under the terms and conditions of the structured products, you are required to pay all charges arising on the transfer of underlying shares following the exercise of structured products.

5. Who is the authorised representative of the Issuer?

The authorised representative of the Issuer is Mr. Harold Kim of 47th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong.

105 GENERAL INFORMATION

6. Are there any experts/auditors involved?

The independent auditors of the Issuer and the Guarantor, KPMG LLP, have given and have not withdrawn their written consent to the inclusion of their reports dated 30 April 2012 and 23 March 2012 respectively, and their name, in this document in the form and context in which they are included. The reports were not prepared for incorporation in this document. The auditors of the Issuer and the Guarantor do not have any shareholding in the Issuer or the Guarantor or in any member of the group, nor do they have the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for the securities or securities in any member of the group.

7. Who has been authorised to accept service of process on the Issuer and the Guarantor?

Citigroup Global Markets Asia Limited of 50th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong, has been authorised to accept service of process and any other notices required to be served on the Issuer and/or the Guarantor.

8. Who is authorised to give information or make representations?

No person has been authorised to give any information or make any representations other than those contained in this document and the applicable supplemental listing document. If any person gives any such information or makes any such representations you should not rely on them as having been authorised by the Issuer and/or the Guarantor.

9. Where can you find out information about the Issuer and the Guarantor?

You may inspect copies of the following documents at the offices of Citigroup Global Markets Asia Limited, which is presently at 50th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong during usual business hours on any weekday (Saturdays, Sundays and holidays excepted):

(a) a copy of this document and any addendum to this document (both the English version and the Chinese translation);

(b) a copy of the latest publicly available annual report and interim financial statements (if any) of the Issuer and the Guarantor; and

10. Are the Issuer or the Guarantor involved in any litigation?

Other than as may be disclosed in this Base Listing Document and/or in Exhibits A, B and D, the Issuer and the Guarantor are not involved in any litigation, claims or arbitration proceedings which are material in the context of the issue of the structured products, and the Issuer and the Guarantor are not aware of any such proceedings or claims which are threatened or pending against the Issuer or the Guarantor.

11. Has there been any material adverse change?

Other than as may be disclosed in this Base Listing Document and/or in Exhibits A, B and D, there has been no material adverse change in the financial or trading position or prospects or indebtedness of the Issuer or the Guarantor since 31 December 2011.

If, after the date of this document, you receive this document or purchase any Structured Products issued pursuant to this document you should not assume that there have been no changes in the affairs or financial condition of the Issuer or the Guarantor since the date of this document. You should ask

106 GENERAL INFORMATION

the Issuer or the Guarantor if they have published any addenda to this document or any subsequent base listing document relating to the programme. Any such addenda will be available for inspection in the manner described under the section headed “Where can you find out information about the Issuer and the Guarantor?” above.

107 EXHIBIT A

AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF THE ISSUER AND SUBSIDIARIES AS OF AND FOR THE TWO YEARS ENDED 31 DECEMBER 2011, INDEPENDENT AUDITORS’ REPORT THEREON AND OTHER INFORMATION

The information in this Exhibit A has been reproduced from the annual financial statements of the Issuer for the year ended 31 December 2011. References to dollars and $ in this Exhibit A, unless otherwise stated, are to U.S. dollars.

108 EXHIBIT A

CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Independent Auditors’ Report 110

Consolidated Financial Statements Consolidated Statements of Operations – For the Years Ended December 31, 2011, 2010 and 2009 111 Consolidated Statements of Financial Condition – December 31, 2011 and 2010 112 Consolidated Statements of Changes in Stockholder’s Equity – For the Years Ended December 31, 2011, 2010 and 2009 114 Consolidated Statements of Cash Flows – For the Years Ended December 31, 2011, 2010 and 2009 115 Notes to Consolidated Financial Statements 116

109 EXHIBIT A

Independent Auditors’ Report

The Board of Directors Citigroup Global Markets Holdings Inc.:

We have audited the accompanying consolidated statements of financial condition of Citigroup Global Markets Holdings Inc. and subsidiaries (the Company) (a direct, wholly-owned subsidiary of Citigroup Inc.) as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholder’s equity, and cash flows for each of the years in the three-year period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citigroup Global Markets Holdings Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 2010 the Company changed its method of accounting for qualifying special purpose entities and variable interest entities.

April 30, 2012

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

In millions of dollars Year ended December 31 2011 2010 2009 Revenues: Investment banking $ 2,382 $ 3,021 $ 4,156 Commissions 1,851 1,764 2,528 Principal transactions 953 3,460 3,361 Asset management and administration fees 203 232 1,306 Gain on sale of Smith Barney and Managed Futures businesses – – 11,775 Other 2,005 1,540 1,840 Total non-interest revenues 7,394 10,017 24,966 Interest and dividends 6,769 7,308 9,209 Interest expense 4,866 4,212 4,723 Net interest and dividends 1,903 3,096 4,486 Revenues, net of interest expense 9,297 13,113 29,452 Non-interest expenses: Compensation and benefits 5,778 5,671 6,859 Communications 979 921 1,073 Floor brokerage and other production 913 836 945 Professional services 363 404 507 Occupancy and equipment 259 278 427 Advertising and market development 255 184 160 Other operating and administrative expenses 1,799 1,827 1,160 Total non-interest expenses 10,346 10,121 11,131 Income (loss) before income taxes (1,049) 2,992 18,321 Provision (benefit) for income taxes (283) 948 6,731 Net income (loss) before attribution of noncontrolling interests (766) 2,044 11,590 Net income (loss) attributable to noncontrolling interests 24 53 (18) CGMHI’s net income (loss) $ (790) $ 1,991 $11,608

See Notes to the Consolidated Financial Statements.

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

In millions of dollars, except as noted December 31, 2011 December 31, 2010 Assets Cash and cash equivalents $ 21,692 $ 31,202 Cash segregated and on deposit for Federal and other regulations or deposited with clearing organizations 13,635 15,635

Collateralized short-term financing agreements: Securities purchased under agreements to resell (including $99,272 and $86,935 as of December 31, 2011 and 2010, respectively, at fair value) $110,010 $101,315 Deposits paid for securities borrowed (including $43,180 and $0 at fair value as of December 31, 2011 and 2010, respectively 110,589 105,177 220,599 206,492

Trading account assets (including $95 billion and $103 billion pledged to creditors at December 31, 2011 and 2010, respectively): Mortgage-backed securities 27,683 29,814 Equity securities 21,404 24,671 Foreign government securities 20,313 17,276 Corporate 18,921 29,329 U.S. Treasury and federal agency 17,543 14,948 Derivatives 16,678 18,768 Asset-backed securities 5,380 4,203 State and municipal securities 4,031 5,622 Other debt securities 383 236 132,336 144,867

Receivables: Customers 20,860 22,234 Loans to affiliates 16,424 12,395 Brokers, dealers and clearing organizations 5,923 7,525 Other 3,997 3,161 47,204 45,315

Property, equipment and leasehold improvements, net of accumulated depreciation and amortization of $1,543 and $1,363 at December 31, 2011 and 2010, respectively 1,118 1,303 Goodwill 2,293 2,295 Other assets 10,632 23,259 Total assets $449,509 $470,368

See Notes to the Consolidated Financial Statements.

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

In millions of dollars, except shares December 31, 2011 December 31, 2010 Liabilities Short-term borrowings (including $189 and $218 at December 31, 2011 and 2010, respectively, at fair value) $ 44,205 $ 68,941

Collateralized short-term financing agreements: Securities sold under agreements to repurchase (including $111,900 and $121,112 as of December 31, 2011 and 2010, respectively, at fair value) $150,397 $ 139,043 Deposits received for securities loaned 25,227 24,806 175,624 163,849

Trading account liabilities: Derivatives 26,333 35,225 Foreign government securities 18,245 13,713 U.S. Treasury and federal agency 17,925 16,194 Equity securities 12,619 11,751 Corporate and other debt securities 5,901 7,285 81,023 84,168 Payables and accrued liabilities: Customers 46,593 42,148 Brokers, dealers and clearing organizations 7,454 6,203 Other 19,726 19,817 73,773 68,168

Long-term debt (including $2,392 and $3,417 at December 31, 2011 and 2010, respectively, at fair value) 66,842 69,653 Total liabilities 441,467 454,779

CGMHI stockholder’s equity Common stock (par value $.01 per share, 1,000 shares authorized; 1,000 shares issued and outstanding) – – Additional paid-in capital 4,990 11,639 Retained earnings 2,911 3,701 Accumulated other comprehensive income (loss) (253) (166) Total CGMHI stockholder’s equity 7,648 15,174 Noncontrolling interest 394 415 Total equity 8,042 15,589 Total liabilities and equity $449,509 $470,368

See Notes to the Consolidated Financial Statements.

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

Year ended December 31 In millions of dollars 2011 2010 2009 Common stock and additional paid-in capital Balance, beginning of year $11,639 $17,464 $16,725 Capital contribution from Parent – 394 149 Capital distributions to Parent (7,103) (7,519) (328) Employee benefit plans 454 1,300 812 Gains on sales of subsidiaries and affiliates to Citigroup – – 106 Balance, end of year 4,990 11,639 17,464 Retained earnings (accumulated deficit) Balance, beginning of year 3,701 1,710 (8,940) Net income (loss) (790) 1,991 11,608 Dividends – – (958) Balance, end of year 2,911 3,701 1,710 Accumulated other comprehensive income (loss) Balance, beginning of year (166) (152) (3) Pension liability adjustment, net of taxes 80 (16) (86) Net change in foreign currency translation adjustment, net of taxes (167) 7 (57) Other – (5) (6) Net change in Accumulated other comprehensive income (loss) (87) (14) (149) Balance, end of year (253) (166) (152) Total CGMHI stockholder’s equity 7,648 15,174 19,022 Noncontrolling interest Balance, beginning of year 415 428 475 Transactions between CGMHI and the noncontrolling-interest shareholders – – 25 Net income (loss) attributable to noncontrolling-interest shareholders 24 53 (18) Distributions to noncontrolling-interest shareholders (70) (84) – All other 25 18 (54) Net change in noncontrolling interests (21) (13) (47) Balance, end of year 394 415 428 Total equity $ 8,042 $15,589 $19,450

See Notes to the Consolidated Financial Statements.

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31 In millions of dollars 2011 2010 2009 Cash flows from operating activities: Net income (loss) before attribution of noncontrolling interests $ (766) $ 2,044 $ 11,590 Net income (loss) attributable to noncontrolling interests 24 53 (18) CGMHI’s net income (loss) (790) 1,991 11,608 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Deferred tax (benefit) provision (828) 361 7,689 Depreciation and amortization 297 262 275 Provision for credit losses 7 17 129 Net change in: Cash segregated and on deposit for Federal and other regulations or deposited with clearing organizations 2,000 (4,424) 504 Securities purchased under agreements to resell and Deposits paid for securities borrowed (14,107) 13,894 (21,350) Trading account assets 12,530 2,722 18,743 Receivables 2,139 3,030 13,689 Other assets 2,746 1,523 (16,105) Securities sold under agreements to repurchase and Deposits received for securities loaned 11,775 20,606 (56,678) Trading account liabilities (3,145) (6,232) 7,642 Payables and accrued liabilities 5,605 (10,285) (7,079) Net cash provided by (used in) operating activities 18,229 23,465 (40,933) Cash flows from financing activities: Dividends paid – – (958) Capital distributions to Parent (3,103) (7,509) (328) Capital contribution from Parent – 338 – Employee benefit plans 361 1,204 802 Proceeds from issuance of term debt 12,735 9,014 25,368 Term debt maturities and repurchases (12,046) (14,266) (26,187) Net decrease in short-term borrowings (24,736) (4,877) (23,349) Net cash used in financing activities (26,789) (16,096) (24,652) Cash flows from investing activities: Loans to affiliates (854) 3,503 58,262 Property, equipment, leasehold improvements, and sales of subsidiaries (96) 174 1,349 Net cash provided by (used in) investing activities (950) 3,677 59,611 Net increase (decrease) in cash and cash equivalents (9,510) 11,046 (5,974) Cash and cash equivalents at beginning of year 31,202 20,156 26,130 Cash and cash equivalents at end of year $ 21,692 $ 31,202 $ 20,156 Cash paid during the year for interest $ 5,084 $ 5,194 $ 7,311 Supplemental Schedule of Non-cash investing and financing activities Transfer of Investment in MSSB LLC (1) $ 10,675 Capital contribution to Parent (2) $ 4,000

(1) In December 2011, CGMHI transferred its $12.2 billion Investment in Morgan Stanley Smith Barney Holdings LLC (MSSB LLC), including Preferred Securities of $2.0 billion, to affiliates, for $1.5 billion in cash, $7.2 billion in notes receivable and as satisfaction of $3.5 billion in long-term debt. See Note 2 to the Consolidated Financial Statements. (2) CGMHI distributed $4.0 billion in notes receivable from affiliates to Citigroup Inc. as a return of capital. See Notes to the Consolidated Financial Statements.

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CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Citigroup Global Markets Holdings Inc. (CGMHI), a New York Corporation, and its subsidiaries. The Company is a direct wholly-owned subsidiary of Citigroup Inc. (Citigroup). The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries, or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less than 20%-owned entities is recognized when dividends are received. As discussed below, CGMHI consolidates entities deemed to be variable interest entities when CGMHI is determined to be the primary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings, and other investments are included in Other revenue.

Throughout these Notes, “CGMHI” and “the Company” refer to Citigroup Global Markets Holdings Inc. and its consolidated subsidiaries.

Certain reclassifications have been made to the prior-period’s financial statements and notes to conform to the current period’s presentation. For the years ended December 31, 2010 and 2009, this included reclassifications between principal transactions and interest expense of $127 million and $23 million, respectively, to conform to the classification of interest accruals on certain derivative instruments for the year ended December 31, 2011.

Use of Estimates

The Company’s Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. Such estimates are used in connection with certain fair value measurements. See Note 12 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. The Company also uses estimates in determining consolidation decisions for special-purpose entities as discussed in Note 9. Moreover, estimates are significant in determining the amounts of impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and tax reserves. While management makes its best judgment, actual amounts or results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates.

Variable Interest Entities

An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in ASC 810, Consolidation (formerly SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167), which are: (1) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) the entity has equity investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate share of the entity’s expected losses or expected returns.

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Prior to January 1, 2010, the Company consolidated a VIE if it had a majority of the expected losses or a majority of the expected residual returns or both. As of January 1, 2010, when the Company adopted SFAS 167’s amendments to the VIE consolidation guidance, the Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic success and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE (that is, it is the primary beneficiary).

Along with the VIEs that are consolidated in accordance with these guidelines, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary. These include certain collateralized debt obligations (CDOs), and many structured finance transactions.

However, these VIEs as well as all other unconsolidated VIEs are continually monitored by the Company to determine if any events have occurred that could cause its primary beneficiary status to change. These events include:

• additional purchases or sales of variable interests by the Company or an unrelated third party, which cause the Company’s overall variable interest ownership to change;

• changes in contractual arrangements in a manner that reallocates expected losses and residual returns among the variable interest holders;

• changes in the party that has power to direct activities of a VIE that most significantly impact the entity’s economic performance; and

• providing support to an entity that results in an implicit variable interest.

All other entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810 (formerly Accounting Research Bulletin No. 51, Consolidated Financial Statements, SFAS No. 94, Consolidation of All Majority-Owned Subsidiaries, and EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights).

Foreign Currency Translation

Assets and liabilities of foreign operations are translated from their respective functional currencies into U.S. dollars using period-end spot foreign exchange rates. The effects of those translation adjustments are reported in a separate component of stockholders’ equity, along with related hedge and tax effects, until realized upon sale or liquidation of the foreign operation. Revenues and expenses of foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates.

For transactions whose terms are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations with the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related hedge effects. Instruments used to hedge foreign currency exposures include foreign currency forward and swap contracts and designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.

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Cash and Cash Equivalents

The Company defines cash and cash equivalents as highly liquid investments with original maturities of three months or less at the time of purchase, other than those held for sale in the ordinary course of business.

Cash Segregated and On Deposit for Federal and Other Regulations or Deposited with Clearing Organizations

Cash segregated and on deposit for Federal and other regulations or deposited with clearing organizations includes cash segregated in compliance with Federal and other regulations and represent funds deposited by customers and funds accruing to customers as a result of trades or contracts, as well as restricted cash.

Trading Account Assets and Liabilities

Trading account assets include debt and marketable equity securities, derivatives in a receivable position, and residual interests in securitizations. Trading account liabilities include securities sold, not yet purchased (short positions), and derivatives in a net payable position, as well as certain liabilities that the Company has elected to carry at fair value (as described in Note 13 to the Consolidated Financial Statements).

All trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities. Certain dividends paid on short positions for equity securities are recorded in Principal Transactions.

Derivatives used for trading purposes include interest rate, currency, equity, credit, and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Statement of Financial Condition when a valid master netting agreement exists and the other conditions set out in ASC 210-20, Balance Sheet – Offsetting are met.

The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 12 to the Consolidated Financial Statements.

Repurchase and Resale Agreements

Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) generally do not constitute a sale for accounting purposes of the underlying securities and so are treated as collateralized financing transactions. The Company executes these transactions to facilitate customer matched-book activity and to efficiently fund a portion of the Company’s trading inventory.

It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary, require prompt transfer of additional collateral in order to maintain contractual margin protection. Collateral typically consists of government and government-agency securities, corporate and municipal bonds, and mortgage-backed and other asset-backed securities. In the event of counterparty default, the financing agreement provides the Company with the right to liquidate the collateral held.

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As set out in Note 13 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a majority of the repo and reverse repo transactions with unaffiliated third parties, with changes in fair value reported in principal transactions. As described in Note 12 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions. Any transactions for which fair value accounting has not been elected, including all repo and reverse repo transactions with related parties, are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.

Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Statement of Financial Condition. Excluding the impact of the allowable netting, reverse repos totaled $160.7 billion and $152.0 billion at December 31, 2011 and 2010, respectively.

Securities Borrowed and Securities Loaned

Securities borrowing and lending transactions generally do not constitute a sale of the underlying securities for accounting purposes, and so are treated as collateralized financing transactions when the transaction involves the exchange of cash. A majority of the securities borrowing and lending agreements are recorded at the amount of cash advanced or received and are collateralized principally by government and government-agency securities and corporate debt and equity securities. Deposits paid for securities borrowed of $43.2 billion were recorded at fair value at December 31, 2011 as the Company elected the fair value option for certain securities borrowed portfolios. Irrespective of whether the Company has elected fair value accounting, fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.

With respect to securities borrowed or loaned, the Company monitors the market value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection. As described in Note 12 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities borrowing transactions.

Repurchase and Resale Agreements, and Securities Lending and Borrowing Agreements, Accounted for as Sales

Where certain conditions are met under ASC 860-10, Transfers and Servicing (formerly FASB Statement No. 166, Accounting for Transfers of Financial Assets), the Company accounts for certain repurchase agreements and securities lending agreements as sales. The key distinction resulting in these agreements being accounted for as sales is a reduction in initial margin or restriction in daily maintenance margin. At December 31, 2011 and December 31, 2010, a nominal amount of these transactions were accounted for as sales that reduced Trading account assets.

Receivables and Payables and Accrued Liabilities – Customers, Brokers, Dealers and Clearing Organizations

The Company has receivables and payables for financial instruments purchased from and sold to brokers, dealers and customers, which arise in the ordinary course of business. The Company is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case the Company would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as counterparty to the transaction and performs for the broker, dealer or customer in question.

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The Company seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, the Company will liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level.

Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to the Company. Credit limits are established and closely monitored for customers and for brokers and dealers engaged in forwards, futures and other transactions deemed to be credit sensitive. Brokerage receivables and brokerage payables are reported net by counterparty when applicable requirements for net presentation are met.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded substantially on a straight-line basis over the lesser of the estimated useful lives of the related assets or noncancelable lease terms, as appropriate. Maintenance and repairs are charged to Occupancy and equipment expense as incurred. Certain internal use software costs are capitalized and amortized on a straight-line basis over the lesser of the estimated useful lives of the related assets or five years.

Goodwill

Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is subject to annual impairment tests, whereby Goodwill is allocated to the Company’s reporting units and an impairment is deemed to exist if the carrying value of a reporting unit exceeds its estimated fair value. Furthermore, on any business dispositions, Goodwill is allocated to the business disposed of based on the ratio of the fair value of the business disposed of to the fair value of the reporting unit.

Intangible Assets

Intangible assets, including customer relationships and software licenses, are amortized over their estimated useful lives. Intangible assets deemed to have indefinite useful lives are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other Intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the Intangible asset.

Securitizations

The Company primarily securitizes mortgages and corporate debt instruments (in cash and synthetic form). There are two key accounting determinations that must be made relating to securitizations. The Company first makes a determination as to whether the securitization entity would be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under U.S. GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary.

The Company consolidates VIEs when it has both: (1) power to direct activities of the VIE that most significantly impact the entity’s economic performance and (2) an obligation to absorb losses or right to receive benefits from the entity that could potentially be significant to the VIE.

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For all other securitization entities determined not to be VIEs in which the Company participates, a consolidation decision is based on who has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by the Company are consolidated.

Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, and residuals. In the case of consolidated securitization entities, these retained interests are not reported on the Company’s Consolidated Statement of Financial Condition; rather, the securitized loans remain on the balance sheet. Retained interests in securitized mortgage loans are classified as Trading account assets.

Debt

Short-term borrowings and long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value.

Transfers of Financial Assets

For a transfer of financial assets to be considered a sale: the assets must have been isolated from the Company, even in bankruptcy or other receivership; the purchaser must have the right to sell the assets transferred or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell the beneficial interests; and the Company may not have an option or obligation to reacquire the assets. If these sale requirements are met, the assets are removed from the Company’s Consolidated Statement of Financial Condition. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Statement of Financial Condition, and the sale proceeds are recognized as the Company’s liability. A legal opinion on a sale is generally obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, those opinions must state that the asset transfer is considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.

For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionally, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.

See Note 9 to the Consolidated Financial Statements for further discussion.

Risk Management Activities – Derivatives Used for Hedging Purposes

The Company manages its exposures to market rate movements outside its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest-rate swaps and foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.

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To qualify as an accounting hedge under the hedge accounting rules, a derivative must be highly effective in offsetting the risk designated as being hedged. The hedge relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge, which includes the item and risk that is being hedged and the derivative that is being used, as well as how effectiveness will be assessed and ineffectiveness measured. The effectiveness of these hedging relationships is evaluated on a retrospective and prospective basis, typically using quantitative measures of correlation with hedge ineffectiveness measured and recorded in current earnings.

If a hedge relationship is found to be ineffective, it no longer qualifies as an accounting hedge and hedge accounting would not be applied. Any gains or losses attributable to the derivatives, as well as subsequent changes in fair value, are recognized in Other revenue or Principal transactions with no offset on the hedged item, similar to trading derivatives.

The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying asset or liability may be an individual item or a portfolio of similar items.

For fair value hedges, in which derivatives hedge the fair value of assets or liabilities, changes in the fair value of derivatives are reflected in Other revenue or Principal transactions, together with changes in the fair value of the hedged item related to the hedged risk. These are expected to, and generally do, offset each other. Any net amount, representing hedge ineffectiveness, is reflected in current earnings. The Company’s fair value hedges are primarily hedges of fixed-rate long-term debt.

For net investment hedges in which derivatives hedge the foreign currency exposure of a net investment in a foreign operation, the accounting treatment will similarly depend on the effectiveness of the hedge. The effective portion of the change in fair value of the derivative, including any forward premium or discount, is reflected in Accumulated other comprehensive income (loss) as part of the foreign currency translation adjustment.

For those hedge relationships that are terminated or when hedge designations are removed, the hedge accounting treatment described in the paragraphs above is no longer applied. Instead, the end-user derivative is terminated or transferred to the trading account. For fair value hedges, any changes in the fair value of the hedged item remain as part of the basis of the asset or liability and are ultimately reflected as an element of the yield.

Employee Benefits Expense

Employee benefits expense includes current service costs of pension and other postretirement benefit plans allocated by the Parent, which are accrued on a current basis, contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits.

Stock-Based Compensation

The Company recognizes compensation expense related to Citigroup stock and option awards over the requisite service period, generally based on the instrument’s grant date fair value, reduced by expected forfeitures. Compensation cost related to awards granted to employees who meet certain age plus years- of-service requirements (retirement eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated charges fluctuate with changes in Citigroup’s stock price.

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Income Taxes

The Company is subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which the Company operates. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.

Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.

Deferred taxes are recorded for the future consequences of events that have been recognized for financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) (now incorporated into ASC 740, Income Taxes), sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more likely than not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is greater than 50% likely to be realized. FIN 48 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.

See Note 5 to the Consolidated Financial Statements for a further description of the Company’s provision and related income tax assets and liabilities.

Investment Banking, Commissions, Asset Management and Administration Fees and Principal Transactions

Investment banking fees are substantially composed of underwriting and advisory revenues. Investment banking fees are recognized when the Company’s performance under the terms of the contractual arrangements is completed, which is typically at the closing of the transaction. Underwriting revenue is recorded net of both reimbursable and non-reimbursable expenses, consistent with the AICPA Audit and Accounting Guide for Brokers and Dealers in Securities (codified in ASC 940-605-05-1). Expenses associated with advisory transactions are recorded in Other operating and administrative expenses, net of client reimbursements. Out-of-pocket expenses are deferred and recognized at the time the related revenue is recognized. In general, expenses incurred related to investment banking transactions that fail to close (are not consummated) are recorded gross in Other operating and administrative expenses.

Trading-related fees primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sale of mutual funds, insurance and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Trading-related fees are recognized when earned in Commissions and Asset management and administration fees. Gains or losses, if any, on these transactions are included in Principal transactions. Principal transactions revenues are recognized on a trade-date basis.

Related Party Transactions

The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative trading, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business. See Note 16 to Consolidated Financial Statements.

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ACCOUNTING CHANGES

Additional Disclosures Regarding Fair Value Measurements

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The ASU requires disclosure of the amounts of significant transfers in and out of Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in Level 3 of the fair value measurement hierarchy are required for fiscal years beginning after December 15, 2010. The Company adopted ASU 2010-06 as of January 1, 2010. The required disclosures are included in Note 12 to the Consolidated Financial Statements.

Elimination of Qualifying Special Purpose Entities (QSPEs) and Changes in the Consolidation Model for VIEs

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166, now incorporated into ASC Topic 860) and SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167, now incorporated into ASC Topic 810). The Company adopted both standards on January 1, 2010. The Company has elected to apply SFAS 166 and SFAS 167 prospectively.

SFAS 166 eliminates the concept of QSPEs from U.S. GAAP and amends the guidance on accounting for transfers of financial assets. SFAS 167 details three key changes to the consolidation model. First, former QSPEs are now included in the scope of SFAS 167. Second, the FASB has changed the method of analyzing which party to a VIE should consolidate the VIE (known as the primary beneficiary) to a qualitative determination of which party to the VIE has “power,” combined with potentially significant benefits or losses, instead of the previous quantitative risks and rewards model. The party that has “power” has the ability to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Third, the new standard requires that the primary beneficiary analysis be re-evaluated whenever circumstances change. The previous rules required reconsideration of the primary beneficiary only when specified reconsideration events occurred.

As a result of implementing these new accounting standards, the Company consolidated certain of the VIEs and former QSPEs with which it had involvement on January 1, 2010. Further, certain asset transfers, including transfers of portions of assets, that would have been considered sales under SFAS 140 are considered secured borrowings under the new standards.

In accordance with SFAS 167, the Company employed three approaches for newly consolidating certain VIEs and former QSPEs as of January 1, 2010. The first approach requires initially measuring the assets, liabilities, and noncontrolling interests of the VIEs and former QSPEs at their carrying values (the amounts at which the assets, liabilities, and noncontrolling interests would have been carried in the Consolidated Financial Statements, if the Company had always consolidated these VIEs and former QSPEs). The second approach measures assets at their unpaid principal amount, and is applied when determining carrying values is not practicable. The third approach is to elect the fair value option, in which all of the financial assets and liabilities of certain designated VIEs and former QSPEs are recorded at fair value upon adoption of SFAS 167 and continue to be marked to market thereafter, with changes in fair value reported in earnings.

The Company consolidated all required VIEs and former QSPEs, as of January 1, 2010, at carrying values or unpaid principal amounts. The impact from those VIEs and former QSPEs that were consolidated for accounting purposes as of January 1, 2010 was an incremental increase in U.S. GAAP assets and liabilities of $1.0 billion, primarily related to the consolidation of mortgage loan securitization entities which increased trading account assets and long-term debt.

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Immaterial Corrections

Gross-up of Interest and dividends and Interest expense with an affiliate

The Company identified an error that resulted in a gross-up of interest income on loans to affiliates and interest expense on short-term borrowings with affiliates by $1,037 million and $1,018 million in the previously issued Consolidated Statements of Operations for the years ended December 31, 2010 and 2009, respectively. This error did not impact net interest income, net income (loss), stockholder’s equity, cash flow or compliance with debt covenants.

The accompanying 2010 and 2009 Consolidated Statements of Operations have been revised to reduce interest income on loans to affiliates to $1,130 million and $1,787 million, respectively, from the previously reported amounts of $2,167 million and $2,805 million, respectively. The accompanying 2010 and 2009 Consolidated Statements of Operations have been revised to reduce interest expense on short- term borrowings with affiliates to $2,102 million and $2,209 million, respectively, from the previously reported amounts of $3,139 million and $3,227 million, respectively.

DVA Accounting Misstatement

In January 2010, the Company determined that an error existed in the process used to value certain liabilities for which the Company elected the fair value option (FVO). The error related to a calculation intended to measure the impact on the liability’s fair value attributable to CGMHI’s credit spreads. Because of the error in the process, both an initial CGMHI contractual credit spread and an initial own- credit valuation adjustment were being included at the time of issuance of new CGMHI FVO debt. The own-credit valuation adjustment was properly included; therefore, the initial CGMHI contractual credit spread should have been excluded. (See Note 13 to the Consolidated Financial Statements for a description of own-credit valuation adjustments.) The cumulative effect of this error from January 1, 2007 (the date that FAS 157 (ASC 820), requiring the valuation of own-credit for FVO liabilities, was adopted) through December 31, 2008 was to overstate income and retained earnings by $47 million ($76 million on a pretax basis). The impact of this adjustment was determined not to be material to the Company’s results of operations and financial position for any previously reported period. Consequently, in the accompanying financial statements, the cumulative effect through December 31, 2008 was recorded in 2009. The change in fair value for these liabilities is reported in Principal transactions in the Company’s Consolidated Statement of Operations.

Taxes on underwriting revenues with affiliate

Citigroup Global Markets Inc. (CGMI), an indirect wholly-owned subsidiary of CGMHI, acted as underwriter on the issuance of Citigroup preferred stock in 2009 and 2008. CGMI earned $550 million and $336 million in underwriting revenues in 2009 and 2008, respectively, on issuances of Citigroup preferred stock. CGMI recorded $210 million and $128 million in intercompany tax payables in 2009 and 2008, respectively, on these revenues. Because this was a preferred stock issuance (i.e. equity issuance and not a debt issuance), the underwriting fees were not deductible by Citigroup. Correspondingly, no cash was due to Citigroup for the tax expense under the consolidated tax allocation agreement, which considers the intercompany underwriting revenue to be non-taxable to CGMI. Accordingly, CGMI should have recorded a capital contribution rather than an intercompany tax payable. The effect of this error was to understate additional paid-in capital by $338 million and $128 million at December 31, 2009 and December 31, 2008, respectively. The impact of this adjustment was determined not to be material to the Company’s financial position for any previously reported period. Consequently, the cumulative effect through December 31, 2009 is recorded in 2010 in the accompanying financial statements.

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Liquidation of affiliate’s super senior CDO positions

During 2009 several CDO structures breached an event of default trigger and control over the liquidation of the vehicles passed to Citibank, N.A. (CBNA) because CBNA held the super senior risk. The collateral held by these CDO vehicles was then liquidated via a blind auction run by an independent third party. In order to ensure that the liquidation is successful, at least one bid must be received for every collateral asset. As super senior holder, CBNA has a vested interest in seeing a successful liquidation, and as such CGMI submitted a bid for every collateral asset (the reserve bid). The bids resulted in immediate losses to CGMI and offsetting gains for CBNA of approximately $320 million pre-tax ($198 million after tax) during 2009. The transfer should have been recorded at fair value and the net loss to CGMI should have been recorded as a capital distribution to CBNA. The effect of this adjustment was to understate the Company’s net income and retained earnings by $198 million ($320 million on a pretax basis), and to overstate additional paid-in capital by $320 million at December 31, 2009. The impact of this adjustment was determined not to be material to the Company’s results of operations and financial position for any previously reported period. Consequently, the cumulative effect through December 31, 2009 is recorded in 2010 in the accompanying financial statements.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

Repurchase Agreements – Assessment of Effective Control

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860) – Reconsideration of Effective Control for Repurchase Agreements. The amendments in the ASU remove from the assessment of effective control: (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. Other criteria applicable to the assessment of effective control are not changed by the amendments in the ASU.

The ASU became effective for the Company on January 1, 2012. The guidance is to be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The ASU did not have a material effect on the Company’s financial statements. A nominal amount of the Company’s repurchase transactions are currently accounted for as sales, because of a reduction in initial margin or restriction in daily maintenance margin. Such transactions will be accounted for as financing transactions if executed on or after January 1, 2012.

Fair Value Measurement

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendment creates a common definition of fair value for U.S. GAAP and International Financial Reporting Standards (IFRS) and aligns the measurement and disclosure requirements. It requires significant additional disclosures both of a qualitative and quantitative nature, particularly on those instruments measured at fair value that are classified in Level 3 of the fair value hierarchy. Additionally, the amendment provides guidance on when it is appropriate to measure fair value on a portfolio basis and expands the prohibition on valuation adjustments from Level 1 to all levels of the fair value hierarchy where the size of the Company’s position is a characteristic of the adjustment. The amendment became effective for the Company on January 1, 2012. As a result of implementing the prohibition on valuation adjustments where the size of the Company’s position is a characteristic, the Company will release reserves of approximately $90 million, increasing pretax income on January 1, 2012.

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Offsetting

In December 2011, the FASB issued Accounting Standards Update No. 2011-11 – Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The standard requires new disclosures about certain financial instruments and derivative instruments that are either offset in the balance sheet (presented on a net basis) or subject to an enforceable master netting arrangement or similar arrangement. The standard requires disclosures that provide both gross and net information in the notes to the financial statements for relevant assets and liabilities. This ASU does not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria. The new disclosure requirements should enhance comparability between those companies that prepare their financial statements on the basis of U.S. GAAP and those that prepare their financial statements in accordance with IFRS. For many financial institutions, the differences in the offsetting requirements between U.S. GAAP and IFRS result in a significant difference in the amounts presented in the balance sheets prepared in accordance with U.S. GAAP and IFRS. The disclosure standard will become effective for annual periods beginning January 1, 2013. The disclosures are required retrospectively for all comparative periods presented.

Potential Amendments to Current Accounting Standards

The FASB and IASB, either jointly or separately, are currently working on several major projects, including amendments to existing accounting standards governing financial instruments, lease accounting, consolidation and investment companies. As part of the joint financial instruments project, the FASB is proposing sweeping changes to the classification and measurement of financial instruments, hedging and impairment guidance. The FASB is also working on a joint project that would require all leases to be capitalized on the balance sheet. Additionally, the FASB has issued a proposal on principal-agent considerations that would change the way the Company needs to evaluate whether to consolidate VIEs and non-VIE partnerships. Furthermore, the FASB has issued a proposed Accounting Standards Update that would change the criteria used to determine whether an entity is subject to the accounting and reporting requirements of an investment company. The principal-agent consolidation proposal would require all VIEs, including those that are investment companies, to be evaluated for consolidation under the same requirements.

In addition to the major projects, the FASB has also proposed changes regarding the Company’s release of any cumulative translation adjustment into earnings when it ceases to have a controlling financial interest in certain groups of assets that constitute a business within a consolidated foreign subsidiary. All these projects may have significant impacts for the Company. Upon completion of the standards, the Company will need to re-evaluate its accounting and disclosures. However, due to ongoing deliberations of the standard-setters, the Company is currently unable to determine the effect of future amendments or proposals.

2. DIVESTITURE

Joint Venture with Morgan Stanley

On June 1, 2009, Citigroup and Morgan Stanley established a joint venture (JV) that combines the Global Wealth Management platform of Morgan Stanley with Citigroup’s Smith Barney, Quilter and Australia private client networks. Citigroup sold 100% of these businesses to Morgan Stanley in exchange for a 49% stake in the JV and an upfront cash payment of $2.75 billion. The Company recorded a pretax gain of approximately $11.5 billion ($6.9 billion after-tax) on this sale. Both Morgan Stanley and Citigroup will access the JV for retail distribution, and each firm’s institutional businesses will continue to execute order flow from the JV.

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Pursuant to the Managed Futures Contribution and Interest Purchase Agreement dated as of July 31, 2009, Citigroup sold its Managed Futures business to Morgan Stanley in exchange for membership interests of Morgan Stanley Smith Barney Holdings LLC (MSSB LLC). The Company recorded a pre-tax gain of $320 million on this sale.

In December 2011, the Company transferred its $12.2 billion Investment in MSSB LLC, including Preferred Securities of $2.0 billion, to affiliates in exchange for $1.5 billion in cash, $7.2 billion in notes receivable and a reduction of $3.5 billion in long-term debt as part of a loan satisfaction agreement. The Company recorded the transfer of the Investment in MSSB LLC at carrying value, which approximated fair value.

3. PRINCIPAL TRANSACTIONS

Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading activities include revenues from fixed income, equities, credit and commodities products, as well as foreign exchange transactions. Not included in the table below is the impact of net interest revenue related to trading activities, which is an integral part of trading activities’ profitability. The following table presents principal transactions revenue for the years ended December 31:

In millions of dollars 2011 2010 2009 Interest rate contracts (1) $ 922 $ 778 $ 722 Equity contracts (2) 206 910 1,563 Commodity and other contracts (3) 96 398 130 Credit derivatives (4) (301) 1,340 890 Foreign exchange contracts (5) 30 34 56 Total principal transactions revenue $ 953 $ 3,460 $ 3,361

(1) Includes revenues from government securities and corporate debt, municipal securities, preferred stock, mortgage securities, and other debt instruments. Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options, and forward contracts on fixed income securities. (2) Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes, and exchange-traded and OTC equity options and warrants. (3) Primarily includes revenues from crude oil, refined oil products, natural gas, and other commodities trades. (4) Includes revenues and losses from structured credit products. (5) Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as translation gains and losses.

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4. INCENTIVE PLANS AND RETIREMENT BENEFITS

Stock Award Programs

The Company participates in various Citigroup stock-based compensation programs under which Citigroup administers award programs involving grants of stock options, restricted or deferred stock awards, and stock payments for employees of Citigroup and its subsidiaries, including CGMHI. The awards are denominated in (and, in most cases, are payable in) shares of Citigroup common stock. The award programs are used to attract, retain and motivate officers, employees and nonemployee directors of Citigroup and its subsidiaries, to provide incentives for their contributions to the long-term performance and growth of Citigroup and its subsidiaries, and to align their interests with those of Citigroup’s stockholders. The plans are administered by the Personnel and Compensation Committee (the Committee) of the Citigroup Board of Directors, which is composed entirely of independent non-employee directors. Executives and employees of the Company participate in the Citigroup programs described below to the extent they meet the eligibility criteria established by Citigroup. The Company makes cash payments to reimburse Citigroup for the cost of the awards when shares are delivered to participants (the payments are based on the market value of the vested stock awards at such time, or the spread realized by the employee on an option exercise), but the Company recognizes compensation expense for the awards as described below.

For all stock award programs, during the applicable vesting period, the shares awarded are not issued to participants (in the case of a deferred stock award) or cannot be sold or transferred by the participants (in the case of a restricted stock award), until after the vesting conditions have been satisfied. Recipients of deferred stock awards do not have any stockholder rights until shares are delivered to them, but they generally are entitled to receive dividend-equivalent payments during the vesting period. Recipients of restricted stock awards are entitled to a limited voting right and to receive dividend-equivalent payments during the vesting period. (Dividend equivalents are paid through payroll and recorded as an offset to retained earnings on those shares expected to vest.) Once a stock award vests, the shares may become freely transferable, but in the case of certain executives, may be subject to transfer restrictions by their terms or a stock ownership commitment. Dividend equivalents and any other cash payments to participants who are employed by the Company are paid directly by the Company.

The total expense to be recognized for the stock awards represents the fair value of Citigroup common stock at the date of grant. The expense is recognized as a charge ratably over the vesting period, except for those awards granted to retirement-eligible employees, and salary stock and other immediately vested awards. For awards of deferred stock expected to be made to retirement-eligible employees, the charge to income is accelerated based on the dates the retirement rules are or will be met. If the retirement rules will have been met on or prior to the expected award date, the entire estimated expense is recognized in the year prior to grant in the same manner as cash incentive compensation is accrued, rather than amortized over the applicable vesting period of the award. Salary stock and other immediately vested awards generally were granted in lieu of cash compensation and are also recognized in the year prior to the grant in the same manner as cash compensation is accrued. Certain stock awards with performance conditions or certain clawback provisions may be subject to variable accounting, pursuant to which the associated charges fluctuate with changes in Citigroup’s stock price over the applicable vesting periods. The total amount that will be recognized as expense cannot be determined in full until the awards vest.

Citigroup’s primary stock award program is the Capital Accumulation Program (CAP). Generally, CAP awards of restricted or deferred stock constitute a percentage of annual discretionary incentive compensation and vest ratably over three-or four-year periods, beginning on the first anniversary of the award date.

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In January 2010, the percentages of total annual incentives awarded pursuant to CAP were reduced and instead awarded as deferred cash awards primarily in the U.S. and the U.K. The deferred cash awards are subject to two-year and four-year vesting schedules, but the other terms and conditions are the same as CAP awards made in those years. The deferred cash awards earn a return during the vesting period based on LIBOR; in 2010 only, a portion of the award was denominated as a stock unit, the value of which will fluctuate based on the price of Citigroup common stock. In both cases, only cash is delivered at vesting.

The Company’s stock award programs resulted in expenses of $821 million, $867 million, and $1.0 billion for the years ended December 31, 2011, 2010, and 2009, respectively, including CAP awards of $720 million, $749 million, and $938 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Stock Option Programs

While Citigroup no longer grants options as part of its annual incentive award programs, Citigroup may grant stock options to employees on a one-time basis, as sign-on awards or as retention awards. All stock options are granted on Citigroup common stock with exercise prices that are no less than the fair market value at the time of grant (which is defined under Citigroup’s 2009 Stock Incentive Plan to be the NYSE closing price on the trading day immediately preceding the grant date or on the grant date for grants to executive officers).

On April 20, 2010, Citigroup made an option grant to a group of employees (including employees of the Company) who were not eligible for the October 29, 2009, broad-based grant described below. The options were awarded with an exercise price equal to the NYSE closing price on the trading day immediately preceding the date of grant ($48.80). The options vest in three annual installments beginning on October 29, 2010. The options have a six-year term.

On October 29, 2009, Citigroup made a one-time broad-based option grant to employees worldwide, including employees of the Company. The options have a six-year term, generally vest in three equal installments over three years beginning on the first anniversary of the grant date, and have an exercise price of $40.80.

Profit Sharing Plan

In October 2010, the Committee approved awards under the 2010 Key Employee Profit Sharing Plan (KEPSP) to certain executives (including executives of the Company), which may entitle participants to profit-sharing payments based on an initial performance measurement period of January 1, 2010 through December 31, 2012. Generally, if a participant remains employed and all other conditions to vesting and payment are satisfied, the participant will be entitled to an initial payment in 2013, as well as a holdback payment in 2014 that may be reduced based on performance during the subsequent holdback period (generally, January 1, 2013 through December 31, 2013). If the vesting and performance conditions are satisfied, a participant’s initial payment will equal two-thirds of the product of the cumulative pretax income of Citicorp (as defined in the KEPSP) for the initial performance period and the participant’s applicable percentage. The initial payment will be paid after January 20, 2013, but no later than March 15, 2013.

The participant’s holdback payment, if any, will equal the product of (a) the lesser of cumulative pretax income of Citicorp for the initial performance period and cumulative pretax income of Citicorp for the initial performance period and the holdback period combined (generally, January 1, 2010 through December 31, 2013), and (b) the participant’s applicable percentage, less the initial payment; provided that the holdback payment may not be less than zero. The holdback payment, if any, will be paid after January 20, 2014, but no later than March 15, 2014.

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On February 14, 2011, the Committee approved grants of awards under the 2011 KEPSP to certain other executive officers of Citigroup (including the Company). These awards have a performance period of January 1, 2011 to December 31, 2012 and other terms of the awards are similar to the 2010 KEPSP.

Additionally, the Company operates and may from time to time introduce other incentive plans for certain employees that have an incentive-based award component. Individually, these plans are not deemed material.

Pension and Postretirement Benefits and Defined Contribution Plans

The Company’s employees participate in several non-contributory defined benefit pension plans sponsored by Citigroup covering certain U.S. employees. The Company also participates in various defined benefit pension and termination indemnity plans covering employees outside the United States. Effective January 1, 2008, Citigroup’s U.S. qualified pension plan was frozen for most employees. Accordingly, no additional compensation-based contributions were credited to the cash balance formula for existing plan participants after 2007. However, certain employees covered under the prior final pay formula continue to accrue benefits.

Citigroup administers defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The Company participates in many of these plans. The most significant of these plans is the Citigroup 401(k) Plan in the U.S.

The Company participates in the Citigroup 401(k) Plan, a defined contribution plan, under which eligible U.S. employees receive matching contributions of up to 6% and 4% of their pay in 2011 and 2010, respectively, subject to statutory limits. Effective January 1, 2011, the maximum amount of matching contributions on employee deferral contributions made into this plan was increased from 4% to 6% of eligible pay, subject to statutory limits. The matching contribution is invested according to participants’ individual elections. Additionally, for eligible employees whose compensation is $100,000 or less, a fixed contribution of up to 2% of compensation is provided.

The Company’s pretax expense associated with Citigroup pension and postretirement benefits and defined contribution plans were $152 million, $129 million, and $268 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Health Care and Life Insurance Plans

The Company, through Citigroup, offers certain health care and life insurance benefits to its active employees. The Company also participates in postretirement health care and life insurance benefits offered by Citigroup to certain eligible U.S. retired employees, as well as to certain eligible employees outside the United States. The pretax expenses recorded for health care and life insurance benefits were $143 million, $125 million, and $253 million for the years ended December 31, 2011, 2010 and 2009, respectively.

5. INCOME TAXES

The Company is included in the Citigroup consolidated federal tax return and is a party to a tax allocation agreement with Citigroup. The Company’s U.S. federal, state and local income taxes are provided on a separate return basis and are subject to the utilization of tax attributes in Citigroup’s consolidated income tax provision. Under the tax sharing agreement with Citigroup, the Company remits its current tax liabilities to Citigroup throughout the year except for certain liabilities expected to be payable as a separate taxpayer.

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The components of Provision (benefit) for income taxes are as follows:

In millions of dollars Year Ended December 31, 2011 2010 2009 Current tax provision (benefit): Federal $ 352 $ 294 $ (1,719) Foreign 127 217 356 State 66 76 405 Total current tax provision (benefit) 545 587 (958) Deferred tax provision (benefit): Federal (743) 166 6,858 Foreign 44 164 (171) State (129) 31 1,002 Total deferred tax provision (benefit) (828) 361 7,689 Provision (benefit) for income taxes $ (283) $ 948 $ 6,731

Tax benefits (liabilities) allocated directly to stockholder’s equity were as follows:

In millions of dollars Year Ended December 31, 2011 2010 2009 Foreign currency translation $ 62 $ 14 $ 37 Other comprehensive income – 3 4 Pension liability adjustments (50) 10 52 Employee stock plans – (2) (22) Total tax benefits allocated directly to stockholder’s equity $ 12 $ 25 $ 71

The Company paid taxes of $321 million and $246 million in 2011 and 2010, respectively. The Company received tax refunds from Citigroup with respect to income taxes of $663 million in 2009.

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The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income (before noncontrolling interests) for the years ended December 31 was as follows:

2011 2010 2009 Federal statutory rate 35% 35% 35% State income taxes, net of federal benefit (10) 3 5 Tax advantaged investments 8 (4) (1) Foreign income tax rate differential 2 (2) (1) Basis difference in subsidiary (2) – – Non-deductible compensation (2) – – Other, net (4) – (1) Effective income tax rate 27% 32% 37%

Deferred income taxes at December 31 related to the following:

In millions of dollars 2011 2010 Deferred tax assets Litigation and other reserves $ 221 $ 211 Deferred compensation and employee benefits 1,133 1,037 Unremitted foreign earnings 304 365 Tax credit and net operating loss carryforwards 2,315 4,852 Investments 595 – Other deferred tax assets 91 28 Total deferred tax assets 4,659 6,493 Deferred tax liabilities Investments – (2,733) Fixed assets and leases (181) (408) Intangibles (271) (214) Cumulative translation adjustments (62) (176) Credit valuation adjustment on Company-issued debt (62) (31) Other deferred tax liabilities (70) (302) Total deferred tax liabilities (646) (3,864) Net deferred tax asset $ 4,013 $ 2,629

The following is a roll-forward of the Company’s unrecognized tax benefits.

In millions of dollars 2011 2010 (1) 2009 (1) Total unrecognized tax benefits at January 1, $212 $220 $296 Net amount of (decreases)/increases for current year’s tax positions 2 (6) 9 Gross amount of increases for prior years’ tax positions 19 27 1 Gross amount of decreases for prior years’ tax positions (18) (16) (86) Amounts of decreases relating to settlements – (13) – Total unrecognized tax benefits at December 31, $215 $212 $220

(1) Certain amounts were corrected in the prior periods that had no impact on the consolidated statements of operations and financial condition for the periods presented.

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Total amount of unrecognized tax benefits at December 31, 2011, 2010 and 2009 that, if recognized, would affect the effective tax rate are $168 million, $150 million and $169 million, respectively. The remainder of the uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.

Interest and penalties (not included in the “unrecognized tax benefits” above) are a component of the Provision for income taxes.

2011 2010 2009 Net of Net of Net of In millions of dollars Pretax tax Pretax tax Pretax tax Total interest and penalties in the balance sheet at January 1, $46 $28 $50 $31 $99 $61 Total interest and penalties in the statement of operations 3 2 (4) (2) (44) (27) Total interest and penalties in the balance sheet at December 31, 49 30 46 29 50 31

The Company is currently under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months, but the Company does not expect such audits to result in amounts that would cause a significant change to its effective tax rate.

The Company expects to conclude the IRS audit of its U.S. federal consolidated income tax returns for the years 2006-2008 and may resolve certain issues with IRS Appeals for the years 2003-2005 within the next 12 months. The gross uncertain tax positions at December 31, 2011 for the items that may be resolved for 2003-2008 are as much as $9 million plus gross interest of $1 million. Because of the number of issues remaining to be resolved, the potential tax benefit to continuing operations could be anywhere in a range between $0 and $21 million. In addition, the Company concluded a New York City audit for 2006-2008 in the first quarter of 2012 which resulted in a reduction of approximately $82 million in gross uncertain tax positions and a reduction in gross interest of approximately $12 million which resulted in a tax benefit to continuing operations of approximately $56 million.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:

Jurisdiction Tax year United States 2006 New York State and City 2006 California 2003 United Kingdom 2010

Foreign pretax earnings (losses) approximated $(0.3) billion in 2011, $0.2 billion in 2010, and $2.9 billion in 2009. As a U.S. corporation, the Company and its U.S. subsidiaries are subject to U.S. taxation currently on all foreign pretax earnings earned by a foreign branch. Pretax earnings of a foreign subsidiary or affiliate are subject to U.S. taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are indefinitely invested outside the United States. At December 31, 2011, $3.2 billion of accumulated undistributed earnings of non-U.S. subsidiaries were indefinitely invested. At the existing U.S. federal income tax rate, additional taxes (net of U.S. foreign tax credits) of $978 million would have to be provided if such earnings were remitted currently. The current year’s effect on income tax expense is included in the “Foreign income tax rate differential” line in the reconciliation of the federal statutory rate to the Company’s effective income tax rate.

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At December 31, 2011, the Company had a U.S. foreign tax-credit carryforward of $391 million, $195 million whose expiry date is 2017 and $196 million whose expiry date is 2018. The Company has a U.S federal consolidated net operating loss (NOL) carryforward of approximately $1.8 billion whose expiration date is 2028. The Company has state and local net operating loss carryforwards of $4.6 billion and $3.1 billion in New York State and New York City, respectively, whose expiration date is 2028. The Company has recorded a deferred tax asset of $418 million for these state and local net operating loss carryforwards. The Company has less significant net operating losses in various other states for which the Company has recorded a deferred tax asset of $13 million and which expire between 2012 and 2028.

Although realization is not assured, the Company believes that the realization of the recognized net deferred tax asset (DTA) of $4.0 billion is more likely than not based on expectations as to future taxable income in the jurisdictions in which the DTAs arise and available tax planning strategies, as defined in ASC 740, Income Taxes, (formerly SFAS 109) that could be implemented if necessary to prevent a carryforward from expiring. The Company’s net DTA of $4.0 billion consists of approximately $2.4 billion of net U.S. federal DTAs, $0.9 billion of net state DTA and $0.7 billion of net foreign DTAs. Included in the net federal DTA of $2.4 billion are DTLs of $0.8 billion that will reverse in the relevant carryforward period and may be used to support the DTA. The major components of the U.S. federal DTA are $0.4 billion in foreign tax-credit carryforwards, $0.8 billion in a net-operating-loss carryforward, $10 million in a general-business-credit carryforward, and $1.2 billion of future deductions that have not yet been recognized on a tax return.

6. DEBT

Short-Term Borrowings

Short-term borrowings consist of borrowings with affiliates, bank and other borrowings with weighted average interest rates at December 31 as follows:

2011 2010 Weighted Weighted In millions of dollars Balance average Balance average Borrowings with affiliates $43,155 3.5% $66,841 1.1% Other short-term borrowings 1,050 1.5% 2,100 1.2% Total $44,205 $68,941

Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate, or bids submitted by the banks. CGMHI pays commitment fees for its lines of credit.

CGMHI has substantial borrowing agreements consisting of facilities that CGMHI has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting CGMHI’s short-term requirements.

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Long-Term Debt

Balances at December 31, Weighted average In millions of dollars coupon Maturities 2011 2010 Senior notes 2.8% 2012-2097 $65,256 $64,653 Subordinated notes 3.8% 2012-2016 1,586 5,000 Total $66,842 $69,653

Included in term debt at December 31, 2011, was $60.0 billion of variable rate debt with Citigroup. This debt bears interest at rates ranging from 0.6% to 6.0% and matures on various dates from 2012 to 2045.

CGMHI has committed long-term financing facilities with unaffiliated banks. At December 31, 2011, CGMHI had drawn down the full $700 million available under these facilities, of which $150 million is guaranteed by Citigroup. Generally, a bank can terminate these facilities by giving CGMHI one-year prior notice.

The Company issues both fixed and variable rate debt in a range of currencies. It uses derivative contracts, primarily interest rate swaps, to effectively convert a portion of its fixed rate debt to variable rate debt and variable rate debt to fixed rate debt. The maturity structure of the derivatives generally corresponds to the maturity structure of the debt being hedged. In addition, the Company uses other derivative contracts to manage the foreign exchange impact of certain debt issuances. At December 31, 2011, the Company’s overall weighted average interest rate for long-term debt was 2.8% on a contractual basis.

Aggregate annual maturities of long-term debt obligations (based on final maturity dates) are as follows:

In millions of dollars 2012 $ 5,753 2013 11,960 2014 6,149 2015 6,106 2016 9,156 Thereafter 27,718 Total $ 66,842

7. CAPITAL REQUIREMENTS

Certain U.S. and non-U.S. broker/dealer subsidiaries are subject to various securities and commodities regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These regulatory restrictions may impose regulatory capital requirements and limit the amounts that these subsidiaries can pay in dividends or advance to the Company.

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Capital requirements related to the Company’s principal regulated subsidiaries at December 31, 2011 are as follows:

In millions of dollars Excess over Net capital or minimum Subsidiary Jurisdiction equivalent requirement U.S. Securities and Exchange Commission Uniform Net Citigroup Global Markets Inc. Capital Rule (Rule 15c3-1) $7,773 $6,978

United Kingdom’s Financial Citigroup Global Markets Limited Services Authority $8,140 $5,757

Citigroup Global Markets Inc. (CGMI) has elected to compute net capital in accordance with the provisions of Appendix E of SEC Rule 15c3-1 (Net Capital Rule). This methodology allows CGMI to compute market risk capital charges using internal value-at-risk models. Under Appendix E of the Net Capital Rule, CGMI is required to hold tentative net capital in excess of $1 billion and net capital in excess of $500 million. CGMI is also required to notify the SEC in the event that its tentative net capital is less than $5 billion. As of December 31, 2011, CGMI had tentative net capital in excess of both the minimum and the notification requirements.

8. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) represents the sum of net income (loss) and other changes in stockholder’s equity from nonowner sources which, for the Company, are comprised primarily of pension liability adjustments and foreign currency translation adjustments, net of tax. The composition of “Comprehensive Income (Loss)” for the three-year period ended December 31, 2011 follows:

In millions of dollars Year Ended December 31, 2011 2010 2009 Comprehensive income (loss) Net income (loss) before attribution of noncontrolling interests $(766) $2,044 $11,590 Pension liability adjustment, net of tax 80 (16) (86) Net change in FX translation adjustment, net of tax (167) 7 (57) Other – (5) (6) Total comprehensive income (loss) (853) 2,030 11,441 Comprehensive income (loss) attributable to noncontrolling interests 24 53 (18) Comprehensive income (loss) attributable to CGMHI $(877) $1,977 $11,459

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9. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

Uses of SPEs

A special purpose entity (SPE) is an entity designed to fulfill a specific limited need of the company that organized it. The principal uses of SPEs are to obtain liquidity and favorable capital treatment by securitizing certain of the Company’s financial assets, to assist clients in securitizing their financial assets and to create investment products for clients. SPEs may be organized in many legal forms including trusts, partnerships or corporations. In a securitization, the company transferring assets to an SPE converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt and equity instruments, certificates, commercial paper and other notes of indebtedness, which are recorded on the balance sheet of the SPE and not reflected in the transferring company’s balance sheet, assuming applicable accounting requirements are satisfied.

Variable Interest Entities

VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights, and right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. The Company would be deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:

• power to direct activities of a VIE that most significantly impact the entity’s economic performance; and

• obligation to absorb losses of the entity that could potentially be significant to the VIE or right to receive benefits from the entity that could potentially be significant to the VIE.

The Company must evaluate its involvement in each VIE and understand the purpose and design of the entity, the role the Company had in the entity’s design, and its involvement in its ongoing activities. The Company then must evaluate which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities.

For those VIEs where the Company determines that it has the power to direct the activities that most significantly impact the VIE’s economic performance, the Company then must evaluate its economic interests, if any, and determine whether it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to such loss without consideration of probability. Such obligations could be in various forms, including but not limited to, debt and equity investments, guarantees, liquidity agreements, and certain derivative contracts.

In various other transactions, the Company may act as a derivative counterparty (for example, interest rate swap, cross-currency swap, or purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE); may act as underwriter or placement agent; may provide administrative, trustee, or other services; or may make a market in debt securities or other instruments issued by VIEs. The Company generally considers such involvement, by itself, not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.

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The Company’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests as of December 31, 2011 and 2010 is presented in the following tables:

In millions of dollars As of December 31, 2011 Maximum exposure to loss in significant unconsolidated VIEs(1) Funded exposures (2) Unfunded exposures (3) Total involvement Consolidated Significant with SPE VIE/SPE unconsolidated Debt Equity Funding assets assets VIE assets (4) investments investments commitments Derivatives Total Mortgage securitizations (5) U.S. agency-sponsored $50,563 $ – $50,563 $2,277 $ – $ – $ – $2,277 Non-agency-sponsored 8,529 83 8,446 342 – – – 342 Collateralized debt obligations 9,451 – 9,451 136 – – 39 175 Collateralized loan obligations 9,890 – 9,890 810 – – 90 900 Asset-based financing 691 117 574 11 3 – – 14 Client intermediation 4,137 2,269 1,868 250 – – – 250 Other 4,032 294 3,738 28 175 35 79 317 Total $87,293 $2,763 $84,530 $3,854 $178 $35 $208 $4,275

In millions of dollars As of December 31, 2010 Maximum exposure to loss in significant unconsolidated VIEs(1) Funded exposures (2) Unfunded exposures (3) Total involvement Consolidated Significant with SPE VIE/SPE unconsolidated Debt Equity Funding assets assets VIE assets (4) investments investments commitments Derivatives Total Mortgage securitizations (5) U.S. agency-sponsored $35,949 $ – $35,949 $929 $ – $ – $ – $ 929 Non-agency-sponsored 13,636 142 13,494 677 – – – 677 Collateralized debt obligations 12,846 – 12,846 255 – – 78 333 Collateralized loan obligations 14,025 – 14,025 869 – – 401 1,270 Asset-based financing 4,427 2,393 2,034 489 3 – – 492 Client intermediation 6,930 2,577 4,353 730 8 – – 738 Other 2,491 482 2,009 40 101 92 79 312 Total $90,304 $5,594 $84,710 $3,989 $112 $92 $558 $4,751

(1) The definition of maximum exposure to loss is included in the text that follows. (2) Included in the Company’s Consolidated Statement of Financial Condition. (3) Not included in the Company’s Consolidated Statement of Financial Condition. (4) A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the likelihood of loss or the notional amount of exposure. (5) CGMHI mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated. See “Re-Securitizations” below for further discussion.

Reclassified to conform to the current year’s presentation.

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The previous tables do not include:

• certain investment funds for which the Company provides investment management services and personal estate trusts for which the Company provides administrative, trustee and/or investment management services;

• VIEs structured by third parties where the Company holds securities in inventory. These investments are made on arm’s-length terms;

• certain positions in mortgage-backed and asset-backed securities held by the Company, which are classified as Trading account assets, where the Company has no other involvement with the related securitization entity deemed to be significant; and

• certain representations and warranties exposures in Securities and Banking mortgage-backed and asset-backed securitizations, where the Company has no variable interest or continuing involvement as servicer. The outstanding balance of the loans securitized was approximately $22 billion at December 31, 2011, related to legacy transactions sponsored by Securities and Banking during the period 2005 to 2008.

The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., security or loan) and the Company’s standard accounting policies for the asset type.

The asset balances for unconsolidated VIEs where the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments in fair value, unless fair value information is readily available to the Company. For VIEs that obtain asset exposures synthetically through derivative instruments (for example, synthetic CDOs), the table generally includes the full original notional amount of the derivative as an asset.

The maximum funded exposure represents the balance sheet carrying amount of the Company’s investment in the VIE. It reflects the initial amount of cash invested in the VIE plus any accrued interest and is adjusted for any impairments in value recognized in earnings and any cash principal payments received. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company, or the notional amount of a derivative instrument considered to be a variable interest, adjusted for any declines in fair value recognized in earnings. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross- currency swaps, or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.

Consolidated VIEs – Balance Sheet Classification

The Company engages in on-balance-sheet securitizations which are securitizations that do not qualify for sales treatment; thus, the assets remain on the Company’s balance sheet. The consolidated VIEs included in the table below represents hundreds of separate entities with which the Company is involved. In general, the third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to the Company, except where the Company has provided a guarantee to the investors or is the counterparty to certain derivative transactions involving the VIE. In addition, the assets are generally restricted only to pay such liabilities.

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Thus, the Company’s maximum legal exposure to loss related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets due to outstanding third-party financing. Intercompany assets and liabilities are excluded from the table. All assets are restricted from being sold or pledged as collateral. The cash flows from these assets are the only source used to pay down the associated liabilities, which are non-recourse to the Company’s general assets.

The following table presents the carrying amounts and classifications of consolidated assets that are collateral for consolidated VIE and SPE obligations:

December 31, December 31, In millions of dollars 2011 2010 Cash $ 259 $ 715 Trading account assets 136 2,301 Loans receivable, net 2,195 2,188 Other 173 390 Total assets $2,763 $5,594

Long-term debt $1,877 $2,900 Other liabilities 75 952 Total liabilities $1,952 $3,852

Significant Interests in Unconsolidated VIEs – Balance Sheet Classification

The following table presents the carrying amounts and classification of significant interests in unconsolidated VIEs:

December 31, December 31, In millions of dollars 2011 2010 Cash $ 28 $ 28 Trading account assets 3,930 3,703 Investments 61 356 Loans 13 493 Total assets $4,032 $4,580

Total liabilities $ – $ –

Mortgage Securitizations

The Company provides a wide range of mortgage loan products to a diverse customer base. The Company’s mortgage loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the purchasers of the securities issued by the trust.

The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations, because CGMHI does not have the power to direct the activities of the SPE that most significantly impact the entity’s economic performance. Therefore, CGMHI does not consolidate these U.S. agency-sponsored mortgage securitizations.

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The Company does not consolidate certain non-agency-sponsored mortgage securitizations because CGMHI is not the servicer with the power to direct the significant activities of the entity. In certain instances, the Company has (1) the power to direct the activities and (2) the obligation to either absorb losses or right to receive benefits that could be potentially significant to its non-agency-sponsored mortgage securitizations and, therefore, is the primary beneficiary and consolidates the SPE.

The following table summarizes selected cash flow information related to mortgage securitizations for the years ended December 31, 2011, 2010 and 2009:

In millions of dollars 2011 2010 2009 Proceeds from new securitizations $7,697 $11,895 $15,745 Cash flows received on residual interests (1) 81159

(1) Cash flows received on residual interests represents cash received on mortgage-backed security residual positions from only the most subordinated tranche retained in securitization transactions; it does not include cash flows received on other retained tranches from securitization transactions held in trading inventory which may turnover on a regular basis due to market-making activity.

Gains (losses) recognized on the securitization of mortgages for the years ended December 31, 2011, 2010 and 2009 were $(9) million, $(4) million, and $19 million, respectively.

The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown in the following table.

At December 31, 2011 and 2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:

2011 2010 Discount rate 1.3% to 28.1% 0.1% to 44.9% Constant prepayment rate 0.6% to 30.6% 1.0% to 38.8% Anticipated net credit losses 29.3% to 90.0% 27.2% to 80.0%

In millions of dollars Carrying value of retained interests $1,092 $1,435 Discount rates Adverse change of 10% $ (36) $ (46) Adverse change of 20% (68) (89) Constant prepayment rate Adverse change of 10% $ (13) $ (19) Adverse change of 20% (29) (36) Anticipated net credit losses Adverse change of 10% $ (12) $ (1) Adverse change of 20% (22) (12)

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The range in the key assumptions for retained interests is due to the different characteristics of the interests retained by the Company. The interests retained range from highly rated and/or senior in the capital structure to unrated and/or residual interests.

Re-securitizations

The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. During the 12 months ended December 31, 2011, CGMHI transferred non-agency (private label) securities with an original par value of approximately $303 million to re-securitization entities. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients. As of December 31, 2011, the fair value of CGMHI-retained interests in private-label re-securitization transactions structured by CGMHI totaled approximately $340 million ($39 million of which relates to re-securitization transactions executed in 2011) and are recorded in trading assets. Of this amount, approximately $17 million and $323 million related to senior and subordinated beneficial interests, respectively. The original par value of private label re-securitization transactions in which CGMHI holds a retained interest as of December 31, 2011 was approximately $7.2 billion.

The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the 12 months ended December 31, 2011, CGMHI transferred agency securities with a fair value of approximately $37.7 billion to re-securitization entities. As of December 31, 2011, the fair value of CGMHI-retained interests in agency re-securitization transactions structured by CGMHI totaled approximately $2.3 billion ($2.1 billion of which related to re-securitization transactions executed in 2011) and are recorded in trading assets. The original fair value of agency re-securitization transactions in which CGMHI holds a retained interest as of December 31, 2011 was approximately $50.6 billion.

As of December 31, 2011, the Company did not consolidate any private-label or agency re- securitization entities.

Collateralized Debt and Loan Obligations

A securitized collateralized debt obligation (CDO) is an SPE that purchases a pool of assets consisting of asset-backed securities and synthetic exposures through derivatives on asset-backed securities and issues multiple tranches of equity and notes to investors.

A cash CDO, or arbitrage CDO, is a CDO designed to take advantage of the difference between the yield on a portfolio of selected assets, typically residential mortgage-backed securities, and the cost of funding the CDO through the sale of notes to investors. “Cash flow” CDOs are entities in which the CDO passes on cash flows from a pool of assets, while “market value” CDOs pay to investors the market value of the pool of assets owned by the CDO at maturity. In these transactions, all of the equity and notes issued by the CDO are funded, as the cash is needed to purchase the debt securities.

A synthetic CDO is similar to a cash CDO, except that the CDO obtains exposure to all or a portion of the referenced assets synthetically through derivative instruments, such as credit default swaps. Because the CDO does not need to raise cash sufficient to purchase the entire referenced portfolio, a substantial portion of the senior tranches of risk is typically passed on to CDO investors in the form of unfunded liabilities or derivative instruments. Thus, the CDO writes credit protection on select referenced debt securities to the Company or third parties and the risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the obligations of the CDO on the credit default swaps written to counterparties.

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A securitized collateralized loan obligation (CLO) is substantially similar to the CDO transactions described above, except that the assets owned by the SPE (either cash instruments or synthetic exposures through derivative instruments) are corporate loans and to a lesser extent corporate bonds, rather than asset-backed debt securities.

A third-party asset manager is typically retained by the CDO/CLO to select the pool of assets and manage those assets over the term of the SPE. The Company is the manager for a limited number of CLO transactions.

The Company earns fees for warehousing assets prior to the creation of a “cash flow” or “market value” CDO/CLO, structuring CDOs/CLOs and placing debt securities with investors. In addition, the Company has retained interests in many of the CDOs/CLOs it has structured and makes a market in the issued notes.

The Company’s continuing involvement in synthetic CDOs/CLOs generally includes purchasing credit protection through credit default swaps with the CDO/CLO, owning a portion of the capital structure of the CDO/CLO in the form of both unfunded derivative positions (primarily super-senior exposures discussed below) and funded notes, entering into interest-rate swap and total-return swap transactions with the CDO/CLO, lending to the CDO/CLO, and making a market in the funded notes.

Where a CDO/CLO entity issues preferred shares (or subordinated notes that are the equivalent form), the preferred shares generally represent an insufficient amount of equity (less than 10%) and create the presumption that preferred shares are insufficient to finance the entity’s activities without subordinated financial support. In addition, although the preferred shareholders generally have full exposure to expected losses on the collateral and uncapped potential to receive expected residual returns, they generally do not have the ability to make decisions about the entity that have a significant effect on the entity’s financial results because of their limited role in making day-to-day decisions and their limited ability to remove the asset manager. Because one or both of the above conditions will generally be met, the Company has concluded that, even where a CDO/CLO entity issued preferred shares, the entity should be classified as a VIE.

In general, the asset manager, through its ability to purchase and sell assets or – where the reinvestment period of a CDO/CLO has expired – the ability to sell assets, will have the power to direct the activities of the entity that most significantly impact the economic performance of the CDO/CLO. However, where a CDO/CLO has experienced an event of default or an optional redemption period has gone into effect, the activities of the asset manager may be curtailed and/or certain additional rights will generally be provided to the investors in a CDO/CLO entity, including the right to direct the liquidation of the CDO/CLO entity.

The Company has retained portions of the “super-senior” positions issued by certain CDOs. These positions are referred to as “super-senior” because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies.

The Company does not generally have the power to direct the activities of the entity that most significantly impacts the economic performance of the CDOs/CLOs as this power is generally held by a third-party asset manager of the CDO/CLO. As such, those CDOs/CLOs are not consolidated. The Company may consolidate the CDO/CLO when: (i) the Company is the asset manager and no other single investor has the unilateral ability to remove the Company or unilaterally cause the liquidation of the CDO/ CLO, or the Company is not the asset manager but has a unilateral right to remove the third-party asset manager or unilaterally liquidate the CDO/CLO and receive the underlying assets, and (ii) the Company has economic exposure to the entity that could be potentially significant to the entity.

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The Company continues to monitor its involvement in unconsolidated CDOs/CLOs to assess future consolidation risk. For example, if the Company were to acquire additional interests in these entities and obtain the right, due to an event of default trigger being met, to unilaterally liquidate or direct the activities of a CDO/CLO, the Company may be required to consolidate the asset entity. For cash CDOs/ CLOs, the net result of such consolidation would be to gross up the Company’s balance sheet by the current fair value of the securities held by third parties and assets held by the CDO/CLO, which amounts are not considered material. For synthetic CDOs/CLOs, the net result of such consolidation may reduce the Company’s balance sheet, because intercompany derivative receivables and payables would be eliminated in consolidation, and other assets held by the CDO/CLO and the securities held by third parties would be recognized at their current fair values.

Asset-Based Financing

The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported in Trading account assets and accounted for at fair value through earnings. The Company generally does not have the power to direct the activities that most significantly impact these VIEs’ economic performance and thus it does not consolidate them.

The primary types of the Company’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement and the Company’s maximum exposure to loss at December 31, 2011 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.

Total Maximum In millions of dollars assets exposure Type Commercial and other real estate $440 $ 1 Airplanes, ships and other assets 134 13 Total $574 $14

Client Intermediation

Client intermediation transactions represent a range of transactions designed to provide investors with specified returns based on the returns of an underlying security, referenced asset or index. These transactions include credit-linked notes and equity-linked notes. In these transactions, the VIE typically obtains exposure to the underlying security, referenced asset or index through a derivative instrument, such as a total-return swap or a credit-default swap. In turn the VIE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The VIE invests the proceeds in a financial asset that serves as collateral for the derivative contract over the term of the transaction. The Company’s involvement in these transactions includes being the counterparty to the VIE’s derivative instruments and investing in a portion of the notes issued by the VIE. In certain transactions, the investor’s maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the power to direct the activities of the VIEs that most significantly impact their economic performance and thus it does not consolidate them.

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The Company’s maximum risk of loss in these transactions is defined as the amount invested in notes issued by the VIE and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the VIE. The derivative instrument held by the Company may generate a receivable from the VIE (for example, where the Company purchases credit protection from the VIE in connection with the VIE’s issuance of a credit-linked note), which is collateralized by the assets owned by the VIE. These derivative instruments are not considered variable interests and any associated receivables are not included in the calculation of maximum exposure to the VIE.

10. DERIVATIVES ACTIVITIES

In the ordinary course of business, the Company enters into various types of derivative transactions. These derivative transactions include:

• Futures and forward contracts, which are commitments to buy or sell at a future date a financial instrument, commodity or currency at a contracted price and may be settled in cash or through delivery.

• Swap contracts, which are commitments to settle in cash at a future date or dates that may range from a few days to a number of years, based on differentials between specified financial indices, as applied to a notional principal amount.

• Option contracts, which give the purchaser, for a premium, the right, but not the obligation, to buy or sell within a specified time a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices.

The Company enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons:

• Trading Purposes – Customer Needs: The Company offers its customers derivatives in connection with their risk-management actions to transfer, modify or reduce their interest rate, foreign exchange and other market/credit risks or for their own trading purposes. As part of this process, the Company considers the customers’ suitability for the risk involved and the business purpose for the transaction. The Company also manages its derivative risk positions through offsetting trade activities, controls focused on price verification, and daily reporting of positions to senior managers.

• Trading Purposes – Own Account: The Company trades derivatives for its own account and as an active market maker. Trading limits and price verification controls are key aspects of this activity.

• Hedging: The Company uses derivatives in connection with its risk-management activities to hedge certain risks or reposition the risk profile of the Company. For example, the Company issues fixed-rate long-term debt and then enter into a receive-fixed, pay-variable-rate interest rate swap with the same tenor and notional amount to convert the interest payments to a net variable-rate basis. This strategy is the most common form of an interest rate hedge, as it minimizes interest cost in certain yield curve environments. In addition, foreign-exchange contracts are used to hedge non-U.S.-dollar-denominated debt and net investment exposures.

Derivatives may expose the Company to market, credit or liquidity risks in excess of the amounts recorded on the Consolidated Statement of Financial Condition. Market risk on a derivative product is the exposure created by potential fluctuations in interest rates, foreign-exchange rates and other factors and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other

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party to the transaction where the value of any collateral held is not adequate to cover such losses. The recognition in earnings of unrealized gains on these transactions is subject to management’s assessment as to collectability. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in periods of high volatility and financial stress at a reasonable cost.

Information pertaining to the volume of derivative activity is provided in the following tables. The notional amounts, for both long and short derivative positions, of the Company’s derivative instruments as of December 31, 2011 and December 31, 2010 are presented in the following table.

Derivative Notionals

Hedging instruments under ASC 815 (SFAS 133) (1) Trading Derivatives December 31, December 31, December 31, December 31, In millions of dollars 2011 2010 2011 2010 Interest rate contracts Swaps $1,429 $2,369 $ 5,957,619 $ 8,307,010 Futures and forwards – – 587,482 1,504,673 Written options – – 303,992 313,779 Purchased options – – 242,302 281,059 Total interest rate contract notionals 1,429 2,369 7,091,395 10,406,521 Foreign exchange contracts Swaps 192 185 371,572 347,638 Futures and forwards – – 123,850 111,953 Written options – – 17,664 18,172 Purchased options – – 17,327 17,868 Total foreign exchange contract notionals 192 185 530,413 495,631 Equity contracts Swaps – – 62,555 55,820 Futures and forwards – – 10,885 16,365 Written options – – 269,961 253,866 Purchased options – – 260,061 247,827 Total equity contract notionals – – 603,462 573,878 Commodity and other contracts Swaps – – 23,969 26,717 Futures and forwards – – 71,549 115,126 Written options – – 69,816 46,499 Purchased options – – 70,420 49,431 Total commodity and other contract notionals – – 235,754 237,773 Credit derivatives (2) Protection sold – – 831,866 756,594 Protection purchased – – 846,859 762,268 Total credit derivatives – – 1,678,725 1,518,862 Total derivative notionals $1,621 $2,554 $10,139,749 $13,232,665

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(1) Derivatives in hedge accounting relationships accounted for under ASC 815 (SFAS 133) are recorded in Trading account assets/liabilities on the Consolidated Statement of Financial Condition. (2) Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “reference asset” to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company has entered into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.

Derivative Mark-to-Market (MTM) Receivables/Payables

December 31, 2011 December 31, 2010 In millions of dollars Assets Liabilities Assets Liabilities Derivative instruments designated as ASC 815 (SFAS 133) hedges Interest rate contracts $ 187 $ 35 $ 208 $ 44 Foreign exchange contracts 29 – 20 – Total derivative instruments designated as ASC 815 (SFAS 133) hedges 216 35 228 44 Other derivative instruments Interest rate contracts 160,067 159,451 109,333 112,376 Foreign exchange contracts 11,866 18,285 12,254 18,741 Equity contracts 16,349 26,211 14,294 28,462 Commodity and other contracts 11,858 12,718 11,250 11,477 Credit derivatives 45,259 44,930 29,276 30,683 Total other derivative instruments 245,399 261,595 176,407 201,739 Total derivatives 245,615 261,630 176,635 201,783 Cash collateral paid/received (1) 4,874 4,423 4,648 5,076 Less: Netting agreements and market value adjustments (2) (223,193) (222,477) (157,274) (156,404) Less: Netting cash collateral received/paid (3) (10,618) (17,243) (5,241) (15,230) Net receivables/payables $ 16,678 $ 26,333 $ 18,768 $ 35,225

(1) At December 31, 2011, this is the net amount of the $22,117 million and $15,041 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $17,243 million was used to offset derivative liabilities, and of the gross cash collateral received, $10,618 million was used to offset derivative assets. At December 31, 2010, this is the net amount of the $19,878 million and $10,317 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $15,230 million was used to offset derivative liabilities, and of the gross cash collateral received, $5,241 million was used to offset derivative assets. (2) Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements. (3) Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements.

All derivatives are reported on the balance sheet at fair value in Trading account assets/liabilities. In addition, where applicable, all such contracts covered by master netting agreements are reported net. Gross positive fair values are netted with gross negative fair values by counterparty pursuant to a valid master netting agreement. In addition, payables and receivables in respect of cash collateral received from or paid to a given counterparty are included in this netting. However, non-cash collateral is not included.

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Derivatives not designated in a qualifying hedging relationship as well as the underlying non- derivative instruments are recognized in Principal transactions in the Consolidated Statement of Operations. See Note 3, Principal Transactions, to the Consolidated Financial Statements. The Company presents this disclosure by business classification, showing derivative gains and losses related to its trading activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this represents the way these portfolios are risk managed.

Accounting for Derivative Hedging

The Company accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging (formerly SFAS 133). As a general rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interest-rate or foreign-exchange risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset or liability that may affect earnings.

Derivative contracts hedging the risks associated with the changes in fair value are referred to as fair value hedges. Hedges that utilize derivatives or debt instruments to manage the foreign exchange risk associated with equity investments in non-U.S.-dollar-functional-currency foreign subsidiaries (net investment in a foreign operation) are called net investment hedges.

If certain hedging criteria specified in ASC 815 are met, including testing for hedge effectiveness, special hedge accounting may be applied. The hedge effectiveness assessment methodologies for similar hedges are performed in a similar manner and are used consistently throughout the hedging relationships. For fair value hedges, the changes in value of the hedging derivative, as well as the changes in value of the related hedged item due to the risk being hedged, are reflected in current earnings. For net investment hedges, the changes in value of the hedging derivative are reflected in Accumulated other comprehensive income (loss) in the Company’s stockholder’s equity, to the extent the hedge is effective. Hedge ineffectiveness, in either case, is reflected in current earnings.

For asset/liability management hedging, the fixed-rate long-term debt would be recorded at amortized cost under current U.S. GAAP. However, by electing to use ASC 815 (SFAS 133) hedge accounting, the carrying value of the debt is adjusted for changes in the benchmark interest rate, with any such changes in value recorded in current earnings. The related interest-rate swap is also recorded on the balance sheet at fair value, with any changes in fair value reflected in earnings. Thus, any ineffectiveness resulting from the hedging relationship is recorded in current earnings. Alternatively, a management hedge, which does not meet the ASC 815 hedging criteria, would involve recording only the derivative at fair value on the balance sheet, with its associated changes in fair value recorded in earnings. The debt would continue to be carried at amortized cost and, therefore, current earnings would be impacted only by the interest rate shifts and other factors that cause the change in the swap’s value and may change the underlying yield of the debt. This type of hedge is undertaken when hedging requirements cannot be achieved or management decides not to apply ASC 815 hedge accounting. Another alternative for the Company would be to elect to carry the debt at fair value under the fair value option. Once the irrevocable election is made upon issuance of the debt, the full change in fair value of the debt would be reported in earnings. The related interest rate swap, with changes in fair value, would also be reflected in earnings, and provides a natural offset to the debt’s fair value change. To the extent the two offsets would not be exactly equal, the difference would be reflected in current earnings.

Key aspects of achieving ASC 815 hedge accounting are documentation of hedging strategy and hedge effectiveness at the hedge inception and substantiating hedge effectiveness on an ongoing basis. A derivative must be highly effective in accomplishing the hedge objective of offsetting changes in the fair value of the hedged item for the risk being hedged. Any ineffectiveness in the hedge relationship is recognized in current earnings. The assessment of effectiveness excludes changes in the value of the hedged item that are unrelated to the risks being hedged. Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value that, if excluded, are recognized in current earnings.

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Fair Value Hedges

Hedging of benchmark interest rate risk

The Company hedges exposure to changes in the fair value of outstanding fixed-rate issued debt. The fixed cash flows from these financing transactions are converted to benchmark variable-rate cash flows by entering into receive-fixed, pay-variable interest rate swaps. These fair value hedge relationships use regression analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis.

Gains/(losses) on fair value hedges (1) Year ended December 31, In millions of dollars 2011 2010 Gain on the derivatives in designated and qualifying fair value hedges $107 $51 Loss on the hedged item in designated and qualifying fair value hedges ($ 36) ($43) Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges $ 71 $ 8

(1) Amounts are included in Other revenue on the Consolidated Statement of Operations. The accrued interest income on fair value hedges is recorded in Net interest revenue and is excluded from this table.

Net Investment Hedges

Consistent with ASC 830-20, Foreign Currency Matters – Foreign Currency Transactions (formerly SFAS 52, Foreign Currency Translation), ASC 815 allows hedging of the foreign currency risk of a net investment in a foreign operation. The Company uses foreign currency forwards, swaps and foreign-currency-denominated debt instruments to manage the foreign exchange risk associated with the Company’s equity investments in several non-U.S. dollar functional currency foreign subsidiaries. The Company records the change in the carrying amount of these investments in the Foreign currency translation adjustment account within Accumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in the Foreign currency translation adjustment account and the ineffective portion, if any, is immediately recorded in earnings.

For derivatives used in net investment hedges, the Company follows the forward-rate method from FASB Derivative Implementation Group Issue H8 (now ASC 815-35-35-16 through 35-26), Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge. According to that method, all changes in fair value, including changes related to the forward-rate component of the foreign currency forward contracts, are recorded in the Foreign currency translation adjustment account within Accumulated other comprehensive income (loss).

For foreign currency denominated debt instruments that are designated as hedges of net investments, the translation gain or loss that is recorded in the Foreign currency translation adjustment account is based on the spot exchange rate between the functional currency of the respective subsidiary and the U.S. dollar, which is the functional currency of the Company. To the extent the notional amount of the hedging instrument exactly matches the hedged net investment and the underlying exchange rate of the derivative hedging instrument relates to the exchange rate between the functional currency of the net investment and the Company’s functional currency (or, in the case of a non-derivative debt instrument, such instrument is denominated in the functional currency of the net investment), no ineffectiveness is recorded in earnings.

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The pretax gain (loss) recorded in the Foreign currency translation adjustment account within Accumulated other comprehensive income (loss), related to the effective portion of the net investment hedges, is $136 million and $(91) million for the years ended December 31, 2011 and December 31, 2010, respectively.

Credit Derivatives

A credit derivative is a bilateral contract between a buyer and a seller under which the seller agrees to provide protection to the buyer against the credit risk of a particular entity (“reference entity” or “reference credit”). Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined credit events (commonly referred to as “settlement triggers”). These settlement triggers are defined by the form of the derivative and the reference credit and are generally limited to the market standard of failure to pay on indebtedness and bankruptcy of the reference credit and, in a more limited range of transactions, debt restructuring. Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions, protection may be provided on a portfolio of referenced credits or asset-backed securities. The seller of such protection may not be required to make payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.

The Company makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its cash positions, to take proprietary trading positions, and to facilitate client transactions. The range of credit derivatives sold includes credit default swaps, total return swaps, credit options and credit-linked notes.

A credit default swap is a contract in which, for a fee, a protection seller agrees to reimburse a protection buyer for any losses that occur due to a credit event on a reference entity. If there is no credit default event or settlement trigger, as defined by the specific derivative contract, then the protection seller makes no payments to the protection buyer and receives only the contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the protection seller will be required to make a payment to the protection buyer.

A total return swap transfers the total economic performance of a reference asset, which includes all associated cash flows, as well as capital appreciation or depreciation. The protection buyer receives a floating rate of interest and any depreciation on the reference asset from the protection seller and, in return, the protection seller receives the cash flows associated with the reference asset plus any appreciation. Thus, according to the total return swap agreement, the protection seller will be obligated to make a payment anytime the floating interest rate payment and any depreciation of the reference asset exceed the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset subject to the provisions of the related total return swap agreement between the protection seller and the protection buyer.

A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of the reference asset. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell the reference asset at a specified “strike” spread level. The option purchaser buys the right to sell the reference asset to, or purchase it from, the option writer at the strike spread level. The payments on credit spread options depend either on a particular credit spread or the price of the underlying credit-sensitive asset. The options usually terminate if the underlying assets default.

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A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap. The purchaser of the note writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of December 31, 2011 and December 31, 2010, the amount of credit-linked notes held by the Company in trading inventory was immaterial.

The following tables summarize the key characteristics of the Company’s credit derivative portfolio as protection seller as of December 31, 2011 and December 31, 2010.

Maximum potential amount of future Fair value In millions of dollars as of December 31, 2011 payments payable By industry/counterparty Bank $697,096 $31,528 Broker-dealer 88,052 4,797 Non-financial 129 42 Insurance and other financial institutions 46,589 2,151 Total by industry/counterparty $831,866 $38,518 By instrument Credit default swaps and options $827,700 $38,342 Total return swaps and other 4,166 176 Total by instrument $831,866 $38,518 By rating Investment grade $403,241 $13,783 Non-investment grade 104,702 10,030 Not rated 323,923 14,705 Total by rating $831,866 $38,518 By maturity Within 1 year $156,346 $ 1,871 From 1 to 5 years 591,543 27,321 After 5 years 83,977 9,326 Total by maturity $831,866 $38,518

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Maximum potential amount of future Fair value In millions of dollars as of December 31, 2010 payments payable By industry/counterparty Bank $611,474 $13,226 Broker-dealer 98,204 2,193 Non-financial 145 27 Insurance and other financial institutions 46,771 2,125 Total by industry/counterparty $756,594 $17,571 By instrument Credit default swaps and options $746,272 $17,329 Total return swaps and other 10,322 242 Total by instrument $756,594 $17,571 By rating Investment grade $582,806 $10,928 Non-investment grade 118,105 3,092 Not rated 55,683 3,551 Total by rating $756,594 $17,571 By maturity Within 1 year $100,148 $ 259 From 1 to 5 years 551,776 8,840 After 5 years 104,670 8,472 Total by maturity $756,594 $17,571

The Company evaluates the payment/performance risk of the credit derivatives for which it stands as a protection seller based on the credit rating assigned to the underlying referenced credit. Where external ratings by nationally recognized statistical rating organizations (such as Moody’s and S&P) are used, investment grade ratings are considered to be Baa/BBB or above, while anything below is considered non- investment grade. The Company’s internal ratings are in line with the related external credit rating system. On certain underlying reference credits, mainly related to over-the-counter credit derivatives, ratings are not available, and these are included in the not-rated category. Credit derivatives written on an underlying non-investment grade reference credit represent greater payment risk to the Company. The non-investment grade category in the table above primarily includes credit derivatives where the underlying referenced entity has been downgraded subsequent to the inception of the derivative.

The maximum potential amount of future payments under credit derivative contracts presented in the table above is based on the notional value of the derivatives. The Company believes that the maximum potential amount of future payments for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the Company’s rights to the underlying assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event (or settlement trigger) occur, the Company is usually liable for the difference between the protection sold and the recourse it holds in the value of the underlying assets. Thus, if the reference entity defaults, the Company will generally have a right to collect on the underlying reference credit and any related cash flows, while being liable for the full notional amount of credit protection sold to the buyer. Furthermore, this maximum potential amount of future payments for credit protection sold has not been reduced for any cash collateral paid to a given counterparty as such payments would be calculated after netting all derivative exposures, including any credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting processes, determining the amount of collateral

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that corresponds to credit derivative exposures only is not possible. The Company actively monitors open credit risk exposures, and manages this exposure by using a variety of strategies including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the preceding table.

Credit-Risk-Related Contingent Features in Derivatives

Certain derivative instruments contain provisions that require the Company to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified credit-risk-related event. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates. The fair value (excluding CVA) of all derivative instruments with credit-risk-related contingent features that are in a liability position is $4.4 billion at December 31, 2011 and December 31, 2010. The Company has posted $3.4 billion and $2.4 billion as collateral for this exposure in the normal course of business as of December 31, 2011 and December 31, 2010, respectively. Each downgrade would trigger additional collateral requirements for the Company and its affiliates. In the event that each legal entity was downgraded a single notch as of December 31, 2011, the Company would be required to post additional collateral of $0.7 billion.

11. CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to the Company’s total credit exposure. Although the Company’s portfolio of financial instruments is broadly diversified along product and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading and derivatives businesses.

In connection with the Company’s efforts to maintain a diversified portfolio, the Company limits its exposure to any one geographic region, country or individual creditor and monitors this exposure on a continuous basis. The Company’s largest single concentration of credit risk is in securities issued by the U.S. government and its agencies, which totaled $41.2 billion at December 31, 2011 and $38.8 billion at December 31, 2010. With the addition of U.S. government and U.S. government agency securities pledged as collateral by counterparties in connection with collateralized financing activity, the Company’s total holdings of U.S. government securities were approximately $177 billion or 35% of the Company’s total assets before netting at December 31, 2011, and approximately $177 billion or 34% of the Company’s total assets before netting at December 31, 2010. Concentrations with foreign governments totaled approximately $103 billion at December 31, 2011 and $66 billion at December 31, 2010. These consist predominantly of securities issued by the governments of major industrialized nations.

12. FAIR VALUE MEASUREMENT

ASC 820-10 (formerly SFAS 157) defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Among other things the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In addition, the use of block discounts is precluded when measuring the fair value of instruments traded in an active market. It also requires recognition of trade-date gains related to certain derivative transactions whose fair values have been determined using unobservable market inputs.

Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative positions and includes the impact of the Company’s own credit risk on derivatives and other liabilities measured at fair value.

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Fair Value Hierarchy

ASC 820-10, Fair Value Measurement, specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

• Level 1: Quoted prices for identical instruments in active markets.

• Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

• Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company’s policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.

Determination of Fair Value

For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election or whether they were previously carried at fair value.

When available, the Company generally uses quoted market prices to determine fair value and classifies such items as Level 1. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified as Level 2.

If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

Where available, the Company may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2. If prices are not available, other valuation techniques would be used and the item would be classified as Level 3.

Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors and brokers’ valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.

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The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models and any significant assumptions.

Securities borrowed or purchased under agreements to resell and securities sold under agreements to repurchase

No quoted prices exist for such instruments and so fair value is determined using a discounted cash- flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. Expected cash flows are discounted using market rates appropriate to the maturity of the instrument as well as the nature and amount of collateral taken or received. Generally, such instruments are classified within Level 2 of the fair value hierarchy as the inputs used in the fair valuation are readily observable.

Trading account assets and liabilities – trading securities and trading loans

When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities and exchange-traded equity securities.

For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. If available, the Company may also use quoted prices for recent trading activity of assets with similar characteristics to the bond or loan being valued. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale or prices from independent sources vary, a loan or security is generally classified as Level 3.

Where the Company’s principal market for a portfolio of loans is the securitization market, the Company uses the securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such as commercial real estate loans, pricing verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, this loan portfolio is classified as Level 2 in the fair value hierarchy.

Trading account assets and liabilities – derivatives

The majority of derivatives entered into by the Company are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows, Black- Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).

The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, the spot price of the underlying volatility and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenors are generally less observable.

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In the fourth quarter of 2011, the Company began incorporating overnight indexed swap (“OIS”) curves as fair value measurement inputs for the valuation of certain collateralized interest-rate related derivatives. The OIS curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives. The Company believes using relevant OIS curves as inputs to determine fair value measurements provides a more representative reflection of the fair value of these collateralized interest- rate related derivatives. Previously, the Company used the relevant benchmark curve for the currency of the derivative (e.g., the London Interbank Offered Rate for U.S. dollar derivatives) as the discount rate for these collateralized interest-rate related derivatives. The Company recognized a pretax loss of approximately $362 million upon the change in this fair value measurement input. For further information on derivative instruments and hedging activities, see Note 10.

Subprime-related direct exposures in CDOs

The valuation of high-grade and mezzanine asset-backed security (ABS) CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. The high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are trader priced. This results in closer symmetry in the way these long and short positions are valued by the Company. The Company uses trader marks to value this portion of the portfolio and will do so as long as it remains largely hedged.

For most of the lending and structuring direct subprime exposures, fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.

Investments

The investments category includes nonpublic investments in private equity and real estate entities. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Private equity securities are generally classified as Level 3 of the fair value hierarchy.

Short-term borrowings and long-term debt

Where fair value accounting has been elected, the fair values of non-structured liabilities are determined by discounting expected cash flows using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy as all inputs are readily observable.

The Company determines the fair values of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.

Market valuation adjustments

Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair value hierarchy to ensure that the fair value reflects the price at which the entire position could be liquidated in an orderly

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manner. The liquidity reserve is based on the bid-offer spread for an instrument, adjusted to take into account the size of the position consistent with what the Company believes a market participant would consider.

Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter derivatives, where the base valuation uses market parameters based on the LIBOR interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.

Bilateral or “own” credit-risk adjustments are applied to reflect the Company’s own credit risk when valuing derivatives and liabilities measured at fair value. Counterparty and own credit adjustments consider the expected future cash flows between the Company and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.

Alt-A mortgage securities

The Company classifies its Alt-A mortgage securities as trading investments. The securities are recorded at fair value with changes in fair value reported in current earnings. For these purposes, the Company defines Alt-A mortgage securities as non-agency residential mortgage-backed securities (RMBS) where (1) the underlying collateral has weighted average FICO scores between 680 and 720 or (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair values of Alt-A mortgage securities utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to the security being valued.

The internal valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, consider estimated housing price changes, unemployment rates, interest rates and borrower attributes. They also consider prepayment rates as well as other market indicators.

Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or more recent vintages are mostly classified as Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.

Commercial mortgage securities

The Company classifies its commercial mortgage securities and loans as trading investments. The securities are recorded at fair value with changes in fair value reported in current earnings.

Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of securities and loans linked to commercial real estate utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same or similar characteristics to that being valued. Securities and loans linked to commercial real estate valued using these methodologies are generally classified as Level 3 as a result of the current reduced liquidity in the market for such exposures.

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Items Measured at Fair Value on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011 and December 31, 2010. The Company’s hedging of positions that have been classified in the Level 3 category is not limited to other financial instruments that have been classified as Level 3, but also instruments classified as Level 1 or Level 2 of the fair value hierarchy. The effects of these hedges are presented gross in the following table.

Gross In millions of dollars at December 31, 2011 Level 1 Level 2 Level 3 inventory Netting (1) Net balance Assets Securities purchased under agreements to resell and securities borrowed $ – $187,624 $ 4,701 $192,325 $ (49,873) $142,452 Trading securities Trading mortgage-backed securities U.S. government-sponsored agency guaranteed – 23,210 495 23,705 – 23,705 Prime – 120 597 717 – 717 Alt-A – 442 111 553 – 553 Subprime – 523 120 643 – 643 Non-U.S. residential – 274 104 378 – 378 Commercial – 1,231 456 1,687 – 1,687 Total trading mortgage-backed securities – 25,800 1,883 27,683 – 27,683 U.S. Treasury and federal agency securities U.S. Treasury 13,921 2,451 – 16,372 – 16,372 Agency obligations – 1,171 – 1,171 – 1,171 Total U.S. Treasury and federal agency securities 13,921 3,622 – 17,543 – 17,543 State and municipal – 3,845 186 4,031 – 4,031 Foreign government 14,028 5,917 368 20,313 – 20,313 Corporate – 17,508 1,413 18,921 – 18,921 Equity securities 18,807 2,394 203 21,404 – 21,404 Asset-backed securities – 1,085 4,295 5,380 – 5,380 Other debt securities – 382 1 383 – 383 Total trading securities 46,756 60,553 8,349 115,658 – 115,658 Trading account derivatives Interest rate contracts – 159,222 1,032 160,254 Foreign exchange contracts – 11,157 738 11,895 Equity contracts 2,232 12,644 1,473 16,349 Commodity contracts 952 10,309 597 11,858 Credit derivatives – 42,195 3,064 45,259 Total trading account derivatives 3,184 235,527 6,904 245,615 Gross cash collateral paid 22,117 Netting agreements and market value adjustments (251,054) Total derivatives 3,184 235,527 6,904 267,732 (251,054) 16,678 Investments Foreign government – 1 – 1 – 1 Non-marketable equity securities – 29 80 109 – 109 Total investments – 30 80 110 – 110 Loans – – 80 80 – 80 Other financial assets measured on a recurring basis – – 47 47 – 47 Total assets $49,940 $483,734 $20,161 $575,952 $(300,927) $275,025 Total as a percentage of gross assets (2) 9.0% 87.4% 3.6% 100.0%

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(2) Percentage is calculated based on total assets measured at fair value on a recurring basis, excluding collateral paid/ received on derivatives.

Gross In millions of dollars at December 31, 2011 Level 1 Level 2 Level 3 inventory Netting (1) Net balance Liabilities Securities sold under agreements to repurchase $ – $ 160,712 $ 1,061 $ 161,773 $ (49,873) $ 111,900 Trading account liabilities Securities sold, not yet purchased 43,853 10,712 125 54,690 – 54,690 Trading account derivatives Interest rate contracts – 158,730 756 159,486 Foreign exchange contracts – 17,092 1,193 18,285 Equity contracts 2,706 21,433 2,072 26,211 Commodity contracts 861 10,302 1,555 12,718 Credit derivatives – 42,164 2,766 44,930 Total trading account derivatives 3,567 249,721 8,342 261,630 Gross cash collateral received 15,041 Netting agreements and market value adjustments (250,338) Total derivatives 3,567 249,721 8,342 276,671 (250,338) 26,333 Short-term borrowings – 84 105 189 – 189 Long-term debt – 1,906 486 2,392 – 2,392 Total liabilities $ 47,420 $ 423,135 $ 10,119 $ 495,715 $ (300,211) $ 195,504 Total as a percentage of gross liabilities (2) 9.9% 88.0% 2.1% 100.0%

(1) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral, and the market value adjustment. (2) Percentage is calculated based on total liabilities measured at fair value on a recurring basis, excluding collateral paid/ received on derivatives.

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Gross In millions of dollars at December 31, 2010 Level 1 Level 2 Level 3 inventory Netting (1) Net balance Assets Securities purchased under agreements to resell $ – $131,254 $ 4,911 $136,165 $ (49,230) $ 86,935 Trading securities Trading mortgage-backed securities U.S. government sponsored – 23,595 254 23,849 – 23,849 Prime – 593 482 1,075 – 1,075 Alt-A – 1,070 289 1,359 – 1,359 Subprime – 772 613 1,385 – 1,385 Non-U.S. residential – 786 224 1,010 – 1,010 Commercial – 795 341 1,136 – 1,136 Total trading mortgage-backed securities – 27,611 2,203 29,814 – 29,814 U.S. Treasury and federal agency securities U.S. Treasury 9,793 1,868 – 11,661 – 11,661 Agency obligations 7 3,280 – 3,287 – 3,287 Total U.S. Treasury and federal agency securities 9,800 5,148 – 14,948 – 14,948 State and municipal – 5,563 59 5,622 – 5,622 Foreign government 11,173 5,566 537 17,276 – 17,276 Corporate – 26,731 2,598 29,329 – 29,329 Equity securities 23,162 770 739 24,671 – 24,671 Asset-backed securities – 169 4,034 4,203 – 4,203 Other debt securities – 236 – 236 – 236 Total trading securities 44,135 71,794 10,170 126,099 – 126,099 Derivatives Interest rate contracts 351 107,604 1,586 109,541 Foreign exchange contracts 11 11,350 913 12,274 Equity contracts 2,577 10,454 1,263 14,294 Commodity and other contracts 574 9,818 858 11,250 Credit derivatives – 25,411 3,865 29,276 Total gross derivatives 3,513 164,637 8,485 176,635 Cash collateral paid 19,878 Netting agreements and market value adjustments (177,745) Total derivatives 3,513 164,637 8,485 196,513 (177,745) 18,768 Investment in Preferred Securities of MSSB LLC – – 2,000 2,000 – 2,000 Investments in non-marketable equity securities – – 263 263 – 263 Loans – – 135 135 – 135 Other financial assets measured on a recurring basis – – 327 327 – 327 Total assets $47,648 $367,685 $26,291 $461,502 $(226,975) $234,527 Total as a percentage of gross assets (2) 10.8% 83.3% 5.9% 100.0%

(1) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral, and the market value adjustment. (2) Percentage is calculated based on total assets measured at fair value on a recurring basis, excluding collateral paid/ received on derivatives.

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Gross In millions of dollars at December 31, 2010 Level 1 Level 2 Level 3 inventory Netting (1) Net balance Liabilities Securities sold under agreements to repurchase $ – $169,081 $ 1,261 $170,342 $ (49,230) $121,112 Trading account liabilities Securities sold, not yet purchased 39,738 9,025 180 48,943 – 48,943 Derivatives Interest rate contracts 320 109,033 3,067 112,420 Foreign exchange contracts 2 17,425 1,314 18,741 Equity contracts 2,465 23,687 2,310 28,462 Commodity and other contracts 447 9,315 1,715 11,477 Credit derivatives – 25,112 5,571 30,683 Total gross derivatives 3,234 184,572 13,977 201,783 Cash collateral received 10,317 Netting agreements and market value adjustments (176,875) Total derivatives 3,234 184,572 13,977 212,100 (176,875) 35,225 Short-term borrowings – 13 205 218 – 218 Long-term debt – 2,556 861 3,417 – 3,417 Total liabilities $42,972 $365,247 $16,484 $435,020 $(226,105) $208,915 Total as a percentage of gross liabilities (2) 10.1% 86.0% 3.9% 100.0%

(1) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase, and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral, and the market value adjustment. (2) Percentage is calculated based on total liabilities measured at fair value on a recurring basis, excluding collateral paid/ received on derivatives.

Changes in Level 3 Fair Value Category

The following tables present the changes in the Level 3 fair value category for the twelve months ended December 31, 2011 and December 31, 2010. The Company classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables.

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Net realized/unrealized Unrealized gains (losses) included in Transfers in gains Dec. 31, Principal and/or out Dec. 31, (losses) still In millions of dollars 2010 transactions Other of Level 3 Purchases Issuances Sales Settlements 2011 held (1) Assets Securities borrowed or purchased under agreements to resell $4,911 $90 $– ($300) $– $– $– $– $4,701 $89 Trading securities Trading mortgage-backed securities U.S. government-sponsored agency guaranteed 254 (23) – 171 650 – (557) – 495 (51) Prime 482 126 – 48 370 – (409) (20) 597 28 Alt-A 289 26 – (35) 95 – (261) (3) 111 (5) Subprime 613 (3) – (179) 252 – (527) (36) 120 33 Non-U.S. residential 224 7 – (59) 354 – (422) – 104 (30) Commercial 341 91 – 199 283 – (432) (26) 456 (57) Total trading mortgage-backed securities 2,203 224 – 145 2,004 – (2,608) (85) 1,883 (82) State and municipal 59 (7) – 96 181 – (133) (10) 186 (30) Foreign government 537 (33) – (223) 1,208 – (693) (428) 368 (23) Corporate debt 2,598 (151) – (79) 3,004 – (3,537) (422) 1,413 (100) Equity securities 739 (199) – (175) 190 – (352) – 203 (50) Asset-backed securities 4,034 78 – 603 4,574 – (4,777) (217) 4,295 (616) Other debt securities – (5) – (1) 23 – (16) – 1 (5) Total trading securities 10,170 (93) – 366 11,184 – (12,116) (1,162) 8,349 (906) Investment in Preferred Securities of MSSB LLC 2,000 – – – – – (2,000) – – – Investments in non-marketable equity securities 263 – (37) (25) 7 – (128) – 80 (3) Loans 135 – (5) ––––(50) 80 (5) Other financial assets measured on a recurring basis 327 – (33) (63) 1 – – (185) 47 –

(1) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2011. (2) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

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Net realized/ unrealized Purchases, Unrealized gains (losses) included in Transfers in issuances gains December Principal and/or out and December (losses) still In millions of dollars 31, 2009 (1) transactions Other of Level 3 settlements 31, 2010 held (2) Assets Securities purchased under agreements to resell $1,127 $100 $– $3,019 665 $4,911 374 Trading securities Trading mortgage-backed securities U.S. government sponsored 56 (1) – 34 165 254 33 Prime 324 61 – 78 19 482 22 Alt-A 194 13 – 114 (32) 289 (47) Subprime 1,283 (1,700) – (538) 1,568 613 8 Non-U.S. residential 572 24 – (315) (57) 224 39 Commercial 302 37 – 8 (6) 341 54 Total trading mortgage-backed securities 2,731 (1,566) – (619) 1,657 2,203 109 State and municipal 222 40 – 57 (260) 59 5 Foreign government 400 16 – (109) 230 537 (11) Corporate 3,952 41 – (162) (1,233) 2,598 109 Equity securities 551 28 – 321 (161) 739 219 Asset-backed securities 3,749 223 – (60) 122 4,034 (162) Other debt securities 113–1(15) – – Total trading securities 11,616 (1,215) – (571) 340 10,170 269 Investment in Preferred Securities of MSSB LLC 2,153–––(153) 2,000 – Investments in non-marketable equity securities 236 – (7) 34 – 263 (35) Loans – – (18) – 153 135 – Other financial assets measured on a recurring basis 742 – (122) 9 (302) 327 (76)

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(1) Reclassified to conform to current period’s presentation. (2) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2010. (3) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

The significant changes from December 31, 2010 to December 31, 2011 in Level 3 assets and liabilities were due to:

• A net decrease in trading securities of $1.8 billion that included:

– Purchases of corporate debt trading securities of $3.0 billion and sales of $3.5 billion, reflecting strong trading activity.

– Purchases of asset-backed securities of $4.6 billion and sales of $4.8 billion, reflecting trading in CLO and CDO positions.

• A net increase in interest rate contracts of $1.8 billion, including transfers of $1.6 billion from Level 2 to Level 3.

• The transfer of Investment in Preferred Securities to affiliates. See Note 2 to the Consolidated Financial Statements.

The significant changes from December 31, 2009 to December 31, 2010 in Level 3 assets and liabilities were due to:

• An increase in securities purchased under agreements to resell of $3.8 billion, driven primarily by transfers of certain collateralized long-dated callable reverse repos (structured reverse repos) of $3.0 billion from Level 2 to Level 3. The Company has noted that there is more transparency and observability for repo curves (used in the determination of the fair value of structured reverse repos) with a tenor of five years or less; thus, structured reverse repos that are expected to mature beyond the five-year point are generally classified as Level 3. The primary factor driving the change in expected maturities in structured reverse repo transactions is the embedded call option feature that enables the investor (the Company) to elect to terminate the trade early. During 2010, the decrease in interest rates caused the estimated maturity dates of certain structured reverse repos to lengthen to more than five years, resulting in the transfer from Level 2 to Level 3.

• A net decrease in Derivatives of $5.1 billion, including net trading losses of $2.9 billion, net settlements of $1.5 billion and net transfers out of Level 3 to Level 2 of $0.7 billion.

Transfers between Level 1 and Level 2 of the Fair Value Hierarchy

The Company did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the twelve months ended December 31, 2011 and December 31, 2010.

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13. FAIR VALUE ELECTIONS

The following table presents, as of December 31, 2011 and 2010, the fair value of those positions selected for fair value accounting, as well as the changes in fair value gains and losses for the years ended December 31, 2011 and 2010:

Changes in fair-value gains (losses) for the Fair value at years ended December 31, December December In millions of dollars 31,2011 31,2010 2011 2010 Assets Selected portfolios of securities purchased under agreements to resell (1) $ 142,452 $ 86,935 ($ 151) $ 30 Certain investments in private equity and real estate ventures and certain equity method investments 156 288 (29) (80) Mortgage loans (2) 80 135 (5) (18) Total assets $ 142,688 $ 87,358 ($ 185) ($ 68) Liabilities Selected portfolios of securities sold under agreements to repurchase (1) $ 111,900 $121,112 ($ 108) $ 6 Trading account liabilities 1,895 3,953 848 (481) Short-term borrowings 189 218 (1) 16 Long-term debt 2,392 3,417 232 (162) Total liabilities $ 116,376 $128,700 $ 971 ($621)

(1) Reflects netting of the amounts due from securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase. (2) Mortgage loans held by a mortgage loan securitization VIE consolidated upon the adoption of SFAS 167 on January 1, 2010.

Own Debt Valuation Adjustment

Own debt valuation adjustments are recognized on the Company’s debt liabilities for which the fair value option has been elected using the Company’s credit spreads observed in the bond market. The fair value of debt liabilities for which the fair value option is elected (other than non-recourse and similar liabilities) is impacted by the narrowing or widening of the Company’s credit spreads. The estimated change in the fair value of these debt liabilities due to such changes in the Company’s own credit risk (or instrument-specific credit risk) was a gain of $541 million and a loss of $181 million for the years ended December 31, 2011 and 2010, respectively. Changes in fair value resulting from changes in instrument- specific credit risk were estimated by incorporating the Company’s current credit spreads observable in the bond market into the relevant valuation technique used to value each liability as described above.

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The Fair Value Option for Financial Assets and Financial Liabilities Selected portfolios of securities purchased under agreements to resell, securities borrowed, securities sold under agreements to repurchase, and certain non-collateralized short-term borrowings

The Company elected the fair value option for certain portfolios of fixed-income securities purchased under agreements to resell and fixed-income securities sold under agreements to repurchase, securities borrowed (and certain non-collateralized short-term borrowings) on broker-dealer entities in the United States and United Kingdom. In each case, the election was made because the related interest-rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings.

Changes in fair value for transactions in these portfolios are recorded in Principal transactions. The related interest revenue and interest expense are measured based on the contractual rates specified in the transactions and are reported as interest revenue and expense in the Consolidated Statement of Operations.

Certain investments in private equity and real estate ventures and certain equity method investments

The Company invests in private equity and real estate ventures for the purpose of earning investment returns and for capital appreciation. The Company has elected the fair value option for certain of these ventures, because such investments are considered similar to many private equity or hedge fund activities in the Company’s investment companies, which are reported at fair value. The fair value option brings consistency in the accounting and evaluation of these investments. All investments (debt and equity) in such private equity and real estate entities are accounted for at fair value. These investments are classified as Other assets on the Company’s Consolidated Statement of Financial Condition.

The Company also holds various non-strategic investments in leveraged buyout funds and other hedge funds for which the Company elected fair value accounting to reduce operational and accounting complexity. Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to the Company’s investment in these funds was equivalent to fair value accounting. These investments are classified as Other assets on the Company’s Consolidated Statement of Financial Condition.

Changes in the fair values of these investments are classified in Other revenue in the Company’s Consolidated Statement of Operations.

Consolidated VIE

The Company has elected the fair value option for all qualified assets and liabilities of a VIE that was consolidated upon the adoption of SFAS 167 on January 1, 2010, consisting of certain private label mortgage securitizations. The Company elected the fair value option for this VIE as the Company believes this method better reflects the economic risks, since all of the Company’s retained interests in this entity are carried at fair value.

The Company determined the fair value for the mortgage loan and long-term debt utilizing internal valuation techniques. Security pricing associated with the long-term debt is valued using significant unobservable inputs and is classified as Level 3. The fair value of the mortgage loan of the VIE is derived from the security pricing and is classified as Level 3. The mortgage loan is classified as Other assets on the Company’s Consolidated Statement of Financial Condition. The change in fair value of the loan is reported as Principal transactions in the Company’s Consolidated Statement of Operations. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue in the Company’s Consolidated Statement of Operations.

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The debt issued by this consolidated VIE is classified as long-term debt on the Company’s Consolidated Statement of Financial Condition. The change in fair value of this long-term debt is reported in Principal transactions in the Company’s Consolidated Statement of Operations. Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Statement of Operations. The aggregate unpaid principal balance of long-term debt of this consolidated VIE exceeded the aggregate fair value by $226 million as of December 31, 2011.

The following table provides information about the mortgage loan of the consolidated VIE carried at fair value at December 31, 2011:

In millions of dollars Carrying amount reported on the Consolidated Statement of Financial Condition $ 80 Aggregate unpaid principal balance in excess of fair value 146 Balance of non-accrual loans or loans more than 90 days past due 23 Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due 42

Certain structured liabilities

The Company has elected the fair value option for certain structured liabilities whose performance is linked to structured interest rates, inflation, currency, equity, referenced credit or commodity risks (structured liabilities). The Company elected the fair value option, because these exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions are classified as derivatives (Trading account liabilities) on the Company’s Consolidated Statement of Financial Condition. The change in fair value for these structured liabilities is reported in Principal transactions in the Company’s Consolidated Statement of Operations. For structured debt that contains embedded interest rate, inflation or currency risks, related interest expense is measured based on the contracted interest rates and reported as such in the Consolidated Statement of Operations.

Certain non-structured liabilities

The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates (non-structured liabilities). The Company has elected the fair value option where the interest-rate risk of such liabilities is economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings. The election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported in Short-term borrowings and Long-term debt on the Company’s Consolidated Statement of Financial Condition.

The change in fair value for these non-structured liabilities is reported in Principal transactions in the Company’s Consolidated Statement of Operations. Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Operations.

The following table provides information about long-term debt carried at fair value, excluding the debt issued by the consolidated VIEs, at December 31, 2011:

In millions of dollars Carrying amount reported on the Consolidated Statement of Financial Condition $2,176 Aggregate unpaid principal balance in excess of fair value 498

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14. FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated Fair Value of Financial Instruments

The table below presents the carrying value and fair value of the Company’s financial instruments. The disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as intangible values, which are integral to a full assessment of the Company’s financial position and the value of its net assets.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization.

December 31, 2011 December 31, 2010 Carrying Estimated Carrying Estimated In billions of dollars value fair value value fair value Assets Collateralized short-term financing agreements $220.6 $220.6 $206.5 $206.5 Trading account assets 132.3 132.3 144.9 144.9 Receivables 47.2 47.2 45.3 45.3 Other financial assets (1) 39.1 39.1 61.5 61.5

December 31, 2011 December 31, 2010 Carrying Estimated Carrying Estimated In billions of dollars value fair value value fair value Liabilities Collateralized short-term financing agreements $175.6 $175.6 $163.8 $163.8 Trading account liabilities 81.0 81.0 84.2 84.2 Long-term debt 66.8 67.1 69.7 69.4 Other financial liabilities (2) 112.3 112.3 130.1 130.1

(1) Includes cash and cash equivalents, cash segregated and on deposit for Federal and other regulations or deposited with clearing organizations and other financial instruments included in Other assets on the Consolidated Statement of Financial Condition, for all of which the carrying value is a reasonable estimate of fair value. (2) Includes short-term borrowings, payables to customers and brokers, dealers and clearing organizations, and other financial instruments included in Other payables and accrued liabilities on the Consolidated Statement of Financial Condition, for all of which the carrying value is a reasonable estimate of fair value.

Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

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15. COLLATERAL, COMMITMENTS AND GUARANTEES

Collateral

At December 31, 2011 and 2010, the approximate fair value of collateral received by the Company that may be sold or repledged by the Company, excluding the impact of allowable netting, was $352.6 billion and $327.6 billion, respectively. This collateral was received in connection with resale agreements, securities borrowings and loans, derivative transactions and margined broker loans.

At December 31, 2011 and 2010, a substantial portion of the collateral received by the Company had been sold or repledged in connection with repurchase agreements, securities sold, not yet purchased, securities borrowings and loans, pledges to clearing organizations, segregation requirements under securities laws and regulations, and derivative transactions.

At December 31, 2011 and 2010, the Company had $1.4 billion and $1.1 billion, respectively, of outstanding letters of credit from third-party banks to satisfy various collateral and margin requirements.

Lease Commitments

Rental expense (principally for offices and computer equipment) was $193 million, $146 million and $237 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Future minimum annual rentals under noncancelable leases, net of sublease income, are as follows:

In millions of dollars 2012 $ 117 2013 116 2014 113 2015 111 2016 111 Thereafter 436 Minimum future rentals $ 1,004

Guarantees

The Company provides a variety of guarantees and indemnifications to its customers to enhance their credit standing and enable them to complete a wide variety of business transactions. For certain contracts meeting the definition of a guarantee, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee.

In addition, the guarantor must disclose the maximum potential amount of future payments the guarantor could be required to make under the guarantee, if there were a total default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees. The following tables present information about the Company’s guarantees at December 31, 2011 and December 31, 2010:

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Maximum potential amount of future payments Expire Expire Total In millions of dollars at within after amount Carrying December 31, 2011 1 year 1 year outstanding value Derivative instruments considered to be guarantees $1,361 $ 968 $ 2,329 $724 Securities lending indemnifications (1) 8,445 – 8,445 – Total $9,806 $ 968 $10,774 $724

Maximum potential amount of future payments Expire Expire Total In millions of dollars at within after amount Carrying December 31, 2010 1 year 1 year outstanding value Derivative instruments considered to be guarantees $1,214 $1,690 $ 2,904 $398 Securities lending indemnifications (1) 7,176 – 7,176 – Total $8,390 $1,690 $10,080 $398

(1) The indemnifications were fully collateralized as of December 31, 2011 and 2010. The carrying value of securities lending indemnifications is not material, as the Company has determined that the amount and probability of potential liabilities arising from these guarantees are not significant.

Derivative instruments considered to be guarantees

Derivatives are financial instruments whose cash flows are based on a notional amount and an underlying, where there is little or no initial investment, and whose terms require or permit net settlement. Derivatives may be used for a variety of reasons, including risk management, or to enhance returns. Financial institutions often act as intermediaries for their clients, helping clients reduce their risks. However, derivatives may also be used to take a risk position.

The derivative instruments considered to be guarantees, which are presented in the tables above, include only those instruments that require the Company to make payments to the counterparty based on changes in an underlying instrument that is related to an asset, a liability, or an equity security held by the guaranteed party. More specifically, derivative instruments considered to be guarantees include certain over-the-counter written put options where the counterparty is not a bank, hedge fund or broker- dealer (such counterparties are considered to be dealers in these markets and may, therefore, not hold the underlying instruments). However, credit derivatives sold by the Company are excluded from this presentation, as they are disclosed separately in Note 10 to the Consolidated Financial Statements. In addition, non-credit derivative contracts that are cash settled and for which the Company is unable to assert that it is probable the counterparty held the underlying instrument at the inception of the contract also are excluded from the disclosure above. In instances where the Company’s maximum potential future payment is unlimited, the notional amount of the contract is disclosed.

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Securities lending indemnifications

Owners of securities frequently lend those securities for a fee to other parties who may sell them short or deliver them to another party to satisfy some other obligation. Broker-dealers may administer such securities lending programs for their clients. Securities lending indemnifications are issued by the broker-dealer to guarantee that a securities lending customer will be made whole in the event that the security borrower does not return the security subject to the lending agreement and collateral held is insufficient to cover the market value of the security.

Other guarantees and indemnifications Other Representation and Warranty Indemnifications

In the normal course of business, the Company provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides indemnifications, including indemnifications that protect the counterparties to the contracts in the event that additional taxes are owed due either to a change in the tax law or an adverse interpretation of the tax law. Counterparties to these transactions provide the Company with comparable indemnifications. While such representations, warranties and indemnifications are essential components of many contractual relationships, they do not represent the underlying business purpose for the transactions. The indemnification clauses are often standard contractual terms related to the Company’s own performance under the terms of a contract and are entered into in the normal course of business based on an assessment that the risk of loss is remote. Often these clauses are intended to ensure that terms of a contract are met at inception. No compensation is received for these standard representations and warranties, and it is not possible to determine their fair value because they rarely, if ever, result in a payment. In many cases, there are no stated or notional amounts included in the indemnification clauses and the contingencies potentially triggering the obligation to indemnify have not occurred and are not expected to occur. These indemnifications are not included in the tables above.

Value-Transfer Networks

The Company is a member of, or shareholder in, hundreds of value-transfer networks (VTNs) (payment, clearing and settlement systems as well as exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to pay a pro rata share of the losses incurred by the organization due to another member’s default on its obligations. The Company’s potential obligations may be limited to its membership interests in the VTNs, contributions to the VTN’s funds, or, in limited cases, the obligation may be unlimited. The maximum exposure cannot be estimated as this would require an assessment of future claims that have not yet occurred. Management believes the risk of loss is remote given historical experience with the VTNs. Accordingly, the Company’s participation in VTNs is not reported in the Company’s guarantees tables above and there are no amounts reflected on the Consolidated Statement of Financial Condition as of December 31, 2011 or December 31, 2010 for potential obligations that could arise from the Company’s involvement with VTN associations.

Credit Commitments

Credit commitments include commercial commitments to make or purchase loans, to purchase third-party receivables, to provide note issuance or revolving underwriting facilities and to invest in the form of equity. Total credit commitments were $852 million and $747 million at December 31, 2011 and December 31, 2010, respectively, including $87 million and $192 million with an original maturity of less than one year at December 31, 2011 and December 31, 2010, respectively.

In addition, included in these amounts are highly leveraged financing commitments, which are agreements that provide funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower) than is generally considered normal for other companies. This type of financing is commonly employed in corporate acquisitions, management buy-outs and similar transactions.

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16. RELATED PARTY TRANSACTIONS

Pursuant to various intercompany agreements, a number of significant transactions are carried out between the Company and Citigroup and/or their affiliates. Detailed below is a summary of the Company’s transactions with other Citigroup affiliates which are included in the accompanying Consolidated Statement of Operations and Statement of Financial Condition at December 31, 2011 and 2010. These amounts exclude intercompany balances that eliminate in consolidation.

STATEMENT OF OPERATIONS ITEMS

December 31, In millions of dollars 2011 2010 2009 Revenues Investment banking $ 35 $ 107 $ 777 Principal transactions (586) (3,929) 3,628 All other revenues (1) 1,477 947 1,592 Total non-interest revenues 926 (2,875) 5,997 Interest revenue 917 1,130 1,787 Interest expense 2,479 2,102 2,209 Net interest revenue (expense) (1,562) (972) (422) Total revenues, net of interest expense $ (636) $ (3,847) $ 5,575 Operating expenses Communications $ 372 $ 311 $ 395 All other expenses (2) 1,457 1,204 978 Total non-interest revenues $ 1,829 $ 1,515 $ 1,373

(1) Includes trade management and intermediation fees charged to affiliates. (2) Includes charges from affiliates for shared services.

See Immaterial Corrections in Note 1 to the Consolidated Financial Statements.

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STATEMENT OF FINANCIAL CONDITION ITEMS

December 31, In millions of dollars 2011 2010 Assets Cash and cash equivalents $ 18,828 $ 28,503 Cash and securities segregated and on deposit for Federal and other regulations or deposited with clearing organizations 8,123 7,797 Collateralized short-term financing agreements: Securities purchased under agreements to resell 7,963 12,706 Deposits paid for securities borrowed 3,018 1,823 Derivatives 8,394 10,014 Receivables: Customer and Brokers, dealers and clearing organizations 1,195 387 Loans to affiliates 16,423 12,395 Other 1,028 435 Other assets, including other trading account assets 350 50 Total assets $ 65,322 $ 74,110 Liabilities Short-term borrowings $ 43,155 $ 66,841 Collateralized short-term financing agreements 25,899 7,536 Derivatives 8,426 10,155 Other trading account liabilities 104 111 Payables and accrued liabilities: Customers 6,402 6,121 Brokers, dealers and clearing organizations 509 325 Other 3,669 3,470 Long-term debt 59,958 60,088 Total liabilities $ 148,122 $154,647

Incentive Plans and Retirement Benefits

As discussed in Note 4, the Company participates in various Citigroup stock-based compensation programs under which Citigroup stock or stock options are granted to certain of the Company’s employees. The Company has no stock-based compensation programs in which its own stock is granted. The Company pays Citigroup directly for participation in certain of its stock-based compensation programs, but receives a capital contribution for those awards related to participation in the employee incentive stock option program. As discussed in Note 4 to the Consolidated Financial Statements, the Company participates in several non-contributory defined benefit pension plans and a defined contribution plan sponsored by Citigroup covering certain eligible employees.

Other Intercompany Agreements

Citigroup and its subsidiaries engage in other transactions and servicing activities with the Company, including cash management, data processing, telecommunications, payroll processing, and administration, facilities procurement, underwriting and others.

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17. CONTINGENCIES

Overview

In addition to the matters described below, in the ordinary course of business, CGMHI, its parent entity Citigroup, and its affiliates and subsidiaries, as well as their respective current and former officers, directors and employees (for purposes of this section, sometimes collectively referred to as Citigroup and Related Parties), routinely are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of consumer protection, securities, banking, antifraud, antitrust, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief, and in some instances seek recovery on a class-wide basis.

In the ordinary course of business, Citigroup and Related Parties also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, injunctions or other relief. In addition, Citigroup is a bank holding company, and certain affiliates and subsidiaries of CGMHI are banks, registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, banking, commodity futures and other regulators. In connection with formal and informal inquiries by these regulators, Citigroup and Related Parties receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of their regulated activities.

Because of the global scope of Citigroup’s operations, and its presence in countries around the world, Citigroup and Related Parties are subject to litigation, and governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), in multiple jurisdictions with legal and regulatory regimes that may differ substantially, and present substantially different risks, from those Citigroup and Related Parties are subject to in the United States. In some instances Citigroup and Related Parties may be involved in proceedings involving the same subject matter in multiple jurisdictions, which may result in overlapping, cumulative or inconsistent outcomes.

Citigroup and CGMHI seek to resolve all litigation and regulatory matters in the manner management believes is in the best interests of Citigroup and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.

In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for litigation and regulatory matters, including the matters disclosed herein, when Citigroup believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. In view of the inherent unpredictability of litigation and regulatory matters, particularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the early stages, or the matters involve novel legal theories or a large number of parties, Citigroup cannot at this time estimate the possible loss or range of loss, if any, in excess of the amounts accrued for these matters or predict the timing of their eventual resolution, and the actual costs of resolving litigation and regulatory matters may be substantially higher or lower than the amounts accrued for those matters.

Subject to the foregoing, it is the opinion of Citigroup’s management, based on current knowledge and after taking into account its current legal accruals, that the eventual outcome of all matters described in this Note would not be likely to have a material adverse effect on the consolidated financial condition of CGMHI. Nonetheless, given the inherent unpredictability of litigation and the substantial or indeterminate amounts sought in certain of these matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on CGMHI’s consolidated results of operations or cash flows in particular quarterly or annual periods.

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CGMHI or its subsidiaries are named as defendants or otherwise directly involved in certain, but not all, of the matters disclosed below. In addition, certain of the matters below relate principally to broker- dealer activity, while other matters relate principally to lending or other Citigroup activities in which CGMHI or its subsidiaries had no direct involvement.

Credit-Crisis-Related Litigation and Other Matters

Citigroup and Related Parties have been named as defendants in numerous legal actions and other proceedings asserting claims for damages and related relief for losses arising from the global financial credit crisis that began in 2007. Such matters include, among other types of proceedings, claims asserted by: (i) individual investors and purported classes of investors in Citigroup’s common and preferred stock and debt, alleging violations of the federal securities laws and state securities and fraud laws; (ii) participants and purported classes of participants in Citigroup’s retirement plans, alleging violations of the Employee Retirement Income Security Act (ERISA); (iii) counterparties to transactions adversely affected by developments in the credit and mortgage markets; (iv) individual investors and purported classes of investors in securities and other investments underwritten, issued or marketed by Citigroup, including collateralized debt obligations (CDOs), mortgage-backed securities (MBS), auction-rate securities (ARS), investment funds, and other structured or leveraged instruments, that have suffered losses as a result of the credit crisis; and (v) individual borrowers asserting claims related to their loans. These matters have been filed in state and federal courts across the country, as well as in arbitrations before the Financial Industry Regulatory Authority (FINRA) and other arbitration associations.

In addition to these litigations and arbitrations, Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission (SEC), FINRA, state attorneys general, the Department of Justice and subdivisions thereof, bank regulators, and other government agencies and authorities, in connection with various formal and informal (and, in many instances, industry-wide) inquiries concerning Citigroup’s mortgage-related conduct and business activities, as well as other business activities affected by the credit crisis. These business activities include, but are not limited to, Citigroup’s sponsorship, packaging, issuance, marketing, servicing and underwriting of MBS and CDOs and its origination, sale or other transfer, servicing, and foreclosure of residential mortgages.

Mortgage-Related Litigation and Other Matters

Beginning in November 2007, Citigroup and Related Parties have been named as defendants in numerous legal actions and other proceedings brought by Citigroup shareholders, investors, counterparties, regulators and others concerning Citigroup’s activities relating to mortgages, including Citigroup’s involvement with CDOs, MBS and structured investment vehicles, Citigroup’s underwriting activity for mortgage lenders, and Citigroup’s more general mortgage-and credit-related activities.

Regulatory Actions: On October 19, 2011, in connection with its industry-wide investigation concerning CDO-related business activities, the SEC filed a complaint in the United States District Court for the Southern District of New York regarding Citigroup’s structuring and sale of the Class V Funding III CDO transaction (Class V). On the same day, the SEC and Citigroup announced a settlement of the SEC’s claims, subject to judicial approval, and the SEC filed a proposed final judgment pursuant to which Citigroup’s U.S. broker-dealer Citigroup Global Markets Inc. (CGMI) agreed to disgorge $160 million, and pay $30 million in prejudgment interest and a $95 million penalty. On November 28, 2011, the district court issued an order refusing to approve the proposed settlement and ordering trial to begin on July 16, 2012. On December 15 and 19, 2011, respectively, the SEC and CGMI filed notices of appeal from the district court’s November 28 order. On December 27, 2011, the United States Court of Appeals for the Second Circuit granted an emergency stay of further proceedings in the district court, pending the Second Circuit’s ruling on the SEC’s motion to stay the district court proceedings during the pendency of the appeals. Additional information relating to this matter is publicly available in court filings under the docket numbers 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.) and 11-5227 (2d Cir.).

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Federal and state regulators, including the SEC, also have served subpoenas or otherwise requested information related to Citigroup’s issuing, sponsoring, or underwriting of MBS. These inquiries include a subpoena from the Civil Division of the Department of Justice that Citigroup received on January 27, 2012.

Securities Actions: Citigroup and Related Parties have been named as defendants in four putative class actions filed in the United States District Court for the Southern District of New York. On August 19, 2008, these actions were consolidated under the caption IN RE CITIGROUP INC. SECURITIES LITIGATION. The consolidated amended complaint asserts claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of purchasers of Citigroup common stock from January 1, 2004 through January 15, 2009. On November 9, 2010, the district court issued an opinion and order dismissing all claims except those arising out of Citigroup’s exposure to CDOs for the time period February 1, 2007 through April 18, 2008. Fact discovery is underway. Plaintiffs have not yet quantified the putative class’s alleged damages. During the putative class period, as narrowed by the district court, the price of Citigroup’s common stock declined from $54.73 at the beginning of the period to $25.11 at the end of the period. (These share prices represent Citi’s common stock prices prior to its 1-for-10 reverse stock split, effective May 6, 2011. Additional information relating to this action is publicly available in court filings under the consolidated lead docket number 07 Civ. 9901 (S.D.N.Y.) (Stein, J.).

Citigroup and Related Parties also have been named as defendants in two putative class actions filed in New York state court, but since removed to the United States District Court for the Southern District of New York, alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 in connection with various offerings of Citigroup securities. On December 10, 2008, these actions were consolidated under the caption IN RE CITIGROUP INC. BOND LITIGATION. In the consolidated action, lead plaintiffs assert claims on behalf of a putative class of purchasers of corporate debt securities, preferred stock and interests in preferred stock issued by Citigroup and related issuers over a two-year period from 2006 to 2008. On July 12, 2010, the district court issued an opinion and order dismissing plaintiffs’ claims under Section 12 of the Securities Act of 1933, but denying defendants’ motion to dismiss certain claims under Section 11. Fact discovery is underway. Plaintiffs have not yet quantified the putative class’s alleged damages. Additional information relating to this action is publicly available in court filings under the consolidated lead docket number 08 Civ. 9522 (S.D.N.Y.) (Stein, J.).

Citigroup and CGMI have been named as defendants in two putative class actions filed in the United States District Court for the Southern District of California, but since transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Southern District of New York. In the consolidated action, lead plaintiffs assert claims on behalf of a putative class of participants in Citigroup’s Voluntary Financial Advisor Capital Accumulation Plan from November 2006 through January 2009. On June 7, 2011, the district court granted defendants’ motion to dismiss the complaint and subsequently entered judgment. On November 14, 2011, the district court granted in part plaintiffs’ motion to alter or amend the judgment and granted plaintiffs leave to amend the complaint. On November 23, 2011, plaintiffs filed an amended complaint alleging violations of Section 12 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. Defendants filed a motion to dismiss certain of plaintiffs’ claims on December 21, 2011. Additional information relating to this action is publicly available in court filings under the docket number 09 Civ. 7359 (S.D.N.Y.) (Stein, J.).

Several institutional or high-net-worth investors that purchased debt and equity securities issued by Citigroup and affiliated issuers also have filed actions on their own behalf against Citigroup and Related Parties in federal and state court. These actions assert claims similar to those asserted in the IN RE CITIGROUP INC. SECURITIES LITIGATION and IN RE CITIGROUP INC. BOND LITIGATION actions described above. Collectively, these investors seek damages exceeding $1 billion. Additional information relating to these individual actions is publicly available in court filings under the docket numbers 09 Civ. 8755 (S.D.N.Y.) (Stein, J.), 10 Civ. 7202 (S.D.N.Y.) (Stein, J.), 10 Civ. 9325 (S.D.N.Y.) (Stein, J.), 10 Civ. 9646 (S.D.N.Y.) (Stein, J.), 11 Civ. 314 (S.D.N.Y.) (Stein, J.), 11 Civ. 4788 (S.D.N.Y.) (Stein, J.), 11 Civ. 7138 (S.D.N.Y.) (Stein, J.), 11 Civ. 8291 (S.D.N.Y.) (Stein, J.), and Case No. 110105028 (Pa. Commw. Ct.) (Sheppard, J.).

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Mortgage-Backed Securities and CDO Investor Actions and Repurchase Claims: Beginning in July 2010, several investors, including Cambridge Place Investment Management, The Charles Schwab Corporation, the Federal Home Loan Bank of Chicago, the Federal Home Loan Bank of Boston, Allstate Insurance Company and affiliated entities, Union Central Life Insurance Co. and affiliated entities, the Federal Housing Finance Agency, the Western & Southern Life Insurance Company and affiliated entities, Moneygram Payment Systems, Inc., and Loreley Financing (Jersey) No. 3 Ltd. and affiliated entities, have filed lawsuits against Citigroup and Related Parties alleging actionable misstatements or omissions in connection with the issuance and underwriting of MBS and CDOs. These actions are in early stages. As a general matter, plaintiffs in these actions are seeking rescission of their investments or other damages. Additional information relating to these actions is publicly available in court filings under the docket numbers 10-2741-BLS1 (Mass. Super. Ct.) (Lauriat, J.), 11-0555-BLS1 (Mass. Super. Ct.) (Lauriat, J.), CGC-10-501610 (Cal. Super. Ct.) (Kramer, J.), 10 CH 45033 (Ill. Super. Ct.) (Allen, J.), LC091499 (Cal. Super. Ct.) (Mohr, J.), 11 Civ. 10952 (D. Mass.) (O’Toole, J.), 11 Civ. 1927 (S.D.N.Y.) (Sullivan, J.), 11 Civ. 2890 (S.D.N.Y.) (Daniels, J.), 11 Civ. 6188 (S.D.N.Y.) (Cote, J.), 11 Civ. 6196 (S.D.N.Y.) (Cote, J.), 11 Civ. 6916 (S.D.N.Y.) (Cote, J.), 11 Civ. 7010 (S.D.N.Y.) (Cote, J.), A 1105042 (Ohio Ct. Common Pleas) (Myers, J.), No. 27-CB-11-21348 (Minn. Dist. Ct.) (Howard, J.) and 650212/12 (N.Y. Sup. Ct.). Other purchasers of MBS or CDOs sold or underwritten by Citigroup affiliates have threatened to file lawsuits asserting similar claims, some of which Citigroup has agreed to toll pending further discussions with these investors.

In addition, various parties to MBS securitizations, among others, have asserted that certain Citigroup affiliates breached representations and warranties made in connection with mortgage loans placed into securitization trusts. Citigroup also has experienced an increase in the level of inquiries relating to these securitizations, particularly requests for loan files from trustees of securitization trusts and others. In December 2011, Citigroup received a letter from the law firm Gibbs & Bruns LLP, which purports to represent a group of investment advisers and holders of MBS issued or underwritten by Citigroup. The letter asserts that Gibbs & Bruns LLP’s clients collectively hold 25% or more of the voting rights in 35 MBS trusts issued and/or underwritten by Citigroup affiliates, and that these trusts have an aggregate outstanding balance in excess of $9 billion. The letter alleges that certain mortgages in these trusts were sold or deposited into the trusts based on misrepresentations by the mortgage originators, sellers and/or depositors and that Citigroup improperly serviced mortgage loans in those trusts. The letter further threatens to instruct trustees of the trusts to assert claims against Citigroup based on these allegations. Gibbs & Bruns LLP subsequently informed Citigroup that its clients hold the requisite interest in 70 trusts in total, with an alleged total unpaid principal balance of $24 billion, for which Gibbs & Bruns LLP asserts that Citigroup affiliates have repurchase obligations. Citigroup is also a trustee of securitization trusts for MBS issued by unaffiliated issuers that have received similar letters from Gibbs & Bruns, LLP.

Given the continued and increased focus on mortgage-related matters, as well as the increasing level of litigation and regulatory activity relating to mortgage loans and mortgage-backed securities, the level of inquiries and assertions respecting securitizations may further increase. These inquiries and assertions could lead to actual claims for breaches of representations and warranties, or to litigation relating to such breaches or other matters.

Underwriting Matters: Certain Citigroup affiliates have been named as defendants arising out of their activities as underwriters of securities in actions brought by investors in securities of issuers adversely affected by the credit crisis, including AIG, Fannie Mae, Freddie Mac, Ambac and Lehman, among others. These matters are in various stages of litigation. As a general matter, issuers indemnify underwriters in connection with such claims. In certain of these matters, however, Citigroup affiliates are not being indemnified or may in the future cease to be indemnified because of the financial condition of the issuer.

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On September 28, 2011, the United States District Court for the Southern District of New York approved a stipulation of settlement with the underwriter defendants in IN RE AMBAC FINANCIAL GROUP, INC. SECURITIES LITIGATION and judgment was entered. A member of the settlement class has appealed the judgment to the United States Court of Appeals for the Second Circuit. On December 22, 2011, the underwriter defendants moved to dismiss the appeal. Additional information relating to this action is publicly available in court filings under the docket numbers 08 Civ. 0411 (S.D.N.Y.) (Buchwald, J.) and 11-4643 (2d Cir.).

Counterparty and Investor Actions: Citigroup and Related Parties have been named as defendants in actions brought in various state and federal courts, as well as in arbitrations, by counterparties and investors that claim to have suffered losses as a result of the credit crisis. In August 2011, two Saudi nationals and related entities commenced a FINRA arbitration against CGMI alleging $380 million in losses resulting from certain options trades referencing a portfolio of hedge funds and certain credit facilities collateralized by a private equity portfolio. CGMI did not serve as the counterparty or credit facility provider in these transactions. In September 2011, CGMI commenced an action in the United States District Court for the Southern District of New York seeking to enjoin the arbitration. Simultaneously with that filing, the Citigroup entities that served as the counterparty or credit facility provider to the transactions commenced actions in London and Switzerland for declaratory judgments of no liability.

ASTA/MAT and Falcon-Related Litigation and Other Matters

ASTA/MAT and Falcon were alternative investment funds managed and marketed by certain Citigroup affiliates that suffered substantial losses during the credit crisis. The SEC is investigating the management and marketing of the ASTA/MAT and Falcon funds. Citigroup is cooperating fully with the SEC’s inquiry.

In addition, numerous investors in ASTA/MAT have filed lawsuits or arbitrations against Citigroup and Related Parties seeking recoupment of their alleged losses. Although many of these investor disputes have been resolved, others remain pending. In April 2011, a FINRA arbitration panel awarded two ASTA/MAT investors $54 million in damages and attorneys’ fees, including punitive damages, against Citigroup. In December 2011, the United States District Court for the District of Colorado entered an order confirming the FINRA panel’s award. Citigroup has filed a notice of appeal to the 10th Circuit Court of Appeals. Additional information relating to this matter is publicly available in court filings under the docket number 11 Civ. 971 (D. Colo.) (Arguello, J.).

Auction Rate Securities—Related Litigation and Other Matters

Beginning in March 2008, Citigroup and Related Parties have been named as defendants in numerous actions and proceedings brought by Citigroup shareholders and customers concerning ARS, many of which have been resolved. These have included, among others: (i) numerous lawsuits and arbitrations filed by customers of Citigroup and its affiliates seeking damages in connection with investments in ARS; (ii) a consolidated putative class action asserting claims for federal securities violations, which has been dismissed and is now pending on appeal; (iii) two putative class actions asserting violations of Section 1 of the Sherman Act, which have been dismissed and are now pending on appeal; and (iv) a derivative action filed against certain Citigroup officers and directors, which has been dismissed. In addition, based on an investigation, report and recommendation from a committee of Citigroup’s Board of Directors, the Board refused a shareholder demand that was made after dismissal of the derivative action. Additional information relating to certain of these actions is publicly available in court filings under the docket numbers 08 Civ. 3095 (S.D.N.Y.) (Swain, J.), 10-722 (2d Cir.); 10-867 (2d Cir.); 11-1270 (2d Cir.).

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Terra Firma Litigation

In December 2009, plaintiffs, general partners of two related private equity funds, filed a complaint in New York state court, subsequently removed to the Southern District of New York, against certain Citigroup affiliates. Plaintiffs allege that during the May 2007 auction of the music company EMI, Citigroup, as advisor to EMI and as a potential lender to plaintiffs’ acquisition vehicle Maltby, fraudulently or negligently orally misrepresented the intentions of another potential bidder regarding the auction. Plaintiffs alleged that, but for the oral misrepresentations, Maltby would not have acquired EMI for approximately £4.2 billion. Plaintiffs further alleged that, following the acquisition of EMI, certain Citigroup entities tortiously interfered with plaintiffs’ business relationship with EMI. Plaintiffs sought billions of dollars in damages. On September 15, 2010, the district court issued an order granting in part and denying in part Citigroup’s motion for summary judgment. Plaintiffs’ claims for negligent misrepresentation and tortious interference were dismissed. On October 18, 2010, a jury trial commenced on plaintiffs’ remaining claims for fraudulent misrepresentation and fraudulent concealment. The court dismissed the fraudulent concealment claim before sending the case to the jury. On November 4, 2010, the jury returned a verdict on the fraudulent misrepresentation claim in favor of Citigroup. Judgment dismissing the complaint was entered on December 9, 2010. Plaintiffs have appealed the judgment as to the negligent misrepresentation claim, the fraudulent concealment claim and the fraudulent misrepresentation claim. Additional information relating to this action is publicly available in court filings under the docket numbers 09 Civ. 10459 (S.D.N.Y.) (Rakoff, J.) and 11-0126 (2d Cir.).

Tribune Company Bankruptcy

Certain Citigroup affiliates have been named as defendants in adversary proceedings related to the Chapter 11 cases of Tribune Company (Tribune) pending in the United States Bankruptcy Court for the District of Delaware. The complaints, which arise out of the approximate $11 billion leveraged buyout (LBO) of Tribune in 2007, were stayed by court order pending a confirmation hearing on competing plans of reorganization. On October 31, 2011, the bankruptcy court denied confirmation of both the competing plans. A third amended plan of reorganization was then proposed, and confirmation proceedings are expected to take place in 2012. Additional information relating to these actions is publicly available in court filings under the lead docket number 08-13141 (Bankr. D. Del.) (Carey, J.). Certain Citigroup affiliates also have been named as defendants in actions brought by Tribune creditors alleging state law constructive fraudulent conveyance claims relating to the Tribune LBO. These actions have been stayed pending confirmation of a plan of reorganization. Additional information relating to these actions is publicly available in court filings under the docket number 11 MD 02296 (S.D.N.Y.) (Holwell, J.).

Research Analyst Litigation

In March 2004, a putative research-related customer class action alleging various state law claims arising out of the issuance of allegedly misleading research analyst reports concerning numerous issuers was filed against certain Citigroup affiliates in Illinois state court. On October 13, 2011, the court entered an order dismissing with prejudice all class-action claims asserted in the action on the ground that the Securities Litigation Uniform Standards Act of 1998 precludes those claims. The court granted leave for the putative representative plaintiff to file an amended complaint asserting only his individual claims within 21 days. An amended complaint was not filed within the 21-day period. The putative representative plaintiff has filed a notice of appeal from the court’s October 13, 2011 order. Additional information concerning this matter is publicly available in court filings under docket numbers 04-L-265 (Ill. Cir.) (Hylla, J.) and 5-11-0504 (Ill. App. Ct. 5 Dist.).

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Settlement Payments

Payments required in settlement agreements described above have been made or are covered by existing litigation accruals.

* * *

Additional matters asserting claims similar to those described above may be filed in the future.

18. SUBSEQUENT EVENTS

The Company has evaluated whether events or transactions have occurred after December 31, 2011 that would require recognition or disclosure in these financial statements through April 30, 2012, which is the date these financial statements were available to be issued. No such transactions required recognition in the financial statements for the year ended December 31, 2011.

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AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF THE GUARANTOR AND SUBSIDIARIES AS OF AND FOR THE TWO YEARS ENDED 31 DECEMBER 2011, INDEPENDENT AUDITORS’ REPORT THEREON AND OTHER INFORMATION

The information in this Exhibit B has been reproduced from the annual financial statements of the Guarantor for the years ended 31 December 2011 and 2010. References to page numbers (i.e. the page numbers which appear on the bottom of the pages) in this Exhibit B are to pages of the annual financial statements. References to dollars and $ in this Exhibit B, unless otherwise stated, are to U.S. dollars.

182 CITIBANK, N.A. FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors’ Report 1 Consolidated Statement of Income— For the Years Ended December 31, 2011 and 2010 2 Consolidated Balance Sheet— December 31, 2011 and 2010 3 Consolidated Statement of Changes in Stockholder’s Equity—For the Years Ended December 31, 2011 and 2010 5 Consolidated Statement of Cash Flows— For the Years Ended December 31, 2011 and 2010 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization 7 Note 17—Capital Resources 56 Note 2—Summary of Significant Accounting Policies 9 Note 18—Changes in Accumulated Other Note 3—Discontinued Operations 23 Comprehensive Income (Loss) 58 Note 4—Interest Revenue and Expense 24 Note 19—Securitizations and Variable Interest Entities 59 Note 5—Commissions and Fees 24 Note 20—Derivatives Activities 70 Note 6—Principal Transactions 25 Note 21—Concentrations of Credit Risk 79 Note 7—Incentive Plans 25 Note 22—Fair Value Measurement 79 Note 8—Retirement Benefits 27 Note 23—Fair Value Elections 93 Note 9—Income Taxes 29 Note 24—Fair Value of Financial Instruments 97 Note 10—Federal Funds/Securities Borrowed, Loaned, Note 25—Pledged Assets, Collateral, Commitments and Subject to Repurchase/Resale and Guarantees 98 Agreements 31 Note 26—Regional Details 104 Note 11—Trading Account Assets and Liabilities 31 Note 27—Related Party Transactions 105 Note 12—Investments 32 Note 28—Contingencies 107 Note 13—Loans 41 Note 29—Subsequent Events 113 Note 14—Allowance for Credit Losses 51 Note 15—Goodwill and Intangible Assets 53 Note 16—Debt 55

183 INDEPENDENT AUDITORS’ REPORT

The Board of Directors Citibank, N.A.:

We have audited the accompanying consolidated balance In our opinion, the consolidated financial statements referred sheets of Citibank, N.A. and subsidiaries (the Company) as of to above present fairly, in all material respects, the financial December 31, 2011 and 2010, and the related consolidated position of Citibank, N.A. and subsidiaries as of December 31, statements of income, changes in stockholder’s equity, and 2011 and 2010, and the results of their operations and their cash flows for the years then ended. These consolidated cash flows for the years then ended in conformity with U.S. financial statements are the responsibility of the Company’s generally accepted accounting principles. management. Our responsibility is to express an opinion on As discussed in Note 2 to the consolidated financial these consolidated financial statements based on our audits. statements, in 2010 the Company changed its method of We conducted our audits in accordance with auditing accounting for qualifying special purpose entities, variable standards generally accepted in the United States of America. interest entities and embedded credit derivatives. Those standards require that we plan and perform the audit to We also have examined in accordance with attestation obtain reasonable assurance about whether the financial standards established by the American Institute of Certified statements are free of material misstatement. An audit Public Accountants, management’s assertion that the includes examining, on a test basis, evidence supporting the Company maintained effective internal control over financial amounts and disclosures in the financial statements. An audit reporting as of December 31, 2011, based on criteria also includes assessing the accounting principles used and established in Internal Control – Integrated Framework issued significant estimates made by management, as well as by the Committee of Sponsoring Organizations of the evaluating the overall financial statement presentation. We Treadway Commission (COSO) and our report dated March believe that our audits provide a reasonable basis for our 23, 2012 expressed an unqualified opinion on management’s opinion. assertion that the Company maintained effective internal control over financial reporting.

New York, New York March 23, 2012

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF INCOME Year ended December 31 In millions of dollars 2011 2010 Revenues Interest revenue $54,294 $58,135 Interest expense 12,529 13,212 Net interest revenue $41,765 $44,923 Commissions and fees $11,341 $11,564 Principal transactions 5,777 4,815 Realized gains (losses) on sales of investments (500) 1,862 Other than temporary impairment losses on investments Gross impairment losses (1,913) (1,282) Less: Impairments recognized in AOCI 154 70 Net impairment losses recognized in earnings $ (1,759) $ (1,212) Other revenue 229 810 Total non-interest revenues $15,088 $17,839 Total revenues, net of interest expense $56,853 $62,762 Provisions for credit losses and for benefits and claims Provision for loan losses $ 9,623 $21,225 Policyholder benefits and claims 95 77 Provision (release) for unfunded lending commitments 93 (101) Total provisions for credit losses and for benefits and claims $ 9,811 $21,201 Operating expenses Compensation and benefits $15,065 $13,612 Premises and equipment 2,304 2,226 Other operating 16,368 14,643 Total operating expenses $33,737 $30,481 Income from continuing operations before income taxes $13,305 $11,080 Provision for income taxes 2,914 2,285 Income from continuing operations $10,391 $ 8,795 Discontinued operations Income from discontinued operations $ 23 $ 79 Gain (loss) on sale 294 (810) Provision (benefit) for income taxes 115 (395) Income (loss) from discontinued operations, net of taxes $ 202 $ (336) Net income before attribution of noncontrolling interests $10,593 $ 8,459 Net income attributable to noncontrolling interests 84 35 Net income attributable to Citibank $10,509 $ 8,424

See Notes to the Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEET December 31, In millions of dollars, except shares and per share amounts 2011 2010 Assets Cash and due from banks $ 24,498 $ 22,872 Deposits with banks 143,524 145,287 Federal funds sold and securities borrowed or purchased under agreements to resell 74,737 43,306 Trading account assets (including $861 and $1,006 pledged to creditors at December 31, 2011 and 2010, respectively) 157,962 149,359 Investments (including $5,475 and $5,275 pledged to creditors at December 31, 2011 and 2010, respectively, and $201,254 and $220,998 at December 31, 2011 and 2010, respectively, at fair value) 215,289 253,477 Loans, net of unearned income (including $5,156 and $4,209 at December 31, 2011 and 2010, respectively, at fair value) 581,676 567,200 Allowance for loan losses (24,695) (33,036) Total loans, net $ 556,981 $ 534,164 Goodwill 11,485 11,642 Intangible assets 7,909 10,663 Interest and fees receivable 4,877 5,263 Other assets (including $7,483 and $10,537 at December 31, 2011 and 2010, respectively, at fair value) 91,396 99,086 Total assets $1,288,658 $1,275,119

The following table presents certain assets of consolidated variable interest entities (VIEs), which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page and are in excess of those obligations. Additionally, the assets in the table below include third-party assets of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation.

December 31, In millions of dollars 2011 2010 Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs Cash and due from banks $ 185 $ 557 Trading account assets 298 926 Investments 10,498 7,984 Loans, net of unearned income Consumer (including $1,292 and $1,718 at December 31, 2011 and 2010, respectively, at fair value) 96,847 111,997 Corporate (including $118 and $290 at December 31, 2011 and 2010, respectively, at fair value) 23,131 22,666 Loans, net of unearned income $119,978 $134,663 Allowance for loan losses (7,732) (12,102) Total loans, net $112,246 $122,561 Other assets 364 468 Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs $123,591 $132,496

Statement continues on the next page

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CONSOLIDATED BALANCE SHEET (Continued) December 31, In millions of dollars, except shares and per share amounts 2011 2010 Liabilities Non-interest-bearing deposits in U.S. offices $ 129,106 $ 86,686 Interest-bearing deposits in U.S. offices 223,948 219,793 Non-interest-bearing deposits in offices outside the U.S. 51,346 48,873 Interest-bearing deposits in offices outside the U.S. 475,264 488,510 Total deposits (including $1,327 and $1,264 as of December 31, 2011 and 2010, respectively, at fair value) $ 879,664 $ 843,862 Trading account liabilities 64,941 55,593 Federal funds purchased and securities loaned or sold under agreements to repurchase 28,017 12,785 Short-term borrowings (including $92 and $117 at December 31, 2011 and 2010, respectively, at fair value) 34,119 40,239 Long-term debt (including $3,145 and $4,598 as of December 31, 2011 and 2010, respectively, at fair value) 78,581 117,179 Accrued taxes and other expenses 8,362 10,018 Other liabilities (including $2,530 and $7,016 as of December 31, 2011 and 2010, respectively, at fair value) 42,625 43,794 Total liabilities $1,136,309 $1,123,470 Citibank stockholder’s equity Capital stock ($20 par value, issued and outstanding shares: 37,534,553 in each period) $ 751 $ 751 Surplus 137,579 137,287 Retained earnings 22,635 22,929 Accumulated other comprehensive income (loss) (9,210) (10,188) Total Citibank stockholder’s equity $ 151,755 $ 150,779 Noncontrolling interest 594 870 Total equity $ 152,349 $ 151,649 Total liabilities and equity $1,288,658 $1,275,119

The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citibank.

December 31, In millions of dollars 2011 2010 Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citibank Short-term borrowings $20,273 $21,153 Long-term debt (including $1,342 and $1,870 at December 31, 2011 and 2010, respectively, at fair value) 46,511 62,902 Other liabilities 345 229 Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citibank $67,129 $84,284

See Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY Year ended December 31 In millions of dollars, except shares 2011 2010 Common stock ($20 par value) Balance, beginning of year—shares: 37,534,553 in 2011 and 2010 $ 751 $ 751 Balance, end of year—shares: 37,534,553 in 2011 and 2010 $ 751 $ 751 Surplus Balance, beginning of year $137,287 $127,959 Capital contribution from parent company — 8,658 Employee benefit plans 316 679 Other (1) (24) (9) Balance, end of year $137,579 $137,287 Retained earnings Balance, beginning of year $ 22,929 $ 22,820 Adjustment to opening balance, net of taxes (2) — (8,322) Adjusted balance, beginning of year $ 22,929 $ 14,498 Citibank’s net income 10,509 8,424 Dividends paid (10,900) — Other(3) 97 7 Balance, end of year $ 22,635 $ 22,929 Accumulated other comprehensive income (loss) Balance, beginning of year $(10,188) $(11,603) Net change in unrealized gains on investment securities, net of taxes 3,560 1,162 Net change in foreign currency translation adjustment, net of taxes (2,175) 29 Net change in cash flow hedges, net of taxes (266) 518 Pension liability adjustment, net of taxes (141) (294) Net change in Accumulated other comprehensive income $ 978 $ 1,415 Balance, end of year $ (9,210) $ (10,188) Total Citibank stockholder’s equity $151,755 $150,779 Noncontrolling interests Balance, beginning of year $ 870 $ 1,294 Origination of a noncontrolling interest 1 (73) Transactions between Citibank and the noncontrolling interest shareholder — (1) Net income attributable to noncontrolling interest shareholders 84 35 Dividends paid to noncontrolling interest shareholders (67) (40) Accumulated other comprehensive income (loss)—Net change in unrealized gains and losses on investment securities, net of tax (5) 1 Accumulated other comprehensive income (loss)—Net change in FX translation adjustment, net of tax (87) (27) All other (202) (319) Net change in noncontrolling interest $ (276) $ (424) Balance, end of year $ 594 $ 870 Total equity $152,349 $151,649 Comprehensive income Net income before attribution of noncontrolling interest $ 10,593 $ 8,459 Net change in Accumulated other comprehensive income before attribution of noncontrolling interest 886 1,389 Total comprehensive income $ 11,479 $ 9,848 Comprehensive income (loss) attributable to the noncontrolling interest (8) 9 Comprehensive income attributable to Citibank $ 11,487 $ 9,839

(1) Primarily represents the accounting for the transfers of assets and liabilities between Citibank, N.A. and other affiliates under the common control of Citigroup. (2) The adjustment to the opening balance for Retained earnings in 2010 represents the cumulative effect of initially adopting ASC 810, Consolidation (SFAS 167) and ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives. See Note 2 to the Consolidated Financial Statements. (3) Balance in 2010 primarily represents a reversal of dividends accrued on forfeitures of previously issued but unvested employee awards of Citigroup common stock related to employees who have left Citibank.

See Notes to the Consolidated Financial Statements

5 CITIBANK, N.A. 2010–2011 FINANCIALS

188 CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31, In millions of dollars 2011 2010 Cash flows from operating activities of continuing operations Net income before attribution of noncontrolling interests $ 10,593 $ 8,459 Net income attributable to noncontrolling interests 84 35 Citibank’s net income $ 10,509 $ 8,424 Income from discontinued operations, net of taxes 18 71 Gain (loss) on sale, net of taxes 184 (407) Income from continuing operations – excluding noncontrolling interests $ 10,307 $ 8,760 Adjustments to reconcile net income to net cash used in operating activities of continuing operations– excluding noncontrolling interests Depreciation and amortization $ 1,606 $ 1,959 Deferred tax benefit 416 (57) Provision for credit losses 9,716 21,124 Change in trading account assets (8,603) 6,649 Change in trading account liabilities 9,348 6,000 Change in federal funds sold and securities borrowed or purchased under agreements to resell (31,431) (1,184) Purchased funds and other borrowings 9,112 (44,004) Realized (gains) losses from sales of investments 500 (1,862) Change in loans held-for-sale 595 3,265 Other, net (15,599) (9,872) Total adjustments $ (24,340) $ (17,982) Net cash used in operating activities of continuing operations– excluding noncontrolling interests $ (14,033) $ (9,222) Cash flows from investing activities of continuing operations Change in deposits with banks $ 1,763 $ 8,823 Change in loans (22,371) 15,819 Proceeds from sales and securitizations of loans 9,452 9,135 Purchases of investments (229,912) (356,894) Proceeds from sales of investments 136,674 154,507 Proceeds from maturities of investments 114,937 170,203 Capital expenditures on premises and equipment and capitalized software (2,286) (1,493) Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets 574 872 Net cash provided by investing activities of continuing operations $ 8,831 $ 972 Cash flows from financing activities of continuing operations Capital contributions from parent company $ — $ 8,658 Net change in long-term debt (33,323) (21,675) Change in deposits 38,692 21,922 Net cash provided financing activities of continuing operations $ 5,369 $ 8,905 Effect of exchange rate changes on cash and cash equivalents $ (1,210) $ 614 Net cash provided by discontinued operations $2,669 $163 Change in cash and due from banks $1,626 $ 1,432 Cash and due from banks at beginning of year 22,872 21,440 Cash and due from banks at end of year $ 24,498 $ 22,872 Supplemental disclosure of cash flow information for continuing operations Cash paid during the period for income taxes $ 2,256 $ 1,427 Cash paid during the period for interest $ 8,480 $ 10,250 Non-cash investing activities Transfers to repossessed assets $ 510 $ 954 Transfers to trading account assets from investments $ 8,200 $ 6,964

See Notes to the Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION Citibank, N.A. (Citibank, N.A. and, together with its consolidated subsidiaries, Citibank or the Company) is a direct, wholly owned subsidiary of Citicorp, which is a direct, wholly owned subsidiary of Citigroup Inc., a Delaware corporation and a financial holding company under the Bank Holding Company Act (Citigroup). Citibank was originally organized on June 16, 1812, and is currently a national banking association organized under the National Bank Act of 1864. Citibank’s principal offerings include consumer finance, mortgage lending, retail banking products and services, credit cards, subsidiaries and affiliates; investment banking, commercial banking, cash management, trade finance and e- commerce products and services; and private banking products and services throughout the world. The Company is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and also by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB). The foreign branch representative offices and subsidiaries of Citibank are subject to regulation and examination by their respective foreign financial regulators as well as by the OCC and the FRB. These financial statements and footnotes have been prepared in conformity with generally accepted accounting principles (GAAP) in the United States. Additional information about Citibank and Citigroup is available in Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the U.S. Securities and Exchange Commission on February 24, 2012.

Merger of Citibank, N.A. and Citibank (South Dakota), N.A. On July 1, 2011, Citibank, N.A. completed its merger with Citibank (South Dakota) N.A., with Citibank N.A. as the surviving entity. The primary reasons for the merger include: streamlining management and governance of legal entities, more efficiently managing liquidity and capital, streamlining of costs and simplifying operations and technology. Citibank, N.A. accounted for the merger in a manner similar to the “pooling of interests” method. As such, all periods have been restated to include Citibank (South Dakota) N.A. in all disclosures. Citibank (South Dakota) constituted approximately $2.0 billion of Total Citibank consolidated net income for the year ended December 31, 2010 and approximately $126 billion of Total Citibank consolidated assets at December 31, 2010.

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SELECTED PRINCIPAL SUBSIDIARIES

Citibank, N.A.

Department Stores Citibank (China) Citibank Overseas Citicorp USA, Inc. CitiMortgage, Inc. National Bank Co., Ltd. Investment Corporation

Citibank Berhad Bank Handlowy w Citibank Korea Citibank Japan, Citibank Europe Citibank (Malaysia) Warszawie Inc. Ltd. plc Investments (Poland) (Ireland) Limited (U.K.)

Citibank Canada Citigroup Pty Citibank Citigroup Global Citibank Taiwan Citibank Limited Singapore Limited Markets Ltd. International plc (Australia) Deutschland (U.K.)

Citibank España Citibank- Banco Citibank Citibank Hong Citibank Anonim Future Mortgages Colombia S.A. S.A. Kong Limited Surketi Limited (Brazil) (Turkey) (U.K.)

Banco Citibank ZAO Citibank Citibank Belgium Banco Citicard de El Salvador, (Russia) S.A. S.A. S.A. (Brazil)

Some intermediate holding companies are not shown above.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING Along with the VIEs that are consolidated in accordance POLICIES with these guidelines, the Company has variable interests in other VIEs that are not consolidated because the Company is not Principles of Consolidation the primary beneficiary. These include multi-seller finance The Consolidated Financial Statements include the accounts of companies, certain collateralized debt obligations (CDOs) and Citibank, N.A. and its subsidiaries. The Company consolidates many structured finance transactions. subsidiaries in which it holds, directly or indirectly, more than However, these VIEs as well as all other unconsolidated 50% of the voting rights or where it exercises control. Entities VIEs are continually monitored by the Company to determine if where the Company holds 20% to 50% of the voting rights any events have occurred that could cause its primary and/or has the ability to exercise significant influence are beneficiary status to change. These events include: accounted for under the equity method, and the pro rata share of x additional purchases or sales of variable interests by their income (loss) is included in Other revenue. Income from Citibank or an unrelated third party, which cause Citibank’s investments in less than 20%-owned companies is recognized when dividends are received. As discussed below, Citibank overall variable interest ownership to change; consolidates entities deemed to be variable interest entities when x changes in contractual arrangements in a manner that Citibank is determined to be the primary beneficiary. Gains and reallocates expected losses and residual returns among the losses on the disposition of branches, subsidiaries, affiliates, variable interest holders; buildings, and other investments are included in Other revenue. x changes in the party that has power to direct activities of a Certain reclassifications have been made to the prior-year’s VIE that most significantly impact the entity’s economic financial statements and notes to conform to the current year’s performance; and presentation. x providing support to an entity that results in an implicit variable interest. Variable Interest Entities An entity is referred to as a variable interest entity (VIE) if it All other entities not deemed to be VIEs with which the meets the criteria outlined in ASC 810, Consolidation (formerly Company has involvement are evaluated for consolidation under SFAS No. 167, Amendments to FASB Interpretation No. 46(R)) other subtopics of ASC 810 (formerly Accounting Research (SFAS 167), which are: (1) the entity has equity that is Bulletin (ARB) No. 51, Consolidated Financial Statements, insufficient to permit the entity to finance its activities without SFAS No. 94, Consolidation of All Majority-Owned additional subordinated financial support from other parties; or Subsidiaries, and EITF Issue No. 04-5, “Determining Whether a (2) the entity has equity investors that cannot make significant General Partner, or the General Partners as a Group, Controls a decisions about the entity’s operations or that do not absorb Limited Partnership or Similar Entity When the Limited their proportionate share of the entity’s expected losses or Partners Have Certain Rights”). expected returns. As of January 1, 2010, when the Company adopted SFAS Foreign Currency Translation 167’s amendments to the VIE consolidation guidance, the Assets and liabilities of foreign operations are translated from Company consolidates a VIE when it has both the power to their respective functional currencies into U.S. dollars using direct the activities that most significantly impact the VIE’s period-end spot foreign-exchange rates. The effects of those economic success and a right to receive benefits or absorb losses translation adjustments are reported in a separate component of of the entity that could be potentially significant to the VIE (that stockholder’s equity, along with related hedge and tax effects, is, it is the primary beneficiary). until realized upon sale or liquidation of the foreign operation. Revenues and expenses of foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates. For transactions whose terms are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations with the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related hedge effects. Instruments used to hedge foreign currency exposures include foreign currency forward, option and swap contracts and designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.

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Investment Securities Trading Account Assets and Liabilities Investments include fixed income and equity securities. Fixed Trading account assets include debt and marketable equity income instruments include bonds, notes and redeemable securities, derivatives in a receivable position, residual interests preferred stocks, as well as certain loan-backed and structured in securitizations and physical commodities inventory. In securities that are subject to prepayment risk. Equity securities addition (as described in Note 23 to the Consolidated Financial include common and nonredeemable preferred stock. Statements), certain assets that Citibank has elected to carry at Investment securities are classified and accounted for as fair value under the fair value option, such as loans and follows: purchased guarantees, are also included in Trading account assets. x lassified as “held maturity” Fixed income securities c -to- Trading account liabilities include securities sold, not yet represent securities that the Company has both the ability purchased (short positions), and derivatives in a net payable and the intent to hold until maturity, and are carried at position, as well as certain liabilities that Citibank has elected to amortized cost. Interest income on such securities is carry at fair value (as described in Note 23 to the Consolidated included in Interest revenue. Financial Statements). x Fixed income securities and marketable equity securities Other than physical commodities inventory, all trading classified as “available-for-sale” are carried at fair value account assets and liabilities are carried at fair value. Revenues with changes in fair value reported in a separate component generated from trading assets and trading liabilities are of Stockholder’s equity, net of applicable income taxes. As generally reported in Principal transactions and include realized described in more detail in Note 12 to the Consolidated gains and losses as well as unrealized gains and losses resulting Financial Statements, credit-related declines in fair value from changes in the fair value of such instruments. Interest that are determined to be other–than-temporary are income on trading assets is recorded in Interest revenue, recorded in earnings immediately. Realized gains and reduced by interest expense on trading liabilities. losses on sales are included in income primarily on a Physical commodities inventory is carried at the lower of specific identification cost basis. Interest and dividend cost or market with related losses reported in Principal income on such securities is included in Interest revenue. transactions. Realized gains and losses on sales of commodities x Certain non-marketable equity securities are carried at cost inventory are included in Principal transactions. and periodically assessed for other-than-temporary Derivatives used for trading purposes include interest rate, impairment, as set out in Note 12 to the Consolidated currency, equity, credit, and commodity swap agreements, Financial Statements. options, caps and floors, warrants, and financial and commodity For investments in fixed income securities classified as futures and forward contracts. Derivative asset and liability held-to-maturity or available-for-sale, accrual of interest income positions are presented net by counterparty on the Consolidated is suspended for investments that are in default or on which it is Balance Sheet when a valid master netting agreement exists and likely that future interest payments will not be made as the other conditions set out in ASC 210-20, Balance Sheet— scheduled. Offsetting are met. The Company uses a number of valuation techniques for The Company uses a number of techniques to determine the investments carried at fair value, which are described in Note 22 fair value of trading assets and liabilities, which are described in to the Consolidated Financial Statements. Realized gains and Note 22 to the Consolidated Financial Statements. losses on sales of investments are included in income. Securities Borrowed and Securities Loaned Securities borrowing and lending transactions generally do not constitute a sale of the underlying securities for accounting purposes, and so are treated as collateralized financing transactions when the transaction involves the exchange of cash. Such transactions are recorded at the amount of cash advanced or received plus accrued interest. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate. With respect to securities borrowed or loaned, the Company monitors the market value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.

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Repurchase and Resale Agreements Loans that are held-for-investment are classified as Loans, Securities sold under agreements to repurchase (repos) and net of unearned income on the Consolidated Balance Sheet, and securities purchased under agreements to resell (reverse repos) the related cash flows are included within the cash flows from generally do not constitute a sale for accounting purposes of the investing activities category in the Consolidated Statement of underlying securities and so are treated as collateralized Cash Flows on the line Change in loans. However, when the financing transactions. These transactions are recorded at the initial intent for holding a loan has changed from held-for- amount of cash advanced or received plus accrued interest. investment to held-for-sale, the loan is reclassified to held-for- Interest paid or received on all repo and reverse repo sale, but the related cash flows continue to be reported in cash transactions is recorded in Interest expense or Interest revenue flows from investing activities in the Consolidated Statement of at the contractually specified rate. Cash Flows on the line Proceeds from sales and securitizations Where the conditions of ASC 210-20-45-11, Balance of loans. Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net Consumer loans on the Consolidated Balance Sheet. Consumer loans represent loans and leases managed primarily The Company’s policy is to take possession of securities by the Company’s Consumer businesses. purchased under reverse repurchase agreements. The Company monitors the market value of securities subject to repurchase or Non-accrual and re-aging policies resale on a daily basis and obtains or posts additional collateral As a general rule, interest accrual ceases for installment and real in order to maintain contractual margin protection. estate (both open- and closed-end) loans when payments are 90 See related discussion of the assessment of effective control days contractually past due. For credit cards and unsecured for repurchase agreements in “Future Application of Accounting revolving loans, however, Citibank generally accrues interest Standards” below. until payments are 180 days past due. Loans that have been modified to grant a short-term or long-term concession to a Repurchase and Resale Agreements, and Securities Lending borrower who is in financial difficulty may not be accruing and Borrowing Agreements, Accounted for as Sales interest at the time of the modification. The policy for returning Where certain conditions are met under ASC 860-10, Transfers such modified loans to accrual status varies by product and/or and Servicing (formerly FASB Statement No. 166, Accounting region. In most cases, a minimum number of payments (ranging for Transfers of Financial Assets), the Company accounts for from one to six) are required, while in other cases the loan is certain repurchase agreements and securities lending agreements never returned to accrual status. as sales. The key distinction resulting in these agreements being For U.S. Consumer loans, one of the conditions to qualify accounted for as sales is a reduction in initial margin or for modification is that a minimum number of payments restriction in daily maintenance margin. At December 31, 2011 (typically ranging from one to three) must be made. Upon and December 31, 2010, a nominal amount of these transactions modification, the loan is re-aged to current status. However, re- was accounted for as sales that reduced Trading account assets. aging practices for certain open-ended Consumer loans, such as credit cards, are governed by Federal Financial Institutions Loans Examination Council (FFIEC) guidelines. For open-ended Loans are reported at their outstanding principal balances net of Consumer loans subject to FFIEC guidelines, one of the any unearned income and unamortized deferred fees and costs conditions for the loan to be re-aged to current status is that at except that credit card receivable balances also include accrued least three consecutive minimum monthly payments, or the interest and fees. Loan origination fees and certain direct equivalent amount, must be received. In addition, under FFIEC origination costs are generally deferred and recognized as guidelines, the number of times that such a loan can be re-aged adjustments to income over the lives of the related loans. is subject to limitations (generally once in twelve months and As described in Note 23 to the Consolidated Financial twice in five years). Furthermore, Federal Housing Statements, Citibank has elected fair value accounting for Administration (FHA) and Department of Veterans Affairs certain loans. Such loans are carried at fair value with changes (VA) loans are modified under those respective agencies’ in fair value reported in earnings. Interest income on such loans guidelines and payments are not always required in order to re- is recorded in Interest revenue at the contractually specified age a modified loan to current. rate. Charge-off policies Loans for which the fair value option has not been elected Citibank’s charge-off policies follow the general guidelines are classified upon origination or acquisition as either held-for- below: investment or held-for-sale. This classification is based on management’s initial intent and ability with regard to those x Unsecured installment loans are charged off at 120 days loans. past due. x Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due. x Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days past due. x Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.

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x Unsecured loans in bankruptcy are charged off within 60 Loans Held-for-Sale days of notification of filing by the bankruptcy court or in Corporate and Consumer loans that have been identified for sale accordance with Citibank’s charge-off policy, whichever are classified as loans held-for-sale included in Other assets. occurs earlier. The practice of the U.S. prime mortgage business has been to x Real estate-secured loans in bankruptcy are written down to sell substantially all of its conforming loans. As such, U.S. the estimated value of the property, less costs to sell, at the prime mortgage conforming loans are classified as held-for-sale later of 60 days after notification or 60 days contractually and the fair value option is elected at the time of origination. past due. With the exception of these loans for which the fair value option x Commercial market loans are written down to the extent has been elected, held-for-sale loans are accounted for at the that principal is judged to be uncollectable. lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related Corporate loans cash flows are classified in the Consolidated Statement of Cash Corporate loans represent loans and leases primarily managed Flows in the cash flows from operating activities category on by Institutional Client businesses. Corporate loans are identified the line Change in loans held-for-sale. as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking Allowance for Loan Losses assessment of the collectability of the loan in full, that the Allowance for loan losses represents management’s best payment of interest or principal is doubtful or when interest or estimate of probable losses inherent in the portfolio, as well as principal is 90 days past due, except when the loan is well probable losses related to large individually evaluated impaired collateralized and in the process of collection. Any interest loans and troubled debt restructurings. Attribution of the accrued on impaired Corporate loans and leases is reversed at 90 allowance is made for analytical purposes only, and the entire days past due and charged against current earnings, and interest allowance is available to absorb probable loan losses inherent in is thereafter included in earnings only to the extent actually the overall portfolio. Additions to the allowance are made received in cash. When there is doubt regarding the ultimate through the Provision for loan losses. Loan losses are deducted collectability of principal, all cash receipts are thereafter applied from the allowance, and subsequent recoveries are added. to reduce the recorded investment in the loan. Assets received in exchange for loan claims in a restructuring Impaired Corporate loans and leases are written down to the are initially recorded at fair value, with any gain or loss extent that principal is judged to be uncollectable. Impaired reflected as a recovery or charge-off to the allowance. collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying Corporate loans collateral and there are no other available and reliable sources of In the corporate portfolios, the Allowance for loan losses repayment, are written down to the lower of cost or collateral includes an asset-specific component and a statistically based value. Cash-basis loans are returned to an accrual status when component. The asset-specific component is calculated under all contractual principal and interest amounts are reasonably ASC 310-10-35, Receivables—Subsequent Measurement assured of repayment and there is a sustained period of (formerly SFAS 114) on an individual basis for larger-balance, repayment performance in accordance with the contractual non-homogeneous loans, which are considered impaired. An terms. asset-specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. This allowance considers the borrower’s overall financial condition, resources, and payment record, the prospects for support from any financially responsible guarantors (discussed further below) and, if appropriate, the realizable value of any collateral. The asset-specific component of the allowance for smaller balance impaired loans is calculated on a pool basis considering historical loss experience. The allowance for the remainder of the loan portfolio is calculated under ASC 450, Contingencies (formerly SFAS 5) using a statistical methodology, supplemented by management judgment. The statistical analysis considers the portfolio’s size, remaining tenor, and credit quality as measured by internal risk ratings assigned to individual credit facilities, which reflect probability of default and loss given default. The statistical analysis considers historical default rates and historical loss severity in the event of default, including historical average levels and historical variability. The result is an estimated range for inherent losses. The best estimate within the range is then determined by management’s quantitative and qualitative assessment of current conditions, including general economic conditions, specific industry and geographic trends, and internal factors including portfolio concentrations, trends in internal

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credit quality indicators, and current and past underwriting historical delinquency and credit loss experience is applied to standards. the current aging of the portfolio, together with analyses that For both the asset-specific and the statistically based reflect current and anticipated economic conditions, including components of the Allowance for loan losses, management may changes in housing prices and unemployment trends. Citibank’s incorporate guarantor support. The financial wherewithal of the allowance for loan losses under ASC 450-20 only considers guarantor is evaluated, as applicable, based on net worth, cash contractual principal amounts due, except for credit card loans flow statements and personal or company financial statements where estimated loss amounts related to accrued interest which are updated and reviewed at least annually. Citibank receivable are also included. seeks performance on guarantee arrangements in the normal Management also considers overall portfolio indicators, course of business. Seeking performance entails obtaining including historical credit losses, delinquent, non-performing, satisfactory cooperation from the guarantor or borrower to and classified loans, trends in volumes and terms of loans, an achieve Citibank’s strategy in the specific situation. This regular evaluation of overall credit quality, the credit process, including cooperation is indicative of pursuit and successful enforcement lending policies and procedures, and economic, geographical, of the guarantee; the exposure is reduced without the expense product and other environmental factors. and burden of pursuing a legal remedy. Enforcing a guarantee Separate valuation allowances are determined for impaired via legal action against the guarantor is not the primary means smaller-balance homogeneous loans whose terms have been of resolving a troubled loan situation and rarely occurs. A modified in a troubled debt restructuring (TDR). Long-term guarantor’s reputation and willingness to work with Citibank is modification programs as well as short-term (less than 12 evaluated based on the historical experience with the guarantor months) modifications originated from January 1, 2011 that and the knowledge of the marketplace. In the rare event that the provide concessions (such as interest rate reductions) to guarantor is unwilling or unable to perform or facilitate borrowers in financial difficulty are reported as TDRs. In borrower cooperation, Citibank pursues a legal remedy. If addition, loans included in the U.S. Treasury’s Home Citibank does not pursue a legal remedy, it is because Citibank Affordable Modification Program (HAMP) trial period at does not believe that the guarantor has the financial wherewithal December 31, 2011 are reported as TDRs. The allowance for to perform regardless of legal action or because there are legal loan losses for TDRs is determined in accordance with ASC limitations on simultaneously pursuing guarantors and 310-10-35 considering all available evidence, including, as foreclosure. A guarantor’s reputation does not impact our appropriate, the present value of the expected future cash flows decision or ability to seek performance under the guarantee. discounted at the loan’s original contractual effective rate, the In cases where a guarantee is a factor in the assessment of secondary market value of the loan and the fair value of loan losses, it is included via adjustment to the loan’s internal collateral less disposal costs. These expected cash flows risk rating, which in turn is the basis for the adjustment to the incorporate modification program default rate assumptions. The statistically based component of the Allowance for loan losses. original contractual effective rate for credit card loans is the pre- To date, it is only in rare circumstances that an impaired modification rate, which may include interest rate increases commercial or commercial real estate (CRE) loan is carried at a under the original contractual agreement with the borrower. value in excess of the appraised value due to a guarantee. Where short-term concessions have been granted prior to When Citibank’s monitoring of the loan indicates that the January 1, 2011, the allowance for loan losses is materially guarantor’s wherewithal to pay is uncertain or has deteriorated, consistent with the requirements of ASC 310-10-35. there is either no change in the risk rating, because the Valuation allowances for commercial market loans, which guarantor’s credit support was never initially factored in, or the are classifiably managed Consumer loans, are determined in the risk rating is adjusted to reflect that uncertainty or deterioration. same manner as for Corporate loans and are described in more Accordingly, a guarantor’s ultimate failure to perform or a lack detail in the following section. Generally, an asset-specific of legal enforcement of the guarantee does not materially impact component is calculated under ASC 310-10-35 on an individual the allowance for loan losses, as there is typically no further basis for larger-balance, non-homogeneous loans that are significant adjustment of the loan’s risk rating at that time. considered impaired and the allowance for the remainder of the Where Citibank is not seeking performance under the guarantee classifiably managed Consumer loan portfolio is calculated contract, it provides for loans losses as if the loans were non- under ASC 450 using a statistical methodology, supplemented performing and not guaranteed. by management adjustment.

Consumer loans Reserve Estimates and Policies For Consumer loans, each portfolio of non-modified smaller- Management provides reserves for an estimate of probable balance, homogeneous loans is independently evaluated by losses inherent in the funded loan portfolio on the balance sheet product type (e.g., residential mortgage, credit card, etc.) for in the form of an allowance for loan losses. These reserves are impairment in accordance with ASC 450-20. The allowance for established in accordance with Citibank’s credit reserve loan losses attributed to these loans is established via a process policies, as approved by Citibank’s Audit Committee of the that estimates the probable losses inherent in the specific Board of Directors. Citibank’s Chief Risk Officer and Chief portfolio. This process includes migration analysis, in which Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the risk management and finance staffs for each applicable business area. Applicable business areas include those having classifiably managed

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portfolios, where internal credit-risk ratings are assigned This evaluation process is subject to numerous estimates (primarily Institutional Clients Group and Global Consumer and judgments. The frequency of default, risk ratings, loss Banking) or modified Consumer loans, where concessions were recovery rates, the size and diversity of individual large credits, granted due to the borrowers’ financial difficulties. and the ability of borrowers with foreign currency obligations to The above-mentioned representatives covering these obtain the foreign currency necessary for orderly debt servicing, respective business areas present recommended reserve balances among other things, are all taken into account during this for their funded and unfunded lending portfolios along with review. Changes in these estimates could have a direct impact supporting quantitative and qualitative data. The quantitative on the credit costs in any period and could result in a change in data include: the allowance. Changes to the Allowance for loan losses are recorded in the Provision for loan losses. x Estimated probable losses for non-performing, non- homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller- Allowance for Unfunded Lending Commitments balance homogeneous loans whose terms have been A similar approach to the allowance for loan losses is used for modified due to the borrowers’ financial difficulties, and it calculating a reserve for the expected losses related to unfunded was determined that a concession was granted to the loan commitments and standby letters of credit. This reserve is borrower. Consideration may be given to the following, as classified on the balance sheet in Other liabilities. Changes to appropriate, when determining this estimate: (i) the present the allowance for unfunded lending commitments are recorded value of expected future cash flows discounted at the loan’s in the Provision for unfunded lending commitments. original effective rate; (ii) the borrower’s overall financial condition, resources and payment record; and (iii) the Mortgage Servicing Rights prospects for support from financially responsible Mortgage servicing rights (MSRs) are recognized as intangible guarantors or the realizable value of any collateral. In the assets when purchased or when the Company sells or securitizes determination of the allowance for loan losses for TDRs, loans acquired through purchase or origination and retains the management considers a combination of historical re- right to service the loans. Mortgage servicing rights are default rates, the current economic environment and the accounted for at fair value, with changes in value recorded in nature of the modification program when forecasting Other revenue in the Company’s Consolidated Statement of expected cash flows. When impairment is measured based Income. on the present value of expected future cash flows, the Additional information on the Company’s MSRs can be entire change in present value is recorded in the Provision found in Note 19 to the Consolidated Financial Statements. for loan losses. x Statistically calculated losses inherent in the classifiably Consumer Mortgage—Representations and Warranties managed portfolio for performing and de minimis non- The majority of Citibank’s exposure to representation and performing exposures. The calculation is based upon: (i) warranty claims relates to its U.S. Consumer mortgage business. Citibank’s internal system of credit-risk ratings, which are When selling a loan, Citibank makes various analogous to the risk ratings of the major rating agencies; representations and warranties relating to, among other things, and (ii) historical default and loss data, including rating the following:

agency information regarding default rates from 1983 to x Citibank’s ownership of the loan; 2010 and internal data dating to the early 1970s on severity x the validity of the lien securing the loan; of losses in the event of default. x the absence of delinquent taxes or liens against the property x Additional adjustments include: (i) statistically calculated securing the loan; estimates to cover the historical fluctuation of the default x the effectiveness of title insurance on the property securing rates over the credit cycle, the historical variability of loss the loan; severity among defaulted loans, and the degree to which x the process used in selecting the loans for inclusion in a there are large obligor concentrations in the global transaction; portfolio; and (ii) adjustments made for specific known x the loan’s compliance with any applicable loan criteria items, such as current environmental factors and credit trends. established by the buyer; and x the loan’s compliance with applicable local, state and In addition, representatives from each of the risk federal laws. management and finance staffs that cover business areas with delinquency-managed portfolios containing smaller-balance The specific representations and warranties made by Citibank homogeneous loans present their recommended reserve balances depend on the nature of the transaction and the requirements of based upon leading credit indicators, including loan the buyer. Market conditions and credit rating agency delinquencies and changes in portfolio size as well as economic requirements may also affect representations and warranties and trends, including housing prices, unemployment and GDP. This the other provisions to which Citibank may agree in loan sales. methodology is applied separately for each individual product within each geographic region in which these portfolios exist.

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In the event of a breach of these representations and Goodwill warranties, Citibank may be required to either repurchase the Goodwill represents the excess of acquisition cost over the fair mortgage loans with the identified defects (generally at unpaid value of net tangible and intangible assets acquired. Goodwill is principal balance plus accrued interest) or indemnify (“make- subject to annual impairment tests, whereby Goodwill is whole”) the investors for their losses. Citibank’s representations allocated to the Company’s reporting units and an impairment is and warranties are generally not subject to stated limits in deemed to exist if the carrying value of a reporting unit exceeds amount or time of coverage. its estimated fair value. Furthermore, on any business In the case of a repurchase, Citibank will bear any dispositions, Goodwill is allocated to the business disposed of subsequent credit loss on the mortgage loan and the loan is based on the ratio of the fair value of the business disposed of to typically considered a credit-impaired loan and accounted for the fair value of the reporting unit. under SOP 03-3, “Accounting for Certain Loans and Debt Securities Acquired in a Transfer” (now incorporated into ASC Intangible Assets 310-30, Receivables—Loans and Debt Securities Acquired with Intangible assets—including core deposit intangibles, present Deteriorated Credit Quality) (SOP 03-3). These repurchases value of future profits, purchased credit card relationships, other have not had a material impact on Citibank’s non-performing customer relationships, and other intangible assets, but loan statistics because credit-impaired purchased SOP 03-3 excluding MSRs—are amortized over their estimated useful loans are not included in non-accrual loans, since they generally lives. Intangible assets deemed to have indefinite useful lives, continue to accrue interest until write-off. Citibank’s primarily certain asset management contracts and trade names, repurchases have primarily been from the U.S. government are not amortized and are subject to annual impairment tests. An sponsored entities (GSEs). impairment exists if the carrying value of the indefinite-lived Citibank has recorded a reserve for its exposure to losses intangible asset exceeds its fair value. For other Intangible from the obligation to repurchase previously sold loans (referred assets subject to amortization, an impairment is recognized if to as the repurchase reserve) that is included in Other liabilities the carrying amount is not recoverable and exceeds the fair in the Consolidated Balance Sheet. In estimating the repurchase value of the Intangible asset. reserve, Citibank considers reimbursements estimated to be received from third-party correspondent lenders and Other Assets and Other Liabilities indemnification agreements relating to previous acquisitions of Other assets include, among other items, loans held-for-sale, mortgage servicing rights. The estimated reimbursements are deferred tax assets, equity-method investments, interest and fees based on Citibank’s analysis of its most recent collection trends receivable, premises and equipment, repossessed assets, and and the financial solvency of the correspondents. other receivables. Other liabilities include, among other items, In the case of a repurchase of a credit-impaired SOP 03-3 accrued expenses and other payables, deferred tax liabilities, loan, the difference between the loan’s fair value and unpaid and reserves for legal claims, taxes, unfunded lending principal balance at the time of the repurchase is recorded as a commitments, repositioning reserves, and other matters. utilization of the repurchase reserve. Make-whole payments to the investor are also treated as utilizations and charged directly Other Real Estate Owned and Repossessed Assets against the reserve. The repurchase reserve is estimated when Real estate or other assets received through foreclosure or Citibank sells loans (recorded as an adjustment to the gain on repossession are generally reported in Other assets, net of a sale, which is included in Other revenue in the Consolidated valuation allowance for selling costs and for subsequent Statement of Income) and is updated quarterly. Any change in declines in fair value. estimate is recorded in Other revenue. The repurchase reserve is calculated by individual sales Debt vintage (i.e., the year the loans were sold) and is based on Short-term borrowings and long-term debt are accounted for at various assumptions. These assumptions contain a level of amortized cost, except where the Company has elected to report uncertainty and risk that, if different from actual results, could the debt instruments, including certain structured notes, at fair have a material impact on the reserve amount. The most value or the debt is in a fair value hedging relationship. significant assumptions used to calculate the reserve levels are as follows: Securitizations The Company primarily securitizes credit card receivables and x loan documentation requests; mortgages. Other types of securitized assets include corporate x repurchase claims as a percentage of loan documentation debt instruments (in cash and synthetic form) and student loans. requests; There are two key accounting determinations that must be x claims appeal success rate; and made relating to securitizations. Citibank first makes a x estimated loss per repurchase or make-whole. determination as to whether the securitization entity would be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary. The Company consolidates VIEs when it has both: (1) power to direct activities of the VIE that most significantly impact the entity’s economic performance and (2) an obligation to absorb losses or right to receive benefits from the entity that could potentially be significant to the VIE. 15 CITIBANK, N.A. 2010–2011 FINANCIALS

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For all other securitization entities determined not to be Risk Management Activities—Derivatives Used for Hedging VIEs in which Citibank participates, a consolidation decision is Purposes based on who has voting control of the entity, giving The Company manages its exposures to market rate movements consideration to removal and liquidation rights in certain outside its trading activities by modifying the asset and liability partnership structures. Only securitization entities controlled by mix, either directly or through the use of derivative financial Citibank are consolidated. products, including interest-rate swaps, futures, forwards, and Interests in the securitized and sold assets may be retained purchased options, as well as foreign-exchange contracts. These in the form of subordinated or senior interest-only strips, end-user derivatives are carried at fair value in Other assets, subordinated tranches, spread accounts, and servicing rights. In Other liabilities, Trading account assets and Trading account credit card securitizations, the Company retains a seller’s liabilities. interest in the credit card receivables transferred to the trusts, To qualify as an accounting hedge under the hedge which is not in securitized form. In the case of consolidated accounting rules (versus a management hedge where hedge securitization entities, including the credit card trusts, these accounting is not sought), a derivative must be highly effective retained interests are not reported on Citibank’s Consolidated in offsetting the risk designated as being hedged. The hedge Balance Sheet; rather, the securitized loans remain on the relationship must be formally documented at inception, detailing balance sheet. Substantially all of the Consumer loans sold or the particular risk management objective and strategy for the securitized through non-consolidated trusts by Citibank are U.S. hedge, which includes the item and risk that is being hedged and prime residential mortgage loans. Retained interests in non- the derivative that is being used, as well as how effectiveness consolidated mortgage securitization trusts are classified as will be assessed and ineffectiveness measured. The Trading account assets, except for MSRs which are included in effectiveness of these hedging relationships is evaluated on a Intangible assets on Citibank’s Consolidated Balance Sheet. retrospective and prospective basis, typically using quantitative See Note 19 to the Consolidated Financial Statements for measures of correlation with hedge ineffectiveness measured further discussion. and recorded in current earnings. If a hedge relationship is found to be ineffective, it no Transfers of Financial Assets longer qualifies as an accounting hedge and hedge accounting For a transfer of financial assets to be considered a sale: the would not be applied. Any gains or losses attributable to the assets must have been isolated from the Company, even in derivatives, as well as subsequent changes in fair value, are bankruptcy or other receivership; the purchaser must have the recognized in Other revenue or Principal transactions with no right to pledge or sell the assets transferred or, if the purchaser is offset on the hedged item, similar to trading derivatives. an entity whose sole purpose is to engage in securitization and The foregoing criteria are applied on a decentralized basis, asset-backed financing activities and that entity is constrained consistent with the level at which market risk is managed, but from pledging the assets it receives, each beneficial interest are subject to various limits and controls. The underlying asset, holder must have the right to sell the beneficial interests; and the liability or forecasted transaction may be an individual item or a Company may not have an option or obligation to reacquire the portfolio of similar items. assets. If these sale requirements are met, the assets are removed For fair value hedges, in which derivatives hedge the fair from the Company’s Consolidated Balance Sheet. If the value of assets or liabilities, changes in the fair value of conditions for sale are not met, the transfer is considered to be a derivatives are reflected in Other revenue or Principal secured borrowing, the assets remain on the Consolidated transactions, together with changes in the fair value of the Balance Sheet, and the sale proceeds are recognized as the hedged item related to the hedged risk. These are expected to, Company’s liability. A legal opinion on a sale is generally and generally do, offset each other. Any net amount, obtained for complex transactions or where the Company has representing hedge ineffectiveness, is reflected in current continuing involvement with assets transferred or with the earnings. Citibank’s fair value hedges are primarily hedges of securitization entity. For a transfer to be eligible for sale fixed-rate long-term debt and available-for-sale securities. accounting, those opinions must state that the asset transfer is For cash flow hedges, in which derivatives hedge the considered a sale and that the assets transferred would not be variability of cash flows related to floating and fixed-rate assets, consolidated with the Company’s other assets in the event of the liabilities or forecasted transactions, the accounting treatment Company’s insolvency. depends on the effectiveness of the hedge. To the extent these For a transfer of a portion of a financial asset to be derivatives are effective in offsetting the variability of the considered a sale, the portion transferred must meet the hedged cash flows, the effective portion of the changes in the definition of a participating interest. A participating interest derivatives’ fair values will not be included in current earnings, must represent a pro rata ownership in an entire financial asset; but is reported in Accumulated other comprehensive income all cash flows must be divided proportionally, with the same (loss). These changes in fair value will be included in earnings priority of payment; no participating interest in the transferred of future periods when the hedged cash flows impact earnings. asset may be subordinated to the interest of another participating To the extent these derivatives are not effective, changes in their interest holder; and no party may have the right to pledge or fair values are immediately included in Other revenue. exchange the entire financial asset unless all participating Citibank’s cash flow hedges primarily include hedges of interest holders agree. Otherwise, the transfer is accounted for as floating-rate debt, as well as rollovers of short-term fixed-rate a secured borrowing. liabilities and floating-rate liabilities and forecasted debt See Note 19 to the Consolidated Financial Statements for issuances. further discussion.

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For net investment hedges in which derivatives hedge the Income Taxes foreign currency exposure of a net investment in a foreign The Company is subject to the income tax laws of the U.S., its operation, the accounting treatment will similarly depend on the states and municipalities and those of the foreign jurisdictions in effectiveness of the hedge. The effective portion of the change which the Company operates. These tax laws are complex and in fair value of the derivative, including any forward premium subject to different interpretations by the taxpayer and the or discount, is reflected in Accumulated other comprehensive relevant governmental taxing authorities. In establishing a income (loss) as part of the foreign currency translation provision for income tax expense, the Company must make adjustment. judgments and interpretations about the application of these End-user derivatives that are management hedges, rather inherently complex tax laws. The Company must also make than qualifying for hedge accounting, are also carried at fair estimates about when in the future certain items will affect value, with changes in value included in Principal transactions taxable income in the various tax jurisdictions, both domestic or Other revenue. Citibank often uses management hedges when and foreign. qualifying for hedge accounting would be too complex or As discussed in Note 9, the Company is included in the operationally burdensome; examples are hedges of the credit Citigroup consolidated federal tax return and is a party to a tax- risk component of commercial loans and loan commitments. sharing agreement with Citigroup. Under such agreement, the Citibank periodically evaluates its hedging strategies in other Company is entitled to a tax benefit for its losses and credits that areas and may designate either a qualifying hedge or a are recognized in Citigroup's Consolidated Financial management hedge, after considering the relative cost and Statements. Settlements between the Company and Citigroup of benefits. Management hedges are also employed when the current taxes occur throughout the year. The Company also files hedged item itself is marked to market through current earnings, its consolidated and combined state income tax returns with such as hedges of commitments to originate one-to-four-family Citigroup and/or other of its subsidiaries. mortgage loans to be held for sale and MSRs. Disputes over interpretations of the tax laws may be subject For those accounting hedge relationships that are to review/adjudication by the court systems of the various tax terminated or when hedge designations are removed, the hedge jurisdictions or may be settled with the taxing authority upon accounting treatment described in the paragraphs above is no examination or audit. The Company treats interest and penalties longer applied. Instead, the end-user derivative is terminated or on income taxes as a component of Income tax expense. transferred to the trading account. For fair value hedges, any Deferred taxes are recorded for the future consequences of changes in the fair value of the hedged item remain as part of events that have been recognized for financial statements or tax the basis of the asset or liability and are ultimately reflected as returns, based upon enacted tax laws and rates. Deferred tax an element of the yield. For cash flow hedges, any changes in assets are recognized subject to management’s judgment that fair value of the end-user derivative remain in Accumulated realization is more likely than not. FASB Interpretation No. 48, other comprehensive income (loss) and are included in earnings “Accounting for Uncertainty in Income Taxes” (FIN 48) (now of future periods when the hedged cash flows impact earnings. incorporated into ASC 740, Income Taxes), sets out a consistent However, if it becomes probable that the hedged forecasted framework to determine the appropriate level of tax reserves to transaction will not occur, any amounts that remain in maintain for uncertain tax positions. This interpretation uses a Accumulated other comprehensive income (loss) are two-step approach wherein a tax benefit is recognized if a immediately reflected in Other revenue. position is more likely than not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is Employee Benefits Expense greater than 50% likely to be realized. FIN 48 also sets out Employee benefits expense includes current service costs of disclosure requirements to enhance transparency of an entity’s pension and other postretirement benefit plans, which are tax reserves. accrued on a current basis, contributions and unrestricted awards See Note 9 to the Consolidated Financial Statements for a under other employee plans, the amortization of restricted stock further description of the Company’s provision and related awards and costs of other employee benefits. income tax assets and liabilities.

Stock-Based Compensation Commissions, Underwriting and Principal Transactions The Company recognizes compensation expense related to stock Commissions revenues are generally recognized in income and option awards over the requisite service period, generally when earned. Underwriting revenues are typically recognized in based on the instrument’s grant date fair value, reduced by income at the closing of the transaction. Principal transactions expected forfeitures. Compensation cost related to awards revenues are recognized in income on a trade-date basis. See granted to employees who meet certain age plus years-of- Note 5 to the Consolidated Financial Statements for a service requirements (retirement eligible employees) is accrued description of the Company’s revenue recognition policies for in the year prior to the grant date, in the same manner as the commissions and fees. accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are Use of Estimates subject to variable accounting, pursuant to which the associated Management must make estimates and assumptions that affect charges fluctuate with changes in Citigroup’s stock price. the Consolidated Financial Statements and the related footnote disclosures. Such estimates are used in connection with certain fair value measurements. See Note 22 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. The Company also uses 17 CITIBANK, N.A. 2010–2011 FINANCIALS

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estimates in determining consolidation decisions for special- purpose entities as discussed in Note 19. Moreover, estimates are significant in determining the amounts of other-than- temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and tax reserves. While management makes its best judgment, actual amounts or results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates.

Cash Flows Cash equivalents are defined as those amounts included in cash and due from banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.

Related Party Transactions The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative trading, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business. See Note 27 to the Consolidated Financial Statements.

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ACCOUNTING CHANGES x If a borrower doesn’t have access to funds at a market rate for debt with characteristics similar to the restructured Credit Quality and Allowance for Credit Losses debt, that may indicate that the creditor has granted a Disclosures concession. In July 2010, the FASB issued ASU No. 2010-20, Receivables x A borrower that is not currently in default may still be (Topic 310): Disclosures about Credit Quality of Financing considered to be experiencing financial difficulty when Receivables and Allowance for Credit Losses. The ASU payment default is considered “probable in the required a greater level of disaggregated information about the foreseeable future.” allowance for credit losses and the credit quality of financing receivables. The period-end balance disclosure requirements Effective in the third quarter of 2011, as a result of adopting for loans and the allowance for loan losses were effective for ASU 2011-02, certain loans modified under short-term reporting periods ending on or after December 15, 2010 and programs since January 1, 2011 that were previously measured were included in the Company’s 2010 Consolidated Financial for impairment under ASC 450 are now measured for Statements, while disclosures for activity during a reporting impairment under ASC 310-10-35. At September 30, 2011, period in the loan and allowance for loan losses accounts were the recorded investment in receivables previously measured effective for reporting periods beginning on or after December under ASC 450 was $490 million and the allowance for credit 15, 2010 (see Notes 13 and 14 to the Consolidated Financial losses associated with those loans was $270 million. The Statements). The troubled debt restructuring disclosure effect of adopting the ASU was approximately $60 million. requirements that were part of this ASU became effective in the third quarter of 2011 (see below). Change in Accounting for Embedded Credit Derivatives In March 2010, the FASB issued ASU 2010-11, Scope Troubled Debt Restructurings (TDRs) Exception Related to Embedded Credit Derivatives. The ASU In April 2011, the FASB issued ASU No. 2011-02, clarifies that certain embedded derivatives, such as those Receivables (Topic 310): A Creditor’s Determination of contained in certain securitizations, CDOs and structured notes, whether a Restructuring is a Troubled Debt Restructuring, to should be considered embedded credit derivatives subject to clarify the guidance for accounting for troubled debt potential bifurcation and separate fair value accounting. The restructurings. The ASU clarified the guidance on a creditor’s ASU allows any beneficial interest issued by a securitization evaluation of whether it has granted a concession and whether vehicle to be accounted for under the fair value option at a debtor is experiencing financial difficulties, such as: transition on July 1, 2010. The Company has elected to account for certain beneficial x Any shortfall in contractual loan payments is considered a interests issued by securitization vehicles under the fair value concession. option that are included in the table below. Beneficial interests x Creditors cannot assume that debt extensions at or above previously classified as held-to-maturity (HTM) were a borrower’s original contractual rate do not constitute reclassified to available-for-sale (AFS) on June 30, 2010, troubled debt restructurings because the new contractual because as of that reporting date, the Company did not have the rate could still be below the market rate. intent to hold the beneficial interests until maturity.

The following table also shows the gross gains and gross losses that make up the pretax cumulative-effect adjustment to Retained earnings for reclassified beneficial interests, recorded on July 1, 2010:

July 1, 2010 Pretax cumulative effect adjustment to Retained earnings Gross unrealized losses Gross unrealized gains In millions of dollars at June 30, 2010 Amortized cost recognized in AOCI(1) recognized in AOCI Fair value Mortgage-backed securities Prime $ 97 $— $ 1 $ 98 Alt-A 250 — 24 274 Non-U.S. residential 2,249 — 38 2,287 Total mortgage-backed securities $2,596 $— $ 63 $2,659 Asset-backed securities $4,162 $19 $162 $4,305 Total reclassified debt securities $6,758 $19 $225 $6,964

(1) All reclassified debt securities with gross unrealized losses were assessed for other-than-temporary-impairment as of June 30, 2010, including an assessment of whether the Company intends to sell the security. For securities that the Company intends to sell, impairment charges of $158 million were recorded in earnings in 2010.

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Beginning July 1, 2010, the Company elected to account As a result of implementing these new accounting for these beneficial interests under the fair value option for standards, Citibank consolidated certain of the VIEs and various reasons, including: former QSPEs with which it had involvement on January 1, 2010. Further, certain asset transfers, including transfers of (1) to reduce the operational burden of assessing beneficial portions of assets, that would have been considered sales interests for bifurcation under the guidance in the ASU; under SFAS 140 are considered secured borrowings under the (2) where bifurcation would otherwise be required under the new standards. ASU, to avoid the complicated operational requirements In accordance with SFAS 167, Citibank employed three of bifurcating the embedded derivatives from the host approaches for newly consolidating certain VIEs and former contracts and accounting for each separately. The QSPEs as of January 1, 2010. The first approach requires Company reclassified substantially all beneficial interests initially measuring the assets, liabilities, and noncontrolling where bifurcation would otherwise be required under the interests of the VIEs and former QSPEs at their carrying ASU; and values (the amounts at which the assets, liabilities, and (3) to permit more economic hedging strategies without noncontrolling interests would have been carried in the generating volatility in reported earnings. Consolidated Financial Statements, if Citibank had always

consolidated these VIEs and former QSPEs). The second Additional Disclosures Regarding Fair Value approach measures assets at their unpaid principal amount, Measurements and is applied when determining carrying values is not In January 2010, the FASB issued ASU 2010-06, Improving practicable. The third approach is to elect the fair value option, Disclosures about Fair Value Measurements. The ASU in which all of the financial assets and liabilities of certain requires disclosure of the amounts of significant transfers in designated VIEs and former QSPEs are recorded at fair value and out of Levels 1 and 2 of the fair value hierarchy and the upon adoption of SFAS 167 and continue to be marked to reasons for the transfers. The disclosures are effective for market thereafter, with changes in fair value reported in reporting periods beginning after December 15, 2009. earnings. Additionally, disclosures of the gross purchases, sales, Citibank consolidated all required VIEs and former issuances and settlements activity in Level 3 of the fair value QSPEs, as of January 1, 2010, at carrying values or unpaid measurement hierarchy are required for fiscal years beginning principal amounts, except for certain private label residential after December 15, 2010. The Company adopted ASU 2010- mortgage and mutual fund deferred sales commissions VIEs, 06 as of January 1, 2010. The required disclosures are for which the fair value option was elected. included in Note 22 to the Consolidated Financial Statements. The impact from those VIEs and former QSPEs that were

consolidated or deconsolidated for accounting purposes as of Elimination of Qualifying Special Purpose Entities January 1, 2010 was an incremental increase in GAAP assets (QSPEs) and Changes in the Consolidation Model for of approximately $133 billion and a net increase (after VIEs reflecting a partial offset for additional loan loss reserves) in In June 2009, the FASB issued SFAS No. 166, Accounting for risk-weighted assets of approximately $9 billion, which Transfers of Financial Assets, an amendment of FASB primarily related to the consolidation of credit card trusts, Statement No. 140 (SFAS 166, now incorporated into ASC commercial paper conduits and student loan securitization Topic 860) and SFAS No. 167, Amendments to FASB entities. Interpretation No. 46(R) (SFAS 167, now incorporated into The cumulative effect of adopting these accounting ASC Topic 810). Citibank adopted both standards on January standards as of January 1, 2010 resulted in an aggregate after- 1, 2010. Citibank has elected to apply SFAS 166 and SFAS tax charge to Retained earnings of $8.4 billion. 167 prospectively.

SFAS 166 eliminates the concept of QSPEs from U.S. Multiple Foreign Exchange Rates GAAP and amends the guidance on accounting for transfers of In May 2010, the FASB issued ASU 2010-19, Foreign financial assets. SFAS 167 details three key changes to the Currency Issues: Multiple Foreign Currency Exchange Rates. consolidation model. First, former QSPEs are now included in The ASU requires certain disclosure in situations when an the scope of SFAS 167. Second, the FASB has changed the entity’s reported balances in U.S. dollar monetary assets held method of analyzing which party to a VIE should consolidate by its foreign entities differ from the actual U.S. dollar- the VIE (known as the primary beneficiary) to a qualitative denominated balances due to different foreign exchange rates determination of which party to the VIE has “power,” used in remeasurement and translation. The ASU also clarifies combined with potentially significant benefits or losses, the reporting for the difference between the reported balances instead of the previous quantitative risks and rewards model. and the U.S. dollar-denominated balances upon the initial The party that has “power” has the ability to direct the adoption of highly inflationary accounting. The ASU does not activities of the VIE that most significantly impact the VIE’s have a material impact on the Company’s accounting. economic performance. Third, the new standard requires that the primary beneficiary analysis be re-evaluated whenever Effect of a Loan Modification When the Loan Is Part of a circumstances change. The previous rules required Pool Accounted for as a Single Asset (ASU No. 2010-18) reconsideration of the primary beneficiary only when specified In April 2010, the FASB issued ASU No. 2010-18, Effect of a reconsideration events occurred. Loan Modification When the Loan is Part of a Pool Accounted 20 CITIBANK, N.A. 2010–2011 FINANCIALS

203 for as a Single Asset. As a result of the amendments in this ASU, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The ASU was effective for reporting periods ending on or after July 15, 2010. The ASU had no material effect on the Company’s financial statements.

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FUTURE APPLICATION OF ACCOUNTING master netting arrangement or similar arrangement. The STANDARDS standard requires disclosures that provide both gross and net information in the notes to the financial statements for relevant Repurchase Agreements – Assessment of Effective Control assets and liabilities. This ASU does not change the existing In April 2011, the FASB issued ASU No. 2011-03, Transfers offsetting eligibility criteria or the permitted balance sheet and Servicing (Topic 860) – Reconsideration of Effective presentation for those instruments that meet the eligibility Control for Repurchase Agreements. The amendments in the criteria. The new disclosure requirements should enhance ASU remove from the assessment of effective control: (1) the comparability between those companies that prepare their criterion requiring the transferor to have the ability to financial statements on the basis of U.S. GAAP and those that repurchase or redeem the financial assets on substantially the prepare their financial statements in accordance with IFRS. agreed terms, even in the event of default by the transferee, For many financial institutions, the differences in the and (2) the collateral maintenance implementation guidance offsetting requirements between U.S. GAAP and IFRS result related to that criterion. Other criteria applicable to the in a significant difference in the amounts presented in the assessment of effective control are not changed by the balance sheets prepared in accordance with U.S. GAAP and amendments in the ASU. IFRS. The disclosure standard will become effective for The ASU became effective for Citibank on January 1, annual periods beginning January 1, 2013. The disclosures are 2012. The guidance is to be applied prospectively to required retrospectively for all comparative periods presented. transactions or modifications of existing transactions that occur on or after the effective date. The ASU did not have a Potential Amendments to Current Accounting Standards material effect on the Company’s financial statements. A The FASB and International Accounting Standards Board nominal amount of the Company’s repurchase transactions are (IASB), either jointly or separately, are currently working on currently accounted for as sales, because of a reduction in several major projects, including amendments to existing initial margin or restriction in daily maintenance margin. Such accounting standards governing financial instruments, lease transactions will be accounted for as financing transactions if accounting, consolidation and investment companies. As part executed on or after January 1, 2012. of the joint financial instruments project, the FASB is proposing sweeping changes to the classification and Fair Value Measurement measurement of financial instruments, hedging and In May 2011, the Financial Accounting Standards Board impairment guidance. The FASB is also working on a joint (FASB) issued ASU No. 2011-04, Fair Value Measurement project that would require all leases to be capitalized on the (Topic 820): Amendments to Achieve Common Fair Value balance sheet. Additionally, the FASB has issued a proposal Measurement and Disclosure Requirements in U.S. GAAP and on principal-agent considerations that would change the way IFRS. The amendment creates a common definition of fair the Company needs to evaluate whether to consolidate VIEs value for U.S. GAAP and International Financial Reporting and non-VIE partnerships. Furthermore, the FASB has issued Standards (IFRS) and aligns the measurement and disclosure a proposed Accounting Standards Update that would change requirements. It requires significant additional disclosures the criteria used to determine whether an entity is subject to both of a qualitative and quantitative nature, particularly on the accounting and reporting requirements of an investment those instruments measured at fair value that are classified in company. The principal-agent consolidation proposal would Level 3 of the fair value hierarchy. Additionally, the require all VIEs, including those that are investment amendment provides guidance on when it is appropriate to companies, to be evaluated for consolidation under the same measure fair value on a portfolio basis and expands the requirements. prohibition on valuation adjustments from Level 1 to all levels In addition to the major projects, the FASB has also of the fair value hierarchy where the size of the Company’s proposed changes regarding the Company’s release of any position is a characteristic of the adjustment. The amendment cumulative translation adjustment into earnings when it ceases became effective for Citibank on January 1, 2012. As a result to have a controlling financial interest in certain groups of of implementing the prohibition on valuation adjustments assets that constitute a business within a consolidated foreign where the size of the Company’s position is a characteristic, subsidiary. All these projects may have significant impacts for the Company will release reserves of approximately $4 the Company. Upon completion of the standards, the million, increasing pretax income in the first quarter of 2012. Company will need to re-evaluate its accounting and disclosures. However, due to ongoing deliberations of the Offsetting standard-setters, the Company is currently unable to determine In December 2011, the FASB issued Accounting Standards the effect of future amendments or proposals. Update No. 2011-11—Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The standard requires new disclosures about certain financial instruments and derivative instruments that are either offset in the balance sheet (presented on a net basis) or subject to an enforceable

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3. DISCONTINUED OPERATIONS Summarized financial information for discontinued operations, including cash flows, related to the sale of SLC Sale of Egg Banking PLC Credit Card Business follows: On March 1, 2011, the Company announced that Egg Banking plc (Egg), an indirect subsidiary, entered into a definitive In millions of dollars 2011 2010 (1) agreement to sell its credit card business to Barclays PLC. The Total revenues, net of interest expense (2) $— $ (577) sale closed on April 28, 2011. Income (loss) from discontinued operations $— $ 97 This sale is reported as discontinued operations for the Loss on sale — (825) full year of 2011 only. Prior periods were not reclassified due Benefit for income taxes — (339) to the immateriality of the impact in those periods. An after- Loss from discontinued operations, net of taxes $— $ (389) tax gain on sale of $219 million was recognized upon closing.

Egg operations had total assets and total liabilities of (1) approximately $2.7 billion and $39 million, respectively, at In millions of dollars 2011 2010 the time of sale. Cash flows from operating activities $— $5,106 Summarized financial information for Discontinued Cash flows from investing activities — 1,532 operations, including cash flows, for the credit card operations Cash flows from financing activities — (6,483) related to Egg follows: Net cash provided by discontinued operations $— $ 155

(1) Amounts reflect activity from July 1, 2010 through December 31, 2010 In millions of dollars 2011 only. Total revenues, net of interest expense (1) $483 (2) Total revenues include gain or loss on sale, if applicable. Income from discontinued operations 24 Gain on sale 286 Combined Results for Discontinued Operations Provision for income taxes 108 The following is summarized financial information for the Income from discontinued operations, net of taxes $202 Egg credit card, SLC, German retail banking and CitiCapital businesses. The German retail banking operation, which was In millions of dollars sold on December 5, 2008, and the CitiCapital business, which Cash flows from operating activities $ (146) was sold on July 31, 2008, continue to have minimal residual Cash flows from investing activities 2,827 costs associated with the sales. Additionally, during 2010, the Cash flows from financing activities (12) Company completed an income tax audit in Germany related Net cash provided by discontinued operations $2,669 to the business sold in 2008. As a result of completing this audit, the Company released reserves of approximately $68 (1) Total revenues include gain or loss on sale, if applicable. million.

Sale of The Student Loan Corporation In millions of dollars 2011 2010 On September 17, 2010, the Company announced that The Total revenues, net of interest Student Loan Corporation (SLC), a direct subsidiary that was expense (1) $ 491 $ (517) 80% owned by Citibank and 20% owned by public Income from discontinued shareholders, entered into definitive agreements that resulted operations 23 $ 79 in the divestiture of Citi’s private student loan business and Gain (loss) on sale 294 (810) approximately $31 billion of its approximate $40 billion in Provision (benefit) for income taxes 115 (395) assets to Discover Financial Services (Discover) and SLM Income (loss) from discontinued Corporation (Sallie Mae). The transaction closed on December operations, net of taxes $ 202 $ (336) 31, 2010. As part of the transaction, Citi provided Sallie Mae with $1.1 billion of seller-financing. Additionally, as part of In millions of dollars 2011 2010 the transactions, Citibank, N.A. purchased approximately $8.6 Cash flows from operating activities $ (146) $ 5,108 billion of assets from SLC prior to the sale of SLC. Cash flows from investing activities 2,827 1,541 This sale was reported as discontinued operations for the Cash flows from financing activities (12) (6,486) second half of 2010 only. Prior periods were not reclassified due to the immateriality of the impact in those periods. The Net cash provided by discontinued total 2010 impact from the sale of SLC resulted in an after-tax operations $2,669 $ 163 loss of $427 million. SLC operations had total assets and total (1) Total revenues include gain or loss on sale, if applicable. liabilities of approximately $31 billion and $29 billion, respectively, at the time of sale.

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4. INTEREST REVENUE AND EXPENSE 5. COMMISSIONS AND FEES

For the years ended December 31, 2011, and 2010, The table below sets forth Citibank’s Commissions and fees respectively, interest revenue and expense consisted of the revenue for the twelve months ended December 31, 2011 and following: 2010, respectively. The primary components of Commissions and fees revenue for the year ended December 31, 2011 were In millions of dollars 2011 2010 credit card and bank card fees, and asset management and Interest revenue other fiduciary fees. Loan interest, including fees $41,353 $44,646 Credit card and bank card fees are primarily composed of Deposits with banks 1,428 986 interchange revenue and certain card fees, including annual Federal funds sold, securities borrowed or fees, reduced by reward program costs. Interchange revenue purchased under agreements to resell 1,355 862 and fees are recognized when earned, except for annual card Investments, including dividends 6,531 8,346 fees which are deferred and amortized on a straight-line basis Trading account assets(1) 3,299 2,934 over a 12-month period. Reward costs are recognized when Other interest 328 361 points are earned by the customers. Total interest revenue $54,294 $58,135 Interest expense Asset management and other fiduciary fees include fees Deposits(2) $ 7,950 $ 7,830 earned for securities safekeeping and processing services, Federal funds purchased and securities loaned performing transfer, paying agent, or dividend reinvestment or sold under agreements to repurchase 409 387 services, fees from clean or documentary letters of credit, and Trading account liabilities(1) 302 322 endorsements or other guarantee arrangements that facilitate Short-term borrowings 433 465 customer financing or performance. Long-term debt 3,435 4,208 The following table presents commissions and fees Total interest expense $12,529 $13,212 revenue for the years ended December 31: Net interest revenue $41,765 $44,923 Provision for loan losses 9,623 21,225 In millions of dollars 2011 2010 Net interest revenue after Asset management and other fiduciary fees $ 3,279 $ 3,236 provision for loan losses $32,142 $23,698 Credit cards and bank cards 3,112 3,373 Transaction services 1,289 1,215 (1) Certain interest expense on Trading account liabilities is reported as a Insurance related commissions 816 747 reduction of interest revenue from Trading account assets. Checking-related 748 833 (2) Includes deposit insurance fees and charges of $1.2 billion and $851 million for the years ended December 31, 2011 and 2010, respectively. Corporate finance 479 363 Loan servicing 266 519 Other 1,352 1,278 Total commissions and fees $11,341 $11,564

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6. PRINCIPAL TRANSACTIONS 7. INCENTIVE PLANS

Principal transactions revenue consists of realized and Stock Award Programs unrealized gains and losses from trading activities. Trading The Company participates in various Citigroup stock-based activities include revenues from fixed income, equities, credit compensation programs under which Citigroup administers and commodities products, as well as foreign exchange award programs involving grants of stock options, restricted or transactions. Not included in the table below is the impact of deferred stock awards, and stock payments for employees of net interest revenue related to trading activities, which is an Citigroup and its subsidiaries, including Citibank. The awards integral part of trading activities’ profitability. See Note 4 to are denominated in (and, in most cases, are payable in) shares the Consolidated Financial Statements for information about of Citigroup common stock. The award programs are used to net interest revenue related to trading activity. The following attract, retain and motivate officers, employees and non- table presents principal transactions revenue for the years employee directors of Citigroup and its subsidiaries, to ended December 31: provide incentives for their contributions to the long-term performance and growth of Citigroup and its subsidiaries, and In millions of dollars 2011 2010 to align their interests with those of Citigroup’s stockholders. Interest rate contracts (1) $3,603 $3,096 The plans are administered by the Personnel and Foreign exchange contracts (2) 1,871 1,667 Compensation Committee (the Committee) of the Citigroup (3) Equity contracts 118 153 Board of Directors, which is composed entirely of independent Commodity and other contracts (4) (20) (267) (5) non-employee directors. Executives and employees of the Credit derivatives 205 166 Company participate in the Citigroup programs described Total $5,777 $4,815 below to the extent they meet the eligibility criteria established

(1) Includes revenues from government securities and corporate debt, by Citigroup. The Company makes cash payments to municipal securities, preferred stock, mortgage securities, and other debt reimburse Citigroup for the cost of the awards when shares are instruments. Also includes spot and forward trading of currencies and delivered to participants (the payments are based on the exchange-traded and over-the-counter (OTC) currency options, options market value of the vested stock awards at such time, or the on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options, and forward spread realized by the employee on an option exercise), but contracts on fixed income securities. the Company recognizes compensation expense for the awards (2) Includes revenues from foreign exchange spot, forward, option and swap as described below. contracts, as well as translation gains and losses. For all stock award programs, during the applicable (3) Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes, and exchange- vesting period, the shares awarded are not issued to traded and OTC equity options and warrants. participants (in the case of a deferred stock award) or cannot (4) Includes revenues from commodity swaps, options, futures and forward be sold or transferred by the participants (in the case of a contracts and various commodity trades. restricted stock award), until after the vesting conditions have (5) Includes revenues from structured credit products. been satisfied. Recipients of deferred stock awards do not have any stockholder rights until shares are delivered to them, but they generally are entitled to receive dividend-equivalent payments during the vesting period. Recipients of restricted stock awards are entitled to a limited voting right and to receive dividend-equivalent payments during the vesting period. (Dividend equivalents are paid through payroll and recorded as an offset to retained earnings on those shares expected to vest.) Once a stock award vests, the shares may become freely transferable, but in the case of certain executives, may be subject to transfer restrictions by their terms or a stock ownership commitment. Dividend equivalents and any other cash payments to participants who are employed by the Company are paid directly by the Company. The total expense to be recognized for the stock awards represents the fair value of Citigroup common stock at the date of grant. The expense is recognized as a charge ratably over the vesting period, except for those awards granted to retirement-eligible employees, and salary stock and other immediately vested awards. For awards of deferred stock expected to be made to retirement-eligible employees, the charge to income is accelerated based on the dates the retirement rules are or will be met. If the retirement rules will have been met on or prior to the expected award date, the entire estimated expense is recognized in the year prior to grant in the same manner as cash incentive compensation is 25 CITIBANK, N.A. 2010–2011 FINANCIALS

208 accrued, rather than amortized over the applicable vesting Profit Sharing Plan period of the award. Salary stock and other immediately In October 2010, the Committee approved awards under the vested awards generally were granted in lieu of cash 2010 Key Employee Profit Sharing Plan (KEPSP) to certain compensation and are also recognized in the year prior to the executives (including executives of the Company), which may grant in the same manner as cash compensation is accrued. entitle participants to profit-sharing payments based on an Certain stock awards with performance conditions or certain initial performance measurement period of January 1, 2010 clawback provisions may be subject to variable accounting, through December 31, 2012. Generally, if a participant pursuant to which the associated charges fluctuate with remains employed and all other conditions to vesting and changes in Citigroup’s stock price over the applicable vesting payment are satisfied, the participant will be entitled to an periods. The total amount that will be recognized as expense initial payment in 2013, as well as a holdback payment in cannot be determined in full until the awards vest. 2014 that may be reduced based on performance during the Citigroup’s primary stock award program is the Capital subsequent holdback period (generally, January 1, 2013 Accumulation Program (CAP). Generally, CAP awards of through December 31, 2013). If the vesting and performance restricted or deferred stock constitute a percentage of annual conditions are satisfied, a participant’s initial payment will discretionary incentive compensation and vest ratably over equal two-thirds of the product of the cumulative pretax three- or four-year periods, beginning on the first anniversary income of Citicorp (as defined in the KEPSP) for the initial of the award date. performance period and the participant’s applicable In January 2010, the percentages of total annual percentage. The initial payment will be paid after January 20, incentives awarded pursuant to CAP were reduced and instead 2013, but no later than March 15, 2013. awarded as deferred cash awards primarily in the U.S. and the The participant’s holdback payment, if any, will equal the U.K. The deferred cash awards are subject to two-year and product of (a) the lesser of cumulative pretax income of four-year vesting schedules, but the other terms and conditions Citicorp for the initial performance period and cumulative are the same as CAP awards made in those years. The deferred pretax income of Citicorp for the initial performance period cash awards earn a return during the vesting period based on and the holdback period combined (generally, January 1, 2010 LIBOR; in 2010 only, a portion of the award was denominated through December 31, 2013), and (b) the participant’s as a stock unit, the value of which will fluctuate based on the applicable percentage, less the initial payment; provided that price of Citigroup common stock. In both cases, only cash is the holdback payment may not be less than zero. The holdback delivered at vesting. payment, if any, will be paid after January 20, 2014, but no later than March 15, 2014. Stock Option Programs On February 14, 2011, the Committee approved grants of While Citigroup no longer grants options as part of its annual awards under the 2011 KEPSP to certain other executive incentive award programs, Citigroup may grant stock options officers of Citigroup (including the Company). These awards to employees on a one-time basis, as sign-on awards or as have a performance period of January 1, 2011 to December retention awards. All stock options are granted on Citigroup 31, 2012 and other terms of the awards are similar to the 2010 common stock with exercise prices that are no less than the KEPSP. fair market value at the time of grant (which is defined under Additionally, the Company operates and may from time Citigroup’s 2009 Stock Incentive Plan to be the NYSE closing to time introduce other incentive plans for certain employees price on the trading day immediately preceding the grant date that have an incentive-based award component. Individually, or on the grant date for grants to executive officers). these plans are not deemed material. On April 20, 2010, Citigroup made an option grant to a group of employees (including employees of the Company) Compensation Expense who were not eligible for the October 29, 2009, broad-based The Company recognized compensation expense of $218 grant described below. The options were awarded with an million in 2011, relating to its stock-based compensation exercise price equal to the NYSE closing price on the trading programs. day immediately preceding the date of grant ($48.80). The options vest in three annual installments beginning on October 29, 2010. The options have a six-year term. On October 29, 2009, Citigroup made a one-time broad- based option grant to employees worldwide, including employees of the Company. The options have a six-year term, generally vest in three equal installments over three years, beginning on the first anniversary of the grant date, and have an exercise price of $40.80.

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8. RETIREMENT BENEFITS of $31 million and $34 million for the years ended December 31, 2011 and 2010, respectively. Pension and Postretirement Benefits The Company’s employees participate in several non- Plan Assumptions contributory defined benefit pension plans sponsored by Citigroup utilizes a number of assumptions, which are set by Citigroup covering certain U.S. employees. The Company also the plans' management, to determine plan obligations and participates in various defined benefit pension and termination expense. Changes in one or a combination of these indemnity plans covering employees outside the United States. assumptions will have an impact on the Company’s pension Effective January 1, 2008, Citigroup’s U.S. qualified pension and postretirement PBO, funded status and benefit expense. plan was frozen for most employees. Accordingly, no Changes in the plans’ funded status resulting from changes in additional compensation-based contributions were credited to the PBO and fair value of plan assets will have a the cash balance formula for existing plan participants after corresponding impact on Accumulated other comprehensive 2007. However, certain employees covered under the prior income (loss). A discussion of certain assumptions follows. final pay formula continue to accrue benefits. The Company also participates in postretirement health care and life Discount Rate insurance benefits offered by Citigroup to certain eligible U.S. The discount rates for the U.S. pension and postretirement retired employees, as well as to certain eligible employees plans were selected by reference to a Citigroup-specific outside the United States. analysis using each plan’s specific cash flows and compared The Company’s allocated share of the related net funded with high quality corporate bond indices for reasonableness. status of the plans is recognized in the Company’s Balance Citigroup’s policy is to round to the nearest five hundredths of Sheet. For the U.S. pension plans, the Company recognized a a percent. Accordingly, at December 31, 2011, the discount funded status of $(660) million and $(494) million for the rate was set at 4.70% for the pension plans and 4.30% for the years ended December 31, 2011 and 2010, respectively. For postretirement plans. At December 31, 2010, the discount rate the non-U.S. pension plans, the Company recognized a funded was set at 5.45% for the pension plans and 5.10% for the status of $(262) million and $(226) million for the years ended postretirement plans. December 31, 2011 and 2010, respectively. For the U.S. The discount rates for the non-U.S. pension and postretirement plans, the Company recognized a funded status postretirement plans are selected by reference to high quality of $(469) million and $(502) million for the years ended corporate bond rates in countries that have developed December 31, 2011 and 2010, respectively. For the non-U.S. corporate bond markets. However, where developed corporate postretirement plans, the Company recognized a funded status bond markets do not exist, the discount rates are selected by of $(264) million and $(269) million for the years ended reference to local government bond rates with a premium December 31, 2011 and 2010, respectively. added to reflect the additional risk for corporate bonds. The Company’s allocated share of the related net amount recognized in equity in the Company’s Consolidated Expected Rate of Return Balance Sheet. For the U.S. pension plans, the Company Citigroup determines its assumptions for the expected rate of recognized a net amount in equity of $2,118 million and return on plan assets for its U.S. pension and postretirement $1,860 million for the years ended December 31, 2011 and plans using a “building block” approach, which focuses on 2010, respectively. For the non-U.S. pension plans, the ranges of anticipated rates of return for each asset class. A Company recognized a net amount in equity of $(1,162) weighted range of nominal rates is then determined based on million and $(1,219) million for the years ended December target allocations to each asset class. Market performance over 31, 2011and 2010, respectively. For the U.S. postretirement a number of earlier years is evaluated covering a wide range of plans, the Company recognized a net amount in equity of economic conditions to determine whether there are sound $71 million and $124 million for the years ended reasons for projecting any past trends. December 31, 2011 and 2010, respectively. For the Citigroup considers the expected rate of return to be a non-U.S. postretirement plans, the Company recognized long-term assessment of return expectations and does not a net amount in equity of $70 million and $92 million for anticipate changing this assumption annually unless there are the years ended December 31, 2011 and 2010, respectively. significant changes in investment strategy or economic The Company’s allocated share of the related (benefit) conditions. This contrasts with the selection of the discount expense for the plans is recognized in the Company’s rate, future compensation increase rate, and certain other Statement of Income. For the U.S. pension plans, the assumptions, which are reconsidered annually in accordance Company recognized a net benefit of $60 million and $51 with generally accepted accounting principles. million for the years ended December 31, 2011 and 2010, The expected rate of return for the U.S. pension and respectively. For the non-U.S. pension plans, the Company postretirement plans was 7.50% at December 31, 2011 and recognized a net expense of $186 million and $132 million for 2010. Actual returns in 2011 and 2010 were greater than the the years ended December 31, 2011 and 2010, respectively. expected returns. This expected amount reflects the expected For the U.S. postretirement plans, the Company recognized a annual appreciation of the plan assets and reduces the annual net expense of $19 million and $31 million for the years ended pension expense of Citigroup. It is deducted from the sum of December 31, 2011 and 2010, respectively. For the non-U.S. service cost, interest and other components of pension expense postretirement plans, the Company recognized a net expense to arrive at the net pension (benefit) expense. 27 CITIBANK, N.A. 2010–2011 FINANCIALS

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Third-party investment managers and advisors provide x Periodic monitoring of funding levels and funding ratios their services to Citigroup’s U.S. pension plans. Assets are x Periodic monitoring of compliance with asset allocation rebalanced as the Pension Plan Investment Committee deems guidelines appropriate. Citigroup’s investment strategy, with respect to x Periodic monitoring of asset class and/or investment its pension assets, is to maintain a globally diversified manager performance against benchmarks investment portfolio across several asset classes that, when x Periodic risk capital analysis and stress testing combined with Citigroup’s contributions to the plans, will maintain the plans’ ability to meet all required benefit Defined Contribution Plans obligations. Citigroup administers defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are Investment Strategy administered in accordance with local laws. The Company Citigroup’s global pension and postretirement funds’ participates in many of these plans. The most significant of investment strategies are to invest in a prudent manner for the these plans is the Citigroup 401(k) Plan in the U.S. exclusive purpose of providing benefits to participants. The The Company participates in the Citigroup 401(k) Plan, investment strategies are targeted to produce a total return a defined contribution plan, under which eligible U.S. that, when combined with Citigroup’s contributions to the employees receive matching contributions of up to 6% and 4% funds, will maintain the funds’ ability to meet all required of their pay in 2011 and 2010, respectively, subject to benefit obligations. Risk is controlled through diversification statutory limits. Effective January 1, 2011, the maximum of asset types and investments in domestic and international amount of matching contributions on employee deferral equities, fixed-income securities and cash and short-term contributions made into this plan was increased from 4% to investments. The target asset allocation in most locations 6% of eligible pay, subject to statutory limits. The matching outside the U.S. is to have the majority of the assets in equity contribution is invested according to participants’ individual and debt securities. These allocations may vary by geographic elections. Additionally, for eligible employees whose region and country depending on the nature of applicable compensation is $100,000 or less, a fixed contribution of up to obligations and various other regional considerations. The 2% of compensation is provided. wide variation in the actual range of plan asset allocations for The Company’s pretax expense associated with the the funded non-U.S. plans is a result of differing local Citigroup 401(k) Plan amounted to approximately $206 statutory requirements and economic conditions. For example, million and $158 million for the years ended December 31, in certain countries local law requires that all pension plan 2011 and 2010, respectively. assets must be invested in fixed-income investments, The Company sponsors the Citibuilder 401(k) Plan for government funds, or local-country securities. Puerto Rico, a defined contribution plan, under which eligible employees receive a two for one matching contribution up to Significant Concentrations of Risk in Plan Assets the lesser of 3% and 2% of eligible pay or the first $8,000 and The assets of Citigroup’s pension plans are diversified to limit $5,000 in employee deferrals in 2011 and 2010, respectively, the impact of any individual investment. The U.S. pension for all employees in Puerto Rico at all compensation levels. plan is diversified across multiple asset classes, with publicly The matching contribution is invested according to traded fixed income, hedge funds and private equity participants’ individual elections. Additionally, for eligible representing the most significant asset allocations. Investments employees whose compensation is $100,000 or less, a fixed in these three asset classes are further diversified across funds, contribution of up to 2% of compensation is provided. managers, strategies, vintages, sectors and geographies, The Company’s pretax expense associated with the depending on the specific characteristics of each asset class. Citibuilder 401(k) Plan for Puerto Rico amounted to The pension assets for Citigroup’s largest non-U.S. plans are approximately $2 million for the years ended December 31, primarily invested in publicly traded fixed income and 2011 and 2010. publicly traded equity securities. Postemployment Plans Oversight and Risk Management Practices Citigroup sponsors U.S. postemployment plans that provide The framework for Citigroup’s pensions oversight process income continuation and health and welfare benefits to certain includes monitoring of retirement plans by plan fiduciaries eligible U.S. employees on long term disability. For the years and/or management at the global, regional or country level, as ended December 31, 2011 and 2010, the Company’s allocated appropriate. Independent risk management contributes to the share of the plans’ funded status recognized in the Company’s risk oversight and monitoring for Citigroup’s U.S. pension Balance Sheet was $(321) million and $(278) million, plans and largest non-U.S. pension plans. Although the respectively. The Company’s allocated share of the related net specific components of the oversight process are tailored to amount recognized in equity in the Company’s Consolidated the requirements of each region, country and Plan, the Balance Sheet as of December 31, 2011 and 2010 was $157 following elements are common to Citigroup’s monitoring and million and $125 million, respectively. The Company’s risk management process: allocated share of the net expense recognized in the Statement of Income during 2011 and 2010 were $55 million and $48 x Periodic asset/liability management studies and strategic million, respectively. asset allocation reviews 28 CITIBANK, N.A. 2010–2011 FINANCIALS

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9. INCOME TAXES Deferred income taxes for the years ended December 31 The Company is included in the Citigroup consolidated related to the following: federal tax return and is party to a tax sharing agreement with Citigroup. Under such agreement, the Company is entitled to In millions of dollars 2011 2010 a tax benefit for its losses and credits that are recognized in Deferred tax assets Citigroup's Consolidated Financial Statements. Settlements Credit loss deduction $ 9,839 $12,317 between the Company and Citigroup of current taxes occur Deferred compensation and employee benefits 2,155 1,080 throughout the year. The Company also files in consolidated Restructuring and settlement reserves 682 262 and combined state income tax returns with Citigroup and/or Unremitted foreign earnings 3,752 2,886 other of its subsidiaries, and files other separate state income Cash flow hedges 1,339 963 tax returns. Investments and loan basis differences 1,887 4,792 Credit valuation adjustment on Company-issued In millions of dollars 2011 2010 debt (21) 116 Current Tax credit and net operating loss carryforwards 10,784 10,950 Federal $ 16 $ (303) Intangibles 256 (162) Foreign 2,473 2,268 Other 772 592 State 9 377 Gross deferred tax assets $31,445 $33,796 Total current income taxes $2,498 $2,342 Valuation allowance — — Deferred Deferred tax assets after valuation allowance $31,445 $33,796 Federal $ (133) $ (204) Deferred tax liabilities Foreign 465 378 Fixed assets and leases $ (736) $ (634) State 84 (231) Other deferred tax liabilities (1,089) (421) Total deferred income taxes $ 416 $ (57) Interest-related items (159) (370)

Provision for income tax on continuing Gross deferred tax liabilities $ (1,984) $ (1,425) operations before noncontrolling Net deferred tax asset $ 29,461 $32,371 interests(1) $2,914 $2,285 Provision (benefit) for income taxes on The following is a roll-forward of the Company’s discontinued operations 115 (395) unrecognized tax benefits for the years ended December 31: Provision (benefit) for income taxes on cumulative effect of accounting changes — (4,788) In millions of dollars 2011 2010 Income tax expense (benefit) reported in stockholder’s equity related to: Total unrecognized tax benefits at January 1, $1,813 $1,661 Foreign currency translation (360) (111) Net amount of increases for current year’s tax Securities available-for-sale 2,291 907 positions 41 60 Employee stock plans — (7) Gross amount of increases for prior years’ tax Cash flow hedges (148) 341 positions 121 363 Citibank’s portion of Citigroup’s Gross amount of decreases for prior years’ tax pension liability adjustments (115) (152) positions (344) (253) Income taxes before noncontrolling Amounts of decreases relating to settlements (11) (11) interests $4,697 $(1,920) Reductions due to lapse of statutes of limitation (18) (11)

Foreign exchange, acquisitions and dispositions (7) 4 (1) Includes the effect of securities transactions and OTTI losses resulting in a provision (benefit) of $(175) million and $(616) million in 2011, and Total unrecognized tax benefits at December 31 $1,595 $1,813 $652 million and $(424) million in 2010, respectively. The total amount of unrecognized tax benefits at December The reconciliation of the federal statutory income tax rate 31, 2011 and 2010 that, if recognized, would affect the to the Company's effective income tax rate applicable to Company’s effective tax rate was $1,042 million and $973 income from continuing operations (before noncontrolling million, respectively. The remainder of the uncertain tax interests) for the years ended December 31 was as follows: positions has offsetting amounts in other jurisdictions or these positions are temporary differences. 2011 2010 Federal statutory rate 35.0% 35.0% State income taxes, net of federal benefit 0.3 0.6 Foreign income tax rate differential (7.4) (8.4) Tax advantaged investments (5.5) (6.3) Other, net (0.5) (0.3) Effective income tax rate 21.9% 20.6%

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Interest and penalties (not included in "total unrecognized tax benefits" in the table above) are a component of the Provision for income taxes.

2011 2010 In millions of dollars Pretax Net of tax Pretax Net of tax Total interest and penalties in the Consolidated Balance Sheet at January 1, $226 $150 $277 $165 Total interest and penalties in the Consolidated Statement of Income 28 17 (40) (24) Total interest and penalties in the Consolidated Balance Sheet at December 31 262 171 226 150

The Company is currently under audit by the Internal Foreign pretax earnings approximated $11.8 billion in 2011 Revenue Service and other major taxing jursidictions around the and $10.9 billion in 2010. As a U.S. corporation, Citibank and world. Thus, it is reasonably possible that significant changes in its U.S. subsidiaries are subject to U.S. taxation currently on all the gross balance of unrecognized tax benefits may occur within foreign pretax earnings earned by a foreign branch. Pretax the next 12 months; however, the Company does not expect earnings of a foreign subsidiary or affiliate are subject to U.S. such audits to result in amounts that would cause a significant taxation when effectively repatriated. The Company provides change to its effective tax rate. income taxes on the undistributed earnings of non-U.S. Citigroup expects to conclude the IRS audit of its U.S. subsidiaries, except to the extent that such earnings are federal consolidated income tax returns for the years 2006-2008 indefinitely invested outside the United States. At December and may resolve certain issues with the IRS Appeals for the 31, 2011 and 2010, respectively, $28.9 billion and $25.6 billion years 2003-2005 within the next 12 months. The gross uncertain of accumulated undistributed earnings of non-U.S. subsidiaries tax positions of the Company at December 31, 2011 for the were indefinitely invested. At the existing U.S. federal income items that may be resolved for 2003-2008 are as much as $775 tax rate, additional taxes (net of U.S. foreign tax credits) of $7.3 million plus gross interest of $70 million. Because of the billion and $6.5 billion would have to be provided if such number of issues remaining to be resolved, the potential tax earnings were remitted currently. The current year’s effect on benefit to continuing operations could be anywhere in a range the income tax expense from continuing operations is included between $0 and $430 million. in the “Foreign income tax rate differential” line in the The following are the major tax jurisdictions in which the reconciliation of the federal statutory rate to the Company’s Company and its affiliates operate and the earliest tax year effective income tax rate. subject to examination: Income taxes are not provided on the Company’s “savings bank base year bad debt reserves” that arose before 1988, Jurisdiction Tax year because, under current U.S. tax rules, such taxes will become United States 2006 payable only to the extent such amounts are distributed in New York State and City 2005 excess of limits prescribed by federal law. At both December United Kingdom 2010 31, 2011 and 2010, the amount of the base year reserves totaled Ireland 2007 approximately $358 million (subject to a tax of $125 million). Japan 2009 Foreign tax credit carryforwards expire between 2016 Hong Kong 2006 through 2021 and the state and local net operating loss Singapore 2005 carryforwards between 2012 and 2031. Brazil 2007 The Company had no valuation allowance on deferred tax assets at December 31, 2011 and December 31, 2010. Although it is not assured, the Company believes that the realization of the recognized net deferred tax asset of $ 29 billion at December 31, 2011 is more likely than not based on the recognition of its federal and certain state deferred tax assets in Citigroup’s financial statements and expectations as to future taxable income in jurisdictions in which the other deferred tax assets arise and available tax planning strategies, as defined in ASC 740, Income Taxes (formerly SFAS 109), that could be implemented if necessary to prevent a carryforward from expiring.

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10. FEDERAL FUNDS/SECURITIES BORROWED, 11. TRADING ACCOUNT ASSETS AND LIABILITIES LOANED, AND SUBJECT TO REPURCHASE/RESALE AGREEMENTS Trading account assets and Trading account liabilities, at fair value, consisted of the following at December 31: Federal funds sold and securities borrowed or purchased under agreements to resell, at their respective carrying values, In millions of dollars 2011 2010 consisted of the following at December 31: Trading account assets Mortgage-backed securities (1) In millions of dollars 2011 2010 U.S. government-sponsored Federal funds sold $ 37 $ 227 agency guaranteed $ 3,822 $ 3,028 Prime 12 146 Securities purchased under agreements to resell 63,278 38,874 Alt-A — 27 Deposits paid for securities borrowed 11,422 4,205 Subprime — 17 Total $ 74,737 $43,306 Non-U.S. residential 16 42 Commercial — 141 Federal funds purchased and securities loaned or sold under Total mortgage-backed securities $ 3,850 $ 3,401 agreements to repurchase, at their respective carrying values, U.S. Treasury and federal agencies consisted of the following at December 31: U.S. Treasuries $ 1,853 $ 7,507 — Agency obligations 132 Total U.S. Treasury and federal In millions of dollars 2011 2010 agencies $ 1,853 $ 7,639 $ 478 Federal funds purchased $ 688 State and municipal securities $ 1,292 $ 1,185 Securities sold under agreements to repurchase 26,206 12,307 Foreign government securities 36,142 34,118 Deposits received for securities loaned 1,123 — Corporate 18,471 20,245 Total $ 28,017 $12,785 Derivatives (2) 71,684 57,451 Equity securities 10,144 10,346 The resale and repurchase agreements represent Asset-backed securities(1) 47 750 collateralized financing transactions. The Company executes Other debt securities 14,479 14,224 these transactions primarily to facilitate customer financing Total trading account assets $157,962 $149,359 activity. Trading account liabilities It is the Company’s policy to take possession of the Securities sold, not yet purchased $8,553 $ 8,225 Derivatives (2) 56,388 47,368 underlying collateral, monitor its market value relative to the Total trading account liabilities $ 64,941 $ 55,593 amounts due under the agreements and, when necessary, require prompt transfer of additional collateral in order to maintain (1) The Company invests in mortgage-backed and asset-backed securities. contractual margin protection. Collateral typically consists of These securitizations are generally considered VIEs. The Company's government and government-agency securities, corporate and maximum exposure to loss from these VIEs is equal to the carrying municipal bonds, and mortgage-backed and other asset-backed amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company securities. In the event of counterparty default, the financing has other involvement, information is provided in Note 19 to the agreement provides the Company with the right to liquidate the Consolidated Financial Statements. collateral held. (2) Presented net, pursuant to master netting agreements. See Note 20 to the Resale and repurchase agreements are carried at the amount Consolidated Financial Statements for a discussion regarding the accounting and reporting for derivatives. of cash initially advanced or received, plus accrued interest, as specified in the respective agreements. Securities borrowing and lending agreements are recorded at the amount of cash advanced or received and are collateralized principally by government and government- agency securities and corporate debt and equity securities. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value of the securities loaned. The Company monitors the market value of securities borrowed and securities loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.

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12. INVESTMENTS

Overview

In millions of dollars 2011 2010 Securities available-for-sale $201,204 $220,809 Debt securities held-to-maturity (1) 6,497 24,903 Non-marketable equity securities carried at fair value (2) 50 189 Non-marketable equity securities carried at cost (3) 7,538 7,576 Total investments $215,289 $253,477

(1) Recorded at amortized cost less impairment on securities that have credit related impairment. (2) Unrealized gains and losses for non-marketable equity securities carried at fair value are recognized in earnings. (3) Non-marketable equity securities carried at cost primarily consist of shares issued by the Federal Reserve Bank, the Federal Home Loan Banks, foreign central banks and various clearing houses of which Citigroup is a member.

Securities Available-for-Sale The amortized cost and fair value of securities available-for-sale at December 31, 2011 and December 31, 2010 were as follows:

2011 2010 Gross Gross Gross Gross Amortized unrealized unrealized Amortized unrealized unrealized In millions of dollars cost gains losses Fair value cost gains losses Fair value Debt securities available-for-sale Mortgage-backed securities(1) U.S. government-agency guaranteed $ 42,401 $1,370 $ 36 $ 43,735 $ 22,723 $ 402 $ 235 $ 22,890 Prime 6 — — 6 1,660 — 172 1,488 Alt-A — — — — 1 — — 1 Non-U.S. residential 4,670 11 22 4,659 315 1 — 316 Commercial — — — — 106 1 29 78 Total mortgage-backed securities $ 47,077 $1,381 $ 58 $ 48,400 $ 24,805 $ 404 $ 436 $ 24,773 U.S. Treasury and federal agency securities U.S. Treasury $ 27,290 $1,342 $ — $ 28,632 $ 45,667 $ 431 $ 45 $ 46,053 Agency obligations 21,436 553 2 21,987 35,394 360 40 35,714 Total U.S. Treasury and federal agency securities $ 48,726 $1,895 $ 2 $ 50,619 $ 81,061 $ 791 $ 85 $ 81,767 State and municipal(2) 16,185 122 2,432 13,875 14,836 16 2,383 12,469 Foreign government 69,054 327 336 69,045 80,926 566 363 81,129 Corporate 5,333 28 9 5,352 10,626 55 18 10,663 Asset-backed securities(1) 9,801 2 68 9,735 7,657 4 34 7,627 Other debt securities 647 12 — 659 1,358 25 60 1,323 Total debt securities available- for-sale $196,823 $3,767 $2,905 $197,685 $221,269 $1,861 $3,379 $219,751 Marketable equity securities available-for-sale 2,919 602 2 3,519 $ 373 $ 685 $ — $ 1,058 Total securities available-for-sale $199,742 $4,369 $2,907 $201,204 $221,642 $2,546 $3,379 $220,809

(1) The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company's maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 19 to the Consolidated Financial Statements. (2) The gross unrealized losses on state and municipal debt securities are primarily attributable to the result of yields on taxable fixed income instruments decreasing relatively faster than the general tax-exempt municipal yields and the effects of fair value hedge accounting.

At December 31, 2011, the amortized cost of The AFS mortgage-backed securities portfolio fair value approximately 2,000 investments in equity and fixed-income balance of $48.400 billion consists of $43.735 billion of securities exceeded their fair value by $2.907 billion. Of the government-sponsored agency securities, and $4.665 billion of $2.907 billion, the gross unrealized loss on equity securities privately sponsored securities, of which the majority is backed was $2 million. Of the remainder, $289 million represents by mortgages that are not Alt-A or subprime. fixed-income investments that have been in a gross- As discussed in more detail below, the Company conducts unrealized-loss position for less than a year and, of these, 99% and documents periodic reviews of all securities with are rated investment grade; $2.616 billion represents fixed- unrealized losses to evaluate whether the impairment is other income investments that have been in a gross-unrealized-loss than temporary. Any credit-related impairment related to debt position for a year or more and, of these, 98% are rated securities the Company does not plan to sell and is not likely investment grade. to be required to sell is recognized in the Consolidated 32 CITIBANK N.A. 2010–2011 FINANCIALS

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Statement of Income, with the non-credit-related impairment recognized in AOCI. For other impaired debt securities, the entire impairment is recognized in the Consolidated Statement of Income.

The table below shows the fair value of investments in available-for-sale securities that have been in an unrealized loss position for less than 12 months, or for 12 months or longer, each as of December 31, 2011 and December 31, 2010:

Less than 12 months 12 months or longer Total Gross Gross Gross unrealized unrealized unrealized In millions of dollars Fair value losses Fair value losses Fair value losses December 31, 2011 Securities available-for-sale Mortgage-backed securities U.S. government-agency guaranteed $ 5,392 $ 33 $ 36 $ 3 $ 5,428 $ 36 Prime — — — — — — Alt-A — — — — — — Non-U.S. residential 3,418 22 57 — 3,475 22 Commercial — — — — — — Total mortgage-backed securities $ 8,810 $ 55 $ 93 $ 3 $ 8,903 $ 58 U.S. Treasury and federal agency securities U.S. Treasury 51 — — — 51 — Agency obligations 1,516 2 — — 1,516 2 Total U.S. Treasury and federal agency securities $ 1,567 $ 2 $ — $ — $ 1,567 $ 2 State and municipal 56 2 11,226 2,430 11,282 2,432 Foreign government 23,947 156 10,937 180 34,884 336 Corporate 1,459 9 3 — 1,462 9 Asset-backed securities 4,176 65 347 3 4,523 68 Other debt securities 164 — — — 164 — Marketable equity securities available-for-sale 3 2 — — 3 2 Total securities available-for-sale $40,182 $291 $22,606 $2,616 $62,788 $2,907 December 31, 2010 Securities available-for-sale Mortgage-backed securities U.S. government-agency guaranteed $ 8,291 $214 $ 29 $ 21 $ 8,320 $ 235 Prime — — 1,484 172 1,484 172 Alt-A 1 — — — 1 — Non-U.S. residential — — 135 — 135 — Commercial — — 49 29 49 29 Total mortgage-backed securities $ 8,292 $214 $ 1,697 $ 222 $ 9,989 $ 436 U.S. Treasury and federal agency securities U.S. Treasury 4,446 10 725 35 5,171 45 Agency obligations 5,514 40 — — 5,514 40 Total U.S. Treasury and federal agency securities $ 9,960 $ 50 $ 725 $ 35 $10,685 $ 85 State and municipal 577 59 10,842 2,324 11,419 2,383 Foreign government 31,522 246 5,473 117 36,995 363 Corporate 506 14 461 4 967 18 Asset-backed securities 1,877 33 5 1 1,882 34 Other debt securities — — 559 60 559 60 Marketable equity securities available-for-sale — — 31 — 31 — Total securities available-for-sale $52,734 $616 $19,793 $2,763 $72,527 $3,379

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The following table presents the amortized cost and fair value of debt securities available-for-sale by contractual maturity dates, each as of December 31, 2011 and December 31, 2010:

2011 2010 Amortized Amortized In millions of dollars cost Fair value cost Fair value Mortgage-backed securities (1) Due within 1 year $ — $ — $ — $ — After 1 but within 5 years 412 412 399 372 After 5 but within 10 years 1,957 2,025 303 318 After 10 years (2) 44,708 45,963 24,103 24,083 Total $ 47,077 $ 48,400 $ 24,805 $ 24,773 U.S. Treasury and federal agencies Due within 1 year $ 4,788 $ 4,808 $ 24,476 $ 24,505 After 1 but within 5 years 38,053 39,504 45,150 45,735 After 5 but within 10 years 5,508 5,874 10,150 10,187 After 10 years (2) 377 433 1,285 1,340 Total $ 48,726 $ 50,619 $ 81,061 $ 81,767 State and municipal Due within 1 year $ 134 $ 135 $ 2 $ 2 After 1 but within 5 years 431 432 87 89 After 5 but within 10 years 131 133 186 187 After 10 years (2) 15,489 13,175 14,561 12,191 Total $ 16,185 $ 13,875 $ 14,836 $ 12,469 Foreign government Due within 1 year $ 32,046 $ 31,990 $ 34,036 $ 33,509 After 1 but within 5 years 31,090 31,162 41,661 42,326 After 5 but within 10 years 5,668 5,647 4,759 4,832 After 10 years (2) 250 246 470 462 Total $ 69,054 $ 69,045 $ 80,926 $ 81,129 All other (3) Due within 1 year $ 3,145 $ 3,156 $ 1,002 $ 998 After 1 but within 5 years 7,431 7,453 14,886 14,897 After 5 but within 10 years 1,444 1,439 1,053 1,046 After 10 years (2) 3,761 3,698 2,700 2,672 Total $ 15,781 $ 15,746 $ 19,641 $ 19,613 Total debt securities available-for-sale $196,823 $197,685 $221,269 $219,751

(1) Includes mortgage-backed securities of U.S. government-sponsored agencies. (2) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. (3) Includes corporate, asset-backed and other debt securities.

The following table presents interest and dividends on The following table presents realized gains and losses on all investments: investments. The gross realized investment losses exclude losses from other-than-temporary-impairment: In millions of dollars 2011 2010 Taxable interest $5,773 $7,648 In millions of dollars 2011 2010 Interest exempt from U.S. federal income tax 507 423 Gross realized investment gains $1,799 $2,208 Dividends 251 275 Gross realized investment losses (2,299) (346) Total interest and dividends $6,531 $8,346 Net realized gains (losses) $ (500) $1,862

During 2010 and 2011, Citibank sold several corporate debt securities and various mortgage-backed and asset-backed securities that were classified as held-to-maturity. These sales were in response to a significant deterioration in the creditworthiness of the issuers or securities. The corporate debt securities sold during 2010 had a carrying value of $413 million and Citibank recorded a realized loss of $49 million. The mortgage-backed and asset-backed securities sold during 2011 had a carrying value of $623 million and Citibank recorded a realized loss of $64 million.

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Debt Securities Held-to-Maturity The carrying value and fair value of debt securities held-to-maturity (HTM) at December 31, 2011 and December 31, 2010 were as follows:

Net unrealized loss Gross Gross Amortized recognized in Carrying unrealized unrealized Fair In millions of dollars cost (1) AOCI value (2) gains losses value December 31, 2011 Debt securities held-to-maturity Mortgage-backed securities (3) Prime $ 109 $ 25 $ 84 $ 10 $ — $ 94 Alt-A 139 13 126 5 12 119 Subprime 3 1 2 — — 2 Non-U.S. residential 3,487 518 2,969 59 292 2,736 Commercial 513 1 512 4 52 464 Total mortgage-backed securities $ 4,251 $558 $ 3,693 $ 78 $356 $ 3,415 State and municipal $ 112 $ 15 $ 97 $ 11 $ — $ 108 Corporate 1,862 113 1,749 — 254 1,495 Asset-backed securities (3) 981 23 958 9 87 880 Total debt securities held-to-maturity $ 7,206 $709 $ 6,497 $ 98 $697 $ 5,898 December 31, 2010 Debt securities held-to-maturity Mortgage-backed securities (3) Prime $ 4,550 $ 775 $ 3,775 $ 377 $ — $ 4,152 Alt-A 10,835 2,943 7,892 433 62 8,263 Subprime 261 51 210 4 — 214 Non-U.S. residential 5,012 794 4,218 260 72 4,406 Commercial 793 2 791 — 97 694 Total mortgage-backed securities $21,451 $4,565 $16,886 $1,074 $231 $17,729 State and municipal 121 3 118 — — 118 Corporate 6,283 80 6,203 249 268 6,184 Asset-backed securities (3) 1,764 68 1,696 53 54 1,695 Total debt securities held-to-maturity $29,619 $4,716 $24,903 $1,376 $553 $25,726

(1) For securities transferred to HTM from Trading account assets in 2008, amortized cost is defined as the fair value of the securities at the date of transfer plus any accretion income and less any impairments recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS in 2008, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings. (2) HTM securities are carried on the Consolidated Balance Sheet at amortized cost less any unrealized gains and losses recognized in AOCI. The changes in the values of these securities are not reported in the financial statements, except for other-than-temporary impairments. For HTM securities, only the credit loss component of the impairment is recognized in earnings, while the remainder of the impairment is recognized in AOCI. (3) The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 19 to the Consolidated Financial Statements.

Citibank has the positive intent and ability to hold these compared to $4.7 billion as of December 31, 2010. The AOCI securities to maturity absent any unforeseen significant changes balance for HTM securities is amortized over the remaining life in circumstances, including deterioration in credit or changes in of the related securities as an adjustment of yield in a manner regulatory capital requirements. consistent with the accretion of discount on the same debt The net unrealized losses classified in AOCI relate to debt securities. This will have no impact on Citibank’s net income securities reclassified from AFS investments to HTM because the amortization of the unrealized holding loss reported investments in a prior year. Additionally, for HTM securities in equity will offset the effect on interest income of the that have suffered credit impairment, declines in fair value for accretion of the discount on these securities. reasons other than credit losses are recorded in AOCI. The For any credit-related impairment on HTM securities, the AOCI balance was $0.7 billion as of December 31, 2011, credit loss component is recognized in earnings.

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During the first half of 2011, Citibank determined that it no Citibank reclassified and sold the securities as part of its longer had the intent to hold $15.1 billion carrying value of overall efforts to mitigate its risk-weighted assets (RWA) in HTM securities to maturity. As a result, Citibank reclassified order to comply with significant new regulatory capital $8.2 billion carrying value of mortgage-backed, other asset- requirements which, although not yet implemented or formally backed, state and municipal, and corporate debt securities from adopted, are nonetheless currently being used to assess the Investments held-to-maturity to Trading account assets. forecasted capital adequacy of Citibank and other large U.S. Through December 31, 2011, Citibank has sold to unrelated banking organizations. These regulatory capital changes, which third parties substantially all of those HTM securities that were were largely unforeseen when Citibank initially reclassified the reclassified to Trading account assets earlier in 2011. Citibank debt securities from Trading account assets and Investments also sold an additional $7.0 billion carrying value of HTM available-for-sale to Investments held-to-maturity in the fourth securities (composed of sales of $2.4 billion to unrelated third quarter of 2008, include: (i) the U.S. Basel II credit and parties and $4.6 billion to a related party, Citicorp Funding operational risk capital standards; (ii) the Basel Committee’s Inc.). As a result of these actions, a net pretax loss of $2,963 agreed-upon, and the U.S.-proposed, revisions to the market risk million was recognized in the Consolidated Statement of capital rules, which significantly increased the risk weightings Income for the year ended December 31, 2011, composed of for certain trading book positions; (iii) the Basel Committee’s gross unrealized gains of $185 million included in Other substantial issuance of Basel III, which raised the quantity and revenue, gross unrealized losses of $1,277 million included in quality of required regulatory capital and materially increased Other-than-temporary impairment losses on investments, and RWA for securitization exposures; and (iv) certain regulatory net realized losses of $1,871 million included in Realized gains capital-related provisions in The Dodd-Frank Wall Street (losses) on sales of investments. Reform and Consumer Protection Act of 2010.

The table below shows the fair value of debt securities in HTM that have been in an unrecognized loss position for less than 12 months or for 12 months or longer as of December 31, 2011 and December 31, 2010:

Less than 12 months 12 months or longer Total Gross Gross Gross Fair unrecognized Fair unrecognized Fair unrecognized In millions of dollars value losses value losses value losses December 31, 2011 Debt securities held-to-maturity Mortgage-backed securities $ 735 $ 63 $1,571 $293 $2,306 $356 Corporate — — 1,427 254 1,427 254 Asset-backed securities 480 71 300 16 780 87 Total debt securities held-to-maturity $1,215 $134 $3,298 $563 $4,513 $697 December 31, 2010 Debt securities held-to-maturity Mortgage-backed securities $ 339 $ 30 $13,512 $201 $13,851 $231 Corporate 1,584 144 1,579 124 3,163 268 Asset-backed securities 159 11 494 43 653 54 Total debt securities held-to-maturity $2,082 $185 $15,585 $368 $17,667 $553

Excluded from the gross unrecognized losses presented in the above table are the $0.7 billion and $4.7 billion of gross unrealized losses recorded in AOCI as of December 31, 2011 and December 31, 2010, respectively, mainly related to the HTM securities that were reclassified from AFS investments. Virtually all of these unrealized losses relate to securities that have been in a loss position for 12 months or longer at both December 31, 2011 and December 31, 2010.

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The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates as of December 31, 2011 and December 31, 2010:

December 31, 2011 December 31, 2010 In millions of dollars Carrying value Fair value Carrying value Fair value Mortgage-backed securities Due within 1 year $ — $ — $ — $ — After 1 but within 5 years 275 239 245 218 After 5 but within 10 years 238 224 492 433 After 10 years (1) 3,180 2,952 16,149 17,078 Total $3,693 $3,415 $16,886 $17,729 State and municipal Due within 1 year $ 1 $ 1 $ — $ — After 1 but within 5 years 7 7 — — After 5 but within 10 years 3 3 — — After 10 years (1) 86 97 118 118 Total $ 97 $ 108 $ 118 $ 118 All other (2) Due within 1 year $ 8 $ 8 $ 259 $ 261 After 1 but within 5 years 470 438 1,122 1,201 After 5 but within 10 years 1,404 1,183 4,886 4,765 After 10 years (1) 825 746 1,632 1,652 Total $ 2,707 $ 2,375 $ 7,899 $ 7,879 Total debt securities held-to-maturity $ 6,497 $ 5,898 $24,903 $25,726

(1) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. (2) Includes corporate and asset-backed securities.

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Evaluating Investments for Other-Than-Temporary For equity securities, management considers the various Impairments factors described above, including its intent and ability to hold The Company conducts and documents periodic reviews of all the equity security for a period of time sufficient for recovery to securities with unrealized losses to evaluate whether the cost or whether it is more-likely-than-not that the Company will impairment is other than temporary. be required to sell the security prior to recovery of its cost basis. Under the guidance for debt securities, other-than- Where management lacks that intent or ability, the security’s temporary impairment (OTTI) is recognized in earnings for debt decline in fair value is deemed to be other-than-temporary and is securities that the Company has an intent to sell or that the recorded in earnings. AFS equity securities deemed other-than- Company believes it is more-likely-than-not that it will be temporarily impaired are written down to fair value, with the required to sell prior to recovery of the amortized cost basis. For full difference between fair value and cost recognized in those securities that the Company does not intend to sell or earnings. expect to be required to sell, credit-related impairment is Management assesses equity method investments with fair recognized in earnings, with the non-credit-related impairment value less than carrying value for OTTI. Fair value is measured recorded in AOCI. as price multiplied by quantity if the investee has publicly listed An unrealized loss exists when the current fair value of an securities. If the investee is not publicly listed, other methods individual security is less than its amortized cost basis. are used (see Note 22 to the Consolidated Financial Statements). Unrealized losses that are determined to be temporary in nature For impaired equity method investments that the Company are recorded, net of tax, in AOCI for AFS securities, while such plans to sell prior to recovery of value, or would likely be losses related to HTM securities are not recorded, as these required to sell and there is no expectation that the fair value investments are carried at their amortized cost. For securities will recover prior to the expected sale date, the full impairment transferred to HTM from Trading account assets, amortized cost is recognized in the Consolidated Statement of Income as OTTI is defined as the fair value of the securities at the date of regardless of severity and duration. The measurement of the transfer, plus any accretion income and less any impairment OTTI does not include partial projected recoveries subsequent recognized in earnings subsequent to transfer. For securities to the balance sheet date. transferred to HTM from AFS, amortized cost is defined as the For impaired equity method investments that management original purchase cost, plus or minus any accretion or does not plan to sell prior to recovery of value and is not likely amortization of a purchase discount or premium, less any to be required to sell, the evaluation of whether an impairment is impairment recognized in earnings. other than temporary is based on (i) whether and when an equity Regardless of the classification of the securities as AFS or method investment will recover in value and (ii) whether the HTM, the Company has assessed each position with an investor has the intent and ability to hold that investment for a unrealized loss for OTTI. Factors considered in determining period of time sufficient to recover the value. The determination whether a loss is temporary include: of whether the impairment is considered other-than-temporary is based on all of the following indicators, regardless of the time x the length of time and the extent to which fair value has and extent of impairment: been below cost; x the severity of the impairment; x Cause of the impairment and the financial condition and x the cause of the impairment and the financial condition and near-term prospects of the issuer, including any specific near-term prospects of the issuer; events that may influence the operations of the issuer. x activity in the market of the issuer that may indicate adverse x Intent and ability to hold the investment for a period of time credit conditions; and sufficient to allow for any anticipated recovery in market x the Company’s ability and intent to hold the investment for value. a period of time sufficient to allow for any anticipated x Length of time and extent to which fair value has been less recovery. than the carrying value.

The Company’s review for impairment generally entails: At December 31, 2011, Citibank had an equity method investment in Akbank T.A.S. (a Turkish financial institution) as x identification and evaluation of investments that have discussed further below. indications of possible impairment; Excluding the impact of foreign currency translation and x analysis of individual investments that have fair values less related hedges, the fair value of Citibank’s equity method than amortized cost, including consideration of the length investment in Akbank had exceeded its carrying value. During of time the investment has been in an unrealized loss the fourth quarter of 2011, however, the fair value of Citibank’s position and the expected recovery period; equity method investment in Akbank declined, resulting in a x discussion of evidential matter, including an evaluation of temporary impairment. During 2012 to date, Akbank’s share factors or triggers that could cause individual investments price has recovered significantly and, as of March 23, 2012, the to qualify as having other-than-temporary impairment and temporary impairment was approximately $0.2 billion. As of those that would not support other-than-temporary impairment; and x documentation of the results of these analyses, as required under business policies.

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December 31, 2011, foreign currency translation and related considering the transaction structure and any subordination and hedges on this equity method investment totaled an additional credit enhancements that exist in that structure. The cash flow cumulative pretax loss of approximately $0.9 billion. model incorporates actual cash flows on the mortgage-backed On March 23, 2012, Citigroup announced that as part of securities through the current period and then projects the Citi’s ongoing capital planning efforts and in light of general remaining cash flows using a number of assumptions, including improvement in equity capital markets globally, Citibank plans default rates, prepayment rates and recovery rates (on foreclosed to reduce its ownership interest in Akbank T.A.S. (Akbank) to properties). below 10%, subject to appropriate market conditions and Management develops specific assumptions using as much required approvals. Citibank currently holds a 20% equity market data as possible and includes internal estimates as well interest in Akbank, which it purchased in January 2007. The as estimates published by rating agencies and other third-party current carrying value of the equity method investment is $3.4 sources. Default rates are projected by considering current billion; in addition, hedging costs and translation losses underlying mortgage loan performance, generally assuming the reflected in other comprehensive income (OCI), a component of default of (1) 10% of current loans, (2) 25% of 30–59 day equity, total approximately $1.0 billion. delinquent loans, (3) 70% of 60–90 day delinquent loans and (4) As a result of this decision, in the first quarter of 2012 100% of 91+ day delinquent loans. These estimates are Citibank expects to record an impairment charge related to its extrapolated along a default timing curve to estimate the total total investment in Akbank amounting to approximately $1.1 lifetime pool default rate. Other assumptions used contemplate billion pre-tax ($0.7 billion after-tax). This impairment charge the actual collateral attributes, including geographic is primarily driven by the recognition of all respective net concentrations, rating agency loss projections, rating actions and investment foreign currency hedging and translation losses current market prices. previously reflected in OCI as well as a reduction in carrying The key assumptions for mortgage-backed securities as of value of the total investment to reflect closing market price as of December 31, 2011 are in the table below: March 23, 2012. For debt securities that are not deemed to be credit December 31, 2011 impaired, management assesses whether it intends to sell or Prepayment rate (1) 1%–8% CRR whether it is more-likely-than-not that it would be required to Loss severity (2) 45%–95% sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted (1) Conditional Repayment Rate (CRR) represents the annualized expected rate of voluntary prepayment of principal for mortgage-backed securities that it has no intent to sell and that it believes it is not likely to over a certain period of time. be required to sell the investment before recovery of its (2) Loss severity rates are estimated considering collateral characteristics and amortized cost basis. Where such an assertion cannot be made, generally range from 45%–60% for prime bonds, 50%–95% for Alt-A the security’s decline in fair value is deemed to be other than bonds and 65%–90% for subprime bonds. temporary and is recorded in earnings. The valuation as of December 31, 2011 assumes that U.S. For debt securities, a critical component of the evaluation housing prices will decrease 4% in 2012, decrease 1% in 2013, for OTTI is the identification of credit impaired securities, remain flat in 2014 and increase 3% per year from 2015 where management does not expect to receive cash flows onwards, while unemployment is 8.9% for 2012. sufficient to recover the entire amortized cost basis of the In addition, cash flow projections are developed using more security. For securities purchased and classified as AFS with the stressful parameters. Management assesses the results of those expectation of receiving full principal and interest cash flows as stress tests (including the severity of any cash shortfall indicated of the date of purchase, this analysis considers the likelihood of and the likelihood of the stress scenarios actually occurring receiving all contractual principal and interest. For securities based on the underlying pool’s characteristics and performance) reclassified out of the trading category in the fourth quarter of to assess whether management expects to recover the amortized 2008, the analysis considers the likelihood of receiving the cost basis of the security. If cash flow projections indicate that expected principal and interest cash flows anticipated as of the the Company does not expect to recover its amortized cost basis, date of reclassification in the fourth quarter of 2008. The extent the Company recognizes the estimated credit loss in earnings. of the Company’s analysis regarding credit quality and the stress on assumptions used in the analysis have been refined for State and municipal securities securities where the current fair value or other characteristics of Citibank’s AFS state and municipal bonds consist mainly of the security warrant. The paragraphs below describe the bonds that are financed through Tender Option Bond programs Company’s process for identifying credit-related impairments in or were previously financed in this program. The process for security types with the most significant unrealized losses as of identifying credit impairments for these bonds is largely based December 31, 2011. on third-party credit ratings. Individual bond positions are required to meet minimum ratings requirements, which vary Mortgage-backed securities based on the sector of the bond issuer. For U.S. mortgage-backed securities (and in particular for Alt-A Citibank monitors the bond issuer and insurer ratings on a and other mortgage-backed securities that have significant daily basis. The average portfolio rating, ignoring any insurance, unrealized losses as a percentage of amortized cost), credit is Aa3/AA-. In the event of a downgrade of the bond below impairment is assessed using a cash flow model that estimates Aa3/AA-, the subject bond is specifically reviewed for potential the cash flows on the underlying mortgages, using the security- shortfall in contractual principal and interest. The remainder of specific collateral and transaction structure. The model Citibank’s AFS and HTM state and municipal bonds are estimates cash flows from the underlying mortgage loans and specifically reviewed for credit impairment based on distributes those cash flows to various tranches of securities, 39 CITIBANK N.A. 2010–2011 FINANCIALS

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instrument-specific estimates of cash flows, probability of default and loss given default. For impaired AFS state and municipal bonds that Citibank plans to sell, or would likely be required to sell and there is no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in earnings.

Recognition and Measurement of OTTI The following table presents the total OTTI recognized in earnings for the year ended December 31, 2011:

OTTI on Investments Year ended December 31, 2011 In millions of dollars AFS HTM Total Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: Total OTTI losses recognized during the year ended December 31, 2011 $ 53 $ 336 $ 389 Less: portion of OTTI loss recognized in AOCI (before taxes) 44 110 154 Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell $ 9 $ 226 $ 235 OTTI losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery 247 1,277 1,524 Total impairment losses recognized in earnings $256 $ 1,503 $ 1,759

The following table presents activity during the 12 months of 2011 of the credit-related impairments recognized in earnings for AFS and HTM debt securities held as of December 31, 2011 that the Company does not intend to sell nor will likely be required to sell:

OTTI Credit Losses Recognized in Earnings Credit impairments recognized in earnings Credit impairments recognized in on securities not earnings on securities that have In millions of dollars previously impaired been previously impaired Total AFS debt securities Mortgage-backed securities Prime $ — $ — $ — Alt-A — — — Commercial real estate — — — Total mortgage-backed securities $ — $ — $ — State and municipal — — — U.S. Treasury — — — Foreign government 6 3 9 Corporate — — — Asset-backed securities — — — Other debt securities — — — Total OTTI credit losses recognized for AFS debt securities $ 6 $ 3 $ 9 HTM debt securities Mortgage-backed securities Prime $ — $ 2 $ 2 Alt-A 2 161 163 Subprime — 21 21 Non-U.S. residential — — — Commercial real estate — — — Total mortgage-backed securities $ 2 $184 $186 State and municipal — — — Corporate 40 — 40 Asset-backed securities — — — Other debt securities — — — Total OTTI credit losses recognized for HTM debt securities $ 42 $184 $226

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13. LOANS

Citibank loans are reported in two categories—Consumer and Credit quality indicators that are actively monitored Corporate. These categories are classified according to the include: business that manages the loans. Delinquency Status Consumer Loans Delinquency status is carefully monitored and considered a The following table provides information by Consumer loan key indicator of credit quality. Substantially all of the U.S. type: first mortgage loans use the Mortgage Brokers Association (MBA) method of reporting delinquencies, which considers a In millions of dollars at year end 2011 2010 loan delinquent if a monthly payment has not been received by Consumer loans the end of the day immediately preceding the loan’s next due In U.S. offices date. All other loans use the Office of Thrift Supervision (1) Mortgage and real estate $112,163 $120,451 (OTS) method of reporting delinquencies, which considers a Installment, revolving credit, and other 4,550 10,913 loan delinquent if a monthly payment has not been received by Cards 117,796 122,335 the close of business on the loan’s next due date. As a general Commercial and industrial 4,765 5,018 Lease financing 1 2 rule, first and second mortgages and installment loans are $239,275 $258,719 classified as non-accrual when loan payments are 90 days In offices outside the U.S. contractually past due. Credit cards and unsecured revolving Mortgage and real estate (1) $ 44,018 $ 43,338 loans generally accrue interest until payments are 180 days Installment, revolving credit, and other 24,440 28,162 past due. Commercial market loans are placed on a cash (non- Cards 33,476 35,432 accrual) basis when it is determined, based on actual Commercial and industrial 15,346 12,213 experience and a forward-looking assessment of the Lease financing 611 557 collectability of the loan in full, that the payment of interest or $117,891 $119,702 principal is doubtful or when interest or principal is 90 days Total Consumer loans $357,166 $378,421 past due. Net unearned income 1,510 1,094

Consumer loans, net of unearned income $358,260 $379,931

(1) Loans secured primarily by real estate.

During the year ended December 31, 2011, Citibank sold and/or reclassified (to held for sale) $17 billion of Consumer loans. Citibank did not have significant purchases of Consumer loans during the 12 months ended December 31, 2011. Citibank has a comprehensive risk management process to monitor, evaluate and manage the principal risks associated with its Consumer loan portfolio. Included in the loan table above are lending products whose terms may give rise to additional credit issues. Credit cards with below-market introductory interest rates and interest only loans are examples of such products. However, these products are closely managed via credit controls that mitigate their additional inherent risk.

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The following tables provide details on Citibank’s Consumer loan delinquency and non-accrual loans as of December 31, 2011 and December 31, 2010:

Consumer Loan Delinquency and Non-Accrual Details at December 31, 2011

Past due Total 30–89 days ≥ 90 days Government Total Total 90 days past due In millions of dollars current (1)(2) past due (3) past due (3) guaranteed (4) loans (2) non-accrual and accruing In North America offices Residential first mortgages $ 59,494 $ 2,597 $ 2,540 $ 6,686 $ 71,317 $ 2,587 $ 5,054 Home equity loans (5) 37,691 714 834 — 39,239 842 — Credit cards 114,097 2,250 2,056 — 118,403 — 2,056 Installment, commercial market loans and other 12,199 315 108 — 12,622 341 14 Total $223,481 $ 5,876 $ 5,538 $ 6,686 $241,581 $ 3,770 $ 7,124 In offices outside North America Residential first mortgages $ 38,903 $ 451 $ 379 $ — $ 39,733 $ 492 $ — Home equity loans (5) 6 — 2 — 8 2 — Credit cards 32,902 801 636 — 34,339 283 487 Installment, commercial market loans and other 41,847 487 265 — 42,599 408 — Total $113,658 $ 1,739 $ 1,282 $ — $116,679 $ 1,185 $ 487 Total Citibank $337,139 $ 7,615 $ 6,820 $ 6,686 $358,260 $ 4,955 $ 7,611

(1) Loans less than 30 days past due are presented as current. (2) Includes $1.3 billion of residential first mortgages recorded at fair value. (3) Excludes loans guaranteed by U.S. government agencies. (4) Consists of residential first mortgages that are guaranteed by U.S. government agencies that are 30-89 days past due of $1.6 billion and ≥ 90 days past due of $5.1 billion. (5) Fixed rate home equity loans and loans extended under home equity lines of credit which are typically in junior lien positions.

Consumer Loan Delinquency and Non-Accrual Details at December 31, 2010

Past due Total 30–89 days ≥ 90 days Government Total Total 90 days past due In millions of dollars current (1)(2) past due (3) past due (3) guaranteed (4) loans (2) non-accrual and accruing In North America offices Residential first mortgages $ 58,677 $3,579 $3,797 $7,003 $ 73,056 $3,940 $5,405 Home equity loans (5) 41,830 639 1,010 — 43,479 972 — Credit cards 116,069 3,158 3,107 — 122,334 — 3,107 Installment, commercial market loans and other 21,633 386 270 — 22,289 535 430 Total $238,209 $7,762 $8,184 $7,003 $261,158 $5,447 $8,942 In offices outside North America Residential first mortgages $ 36,622 $ 498 $ 376 $ — $ 37,496 $ 406 $ — Home equity loans (5) 8 — 1 — 9 1 — Credit cards 35,383 949 780 — 37,112 265 409 Installment, commercial market loans and other 42,906 789 461 — 44,156 767 42 Total $114,919 $2,236 $1,618 $ — $118,773 $1,439 $ 451 Total Citibank $353,128 $9,998 $9,802 $7,003 $379,931 $6,886 $9,393

(1) Loans less than 30 days past due are presented as current. (2) Includes $1.7 billion of residential first mortgages recorded at fair value. (3) Excludes loans guaranteed by U.S. government agencies. (4) Consists of residential first mortgages that are guaranteed by U.S. government agencies that are 30-89 days past due of $1.6 billion and ≥ 90 days past due of $5.4 billion. (5) Fixed rate home equity loans and loans extended under home equity lines of credit which are typically in junior lien positions.

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Consumer Credit Scores (FICOs) FICO Score Distribution in In the U.S., independent credit agencies rate an individual’s U.S. Portfolio(1)(2) December 31, 2010 risk for assuming debt based on the individual’s credit history In millions of dollars FICO and assign every consumer a credit score. These scores are Equal to or often called “FICO scores” because most credit bureau scores Less than ≥ 620 but less greater used in the U.S. are produced from software developed by Fair 620 than 660 than 660 Residential first mortgages $12,351 $ 5,043 $ 39,772 Isaac Corporation. Scores range from a high of 900 (which Home equity loans 5,892 2,964 32,523 indicates high credit quality) to 300. These scores are Credit Cards 18,339 12,590 88,318 continually updated by the agencies based upon an Installment and other 1,558 719 6,398 individual’s credit actions (e.g., taking out a loan, missed or Total $38,140 $21,316 $167,011 late payments, etc.). The following tables provide details on the FICO scores (1) Excludes loans guaranteed by U.S. government agencies, loans subject attributable to Citibank’s U.S. Consumer loan portfolio as of to long-term standby commitments (LTSCs), and loans recorded at fair value. December 31, 2011 and December 31, 2010 (note that (2) Excludes balances where FICO was not available. Such amounts are not commercial market loans are not included since they are material. business based and FICO scores are not a primary driver in their credit evaluation). FICO scores are updated monthly for Residential Mortgage Loan to Value Ratios substantially all of the portfolio, or, otherwise, on a quarterly Loan to value (LTV) ratios are important credit indicators for basis. U.S. mortgage loans. These ratios (loan balance divided by During the first quarter of 2011, the cards businesses in appraised value) are calculated at origination and updated by the U.S. began using a more updated FICO model version to applying market price data. The following table provides score customer accounts for substantially all of their loans. details on the LTV ratios attributable to Citibank’s U.S. The change was made to incorporate a more recent version of mortgage portfolios as of December 31, 2011 and December FICO in order to improve the predictive strength of the score 31, 2010. LTVs are updated monthly using the most recent and to enhance Citi’s ability to manage risk. In the first Core Logic HPI data available for substantially all of the quarter, this change resulted in an increase in the percentage of portfolio applied at the Metropolitan Statistical Area level, if balances with FICO scores equal to or greater than 660 available; otherwise, at the state level. The remainder of the and conversely lowered the percentage of balances with FICO portfolio is updated in a similar manner using the Office of scores lower than 620. Federal Housing Enterprise Oversight indices.

FICO Score Distribution in LTV Distribution in U.S. U.S. Portfolio(1)(2) December 31, 2011 Portfolio(1)(2) December 31, 2011 In millions of dollars FICO In millions of dollars LTV Equal to or > 80% but less Greater Less than ≥ 620 but less greater Less than or than or equal than 620 than 660 than 660 equal to 80% to 100% 100% Residential first mortgages $ 9,457 $ 4,885 $ 44,126 Residential first mortgages $25,450 $14,707 $18,424 Home equity loans 5,048 3,092 30,045 Home equity loans 11,887 8,823 17,391 Credit Cards 9,614 10,901 93,219 Total $37,337 $23,530 $35,815 Installment and other 438 343 3,275 Total $24,557 $19,221 $170,665 (1) Excludes loans guaranteed by U.S. government agencies, loans subject to LTSCs, and loans recorded at fair value. (1) Excludes loans guaranteed by U.S. government agencies, loans subject (2) Excludes balances where LTV was not available. Such amounts are not to long-term standby commitments (LTSCs), and loans recorded at fair material. value. (2) Excludes balances where FICO was not available. Such amounts are not LTV Distribution in U.S. material. Portfolio(1)(2) December 31, 2010

In millions of dollars LTV > 80% but less Greater Less than or than or equal than equal to 80% to 100% 100% Residential first mortgages $19,280 $17,587 $20,412 Home equity loans 11,762 9,966 19,521 Total $31,042 $27,553 $39,933

(1) Excludes loans guaranteed by U.S. government agencies, loans subject to LTSCs, and loans recorded at fair value. (2) Excludes balances where LTV was not available. Such amounts are not material.

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Impaired Consumer Loans loans included in these short-term programs amounted to Impaired loans are those where Citibank believes it is probable approximately $600 million. that it will not collect all amounts due according to the original Effective in the third quarter of 2011, as a result of contractual terms of the loan. Impaired Consumer loans adopting ASU 2011-02, certain loans modified under short- include non-accrual commercial market loans as well as term programs since January 1, 2011 that were previously smaller-balance homogeneous loans whose terms have been measured for impairment under ASC 450 are now measured modified due to the borrower’s financial difficulties and for impairment under ASC 310-10-35. At the end of Citibank has granted a concession to the borrower. These September 30, 2011 the recorded investment in receivables modifications may include interest rate reductions and/or previously measured under ASC 450 was $490 million and the principal forgiveness. Impaired Consumer loans exclude allowance for credit losses associated with those loans was smaller-balance homogeneous loans that have not been $270 million. See Note 2 to the Consolidated Financial modified and are carried on a non-accrual basis. In addition, Statements for a discussion of this change. Impaired Consumer loans exclude substantially all loans The following table presents information about total modified pursuant to Citibank’s short-term loan modification impaired Consumer loans at and for the periods ending programs (i.e., for periods of 12 months or less) that were December 31, 2011 and 2010, respectively: modified prior to January 1, 2011. At December 31, 2011,

Impaired Consumer Loans

At and for the period ended Dec. 31, 2011 Recorded Unpaid Principal Related specific Average Interest income In millions of dollars investment(1)(2) balance allowance(3) carrying value(4) recognized(5)(6) Mortgage and real estate First mortgages $13,602 $14,589 $2,829 $13,093 $ 507 Home equity loans 1,253 1,304 562 1,129 21 Credit cards 6,631 6,679 3,122 6,438 364 Installment and other(5) Individual installment and other 740 743 502 869 88 Commercial market loans 397 662 21 528 20 Total $22,623 $23,977 $7,036 $22,057 $1,000

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. (2) $759 million of first mortgages, $16 million of home equity loans and $175 million of commercial market loans do not have a specific allowance. (3) Included in the Allowance for loan losses. (4) Average carrying value represents the average recorded investment ending balance for last four quarters and does not include related specific allowance. (5) Includes amounts recognized on both an accrual and cash basis. (6) Cash interest receipts on smaller-balance homogeneous loans are generally recorded as revenue. The interest recognition policy for commercial market loans is identical to that for Corporate loans, as described below.

At and for the period ended Dec. 31, 2010 Recorded Unpaid Principal Related specific Average Interest income In millions of dollars investment(1)(2) balance allowance(3) carrying value(4) recognized(5)(6) Mortgage and real estate First mortgages $10,957 $11,849 $1,899 $ 9,728 $508 Home equity loans 747 798 340 663 9 Credit cards 5,716 5,716 2,840 5,075 84 Installment and other(5) 801 Individual installment and other 1,109 1,170 1,358 170 Commercial market loans 687 925 855 21 Total $19,216 $20,458 5,880 $17,679 $792

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. (2) $901 million of first mortgages, $6 million of home equity loans and $317 million of commercial market loans do not have a specific allowance. (3) Included in the Allowance for loan losses. (4) Average carrying value represents the average recorded investment ending balance for last four quarters and does not include related specific allowance. (5) Includes amounts recognized on both an accrual and cash basis. (6) Cash interest receipts on smaller-balance homogeneous loans are generally recorded as revenue. The interest recognition policy for commercial market loans is identical to that for Corporate loans, as described below.

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Consumer Troubled Debt Restructurings The following tables provide details on TDR activity and default information as of and for the year ended December 31, 2011.

Pre-modification Post-modification Contingent Average In millions of dollars except Number of recorded recorded Deferred principal Principal interest rate number of loans modified loans modified investment investment (1) principal (2) forgiveness (3) forgiveness reduction North America Residential first mortgages 22,644 $4,004 $4,252 $ 94 $40 $— 2% Home equity loans 9,235 631 663 22 1 — 4 Credit cards 611,715 3,560 3,555 — — — 19 Installment and other revolving 12,870 83 83 — — — 4 Commercial markets (4) 579 55 — — — 1 — Total 657,043 $8,333 $8,553 $116 $41 $ 1 International Residential first mortgages 2,888 $ 153 $ 153 $— $— $— 1% Home equity loans 61 4 4 — — — — Credit cards 211,157 575 566 — — 2 24 Installment and other revolving 66,998 342 331 — — — 13 Commercial markets (4) 55 167 — — — 1 — Total 281,159 $1,241 $1,054 $— $— $ 3

(1) Post-modification balances include past due amounts that are capitalized at modification date. (2) Represents portion of loan principal that is non-interest bearing but still due from borrower. (3) Represents portion of loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness. (4) Commercial markets loans are generally borrower-specific modifications and incorporate changes in the amount and/or timing of principal and/or interest.

The following table presents TDR loans that defaulted during 2011 and for which the payment default occurred within one year of the modification.

Year ended December 31, In millions of dollars 2011 (1) North America Residential first mortgages $1,754 Home equity loans 80 Credit cards 1,307 Installment and other revolving 15 Commercial markets (1) 3 Total $3,159

International

Residential first mortgages $ 61

Home equity loans 2

Credit cards 256

Installment and other revolving 202 Commercial markets (1) 14 Total $ 535

(1) Default is defined as 60 days past due, except for classifiably managed commercial markets loans, where default is defined as 90 days past due.

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Corporate Loans For the year ended December 31, 2011, the Company sold Corporate loans represent loans and leases managed by and/or reclassified (to held-for-sale) $5.8 billion of held-for- Corporate businesses. The following table presents investment Corporate loans. The Company did not have information by Corporate loan type as of December 31, 2011 significant purchases of loans classified as held-for-investment and December 31, 2010: for the year ended December 31, 2011. Corporate loans are identified as impaired and placed on a Dec. 31, Dec. 31, cash (non-accrual) basis when it is determined, based on In millions of dollars 2011 2010 actual experience and a forward-looking assessment of the Corporate collectability of the loan in full, that the payment of interest or In U.S. offices principal is doubtful or when interest or principal is 90 days Commercial and industrial $ 20,136 $ 12,633 past due, except when the loan is well collateralized and in the Loans to financial institutions 43,157 34,955 (1) process of collection. Any interest accrued on impaired Mortgage and real estate 19,809 18,422 Installment, revolving credit and other 14,504 11,986 Corporate loans and leases is reversed at 90 days and charged Lease financing 880 995 against current earnings, and interest is thereafter included in $ 98,486 $ 78,991 earnings only to the extent actually received in cash. When In offices outside the U.S. there is doubt regarding the ultimate collectability of principal, Commercial and industrial $ 74,958 $ 68,122 all cash receipts are thereafter applied to reduce the recorded Installment, revolving credit and other 12,921 10,580 investment in the loan. While Corporate loans are generally (1) Mortgage and real estate 6,225 5,222 managed based on their internally assigned risk rating (see Loans to financial institutions 29,505 22,586 further discussion below), the following tables present Lease financing 450 454 delinquency information by Corporate loan type as of Governments and official institutions 2,139 1,541 December 31, 2011 and December 31, 2010: $125,600 $109,103 Total Corporate loans $224,086 $188,094 Net unearned income (670) (825) Corporate loans, net of unearned income $223,416 $187,269

(1) Loans secured primarily by real estate.

Corporate Loan Delinquency and Non-Accrual Details at December 31, 2011

30–89 days ≥ 90 days past due past due and Total past due Total Total Total In millions of dollars and accruing(1) accruing(1) and accruing non-accrual(2) current(3) loans(4)

Commercial and industrial $ 93 $30 $123 $1,038 $ 92,768 $ 93,929 Financial institutions — 2 2 779 70,363 71,144 Mortgage and real estate 223 — 223 1,006 24,788 26,017 Leases 3 11 14 13 1,303 1,330 Other 225 15 240 207 26,719 27,166 Loans at fair value 3,830 Total $544 $58 $602 $3,043 $215,941 $223,416

(1) Corporate loans that are greater than 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid. (2) Citi generally does not manage Corporate loans on a delinquency basis. Non-accrual loans generally include those loans that are ≥ 90 days past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectability of the loan in full that the payment of interest or principal is doubtful. (3) Corporate loans are past due when principal or interest is contractually due but unpaid. Loans less than 30 days past due are presented as current. (4) Includes $3,830 million of loans at fair value.

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Corporate Loan Delinquency and Non-Accrual Details at December 31, 2010

30–89 days ≥ 90 days past due past due and Total past due Total Total Total In millions of dollars and accruing(1) accruing(1) and accruing non-accrual(2) current(3) loans(4)

Commercial and industrial $ 94 $35 $129 $4,877 $ 73,949 $ 78,955 Financial institutions 2 — 2 1,258 55,761 57,021 Mortgage and real estate 298 — 298 1,236 21,753 23,287 Leases 9 — 9 28 1,412 1,449 Other 100 49 149 357 23,587 24,093 Loans at fair value 2,464 Total $503 $84 $587 $7,756 $176,462 $187,269

(1) Corporate loans that are greater than 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid. (2) Citi generally does not manage Corporate loans on a delinquency basis. Non-accrual loans generally include those loans that are ≥ 90 days past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful. (3) Corporate loans are past due when principal or interest is contractually due but unpaid. Loans less than 30 days past due are presented as current. (4) Includes $2,464 million of loans at fair value.

Citibank has established a risk management process to Corporate Loans Credit Quality Indicators at December monitor, evaluate and manage the principal risks associated 31, 2011 and December 31, 2010 with its Corporate loan portfolio. As part of its risk management process, Citi assigns numeric risk ratings to its Recorded investment in Corporate loan facilities based on quantitative and qualitative loans(1) assessments of the obligor and facility. These risk ratings are December 31, In millions of dollars 2011 2010 reviewed at least annually or more often if material events (2) related to the obligor or facility warrant. Factors considered in Investment grade assigning the risk ratings include: financial condition of the Commercial and industrial $ 63,320 $ 50,610 Financial institutions 63,215 52,528 obligor, qualitative assessment of management and strategy, Mortgage and real estate 9,460 7,962 amount and sources of repayment, amount and type of Leases 719 834 collateral and guarantee arrangements, amount and type of any Other 22,790 19,018 contingencies associated with the obligor, and the obligor’s Total investment grade $159,504 $130,952 industry and geography. Non-investment grade(2) The obligor risk ratings are defined by ranges of default Accrual probabilities. The facility risk ratings are defined by ranges of Commercial and industrial $ 29,571 $ 23,464 loss norms, which are the product of the probability of default Financial institutions 7,150 3,308 and the loss given default. The investment grade rating Mortgage and real estate 2,835 2,247 categories are similar to the category BBB-/Baa3 and above as Leases 598 587 Other 4,169 3,829 defined by S&P and Moody’s. Loans classified according to the bank regulatory definitions as special mention, Non-accrual substandard and doubtful will have risk ratings within the non- Commercial and industrial 1,038 4,877 investment grade categories. Financial institutions 779 1,258 Mortgage and real estate 1,006 1,236 Leases 13 28 Other 207 357 Total non-investment grade $ 47,366 $ 41,191 Private Banking loans managed on (2) a delinquency basis $ 12,716 $ 12,662 Loans at fair value 3,830 2,464

Corporate loans, net of unearned income $223,416 $187,269

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. (2) Held-for-investment loans accounted for on an amortized cost basis.

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Corporate loans and leases identified as impaired and of repayment, are written down to the lower of cost or placed on non-accrual status are written down to the extent collateral value, less cost to sell. Cash-basis loans are returned that principal is judged to be uncollectible. Impaired to an accrual status when all contractual principal and interest collateral-dependent loans and leases, where repayment is amounts are reasonably assured of repayment and there is a expected to be provided solely by the sale of the underlying sustained period of repayment performance, generally six collateral and there are no other available and reliable sources months, in accordance with the contractual terms of the loan.

The following tables present non-accrual loan information by Corporate loan type at and for the period ended December 31, 2011, and 2010, respectively:

Non-Accrual Corporate Loans

December 31, 2011 Unpaid Recorded principal Related specific Average Interest income In millions of dollars investment(1) balance allowance carrying value (2) recognized Non-accrual Corporate loans Commercial and industrial $1,038 $1,342 $122 $1,302 $64 Loans to financial institutions 779 1,213 20 1,060 — Mortgage and real estate 1,006 1,212 151 1,281 14 Lease financing 13 21 — 21 2 Other 207 403 63 344 16 Total non-accrual Corporate loans $3,043 $4,191 $356 $4,008 $96

December 31, 2010 Recorded Unpaid Related specific Average Interest income In millions of dollars investment(1) principal balance allowance carrying value (3) recognized Non-accrual Corporate loans Commercial and industrial $4,877 $ 7,570 $ 742 $5,615 $23 Loans to financial institutions 1,258 1,835 259 883 1 Mortgage and real estate 1,236 1,289 205 1,319 6 Lease financing 28 54 — 37 4 Other 357 899 217 976 24 Total non-accrual Corporate loans $7,756 $11,647 $1,423 $8,830 $58

December 31, 2011 December 31, 2010

Recorded Related specific Recorded Related specific In millions of dollars investment(1) allowance investment(1) allowance Non-accrual Corporate loans with valuation allowances Commercial and industrial $ 403 $122 $4,085 $ 742 Loans to financial institutions 68 20 818 259 Mortgage and real estate 540 151 569 205 Other 130 63 228 217 Total non-accrual Corporate loans with specific allowance $1,141 $356 $5,700 $1,423

Non-accrual Corporate loans without specific allowance Commercial and industrial $ 635 $ 792 Loans to financial institutions 711 440 Mortgage and real estate 466 667 Lease financing 13 28 Other 77 129 Total non-accrual Corporate loans without specific allowance $1,902 N/A $2,056 N/A

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. (2) Average carrying value represents the average recorded investment balance and does not include related specific allowance. (3) Average carrying value does not include related specific allowance. N/A Not Applicable

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Corporate Troubled Debt Restructurings (TDR) The following table presents TDRs occurring during the 12-month period ended December 31, 2011.

TDRs TDRs TDRs involving involving involving changes in the changes in the changes in the amount and/or amount and/or amount and/or timing of both Balance of timing of timing of principal and principal Carrying principal interest interest forgiven or Net P&L In millions of dollars Value payments(1) payments(2) payments deferred impact(3) Commercial and industrial $126 $— $16 $110 $— $16 Loans to financial institutions — — — — — — Mortgage and real estate 15 1 7 7 — — Other 7 — — 7 — — Total $148 $ 1 $23 $124 $— $16

(1) TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments. (2) TDRs involving changes in the amount or timing of interest payments may involve a reduction in interest rate or a below-market interest rate. (3) Balances reflect charge-offs and reserves recorded during the 12 months ended December 31, 2011 on loans subject to a TDR during the period then ended.

The following table presents TDR corporate loans that Purchased Distressed Loans defaulted during 2011 and for which the payment default Included in the Corporate and Consumer loan outstanding occurred within one year of the modification. tables above are purchased distressed loans, which are loans that have evidenced significant credit deterioration subsequent TDR Loans (1) to origination but prior to acquisition by Citibank. In in payment default accordance with SOP 03-3 (codified as ASC 310-30), the Twelve Months TDR Balances at Ended difference between the total expected cash flows for these In millions of dollars December 31, 2011 December 31, 2011 loans and the initial recorded investment is recognized in Commercial and industrial $166 $7 income over the life of the loans using a level yield. Loans to financial Accordingly, these loans have been excluded from the institutions 563 — impaired loan table information presented above. In addition, Mortgage and real estate 48 — per SOP 03-3, subsequent decreases in the expected cash Other 21 — flows for a purchased distressed loan require a build of an Total Corporate Loans allowance so the loan retains its level yield. However, modified in TDRs $798 $7 increases in the expected cash flows are first recognized as a reduction of any previously established allowance and then (1) Payment default constitutes failure to pay principal or interest when due per the contractual terms of the loan. recognized as income prospectively over the remaining life of the loan by increasing the loan’s level yield. Where the expected cash flows cannot be reliably estimated, the purchased distressed loan is accounted for under the cost recovery method.

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The carrying amount of the Company’s purchased distressed loan portfolio at December 31, 2011 was $310 million, net of an allowance of $21 million as of December 31, 2011.

The changes in the accretable yield, related allowance and carrying amount net of accretable yield for 2011 are as follows:

Carrying Accretable amount of loan In millions of dollars yield receivable Allowance Beginning balance at December 31, 2010 $128 $246 $34 Purchases (1) — 274 — Disposals/payments received (123) (167) (21) Accretion (3) 3 — Builds (reductions) to the allowance 3 — 8 Increase to expected cash flows 22 1 — FX/other 1 (26) — Balance at December 31, 2011(2) $ 28 $331 $21

(1) The balance reported in the column “Carrying amount of loan receivable” consists of $274 million of purchased loans accounted for under the level-yield method and $0 under the cost-recovery method. These balances represent the fair value of these loans at their acquisition date. The related total expected cash flows for the level-yield loans were $274 million at their acquisition dates. (2) The balance reported in the column “Carrying amount of loan receivable” consists of $307 million of loans accounted for under the level-yield method and $24 million accounted for under the cost-recovery method.

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14. ALLOWANCE FOR CREDIT LOSSES

In millions of dollars 2011 2010 Allowance for loan losses at beginning of year $ 33,036 $ 26,033 Gross credit losses (18,674) (27,709) Gross recoveries 2,541 3,009 Net credit (losses) recoveries (NCLs) $ (16,133) $ (24,700) NCLs $ 16,133 $ 24,700 Net reserve builds (releases) (6,859) (5,059) Net specific reserve builds (releases) 349 1,584 Total provision for credit losses $ 9,623 $ 21,225 Other, net (1) (1,831) 10,478 Allowance for loan losses at end of year $ 24,695 $ 33,036 Allowance for credit losses on unfunded lending commitments at beginning of year (2) $ 943 $ 1,020 Provision for unfunded lending commitments 93 (101) Allowance for credit losses on unfunded lending commitments at end of year (2) $ 1,052 $943 Total allowance for loans, leases, and unfunded lending commitments $ 25,747 $ 33,979

(1) 2011 primarily includes reductions related to the sale or transfer to held-for-sale of various loan portfolios and the impact of foreign exchange ( FX translation). 2010 primarily includes an addition of $13.4 billion related to the impact of consolidating entities in connection with Citibank’s adoption of SFAS 167 (see Note 2 to the Consolidated Financial Statements) partially offset by reductions related to the sale or transfer to held-for-sale of various loan portfolios and the impact of foreign exchange (FX translation). (2) Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other Liabilities on the Consolidated Balance Sheet.

Allowance for Credit Losses and Investment in Loans at December 31, 2011

In millions of dollars Corporate Consumer Total Allowance for loan losses at beginning of year $ 4,312 $ 28,724 $ 33,036 Charge-offs (1,777) (16,897) (18,674) Recoveries 266 2,275 2,541 Replenishment of net charge-offs 1,511 14,622 16,133 Net reserve build (releases) (682) (6,177) (6,859) Net specific reserve builds (releases) (1,084) 1,433 349 Other 6 (1,837) (1,831) Ending balance $ 2,552 $ 22,143 $ 24,695 Allowance for loan losses Determined in accordance with ASC 450-20 $ 2,192 $ 15,090 $ 17,282 Determined in accordance with ASC 310-10-35 356 7,036 7,392 Determined in accordance with ASC 310-30 4 17 21 Total allowance for loan losses $ 2,552 $ 22,143 $ 24,695 Loans, net of unearned income Loans collectively evaluated for impairment in accordance with ASC 450-20 $206,031 $333,991 $540,022 Loans individually evaluated for impairment in accordance with ASC 310-10-35 3,440 22,623 26,063 Loans acquired with deteriorated credit quality in accordance with ASC 310-30 11 320 331 Loans held at fair value 3,830 1,326 5,156 Other Loans—primarily loans with Citigroup affiliates outside the Citibank chain 10,104 — 10,104 Total loans, net of unearned income $223,416 $358,260 $581,676

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Allowance for Credit Losses and Investment in Loans at December 31, 2010

In millions of dollars Corporate Consumer Total Allowance for loan losses at beginning of year $ 6,218 $ 19,815 $ 26,033 Charge-offs (2,176) (25,533) (27,709) Recoveries 650 2,359 3,009 Replenishment of net charge-offs 1,526 23,174 24,700 Net reserve builds (releases) (1,443) (3,616) (5,059) Net specific reserve builds (releases) (405) 1,989 1,584 Other (58) 10,536 10,478 Ending balance $ 4,312 $ 28,724 $ 33,036 Allowance for loan losses Determined in accordance with ASC 450-20 $ 2,882 $ 22,817 $ 25,699 Determined in accordance with ASC 310-10-35 1,423 5,880 7,303 Determined in accordance with ASC 310-30 7 27 34 Total allowance for loan losses $ 4,312 $ 28,724 $ 33,036 Loans, net of unearned income Loans collectively evaluated for impairment in accordance with ASC 450-20 $168,029 $358,745 $526,774 Loans individually evaluated for impairment in accordance with ASC 310-10-35 8,093 19,216 27,309 Loans acquired with deteriorated credit quality in accordance with ASC 310-30 21 225 246 Loans held at fair value 2,464 1,745 4,209 Other Loans—primarily loans with Citigroup affiliates outside the Citibank chain 8,662 — 8,662 Total loans, net of unearned income $187,269 $379,931 $567,200

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15. GOODWILL AND INTANGIBLE ASSETS

Goodwill The changes in Goodwill during 2010 and 2011 were as follows:

In millions of dollars Balance at December 31, 2009 $11,422 Foreign exchange translation $ 73 Smaller acquisitions/divestitures, purchase accounting adjustments and other 147 Balance at December 31, 2010 $11,642 Foreign exchange translation $ (207) Smaller acquisitions/divestitures, purchase accounting adjustments and other 50 Balance at December 31, 2011 $11,485

Goodwill impairment testing is performed at a level below the business segments (referred to as a reporting unit). As noted in Note 1, on July 1, 2011, Citibank, N.A. completed its merger with Citibank (South Dakota) N.A., with Citibank N.A. as the surviving entity. The merger resulted in an additional reporting unit, Local Consumer Lending – Cards, where 100% of Citibank (South Dakota) N.A.’s goodwill has been historically reported. The reporting unit structure in 2011 is otherwise consistent with the prior year. During 2011, goodwill was allocated to disposals and tested for impairment for each of the reporting units. The Company performed goodwill impairment testing for the reporting units as of July 1, 2011, the annual impairment testing date. No goodwill was written off due to impairment in 2010 or 2011.

The following table shows the reporting units with goodwill balances as of December 31, 2011 and the fair value as a percentage of allocated book value as of the annual impairment test.

Reporting Unit Fair Value as a % of Goodwill in millions of dollars Allocated Book Value Goodwill North America Regional Consumer Banking 191% $ 852 EMEA Regional Consumer Banking 455 115 Asia Regional Consumer Banking 285 2,048 Latin America Regional Consumer Banking 138 522 Institutional Clients Group 221 6,742 Local Consumer Lending—Cards 150 1,206

Intangible Assets The components of intangible assets as of December 31, 2011 and 2010, respectively, were as follows:

December 31, 2011 December 31, 2010 Gross Net Gross Net carrying Accumulated carrying carrying Accumulated carrying In millions of dollars amount amortization amount amount amortization amount Purchased credit card relationships $ 7,519 $5,240 $ 2,279 $ 7,789 $5,068 $ 2,721 Core deposit intangibles 747 487 260 777 449 328 Other customer relationships 112 88 24 92 62 30 Indefinite-lived intangible assets 229 — 229 253 — 253 Other (1) 3,882 1,334 2,548 3,745 968 2,777 Intangible assets (excluding MSRs) $12,489 $7,149 $5,340 $12,656 $6,547 $ 6,109 Mortgage servicing rights (MSRs) 2,569 — 2,569 4,554 — 4,554 Total intangible assets $15,058 $7,149 $7,909 $17,210 $6,547 $10,663

(1) Includes contract-related intangible assets.

Intangible assets amortization expense was $768 million and $825 million for 2011 and 2010, respectively. Intangible assets amortization expense is estimated to be $705 million in 2012, $709 million in 2013, $633 million in 2014, $604 million in 2015 and $720 million in 2016.

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The changes in intangible assets during 2011 were as follows:

Net carrying Net carrying amount at FX amount at December 31, Acquisitions/ and Discontinued December 31, In millions of dollars 2010 divestitures Amortization Impairments other (1) Operations 2011 Purchased credit card relationships $ 2,721 $(8) $(432) $— $(2) $ — $2,279 Core deposit intangibles 328 — (67) — (1) — 260 Other customer relationships 30 3 (9) — — — 24 Indefinite-lived intangible assets 253 — — — (24) — 229 Other 2,777 61 (259) (14) 1 (18) 2,548 Intangible assets (excluding MSRs) $ 6,109 $56 $(767) $(14) $(26) $(18) $5,340 Mortgage servicing rights (MSRs) (2) 4,554 2,569 Total intangible assets $10,663 $7,909

(1) Includes foreign exchange translation and purchase accounting adjustments. (2) See Note 19 to the Consolidated Financial Statements for the roll-forward of MSRs.

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16. DEBT Long-Term Debt December 31 Short-Term Borrowings Balances Short-term borrowings consist of commercial paper and other Weighted borrowings with weighted average interest rates as follows: In millions of dollars average at December 31, coupon Maturities 2011 2010 2011 2010 Citibank head office Senior notes (1)(2) 0.81% 2012-2046 $21,516 $38,328 Weighted Weighted Subordinated notes(2)(3) 0.85 2012-2018 2,371 4,297 Average average In millions of dollars Domestic subsidiaries at December 31, Balance rates Balance rates Senior notes 2.54 2012-2037 45,515 62,571 Commercial paper $14,872 0.32% $14,987 0.39% (3) Subordinated notes 6.27 2037 72 278 Other borrowings 19,247 1.41 25,252 0.75 Citibank Overseas Total $34,119 $40,239 Investment Corp. Senior notes 3.83 2012-2039 8,185 10,251 Borrowings under bank lines of credit may be at interest rates Subordinated notes(3) 6.24 2012-2039 318 341 based on LIBOR, CD rates, the prime rate, or bids submitted by Other Citibank banks. Citibank pays commitment fees for its lines of credit. subsidiaries and Some of Citigroup’s non-bank subsidiaries have credit branches facilities with Citibank. Borrowings under these facilities must Senior notes 7.43 2012-2029 506 1,062 (3) be secured in accordance with Section 23A of the Federal Subordinated notes 0.76 2012-2020 98 51 Reserve Act. Total $78,581 $117,179 Senior notes $75,722 $112,212 A majority of the deposits paid for securities borrowed and (3) deposits received for securities loaned are recorded at the Subordinated notes 2,859 4,967 amount of cash advanced or received and are collateralized Total $78,581 $117,179 principally by government and government-agency securities (1) At December 31, 2011 and 2010, collateralized advances from the Federal and corporate debt and equity securities. The remaining portion Home Loan Banks are $11.0 billion and $18.0 billion, respectively. is recorded at fair value as the Company elected fair value (2) Predominately includes floating rate debt priced at LIBOR. options for certain securities borrowed and loaned portfolios. (3) Includes notes that are subordinated within certain countries, regions or subsidiaries. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value The Company issues both fixed and variable rate debt in a of securities loaned. The Company monitors the market value of range of currencies. It uses derivative contracts, primarily securities borrowed and securities loaned daily, and additional interest rate swaps, to effectively convert a portion of its collateral is obtained as necessary. Securities borrowed and fixed rate debt to variable rate debt and variable rate debt to securities loaned are reported net by counterparty, when fixed rate debt. The maturity structure of the derivatives applicable. generally corresponds to the maturity structure of the debt being hedged. In addition, the Company uses other derivative contracts to manage the foreign exchange impact of certain debt issuances. At December 31, 2011, the Company’s overall weighted average interest rate for long-term debt was 2.20% on a contractual basis and 2.68% including the effects of derivative contracts.

Aggregate annual maturities of long-term debt obligations (based on final maturity dates) are as follows:

In millions of dollars 2012 2013 2014 2015 2016 Thereafter Total Citibank head office $13,239 $ 5,397 $ 166 $ 58 $5,011 $ 16 $23,887 Domestic subsidiaries 17,269 4,403 7,490 5,222 2,743 8,461 45,588 Citibank Overseas Investment Corp. 1,307 3,034 1,491 1,277 668 726 8,503 Other Citibank subsidiaries and branches 288 211 11 8 — 85 603 Total $32,103 $13,045 $9,158 $6,565 $8,422 $9,288 $78,581

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17. CAPITAL RESOURCES Citibank’s risk-weighted assets are principally derived from application of the risk-based capital guidelines related to Overview the measurement of credit risk. Pursuant to these guidelines, Citibank generates capital through earnings from its operating on-balance-sheet assets and the credit equivalent amount of businesses. Citibank may augment its capital through capital certain off-balance-sheet exposures (such as financial contributions from its parent, Citicorp, a direct subsidiary of guarantees, unfunded lending commitments, letters of credit, Citigroup and, in the case of regulatory capital, also through and derivatives) are assigned to one of several prescribed risk- the issuance of qualifying subordinated debt. In addition, the weight categories based upon the perceived credit risk impact of future events on Citibank’s business results, such as associated with the obligor, or if relevant, the guarantor, the corporate and asset dispositions, as well as changes in nature of the collateral, or external credit ratings. Risk- regulatory and accounting standards, also affect Citibank’s weighted assets also incorporate a measure for market risk on capital levels. covered trading account positions and all foreign exchange Capital is used primarily to support assets in Citibank’s and commodity positions whether or not carried in the trading businesses and to absorb market, credit, or operational losses. account. Excluded from risk-weighted assets are any assets, Capital may be used for other purposes, such as to pay such as goodwill and deferred tax assets, to the extent required dividends. Citibank’s ability to utilize its capital for these to be deducted from regulatory capital. See “Components of purposes may be limited under federal banking regulations. Capital Under Regulatory Guidelines” below. Citibank’s capital management framework is designed to Citibank is also subject to a Leverage ratio requirement, a ensure that Citibank and its principal subsidiaries maintain non-risk-based measure of capital adequacy, which is defined sufficient capital consistent with Citibank’s risk profile and all as Tier 1 Capital as a percentage of quarterly adjusted average applicable regulatory standards and guidelines, as well as total assets. external rating agency considerations. The following table sets forth Citibank’s regulatory Senior management is responsible for the capital capital ratios as of December 31, 2011 and December 31, management process mainly through Citibank’s Asset and 2010. Liability Management Committee (ALCO), with oversight from the Risk Management and Finance Committee of Citibank, N.A. Capital Tiers and Capital Ratios Under Citibank’s Board of Directors. ALCO is composed of the Regulatory Guidelines(1) senior-most management of Citibank for the purpose of engaging management in decision-making and related In billions of dollars Well- discussions on capital and liquidity matters. Among other at year end, except Required capitalized things, ALCO’s responsibilities include: monitoring the ratios minimum minimum 2011 2010 Company’s assets, liabilities and commitment trends and Tier 1 Common $121.3 $123.6 forecasts; recommending for approval by Citibank’s Board of Tier 1 Capital 121.9 124.2 (2) Directors liquidity risk limits and related requirements for the Total Capital 134.3 138.4 Company; establishing and maintaining the Company’s Tier 1 Common ratio N/A N/A 14.63% 15.33% contingency funding plan; identifying the Company’s liquidity Tier 1 Capital ratio 4.0% 6.0% 14.70 15.42 risks and ensuring those risks are adequately monitored and Total Capital ratio 8.0 10.0 16.20 17.18 controlled; and ensuring prudent interest rate and foreign Leverage ratio 3.0 5.0 9.66 9.32 exchange risk positions for the Company’s accrual portfolios. (1) Effective July 1, 2011, Citibank (South Dakota) N.A. merged into Citibank, N.A. The amount of Tier 1 Common Capital, Tier 1 Capital Regulatory Capital and Related Ratios and Total Capital, and the resultant capital ratios, at December 31, 2010 Citibank is subject to the risk-based capital guidelines issued have been restated to reflect this merger. The 2011 Capital Ratios above by the OCC. Historically, capital adequacy has been also reflect the impact of dividends paid by Citibank, N.A. to Citigroup measured, in part, based on two risk-based capital ratios, the during 2011. (2) Total Capital includes Tier 1 Capital and Tier 2 Capital. Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of “core capital elements,” such as qualifying common stockholder’s equity, as adjusted, and qualifying noncontrolling interests, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes “supplementary” Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. In 2009, the U.S. banking regulators developed a new measure of capital termed “Tier 1 Common,” which is defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. For more detail on all of these capital metrics, see “Components of Capital Under Regulatory

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Components of Capital Under Regulatory Guidelines

In millions of dollars at year end 2011 2010 Tier 1 Common Citibank common stockholder’s equity $151,755 $150,779 Less: Net unrealized losses on securities available-for-sale, net of tax (1) 1 (3,559) Less: Accumulated net losses on cash flow hedges, net of tax (2,200) (1,934) Less: Pension liability adjustment, net of tax (2) (1,610) (1,469) Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax (3) 99 50 Less: Disallowed deferred tax assets (4) 19,388 18,614 Less: Intangible assets: Goodwill 11,485 11,642 Other disallowed intangible assets 3,319 3,866 Other (4) (5) Total Tier 1 Common $121,269 $123,564 Qualifying noncontrolling interests $ 593 $ 679 Total Tier 1 Capital $121,862 $124,243 Tier 2 Capital Allowance for credit losses (5) $ 10,551 $ 9,868 Qualifying subordinated debt (6) 1,600 4,000 Net unrealized pretax gains on available-for-sale equity securities (1) 271 308 Total Tier 2 Capital $ 12,422 $ 14,176 Total Capital (Tier 1 Capital and Tier 2 Capital) $134,284 $138,419 Risk-weighted assets(7) $828,747 $805,825

(1) Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with risk-based capital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values. (2) The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation—Retirement Benefits—Defined Benefits Plans (formerly SFAS 158). (3) The impact of changes in Citibank’s own creditworthiness in valuing financial liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines. (4) Of Citibank N.A.’s approximately $30 billion of net deferred tax assets at December 31, 2011, approximately $10 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $19 billion of such assets exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets,” were deducted in arriving at Tier 1 Capital. Citibank’s approximately $1 billion of other net deferred tax assets primarily represented effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines. (5) Includable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets. (6) Includes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital. (7) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $79.5 billion for interest rate, commodity and equity derivative contracts, foreign exchange contracts, and credit derivatives as of December 31, 2011, compared with $71.7 billion as of December 31, 2010. Market risk equivalent assets included in risk-weighted assets amounted to $36.5 billion at December 31, 2011 and $37.1 billion at December 31, 2010. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions such as certain intangible assets and any excess allowance for credit losses.

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18. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in each component of Accumulated other comprehensive income (loss) for the years ended December 31, 2011 and 2010 are as follows:

Foreign currency Net unrealized translation Accumulated gains (losses) adjustment, Pension other on investment net of Cash flow liability comprehensive In millions of dollars securities hedges hedges adjustments income (loss) Balance, January 1, 2010 $(4,721) $(3,255) $(2,452) $(1,175) $(11,603) Change in net unrealized gains (losses) on investment securities, net of taxes(1) 1,162 — — — 1,162 Foreign currency translation adjustment, net of taxes (2) — 29 — — 29 Cash flow hedges, net of taxes (3) — — 518 — 518 Pension liability adjustment, net of taxes(4) — — — (294) (294) Change $ 1,162 $ 29 $ 518 $ (294) $ 1,415 Balance, December 31, 2010 $(3,559) $(3,226) $(1,934) $(1,469) $(10,188) Change in net unrealized gains (losses) on investment securities, net of taxes(1) $ 3,560 $ — $ — $ — $ 3,560 Foreign currency translation adjustment, net of taxes (2) — (2,175) — — (2,175) Cash flow hedges, net of taxes (3) — — (266) — (266) Pension liability adjustment, net of taxes(4) — — — (141) (141) Change $ 3,560 $(2,175) $ (266) $ (141) $ 978 Balance, December 31, 2011 $ 1 $(5,401) $(2,200) $(1,610) $(9,210)

(1) Also reflects reclassification adjustments for a realized loss of $1,383 million and a realized gain of $422 million, net of taxes, on investments during 2011 and 2010, respectively. (2) For 2011, primarily reflects the movements in (by order of impact) the Brazilian real, Indian rupee, Polish zloty, and Chilean peso against the U.S. dollar. For 2010, primarily reflects the movements in (by order of impact) the Japanese yen, Australian dollar, British pound, Singapore dollar and Brazilian real against the U.S. dollar. (3) Primarily driven by Citibank’s pay fixed/receive floating interest rate swap programs that are hedging the floating rates on deposits and long-term debt. (4) Reflects the Company’s allocated share of adjustments to the funded status of Citigroup’s pension and postretirement plans.

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19. SECURITIZATIONS AND VARIABLE Variable Interest Entities INTEREST ENTITIES VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without Uses of SPEs additional subordinated financial support, or whose equity A special purpose entity (SPE) is an entity designed to fulfill a investors lack the characteristics of a controlling financial specific limited need of the company that organized it. The interest (i.e., ability to make significant decisions through voting principal uses of SPEs are to obtain liquidity and favorable rights, and right to receive the expected residual returns of the capital treatment by securitizing certain of Citibank’s financial entity or obligation to absorb the expected losses of the entity). assets, to assist clients in securitizing their financial assets and Investors that finance the VIE through debt or equity interests or to create investment products for clients. SPEs may be other counterparties that provide other forms of support, such as organized in many legal forms including trusts, partnerships or guarantees, subordinated fee arrangements, or certain types of corporations. In a securitization, the company transferring assets derivative contracts, are variable interest holders in the entity. to an SPE converts all (or a portion) of those assets into cash The variable interest holder, if any, that has a controlling before they would have been realized in the normal course of financial interest in a VIE is deemed to be the primary business through the SPE’s issuance of debt and equity beneficiary and must consolidate the VIE. Citibank would be instruments, certificates, commercial paper and other notes of deemed to have a controlling financial interest and be the indebtedness, which are recorded on the balance sheet of the primary beneficiary if it has both of the following SPE and not reflected in the transferring company’s balance characteristics: sheet, assuming applicable accounting requirements are x power to direct activities of a VIE that most significantly satisfied. impact the entity’s economic performance; and Investors usually have recourse to the assets in the SPE and x obligation to absorb losses of the entity that could often benefit from other credit enhancements, such as a potentially be significant to the VIE or right to receive collateral account or over-collateralization in the form of excess benefits from the entity that could potentially be significant assets in the SPE, a line of credit, or from a liquidity facility, to the VIE. such as a liquidity put option or asset purchase agreement. The SPE can typically obtain a more favorable credit rating from The Company must evaluate its involvement in each VIE rating agencies than the transferor could obtain for its own debt and understand the purpose and design of the entity, the role the issuances, resulting in less expensive financing costs than Company had in the entity’s design, and its involvement in the unsecured debt. The SPE may also enter into derivative VIE’s ongoing activities. The Company then must evaluate contracts in order to convert the yield or currency of the which activities most significantly impact the economic underlying assets to match the needs of the SPE investors or to performance of the VIE and who has the power to direct such limit or change the credit risk of the SPE. Citibank may be the activities. provider of certain credit enhancements as well as the For those VIEs where the Company determines that it has counterparty to any related derivative contracts. the power to direct the activities that most significantly impact Most of Citibank’s SPEs are now VIEs, as described below. the VIE’s economic performance, the Company then must evaluate its economic interests, if any, and determine whether it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to such loss without consideration of probability. Such obligations could be in various forms, including but not limited to, debt and equity investments, guarantees, liquidity agreements, and certain derivative contracts. In various other transactions, the Company may act as a derivative counterparty (for example, interest rate swap, cross- currency swap, or purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE); may act as underwriter or placement agent; or may provide administrative, trustee or other services. The Company generally considers such involvement, by itself, not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.

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Citibank’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE, each as of December 31, 2011 and December 31, 2010, is presented below:

In millions of dollars As of December 31, 2011 (1) Maximum exposure to loss in significant unconsolidated VIEs (2) (3) Funded exposures Unfunded exposures Total involvement Consolidated Significant Guarantees with SPE VIE / SPE unconsolidated Debt Equity Funding and (4) assets assets VIE assets investments investments commitments derivatives Total Credit card securitizations $ 87,863 $ 87,664 $ 199 $ — $ — $ — $ — $ — Mortgage securitizations U.S. agency-sponsored 333,881 — 333,881 2,651 — — 146 2,797 Non-agency-sponsored 19,199 2,914 16,285 63 — — 2 65 Student loan securitizations 1,822 1,822 — — — — — — Citibank-administered asset- backed commercial paper conduits (ABCP) 34,987 21,971 13,016 — — 13,016 — 13,016 Third-party commercial paper conduits 7,955 — 7,955 448 — 298 — 746 Collateralized debt obligations (CDOs) 792 — 792 — — — 81 81 Collateralized loan obligations (CLOs) 3,091 — 3,091 334 — 6 — 340 Asset-based financing 26,949 878 26,071 11,346 — 3,134 8 14,488 Municipal securities tender option bond trusts (TOBs) 16,665 8,063 8,602 708 — 5,393 — 6,101 Municipal investments 21,415 144 21,271 2,299 3,522 1,485 — 7,306 Client intermediation 218 — 218 218 — — — 218 Other 2,676 135 2,541 323 — 279 — 602 Total Citibank $557,513 $123,591 $433,922 $18,390 $3,522 $23,611 $237 $45,760

(1) The definition of maximum exposure to loss is included in the text that follows. (2) Included in Citibank’s December 31, 2011 Consolidated Balance Sheet. (3) Not included in Citibank’s December 31, 2011 Consolidated Balance Sheet. (4) A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the likelihood of loss or the notional amount of exposure.

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In millions of dollars As of December 31, 2010 (1) Maximum exposure to loss in significant unconsolidated VIEs (2) (3) Funded exposures Unfunded exposures Total involvement Consolidated Significant Guarantees with SPE VIE / SPE unconsolidated Debt Equity Funding and (4) assets assets VIE assets investments investments commitments derivatives Total Credit card securitizations $ 95,667 $ 95,257 $ 410 $ — $ — $ — $ — $ — Mortgage securitizations U.S. agency-sponsored 382,958 — 382,958 5,104 — — 135 5,239 Non-agency-sponsored 24,042 3,574 20,468 173 — — — 173 Student loan securitizations 2,893 2,893 — — — — — — Citibank-administered asset- backed commercial paper conduits (ABCP) 30,941 21,312 9,629 — — 9,629 — 9,629 Third-party commercial paper conduits 8,210 308 7,902 415 — 550 — 965 Collateralized debt obligations (CDOs) 230 — 230 — — — 63 63 Collateralized loan obligations (CLOs) 4,468 — 4,468 550 — 29 — 579 Asset-based financing 35,090 971 34,119 12,312 — 5,687 11 18,010 Municipal securities tender option bond trusts (TOBs) 16,320 7,862 8,458 — — 6,398 — 6,398 Municipal investments 18,661 9 18,652 2,506 3,129 2,032 — 7,667 Client intermediation 796 — 796 367 — — 345 712 Other 3,134 310 2,824 666 43 174 1 884 Total Citibank $623,410 $132,496 $490,914 $22,093 $3,172 $24,499 $555 $50,319

(1) The definition of maximum exposure to loss is included in the text that follows. (2) Included in Citibank’s December 31, 2010 Consolidated Balance Sheet. (3) Not included in Citibank’s December 31, 2010 Consolidated Balance Sheet. (4) A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the likelihood of loss or the notional amount of exposure.

The previous table does not include: x VIEs structured by third parties where the Company holds securities in inventory. These investments are made on

arm’s-length terms; x certain positions in mortgage-backed and asset-backed securities held by the Company, which are classified as Trading account assets or Investments, where the Company has no other involvement with the related securitization entity deemed to be significant. For more information on these positions, see Notes 11 and 12 to the Consolidated Financial Statements; x certain representations and warranties exposures in Consumer mortgage securitizations, where the original mortgage loan balances are no longer outstanding.

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The asset balances for consolidated VIEs represent the carrying It reflects the initial amount of cash invested in the VIE plus any amounts of the assets consolidated by the Company. The accrued interest and is adjusted for any impairments in value carrying amount may represent the amortized cost or the current recognized in earnings and any cash principal payments fair value of the assets depending on the legal form of the asset received. The maximum exposure of unfunded positions (e.g., security or loan) and the Company’s standard accounting represents the remaining undrawn committed amount, including policies for the asset type and line of business. liquidity and credit facilities provided by the Company, or the The asset balances for unconsolidated VIEs where the notional amount of a derivative instrument considered to be a Company has significant involvement represent the most current variable interest, adjusted for any declines in fair value information available to the Company. In most cases, the asset recognized in earnings. In certain transactions, the Company has balances represent an amortized cost basis without regard to entered into derivative instruments or other arrangements that impairments in fair value, unless fair value information is are not considered variable interests in the VIE (e.g., interest readily available to the Company. For VIEs that obtain asset rate swaps, cross-currency swaps, or where the Company is the exposures synthetically through derivative instruments (for purchaser of credit protection under a credit default swap or example, synthetic CDOs), the tables generally include the full total return swap where the Company pays the total return on original notional amount of the derivative as an asset. certain assets to the SPE). Receivables under such arrangements The maximum funded exposure represents the balance are not included in the maximum exposure amounts. sheet carrying amount of the Company’s investment in the VIE.

Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the SPE table above as of December 31, 2011:

In millions of dollars Liquidity Facilities Loan Commitments Citibank-administered ABCP $ 13,016 $ — Third-party commercial paper conduits 298 — CLOs — 6 Asset-based financing 84 3,050 Municipal securities TOBs 5,393 — Municipal investments 390 1,095 Other — 279 Total Citibank funding commitments $19,181 $4,430

Consolidated VIEs December 31, December 31, The Company engages in on-balance-sheet securitizations In billions of dollars 2011 2010 which are securitizations that do not qualify for sales treatment; Cash $ 0.2 $ 0.7 thus, the assets remain on the Company’s balance sheet. The Trading account assets 0.3 0.9 consolidated VIEs included in the tables below represent Investments 10.5 7.8 Total loans, net 112.2 122.6 hundreds of separate entities with which the Company is Other 0.4 0.5 involved. In general, the third-party investors in the obligations Total assets $123.6 $132.5 of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to the Company, except Short-term borrowings $22.3 $24.1 where the Company has provided a guarantee to the investors or Long-term debt 46.5 62.9 is the counterparty to certain derivative transactions involving Other liabilities 0.3 0.2 the VIE. In addition, the assets are generally restricted only to Total liabilities $69.1 $87.2 pay such liabilities. Thus, the Company’s maximum legal exposure to loss Significant Interests in Unconsolidated VIEs—Balance Sheet related to consolidated VIEs is significantly less than the Classification carrying value of the consolidated VIE assets due to outstanding The following tables present the carrying amounts and third-party financing. Intercompany assets and liabilities are classification of significant interests in unconsolidated VIEs: excluded from the table. All assets are restricted from being sold or pledged as collateral. The cash flows from these assets are the December 31, December 31, only source used to pay down the associated liabilities, which In billions of dollars 2011 2010 are non-recourse to the Company’s general assets. Trading account assets $ 2.6 $ 3.1 The following table presents the carrying amounts and Investments 7.5 8.7 classifications of consolidated assets that are collateral for Loans 9.3 9.1 consolidated VIE and SPE obligations: Other 2.5 4.7 Total assets $21.9 $25.6

Long-term debt $ 0.4 $ 0.2 Other liabilities — —

Total liabilities $ 0.2 $ 0.4

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Credit Card Securitizations certain securities issued by the trusts, and provides liquidity The Company securitizes credit card receivables through trusts facilities to the trusts, which could result in potentially that are established to purchase the receivables. Citibank significant losses or benefits from the trusts. Accordingly, the transfers receivables into the trusts on a non-recourse basis. transferred credit card receivables are required to remain on the Credit card securitizations are revolving securitizations; that is, Consolidated Balance Sheet with no gain or loss recognized. as customers pay their credit card balances, the cash proceeds The debt issued by the trusts to third parties is included in the are used to purchase new receivables and replenish the Consolidated Balance Sheet. receivables in the trust. Since the adoption of SFAS 167 on The Company relies on securitizations to fund a significant January 1, 2010, the trusts are treated as consolidated entities, portion of its credit card businesses in North America. The because, as servicer, Citibank has the power to direct the following table reflects amounts related to the Company’s activities that most significantly impact the economic securitized credit card receivables: performance of the trusts and also holds a seller’s interest and

December 31, In billions of dollars 2011 2010 Principal amount of credit card receivables in trusts $ 90.4 $101.6 Ownership interests in principal amount of trust credit card receivables Sold to investors via trust-issued securities $ 43.0 $ 58.4 Retained by Citibank as trust-issued securities 14.8 10.5 Retained by Citibank via non-certificated interests 32.6 32.7 Total ownership interests in principal amount of trust credit card receivables $ 90.4 $101.6

The following table summarizes selected cash flow Master Trust Liabilities (at par value) information related to Citibank’s credit card securitizations for the years ended December 31, 2011 and 2010: December 31, December 31, In billions of dollars 2011 2010 In billions of dollars 2011 2010 Term notes issued to multi-seller commercial paper conduits $ — $ 0.3 Proceeds from new securitizations $ 3.9 $ 5.5 Term notes issued to third parties 30.4 41.8 Pay down of maturing notes (20.5) (40.3) Proceeds from collections reinvested Term notes retained by Citibank affiliates 7.7 3.4 in new receivables N/A N/A Total Master Trust liabilities $38.1 $ 45.5 Contractual servicing fees received N/A N/A Cash flows received on retained The Omni Trust issues fixed- and floating-rate term notes, interests and other net cash flows N/A N/A some of which are purchased by multi-seller commercial paper conduits. Managed Loans The weighted average maturity of the third-party term After securitization of credit card receivables, the Company notes issued by the Omni Trust was 1.5 years as of December continues to maintain credit card customer account 31, 2011 and 1.8 years as of December 31, 2010. relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the Omni Trust Liabilities (at par value) securitized credit card receivables to be part of the business it manages. As Citibank consolidates the credit card trusts, all December 31, December 31, managed securitized card receivables are on-balance sheet. In billions of dollars 2011 2010 Term notes issued to multi-seller Funding, Liquidity Facilities and Subordinated Interests commercial paper conduits $ 3.4 $ 7.2 Citibank securitizes credit card receivables through two Term notes issued to third parties 9.2 9.2 securitization trusts—Citibank Credit Card Master Trust Term notes retained by Citibank affiliates 7.1 7.1 (Master Trust), and the Citibank OMNI Master Trust (Omni Total Omni Trust liabilities $19.7 $ 23.5 Trust), as of December 31, 2011. The liabilities of the trusts are included in the Consolidated Balance Sheet, excluding those retained by Citibank. Master Trust issues fixed- and floating-rate term notes. Some of the term notes are issued to multi-seller commercial paper conduits. The weighted average maturity of the term notes issued by the Master Trust was 3.1 years as of December 31, 2011 and 3.4 years as of December 31, 2010.

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Mortgage Securitizations mortgages), or private label (non-agency-sponsored The Company provides a wide range of mortgage loan mortgages) securitization. The Company is not the primary products to a diverse customer base. beneficiary of its U.S. agency-sponsored mortgage Once originated, the Company often securitizes these securitizations, because Citibank does not have the power to loans through the use of SPEs. These SPEs are funded through direct the activities of the SPE that most significantly impact the issuance of Trust Certificates backed solely by the the entity’s economic performance. Therefore, Citibank does transferred assets. These certificates have the same average not consolidate these U.S. agency-sponsored mortgage life as the transferred assets. In addition to providing a source securitizations. of liquidity and less expensive funding, securitizing these The Company does not consolidate certain non-agency- assets also reduces the Company’s credit exposure to the sponsored mortgage securitizations because Citibank is either borrowers. These mortgage loan securitizations are primarily not the servicer with the power to direct the significant non-recourse, thereby effectively transferring the risk of future activities of the entity or Citibank is the servicer but the credit losses to the purchasers of the securities issued by the servicing relationship is deemed to be a fiduciary relationship trust. However, the Company’s Consumer business generally and, therefore, Citibank is not deemed to be the primary retains the servicing rights and in certain instances retains beneficiary of the entity. investment securities, interest-only strips and residual interests In certain instances, the Company has (1) the power to in future cash flows from the trusts and also provides servicing direct the activities and (2) the obligation to either absorb for a limited number of Citigroup businesses. losses or right to receive benefits that could be potentially The Company securitizes mortgage loans generally significant to its non-agency-sponsored mortgage through either a government-sponsored agency, such as securitizations and, therefore, is the primary beneficiary and Ginnie Mae, FNMA or Freddie Mac (U.S. agency-sponsored consolidates the SPE.

The following tables summarize selected cash flow information related to Citibank mortgage securitizations for the years ended December 31, 2011 and 2010:

In billions of dollars 2011 2010 Proceeds from new securitizations $50.7 $53.8 Contractual servicing fees received 1.1 1.3 Cash flows received on retained interests and other net cash flows 0.2 0.2

Gains recognized on the securitization of mortgages in 2011 were $78 million. Gains recognized on the securitization of mortgages during 2010 were $138 million. Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the years ended December 31, 2011 and 2010 are as follows:

2011 2010 Discount rate 14.6% 13.7% Constant prepayment rate 6.4% 8.9% Anticipated net credit losses NM NM

NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

The interests retained by the Company range from highly rated In millions of dollars December 31, 2011 and/or senior in the capital structure to unrated and/or residual Discount rate 8.3% interests. Constant prepayment rate 31.0% The effect of adverse changes of 10% and 20% in each of Anticipated net credit losses NM the key assumptions used to determine the fair value of retained Weighted average life 4.0 years interests is disclosed below. The negative effect of each change Carrying value of retained interests $2,806 is calculated independently, holding all other assumptions Discount rates Adverse change of 10% $ (78) constant. Because the key assumptions may not in fact be Adverse change of 20% (149) independent, the net effect of simultaneous adverse changes in Constant prepayment rate the key assumptions may be less than the sum of the individual Adverse change of 10% $ (249) effects shown below. Adverse change of 20% (483) At December 31, 2011, the key assumptions used Anticipated net credit losses to value retained interests and the sensitivity of the fair value to Adverse change of 10% $ (43) adverse changes of 10% and 20% in each of the key Adverse change of 20% (82) assumptions were as follows:

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Mortgage Servicing Rights The Company receives fees during the course of servicing In connection with the securitization of mortgage loans, the previously securitized mortgages. The amounts of these fees for Company’s U.S. Consumer mortgage business retains the the years ended December 31, 2011 and 2010 were as follows: servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the In millions of dollars 2011 2010 loans in accordance with contractual requirements may lead to a Servicing fees $1,170 $1,356 termination of the servicing rights and the loss of future Late fees 76 87 servicing fees. Ancillary fees 130 214 The fair value of capitalized mortgage servicing rights Total MSR fees $1,376 $1,657 (MSRs) was $2.6 billion and $4.6 billion at December 31, 2011 and 2010, respectively. The MSRs correspond to principal loan These fees are classified in the Consolidated Statement of balances of $401 billion and $455 billion as of December 31, Income as Other revenue. 2011 and 2010, respectively. The following table summarizes the changes in capitalized MSRs for the years ended December Citibank Administered Asset-Backed Commercial Paper 31, 2011 and 2010: Conduits The Company is active in the asset-backed commercial paper In millions of dollars 2011 2010 conduit business as administrator of several multi-seller Balance, as of the beginning of year $4,554 $ 6,530 commercial paper conduits and also as a service provider to Originations 611 658 single-seller and other commercial paper conduits sponsored by Changes in fair value of MSRs due to changes third parties. in inputs and assumptions (1,210) (1,067) Citibank’s multi-seller commercial paper conduits are Other changes (1) (1,174) (1,567) designed to provide the Company’s clients access to low-cost Sale of MSRs (212) — Balance, end of year $2,569 $ 4,554 funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to clients (1) Represents changes due to customer payments and passage of time. and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets The market for MSRs is not sufficiently liquid to provide originated by the Company. The funding of the conduits is participants with quoted market prices. Therefore, the Company facilitated by the liquidity support and credit enhancements uses an option-adjusted spread valuation approach to determine provided by the Company. the fair value of MSRs. This approach consists of projecting As administrator to Citibank’s conduits, the Company is servicing cash flows under multiple interest rate scenarios and generally responsible for selecting and structuring assets discounting these cash flows using risk-adjusted discount rates. purchased or financed by the conduits, making decisions The key assumptions used in the valuation of MSRs include regarding the funding of the conduits, including determining the mortgage prepayment speeds and discount rates. The model tenor and other features of the commercial paper issued, assumptions and the MSRs’ fair value estimates are compared to monitoring the quality and performance of the conduits’ assets, observable trades of similar MSR portfolios and interest-only and facilitating the operations and cash flows of the conduits. In security portfolios, as available, as well as to MSR broker return, the Company earns structuring fees from customers for valuations and industry surveys. The cash flow model and individual transactions and earns an administration fee from the underlying prepayment and interest rate models used to value conduit, which is equal to the income from the client program these MSRs are subject to validation in accordance with the and liquidity fees of the conduit after payment of conduit Company’s model validation policies. expenses. This administration fee is fairly stable, since most The fair value of the MSRs is primarily affected by changes risks and rewards of the underlying assets are passed back to the in prepayments that result from shifts in mortgage interest rates. clients and, once the asset pricing is negotiated, most ongoing In managing this risk, the Company economically hedges a income, costs and fees are relatively stable as a percentage of significant portion of the value of its MSRs through the use of the conduit’s size. interest rate derivative contracts, forward purchase The conduits administered by the Company do not commitments of mortgage-backed securities and purchased generally invest in liquid securities that are formally rated by securities classified as trading. third parties. The assets are privately negotiated and structured transactions that are designed to be held by the conduit, rather than actively traded and sold. The yield earned by the conduit on each asset is generally tied to the rate on the commercial paper issued by the conduit, thus passing interest rate risk to the client. Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over collateralization, cash and excess spread collateral accounts, direct recourse or third- party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on the Company’s internal risk ratings.

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Substantially all of the funding of the conduits is in the and to purchase defaulted loans) to manage the conduit’s loans form of short-term commercial paper, with a weighted average that become delinquent to improve the economic performance life generally ranging from 25 to 60 days. As of December 31, of the conduit. Because the Company does not have the power 2011 and December 31, 2010, the weighted average lives of the to direct the activities of this government-guaranteed loan commercial paper issued by consolidated and unconsolidated conduit that most significantly impact the economic conduits were approximately 37 and 41 days, respectively, at performance of the entity, it was concluded that the Company each period end. should not consolidate the entity. The total notional exposure The primary credit enhancement provided to the conduit under the program-wide liquidity agreement for the Company’s investors is in the form of transaction-specific credit unconsolidated administered conduit as of December 31, 2011 is enhancement described above. In addition, each consolidated $0.6 billion. The program-wide liquidity agreement, along with conduit has obtained a letter of credit from the Company, which each asset APA, is considered in the Company’s maximum needs to be sized to be at least 8–10% of the conduit’s assets exposure to loss to the unconsolidated administered conduit. with a floor of $200 million. The letters of credit provided by As of December 31, 2011, this unconsolidated government- the Company to the consolidated conduits total approximately guaranteed loan conduit held assets of approximately $13.0 $2.0 billion. The net result across all multi-seller conduits billion. administered by the Company is that, in the event defaulted Finally, an affiliate of the Company is one of several named assets exceed the transaction-specific credit enhancements dealers in the commercial paper issued by the conduits and described above, any losses in each conduit are allocated first to earns a market-based fee for providing such services. As of the Company and then the commercial paper investors. December 31, 2011, the Company owned $144 million of the The Company also provides the conduits with two forms of commercial paper issued by its unconsolidated administered liquidity agreements that are used to provide funding to the conduit. conduits in the event of a market disruption, among other events. Each asset of the conduits is supported by a transaction- Third-Party Commercial Paper Conduits specific liquidity facility in the form of an asset purchase The Company also provides liquidity facilities to single- and agreement (APA). Under the APA, the Company has generally multi-seller conduits sponsored by third parties. These conduits agreed to purchase non-defaulted eligible receivables from the are independently owned and managed and invest in a variety of conduit at par. The APA is not generally designed to provide asset classes, depending on the nature of the conduit. The credit support to the conduit, as it generally does not permit the facilities provided by the Company typically represent a small purchase of defaulted or impaired assets. Any funding under the portion of the total liquidity facilities obtained by each conduit, APA will likely subject the underlying borrower to the conduits and are collateralized by the assets of each conduit. As of to increased interest costs. In addition, the Company provides December 31, 2011, the notional amount of these facilities was the conduits with program-wide liquidity in the form of short- approximately $746 million, of which $448 million was funded term lending commitments. Under these commitments, the under these facilities. The Company is not the party that has the Company has agreed to lend to the conduits in the event of a power to direct the activities of these conduits that most short-term disruption in the commercial paper market, subject to significantly impact their economic performance and thus does specified conditions. The Company receives fees for providing not consolidate them. both types of liquidity agreements and considers these fees to be on fair market terms. Collateralized Debt and Loan Obligations With the exception of the government-guaranteed loan A securitized collateralized debt obligation (CDO) is an SPE conduit described below, the asset-backed commercial paper that purchases a pool of assets consisting of asset-backed conduits are consolidated by the Company. The Company securities and synthetic exposures through derivatives on asset- determined that through its role as administrator it had the backed securities and issues multiple tranches of equity and power to direct the activities that most significantly impacted notes to investors. the entities’ economic performance. These powers included its A cash CDO, or arbitrage CDO, is a CDO designed to take ability to structure and approve the assets purchased by the advantage of the difference between the yield on a portfolio of conduits, its ongoing surveillance and credit mitigation selected assets, typically residential mortgage-backed securities, activities, and its liability management. In addition, as a result of and the cost of funding the CDO through the sale of notes to all the Company’s involvement described above, it was investors. “Cash flow” CDOs are entities in which the CDO concluded that the Company had an economic interest that could passes on cash flows from a pool of assets, while “market potentially be significant. However, the assets and liabilities of value” CDOs pay to investors the market value of the pool of the conduits are separate and apart from those of Citibank. No assets owned by the CDO at maturity. In these transactions, all assets of any conduit are available to satisfy the creditors of of the equity and notes issued by the CDO are funded, as the Citigroup or any of its other subsidiaries. cash is needed to purchase the debt securities. The Company administers one conduit that originates loans A synthetic CDO is similar to a cash CDO, except that the to third-party borrowers and those obligations are fully CDO obtains exposure to all or a portion of the referenced assets guaranteed primarily by AAA-rated government agencies that synthetically through derivative instruments, such as credit support export and development financing programs. The default swaps. Because the CDO does not need to raise cash economic performance of this government-guaranteed loan sufficient to purchase the entire referenced portfolio, a conduit is most significantly impacted by the performance of its substantial portion of the senior tranches of risk is typically underlying assets. The guarantors must approve each loan held passed on to CDO investors in the form of unfunded liabilities by the entity and the guarantors have the ability (through or derivative instruments. Thus, the CDO writes credit establishment of the servicing terms to direct default mitigation protection on select referenced debt securities to the Company 66 CITIBANK N.A. 2010–2011 FINANCIALS

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or third parties and the risk is then passed on to the CDO where the Company wrote put options (“liquidity puts”) to investors in the form of funded notes or purchased credit certain CDOs. Under the terms of the liquidity puts, if the CDO protection through derivative instruments. Any cash raised from was unable to issue commercial paper at a rate below a specified investors is invested in a portfolio of collateral securities or maximum (generally LIBOR + 35 bps to LIBOR + 40 bps), the investment contracts. The collateral is then used to support the Company was obligated to fund the senior tranche of the CDO obligations of the CDO on the credit default swaps written to at a specified interest rate. As of December 31, 2011, the counterparties. Company no longer had exposure to this commercial paper as A securitized collateralized loan obligation (CLO) is all of the underlying CDOs had been liquidated. substantially similar to the CDO transactions described above, The Company does not generally have the power to direct except that the assets owned by the SPE (either cash instruments the activities of the entity that most significantly impacts the or synthetic exposures through derivative instruments) are economic performance of the CDOs/CLOs as this power is corporate loans and to a lesser extent corporate bonds, rather generally held by a third-party asset manager of the CDO/CLO. than asset-backed debt securities. As such, those CDOs/CLOs are not consolidated. The Company A third-party asset manager is typically retained by the may consolidate the CDO/CLO when: (i) the Company is the CDO/CLO to select the pool of assets and manage those assets asset manager and no other single investor has the unilateral over the term of the SPE. ability to remove the Company or unilaterally cause the The Company earns fees for warehousing assets prior to the liquidation of the CDO/CLO, or the Company is not the asset creation of a “cash flow” or “market value” CDO/CLO. In manager but has a unilateral right to remove the third-party asset addition, the Company has retained interests in many of the manager or unilaterally liquidate the CDO/CLO and receive the CDOs/CLOs it has structured. underlying assets, and (ii) the Company has economic exposure The continuing involvement of the Company and its to the entity that could be potentially significant to the entity. affiliates in synthetic CDOs/CLOs generally includes The Company continues to monitor its involvement in purchasing credit protection through credit default swaps with unconsolidated CDOs/CLOs to assess future consolidation risk. the CDO/CLO, owning a portion of the capital structure of the For example, if the Company were to acquire additional CDO/CLO in the form of both unfunded derivative positions interests in these entities and obtain the right, due to an event of (primarily super-senior exposures discussed below) and funded default trigger being met, to unilaterally liquidate or direct the notes, entering into interest-rate swap and total-return swap activities of a CDO/CLO, the Company may be required to transactions with the CDO/CLO, and lending to the CDO/CLO. consolidate the asset entity. For cash CDOs/CLOs, the net result Where a CDO/CLO entity issues preferred shares (or of such consolidation would be to gross up the Company’s subordinated notes that are the equivalent form), the preferred balance sheet by the current fair value of the securities held by shares generally represent an insufficient amount of equity (less third parties and assets held by the CDO/CLO, which amounts than 10%) and create the presumption that preferred shares are are not considered material. For synthetic CDOs/CLOs, the net insufficient to finance the entity’s activities without result of such consolidation may reduce the Company’s balance subordinated financial support. In addition, although the sheet, because intercompany derivative receivables and payables preferred shareholders generally have full exposure to expected would be eliminated in consolidation, and other assets held by losses on the collateral and uncapped potential to receive the CDO/CLO and the securities held by third parties would be expected residual returns, they generally do not have the ability recognized at their current fair values. to make decisions about the entity that have a significant effect on the entity’s financial results because of their limited role in making day-to-day decisions and their limited ability to remove the asset manager. Because one or both of the above conditions will generally be met, the Company has concluded that, even where a CDO/CLO entity issued preferred shares, the entity should be classified as a VIE. In general, the asset manager, through its ability to purchase and sell assets or—where the reinvestment period of a CDO/CLO has expired—the ability to sell assets, will have the power to direct the activities of the entity that most significantly impact the economic performance of the CDO/ CLO. However, where a CDO/CLO has experienced an event of default or an optional redemption period has gone into effect, the activities of the asset manager may be curtailed and/or certain additional rights will generally be provided to the investors in a CDO/CLO entity, including the right to direct the liquidation of the CDO/CLO entity. The Company has retained significant portions of the “super-senior” positions issued by certain CDOs. These positions are referred to as “super-senior” because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies. 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Asset-Based Financing The Floaters and the Residuals have a tenor that is equal to The Company provides loans and other forms of financing to or shorter than the tenor of the underlying municipal bonds. The VIEs that hold assets. Those loans are subject to the same credit Residuals entitle their holders to the residual cash flows from approvals as all other loans originated or purchased by the the issuing trust, the interest income generated by the underlying Company. Financings in the form of debt securities or municipal securities net of interest paid on the Floaters and trust derivatives are, in most circumstances, reported in Trading expenses. The Residuals are rated based on the long-term rating account assets and accounted for at fair value through earnings. of the underlying municipal bond. The Floaters bear variable The Company generally does not have the power to direct the interest rates that are reset periodically to a new market rate activities that most significantly impact these VIEs’ economic based on a spread to a high grade, short-term, tax-exempt index. performance and thus it does not consolidate them. The Floaters have a long-term rating based on the long-term The primary types of Citibank’s asset-based financings, total rating of the underlying municipal bond and a short-term rating assets of the unconsolidated VIEs with significant involvement based on that of the liquidity provider to the trust. and the Company’s maximum exposure to loss at December 31, There are two kinds of TOB trusts: customer TOB trusts 2011 are shown below. For the Company to realize that and non-customer TOB trusts. Customer TOB trusts are trusts maximum loss, the VIE (borrower) would have to default with through which customers finance their investments in municipal no recovery from the assets held by the VIE. securities. The Residuals are held by customers and the Floaters by third-party investors, typically tax-exempt money market Total Maximum funds. Non-customer TOB trusts are trusts through which the In billions of dollars assets exposure Company finances its own investments in municipal securities. Type In such trusts, the Company holds the Residuals and third-party Commercial and other real estate $ 4.2 $ 1.0 investors, typically tax-exempt money market funds, hold the Hedge funds and equities 6.0 2.3 Floaters. Airplanes, ships and other assets 11.2 7.3 An affiliate of the Company serves as remarketing agent to Corporate loans 4.7 3.9 Total $26.1 $14.5 the trusts, placing the Floaters with third-party investors at inception, facilitating the periodic reset of the variable rate of

interest on the Floaters and remarketing any tendered Floaters. The following table summarizes selected cash flow For certain non-customer trusts, the Company also provides information related to asset-based financing for the years ended credit enhancement. Approximately $67 million of the December 31, 2011 and 2010: municipal bonds owned by TOB trusts have a credit guarantee

provided by the Company. In billions of dollars 2011 2010 The Company provides liquidity to many of the outstanding Cash flows received on retained interests trusts. If a trust is unwound early due to an event other than a and other net cash flows $0.9 $2.2 credit event on the underlying municipal bond, the underlying municipal bonds are sold in the market. If there is a shortfall in The effect of adverse changes of 10% and 20% in the the trust’s cash flows between the redemption price of the discount rate used to determine the fair value of retained tendered Floaters and the proceeds from the sale of the interests as of December 31, 2011 is disclosed below. underlying municipal bonds, the trust draws on a liquidity agreement in an amount equal to the shortfall. For customer Asset-based TOBs where the Residual is less than 25% of the trust’s capital In millions of dollars financing Carrying value of retained interests $3,864 structure, the Company has a reimbursement agreement with the Value of underlying portfolio Residual holder under which the Residual holder reimburses the Adverse change of 10% — Company for any payment made under the liquidity Adverse change of 20% — arrangement. Through this reimbursement agreement, the Residual holder remains economically exposed to fluctuations in Municipal Securities Tender Option Bond (TOB) Trusts value of the underlying municipal bonds. These reimbursement TOB trusts hold fixed- and floating-rate, taxable and tax-exempt agreements are generally subject to daily margining based on securities issued by state and local governments and changes in value of the underlying municipal bond. In cases municipalities. The trusts are typically single-issuer trusts whose where a third party provides liquidity to a non-customer TOB assets are purchased from the Company or from other investors trust, a similar reimbursement arrangement is made whereby the in the municipal securities market. The TOB trusts fund the Company (or a consolidated subsidiary of the Company) as purchase of their assets by issuing long-term, putable floating Residual holder absorbs any losses incurred by the liquidity rate certificates (Floaters) and residual certificates (Residuals). provider. The trusts are referred to as Tender Option Bond trusts because As of December 31, 2011, liquidity agreements provided the Floater holders have the ability to tender their interests with respect to customer TOB trusts totaled $5.4 billion of periodically back to the issuing trust, as described further below. which $4.0 billion was offset by reimbursement agreements. The Floaters and Residuals evidence beneficial ownership The remaining exposure related to TOB transactions where the interests in, and are collateralized by, the underlying assets of Residual owned by the customer was at least 25% of the bond the trust. The Floaters are held by third-party investors, typically value at the inception of the transaction and no reimbursement tax-exempt money market funds. The Residuals are typically agreement was executed. The Company also provides other held by the original owner of the municipal securities being liquidity agreements or letters of credit to customer-sponsored financed. municipal investment funds, that are not variable interest entities, and municipality-related issuers that totaled $11.7 68 CITIBANK N.A. 2010–2011 FINANCIALS

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billion as of December 31, 2011. These liquidity agreements and Client Intermediation letters of credit are offset by reimbursement agreements with Client intermediation transactions represent a range of various term-out provisions. transactions designed to provide investors with specified returns The Company considers the customer and non-customer based on the returns of an underlying security, referenced asset TOB trusts to be VIEs. Customer TOB trusts are not or index. These transactions include credit-linked notes and consolidated by the Company. The Company has concluded that equity-linked notes. In these transactions, the VIE typically the power to direct the activities that most significantly impact obtains exposure to the underlying security, referenced asset or the economic performance of the customer TOB trusts is index through a derivative instrument, such as a total-return primarily held by the customer Residual holder, who may swap or a credit-default swap. In turn the VIE issues notes to unilaterally cause the sale of the trust’s bonds. investors that pay a return based on the specified underlying Non-customer TOB trusts generally are consolidated. security, referenced asset or index. The VIE invests the proceeds Similar to customer TOB trusts, the Company has concluded in a financial asset or a guaranteed insurance contract (GIC) that that the power over the non-customer TOB trusts is primarily serves as collateral for the derivative contract over the term of held by the Residual holder, which may unilaterally cause the the transaction. The Company’s involvement in these sale of the trust’s bonds. Because the Company holds the transactions includes being the counterparty to the VIE’s Residual interest, and thus has the power to direct the activities derivative instruments and investing in a portion of the notes that most significantly impact the trust’s economic performance, issued by the VIE. In certain transactions, the investor’s it consolidates the non-customer TOB trusts. maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the Municipal Investments power to direct the activities of the VIEs that most significantly Municipal investment transactions include debt and equity impact their economic performance and thus it does not interests in partnerships that finance the construction and consolidate them. rehabilitation of low-income housing, facilitate lending in new The Company’s maximum risk of loss in these transactions or underserved markets, or finance the construction or operation is defined as the amount invested in notes issued by the VIE and of renewable municipal energy facilities. The Company the notional amount of any risk of loss absorbed by the generally invests in these partnerships as a limited partner and Company through a separate instrument issued by the VIE. The earns a return primarily through the receipt of tax credits and derivative instrument held by the Company may generate a grants earned from the investments made by the partnership. receivable from the VIE (for example, where the Company The Company may also provide construction loans or purchases credit protection from the VIE in connection with the permanent loans to the development or continuation of real VIE’s issuance of a credit-linked note), which is collateralized estate properties held by partnerships. These entities are by the assets owned by the VIE. These derivative instruments generally considered VIEs. The power to direct the activities of are not considered variable interests and any associated these entities is typically held by the general partner. receivables are not included in the calculation of maximum Accordingly, these entities are not consolidated by the exposure to the VIE. Company.

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20. DERIVATIVES ACTIVITIES Derivatives may expose Citibank to market, credit or liquidity risks in excess of the amounts recorded on the In the ordinary course of business, Citibank enters into various Consolidated Balance Sheet. Market risk on a derivative product types of derivative transactions. These derivative transactions is the exposure created by potential fluctuations in interest rates, include: foreign-exchange rates and other factors and is a function of the type of product, the volume of transactions, the tenor and terms x Futures and forward contracts, which are commitments to of the agreement, and the underlying volatility. Credit risk is the buy or sell at a future date a financial instrument, exposure to loss in the event of nonperformance by the other commodity or currency at a contracted price and may be party to the transaction where the value of any collateral held is settled in cash or through delivery. not adequate to cover such losses. The recognition in earnings of x Swap contracts, which are commitments to settle in cash at unrealized gains on these transactions is subject to a future date or dates that may range from a few days to a management’s assessment as to collectability. Liquidity risk is number of years, based on differentials between specified the potential exposure that arises when the size of the derivative financial indices, as applied to a notional amount. position may not be able to be rapidly adjusted in periods of x Option contracts, which give the purchaser, for a premium, high volatility and financial stress at a reasonable cost. the right, but not the obligation, to buy or sell within a Information pertaining to the volume of derivative activity specified time a financial instrument, commodity or is provided in the tables below. The notional amounts, for both currency at a contracted price that may also be settled in long and short derivative positions, of Citibank’s derivative cash, based on differentials between specified indices or instruments as of December 31, 2011 and December 31, 2010 prices. are presented in the table below.

Citibank enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons: x Trading Purposes—Customer Needs: Citibank offers its customers derivatives in connection with their risk- management actions to transfer, modify or reduce their interest rate, foreign exchange and other market/credit risks or for their own trading purposes. As part of this process, Citibank considers the customers’ suitability for the risk involved and the business purpose for the transaction. Citibank also manages its derivative risk positions through offsetting trade activities, controls focused on price verification, and daily reporting of positions to senior managers. x Trading Purposes—Own Account: Citibank trades derivatives for its own account and as an active market maker. Trading limits and price verification controls are key aspects of this activity. x Hedging—Citibank uses derivatives in connection with its risk-management activities to hedge certain risks or reposition the risk profile of the Company. For example, Citibank issues fixed-rate long-term debt and then enters into a receive-fixed, pay-variable-rate interest rate swap with the same tenor and notional amount to convert the interest payments to a net variable-rate basis. This strategy is the most common form of an interest rate hedge, as it minimizes interest cost in certain yield curve environments. Derivatives are also used to manage risks inherent in specific groups of on-balance-sheet assets and liabilities, including AFS securities and deposit liabilities, as well as other interest-sensitive assets and liabilities. In addition, foreign-exchange contracts are used to hedge non-U.S.- dollar-denominated debt, foreign-currency-denominated available-for-sale securities and net investment exposures.

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Derivative Notionals

Hedging instruments under ASC 815 (SFAS 133) (1) Other derivative instruments Trading derivatives Management hedges (2) December 31, December 31, December 31, December 31, December 31, December 31, In millions of dollars 2011 2010 2011 2010 2011 2010 Interest rate contracts Swaps $ 42,745 $ 36,347 $31,370,523 $31,032,762 $111,941 $ 106,441 Futures and forwards — — 3,235,225 3,863,952 43,964 46,140 Written options — — 3,631,118 3,209,724 16,733 8,673 Purchased options — — 3,719,357 3,112,174 7,070 18,030 Total interest rate contract notionals $ 42,745 $ 36,347 $ 41,956,223 $ 41,218,612 $179,708 $ 179,284 Foreign exchange contracts Swaps $ 1,214 $ 951 $ 1,348,177 $ 1,239,563 $ 518 $ 378 Futures and forwards 49,323 65,666 3,340,122 2,915,410 2,718 2,016 Written options 141 569 601,342 632,100 190 50 Purchased options 31,597 13,530 593,948 554,479 53 174 Total foreign exchange contract notionals $ 82,275 $ 80,716 $ 5,883,589 $ 5,341,552 $ 3,479 $ 2,618 Equity contracts Swaps $ — $ — $ 88,065 $ 59,543 $ — $ — Futures and forwards — — 4,691 5,237 — — Written options — — 109,411 66,993 — — Purchased options — — 90,580 63,166 — — Total equity contract notionals $ — $ — $ 292,747 $ 194,939 $ — $ — Commodity and other contracts Swaps $ — $ — $ 28,059 $ 14,319 $ — $ — Futures and forwards — — 31,489 21,780 — — Written options — — 105,794 23,018 — — Purchased options — — 131,116 25,645 — — Total commodity and other contract notionals $ — $ — $ 296,458 $ 84,762 $ — $ — Credit derivatives (3) Protection sold $ — $ — $ 1,439,748 $ 1,218,768 $ — $ — Protection purchased 4,253 4,928 1,509,181 1,277,618 21,914 28,526 Total credit derivatives $ 4,253 $ 4,928 $ 2,948,929 $ 2,496,386 $ 21,914 $ 28,526 Total derivative notionals $129,273 $121,991 $51,377,946 $49,336,251 $205,101 $ 210,428

(1) Derivatives in hedge accounting relationships accounted for under ASC 815 (SFAS 133) are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities on the Consolidated Balance Sheet. (2) Management hedges represent derivative instruments used in certain economic hedging relationships that are identified for management purposes, but for which hedge accounting is not applied. These derivatives are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities on the Consolidated Balance Sheet. (3) Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “reference asset” to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company has entered into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.

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Derivative Mark-to-Market (MTM) Receivables/Payables

Derivatives classified in Trading Derivatives classified in Other account assets/liabilities (1) (2) assets/liabilities (2) In millions of dollars at December 31, 2011 Assets Liabilities Assets Liabilities Derivative instruments designated as ASC 815 (SFAS 133) hedges Interest rate contracts $ 41 $ 3,135 $ 2 $1,509 Foreign exchange contracts 2,139 261 342 186 Total derivative instruments designated as ASC 815 (SFAS 133) hedges $ 2,180 $ 3,396 $ 344 $1,695 Other derivative instruments Interest rate contracts $ 823,448 $ 811,710 $ 188 $ 152 Foreign exchange contracts 103,802 101,451 2 1 Equity contracts 13,167 15,005 — — Commodity and other contracts 5,809 6,063 — — Credit derivatives (3) 89,443 84,318 430 126 Total other derivative instruments $1,035,669 $1,018,547 $ 620 $ 279 Total derivatives $1,037,849 $1,021,943 $964 $1,974 Cash collateral paid/received 59,288 55,344 307 556 Less: Netting agreements and market value adjustments (4) (1,025,453) (1,020,899) — — Net receivables/payables $ 71,684 $ 56,388 $1,271 $2,530

(1) The trading derivatives fair values are presented in Note 11 to the Consolidated Financial Statements. (2) Derivative mark-to-market receivables/payables related to management hedges are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities. (3) The credit derivatives trading assets are composed of $78,071 million related to protection purchased and $11,372 million related to protection sold as of December 31, 2011. The credit derivatives trading liabilities are composed of $11,938 million related to protection purchased and $72,380 million related to protection sold as of December 31, 2011. (4) Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements.

Derivatives classified in Trading Derivatives classified in Other account assets/liabilities (1) (2) assets/liabilities (2) In millions of dollars at December 31, 2010 Assets Liabilities Assets Liabilities Derivative instruments designated as ASC 815 (SFAS 133) hedges Interest rate contracts $ — $ — $ 118 $2,048 Foreign exchange contracts 237 633 646 1,052 Total derivative instruments designated as ASC 815 (SFAS 133) hedges $ 237 $ 633 $ 764 $3,100 Other derivative instruments Interest rate contracts $509,792 $507,377 $2,449 $2,463 Foreign exchange contracts 95,153 91,919 3 518 Equity contracts 8,308 10,637 — — Commodity and other contracts 4,838 5,342 — — Credit derivatives (3) 64,014 57,250 88 337 Total other derivative instruments $682,105 $672,525 $2,540 $3,318 Total derivatives $682,342 $673,158 $3,304 $6,418 Cash collateral paid/received 49,127 44,032 12 598 Less: Netting agreements and market value adjustments (4) (674,018) (669,822) — — Net receivables/payables $ 57,451 $ 47,368 $3,316 $7,016

(1) The trading derivatives fair values are presented in Note 11 to the Consolidated Financial Statements. (2) Derivative mark-to-market receivables/payables related to management hedges are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities. (3) The credit derivatives trading assets are composed of $41,493 million related to protection purchased and $22,521 million related to protection sold as of December 31, 2010. The credit derivatives trading liabilities are composed of $22,453 million related to protection purchased and $34,797 million related to protection sold as of December 31, 2010. (4) Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements.

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All derivatives are reported on the balance sheet at fair Accounting for Derivative Hedging value. In addition, where applicable, all such contracts covered Citibank accounts for its hedging activities in accordance with by master netting agreements are reported net. Gross positive ASC 815, Derivatives and Hedging (formerly SFAS 133). As a fair values are netted with gross negative fair values by general rule, hedge accounting is permitted where the Company counterparty pursuant to a valid master netting agreement. In is exposed to a particular risk, such as interest-rate or foreign- addition, payables and receivables in respect of cash collateral exchange risk, that causes changes in the fair value of an asset received from or paid to a given counterparty are included in or liability or variability in the expected future cash flows of an this netting. However, non-cash collateral is not included. existing asset, liability or a forecasted transaction that may The amount of payables in respect of cash collateral affect earnings. received that was netted with unrealized gains from derivatives Derivative contracts hedging the risks associated with the was $36 billion and $24 billion as of December 31, 2011 and changes in fair value are referred to as fair value hedges, while December 31, 2010, respectively. The amount of receivables in contracts hedging the risks affecting the expected future cash respect of cash collateral paid that was netted with unrealized flows are called cash flow hedges. Hedges that utilize losses from derivatives was $43 billion as of December 31, 2011 derivatives or debt instruments to manage the foreign exchange and $37 billion as of December 31, 2010. risk associated with equity investments in non-U.S.-dollar- The amounts recognized in Principal transactions in the functional-currency foreign subsidiaries (net investment in a Consolidated Statement of Income for the years ended foreign operation) are called net investment hedges. December 31, 2011 and 2010 related to derivatives not If certain hedging criteria specified in ASC 815 are met, designated in a qualifying hedging relationship as well as the including testing for hedge effectiveness, special hedge underlying non-derivative instruments are included in the table accounting may be applied. The hedge effectiveness assessment below. Citibank presents this disclosure by business methodologies for similar hedges are performed in a similar classification, showing derivative gains and losses related to its manner and are used consistently throughout the hedging trading activities together with gains and losses related to non- relationships. For fair value hedges, the changes in value of the derivative instruments within the same trading portfolios, as this hedging derivative, as well as the changes in value of the related represents the way these portfolios are risk managed. hedged item due to the risk being hedged, are reflected in current earnings. For cash flow hedges and net investment Year ended December 31, hedges, the changes in value of the hedging derivative are In millions of dollars 2011 2010 reflected in Accumulated other comprehensive income (loss) in Citibank’s stockholder’s equity, to the extent the hedge is Interest rate contracts $3,603 $3,096 effective. Hedge ineffectiveness, in either case, is reflected in Foreign exchange 1,871 1,667 current earnings. Equity contracts 118 153

Commodity and other (20) (267)

Credit derivatives 205 166

Total Citibank (1) $5,777 $4,815

(1) Also see Note 6 to the Consolidated Financial Statements.

The amounts recognized in Other revenue in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship for the years ended December 31, 2011 and 2010 are shown below. The table below does not include the offsetting gains/losses on the hedged items, which amounts are also recorded in Other revenue.

Gains (losses) included in Other revenue Year ended December 31, In millions of dollars 2011 2010 Interest rate contracts $739 $ 444 Foreign exchange 51 32 Credit derivatives 115 (502) Total Citibank $905 $ (26)

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For asset/liability management hedging, the fixed-rate long- Fair Value Hedges term debt would be recorded at amortized cost under current U.S. GAAP. However, by electing to use ASC 815 (SFAS 133) Hedging of benchmark interest rate risk fair value hedge accounting, the carrying value of the debt is Citibank hedges exposure to changes in the fair value of adjusted for changes in the benchmark interest rate, with any outstanding fixed-rate issued debt and certificates of deposit. such changes in value recorded in current earnings. The related The fixed cash flows from those financing transactions are interest-rate swap is also recorded on the balance sheet at fair converted to benchmark variable-rate cash flows by entering value, with any changes in fair value reflected in earnings. Thus, into receive-fixed, pay-variable interest rate swaps. Some of any ineffectiveness resulting from the hedging relationship is these fair value hedge relationships use dollar-offset ratio recorded in current earnings. Alternatively, a management analysis to determine whether the hedging relationships are hedge, which does not meet the ASC 815 hedging criteria, highly effective at inception and on an ongoing basis, while would involve recording only the derivative at fair value on the others use regression. balance sheet, with its associated changes in fair value recorded Citibank also hedges exposure to changes in the fair value in earnings. The debt would continue to be carried at amortized of fixed-rate assets, including available-for-sale debt securities cost and, therefore, current earnings would be impacted only by and loans. The hedging instruments used are receive-variable, the interest rate shifts and other factors that cause the change in pay-fixed interest rate swaps. Some of these fair value hedging the swap’s value and may change the underlying yield of the relationships use dollar-offset ratio analysis to determine debt. This type of hedge is undertaken when hedging whether the hedging relationships are highly effective at requirements cannot be achieved or management decides not to inception and on an ongoing basis, while others use regression apply ASC 815 hedge accounting. Another alternative for the analysis. Company would be to elect to carry the debt at fair value under the fair value option. Once the irrevocable election is made upon Hedging of foreign exchange risk issuance of the debt, the full change in fair value of the debt Citibank hedges the change in fair value attributable to foreign- would be reported in earnings. The related interest rate swap, exchange rate movements in available-for-sale securities that are with changes in fair value, would also be reflected in earnings, denominated in currencies other than the functional currency of and provides a natural offset to the debt’s fair value change. To the entity holding the securities, which may be within or outside the extent the two offsets are not exactly equal, the difference the U.S. The hedging instrument employed is a forward foreign- would be reflected in current earnings. exchange contract. In this type of hedge, the change in fair value Key aspects of achieving ASC 815 hedge accounting are of the hedged available-for-sale security attributable to the documentation of hedging strategy and hedge effectiveness at portion of foreign exchange risk hedged is reported in earnings the hedge inception and substantiating hedge effectiveness on an and not Accumulated other comprehensive income—a process ongoing basis. A derivative must be highly effective in that serves to offset substantially the change in fair value of the accomplishing the hedge objective of offsetting either changes forward contract that is also reflected in earnings. Citibank in the fair value or cash flows of the hedged item for the risk considers the premium associated with forward contracts being hedged. Any ineffectiveness in the hedge relationship is (differential between spot and contractual forward rates) as the recognized in current earnings. The assessment of effectiveness cost of hedging; this is excluded from the assessment of hedge excludes changes in the value of the hedged item that are effectiveness and reflected directly in earnings. The dollar-offset unrelated to the risks being hedged. Similarly, the assessment of method is used to assess hedge effectiveness. Since that effectiveness may exclude changes in the fair value of a assessment is based on changes in fair value attributable to derivative related to time value that, if excluded, are recognized changes in spot rates on both the available-for-sale securities in current earnings. and the forward contracts for the portion of the relationship hedged, the amount of hedge ineffectiveness is not significant.

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The following table summarizes the gains (losses) on the Company’s fair value hedges for the years ended December 31, 2011 and 2010:

Gains (losses) on fair value hedges (1) Year ended December 31, In millions of dollars 2011 2010 Gain (loss) on derivatives in designated and qualifying fair value hedges Interest rate contracts $(1,625) $ (1,090) Foreign exchange contracts (354) 921 Total gain (loss) on derivatives in designated and qualifying fair value hedges $(1,979) $ (169) Gain (loss) on the hedged item in designated and qualifying fair value hedges Interest rate hedges $ 1,434 $ 1,062 Foreign exchange hedges 339 (643) Total gain (loss) on the hedged item in designated and qualifying fair value hedges $ 1,773 $ 419 Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges Interest rate hedges $ (200) $ (59) Foreign exchange hedges 4 36 Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges $ (196) $ (23) Net gain (loss) excluded from assessment of the effectiveness of fair value hedges Interest rate contracts $ 9 $ 31 Foreign exchange contracts (19) 242 Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges $ (10) $ 273

(1) Amounts are included in Other revenue on the Consolidated Statement of Income. The accrued interest income on fair value hedges is recorded in Net interest revenue and is excluded from this table.

Cash Flow Hedges Hedging of foreign exchange risk Citibank locks in the functional currency equivalent cash flows Hedging of benchmark interest rate risk of long-term debt and short-term borrowings that are Citibank hedges variable cash flows resulting from floating-rate denominated in a currency other than the functional currency of liabilities and rollover (re-issuance) of short-term liabilities. the issuing entity. Depending on the risk management Variable cash flows from those liabilities are converted to fixed- objectives, these types of hedges are designated as either cash rate cash flows by entering into receive-variable, pay-fixed flow hedges of only foreign exchange risk or cash flow hedges interest rate swaps and receive-variable, pay-fixed forward- of both foreign exchange and interest rate risk, and the hedging starting interest rate swaps. These cash-flow hedging instruments used are foreign exchange cross-currency swaps and relationships use either regression analysis or dollar-offset ratio forward contracts. These cash flow hedge relationships use analysis to assess whether the hedging relationships are highly dollar-offset ratio analysis to determine whether the hedging effective at inception and on an ongoing basis. When certain relationships are highly effective at inception and on an ongoing interest rates do not qualify as a benchmark interest rate, basis. Citibank designates the risk being hedged as the risk of overall changes in the hedged cash flows. Since efforts are made to Hedging total return match the terms of the derivatives to those of the hedged Citibank generally manages the risk associated with highly forecasted cash flows as closely as possible, the amount of leveraged financing it has entered into by seeking to sell a hedge ineffectiveness is not significant. majority of its exposures to the market prior to or shortly after funding. The portion of the highly leveraged financing that is retained by Citibank is generally hedged with a total return swap. The amount of hedge ineffectiveness on the cash flow hedges recognized in earnings for the years ended December 31, 2011 and 2010 is not significant.

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The pretax change in Accumulated other comprehensive income (loss) from cash flow hedges is presented below for the years ended December 31, 2011 and 2010:

Year ended December 31, In millions of dollars 2011 2010 Effective portion of cash flow hedges included in AOCI Interest rate contracts $ (1,652) $ (676) Foreign exchange contracts (24) (39) Total effective portion of cash flow hedges included in AOCI $ (1,676) $ (715) Effective portion of cash flow hedges reclassified from AOCI to earnings Interest rate contracts $ (1,164) $ (1,415) Foreign exchange contracts (104) (164) Total effective portion of cash flow hedges reclassified from AOCI to earnings (1) $ (1,268) $ (1,579)

(1) Included primarily in Other revenue and Net interest revenue on the Consolidated Income Statement.

For cash flow hedges, any changes in the fair value of the For foreign-currency-denominated debt instruments that end-user derivative remaining in Accumulated other are designated as hedges of net investments, the translation comprehensive income (loss) on the Consolidated Balance gain or loss that is recorded in the Foreign currency Sheet will be included in earnings of future periods to offset translation adjustment account is based on the spot exchange the variability of the hedged cash flows when such cash flows rate between the functional currency of the respective affect earnings. The net loss associated with cash flow hedges subsidiary and the U.S. dollar, which is the functional expected to be reclassified from Accumulated other currency of Citibank. To the extent the notional amount of the comprehensive income (loss) within 12 months of December hedging instrument exactly matches the hedged net investment 31, 2011 is approximately $816 million. The maximum length and the underlying exchange rate of the derivative hedging of time over which forecasted cash flows are hedged is 10 instrument relates to the exchange rate between the functional years. currency of the net investment and Citibank’s functional The after-tax impact of cash flow hedges on AOCI is currency (or, in the case of a non-derivative debt instrument, shown in Note 18 to the Consolidated Financial Statement such instrument is denominated in the functional currency of the net investment), no ineffectiveness is recorded in earnings. Net Investment Hedges The pretax gain (loss) recorded in the Foreign currency Consistent with ASC 830-20, Foreign Currency Matters— translation adjustment account within Accumulated other Foreign Currency Transactions (formerly SFAS 52, Foreign comprehensive income (loss), related to the effective portion Currency Translation), ASC 815 allows hedging of the of the net investment hedges, is $587 million and $(1,068) foreign currency risk of a net investment in a foreign million for the years ended December 31, 2011 and 2010, operation. Citibank uses foreign currency forwards, options, respectively. swaps and foreign-currency-denominated debt instruments to manage the foreign exchange risk associated with Citibank’s Credit Derivatives equity investments in several non-U.S. dollar functional A credit derivative is a bilateral contract between a buyer and currency foreign subsidiaries. Citibank records the change in a seller under which the seller agrees to provide protection to the carrying amount of these investments in the Foreign the buyer against the credit risk of a particular entity currency translation adjustment account within Accumulated (“reference entity” or “reference credit”). Credit derivatives other comprehensive income (loss). Simultaneously, the generally require that the seller of credit protection make effective portion of the hedge of this exposure is also recorded payments to the buyer upon the occurrence of predefined in the Foreign currency translation adjustment account and credit events (commonly referred to as “settlement triggers”). the ineffective portion, if any, is immediately recorded in These settlement triggers are defined by the form of the earnings. derivative and the reference credit and are generally limited to For derivatives used in net investment hedges, Citibank the market standard of failure to pay on indebtedness and follows the forward-rate method from FASB Derivative bankruptcy of the reference credit and, in a more limited range Implementation Group Issue H8 (now ASC 815-35-35-16 of transactions, debt restructuring. Credit derivative through 35-26), “Foreign Currency Hedges: Measuring the transactions referring to emerging market reference credits Amount of Ineffectiveness in a Net Investment Hedge.” will also typically include additional settlement triggers to According to that method, all changes in fair value, including cover the acceleration of indebtedness and the risk of changes related to the forward-rate component of the foreign repudiation or a payment moratorium. In certain transactions, currency forward contracts and the time value of foreign protection may be provided on a portfolio of referenced credits currency options, are recorded in the Foreign currency or asset-backed securities. The seller of such protection may translation adjustment account within Accumulated other not be required to make payment until a specified amount of comprehensive income (loss). losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.

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The Company makes markets in and trades a range of The following tables summarize the key characteristics of credit derivatives, both on behalf of clients as well as for its the Company’s credit derivative portfolio as protection seller own account. Through these contracts, the Company either as of December 31, 2011 and December 31, 2010: purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit Maximum potential In millions of dollars as of amount of derivatives to help mitigate credit risk in its Corporate and December 31, 2011 future payments (1) Consumer loan portfolios and other cash positions, to take By instrument proprietary trading positions, and to facilitate client Credit default swaps and options $ 1,435,371 transactions. Total return swaps and other 4,377 The range of credit derivatives sold includes credit default Total by instrument $ 1,439,748 swaps, total return swaps, credit options and credit-linked By rating notes. Investment grade $ 601,723 (2) A credit default swap is a contract in which, for a fee, a Non-investment grade 838,025 protection seller agrees to reimburse a protection buyer for any Total by rating $ 1,439,748 losses that occur due to a credit event on a reference entity. If By maturity there is no credit default event or settlement trigger, as defined Within 1 year $ 263,139 by the specific derivative contract, then the protection seller From 1 to 5 years 989,514 After 5 years 187,095 makes no payments to the protection buyer and receives only Total by maturity $ 1,439,748 the contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the (1) At December 31, 2011, the fair value amounts payable under credit protection seller will be required to make a payment to the derivatives sold was $72,380 million and were recorded in Trading protection buyer. account liabilities. In addition, fair value amounts receivable under A total return swap transfers the total economic credit derivatives sold was $11,372 million and were recorded in Trading account assets. performance of a reference asset, which includes all associated (2) Also includes credit derivatives sold that are not rated. cash flows, as well as capital appreciation or depreciation. The protection buyer receives a floating rate of interest and any depreciation on the reference asset from the protection seller Maximum potential and, in return, the protection seller receives the cash flows In millions of dollars as of amount of associated with the reference asset plus any appreciation. December 31, 2010 future payments (1) Thus, according to the total return swap agreement, the By instrument protection seller will be obligated to make a payment any time Credit default swaps and options $ 1,214,763 the floating interest rate payment and any depreciation of the Total return swaps and other 4,005 reference asset exceed the cash flows associated with the Total by instrument $ 1,218,768 underlying asset. A total return swap may terminate upon a By rating Investment grade $ 517,070 default of the reference asset subject to the provisions of the (2) related total return swap agreement between the protection Non-investment grade 701,698 seller and the protection buyer. Total by rating $ 1,218,768 A credit option is a credit derivative that allows investors By maturity Within 1 year $ 145,030 to trade or hedge changes in the credit quality of the reference From 1 to 5 years 863,341 asset. For example, in a credit spread option, the option writer After 5 years 210,397 assumes the obligation to purchase or sell the reference asset Total by maturity $ 1,218,768 at a specified “strike” spread level. The option purchaser buys the right to sell the reference asset to, or purchase it from, the (1) At December 31, 2010, the fair value amounts payable under credit option writer at the strike spread level. The payments on credit derivatives sold was $34,797 million and were recorded in Trading spread options depend either on a particular credit spread or account liabilities. In addition, fair value amounts receivable under credit derivatives sold were $22,521 and were recorded in Trading the price of the underlying credit-sensitive asset. The options account assets. usually terminate if the underlying assets default. (2) Also included credit derivatives sold that are not rated. A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap. The purchaser of the note writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of December 31, 2011 and December 31, 2010, the amount of credit-linked notes held by the Company in trading inventory was immaterial.

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Citibank evaluates the payment/performance risk of the Credit-Risk-Related Contingent Features in Derivatives credit derivatives for which it stands as a protection seller Certain derivative instruments contain provisions that require based on the credit rating assigned to the underlying the Company to either post additional collateral or referenced credit. Where external ratings by nationally immediately settle any outstanding liability balances upon the recognized statistical rating organizations (such as Moody’s occurrence of a specified credit-risk-related event. These and S&P) are used, investment grade ratings are considered to events, which are defined by the existing derivative contracts, be Baa/BBB or above, while anything below is considered are primarily downgrades in the credit ratings of the Company non-investment grade. The Citibank internal ratings are in line and its affiliates. The fair value (excluding CVA) of all with the related external credit rating system. On certain derivative instruments with credit-risk-related contingent underlying reference credits, mainly related to over-the- features that are in a liability position at December 31, 2011 counter credit derivatives, ratings are not available, and these and December 31, 2010 is $21 billion and $19 billion, are included in the not-rated category. Credit derivatives respectively. The Company has posted $18 billion and $16 written on an underlying non-investment grade reference billion as collateral for this exposure in the normal course of credit represent greater payment risk to the Company. The business as of December 31, 2011 and December 31, 2010, non-investment grade category in the table above primarily respectively. Each downgrade would trigger additional includes credit derivatives where the underlying referenced collateral requirements for the Company and its affiliates. In entity has been downgraded subsequent to the inception of the the event that each legal entity was downgraded a single notch derivative. as of December 31, 2011, the Company would be required to The maximum potential amount of future payments under post additional collateral of $2.4 billion. credit derivative contracts presented in the table above is based on the notional value of the derivatives. The Company believes that the maximum potential amount of future payments for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the Company’s rights to the underlying assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event (or settlement trigger) occur, the Company is usually liable for the difference between the protection sold and the recourse it holds in the value of the underlying assets. Thus, if the reference entity defaults, Citi will generally have a right to collect on the underlying reference credit and any related cash flows, while being liable for the full notional amount of credit protection sold to the buyer. Furthermore, this maximum potential amount of future payments for credit protection sold has not been reduced for any cash collateral paid to a given counterparty as such payments would be calculated after netting all derivative exposures, including any credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting processes, determining the amount of collateral that corresponds to credit derivative exposures alone is not possible. The Company actively monitors open credit risk exposures, and manages this exposure by using a variety of strategies including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the table above.

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21. CONCENTRATIONS OF CREDIT RISK 22. FAIR VALUE MEASUREMENT

Concentrations of credit risk exist when changes in economic, ASC 820-10 (formerly SFAS 157) defines fair value, industry or geographic factors similarly affect groups of establishes a consistent framework for measuring fair value counterparties whose aggregate credit exposure is material in and expands disclosure requirements about fair value relation to Citibank’s total credit exposure. Although measurements. Fair value is defined as the price that would be Citibank’s portfolio of financial instruments is broadly received to sell an asset or paid to transfer a liability in an diversified along industry, product, and geographic lines, orderly transaction between market participants at the material transactions are completed with other financial measurement date. institutions, particularly in the securities trading, derivatives, Among other things, the standard requires the Company and foreign exchange businesses. to maximize the use of observable inputs and minimize the use In connection with the Company’s efforts to maintain a of unobservable inputs when measuring fair value. In addition, diversified portfolio, the Company limits its exposure to any it precludes the use of block discounts when measuring the one geographic region, country or individual creditor and fair value of instruments traded in an active market, and monitors this exposure on a continuous basis. At requires recognition of trade-date gains related to certain December 31, 2011, Citibank’s most significant concentration derivative transactions whose fair values have been of credit risk was with the U.S. government and its agencies, determined using unobservable market inputs. as well as foreign governments. The Company’s exposure, Under ASC 820-10, the probability of default of a which primarily results from trading assets and investments counterparty is factored into the valuation of derivative issued by the U.S. government and its agencies, and foreign positions and includes the impact of Citibank’s own credit risk governments amounted to $205 billion and $231 billion at on derivatives and other liabilities measured at fair value. December 31, 2011 and 2010, respectively. Fair Value Hierarchy ASC 820-10, Fair Value Measurement, specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

• Level 1: Quoted prices for identical instruments in active markets. • Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. • Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets. The Company’s policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.

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Determination of Fair Value Trading account assets and liabilities—trading securities For assets and liabilities carried at fair value, the Company and trading loans measures such value using the procedures set out below, When available, the Company uses quoted market prices to irrespective of whether these assets and liabilities are carried determine the fair value of trading securities; such items are at fair value as a result of an election or whether they were classified as Level 1 of the fair value hierarchy. Examples previously carried at fair value. include some government securities and exchange-traded When available, the Company generally uses quoted equity securities. market prices to determine fair value and classifies such items For bonds and secondary market loans traded over the as Level 1. In some cases where a market price is available, counter, the Company generally determines fair value utilizing the Company will make use of acceptable practical expedients internal valuation techniques. Fair value estimates from (such as matrix pricing) to calculate fair value, in which case internal valuation techniques are verified, where possible, to the items are classified as Level 2. prices obtained from independent vendors. Vendors compile If quoted market prices are not available, fair value is prices from various sources and may apply matrix pricing for based upon internally developed valuation techniques that use, similar bonds or loans where no price is observable. If where possible, current market-based or independently available, the Company may also use quoted prices for recent sourced market parameters, such as interest rates, currency trading activity of assets with similar characteristics to the rates, option volatilities, etc. Items valued using such bond or loan being valued. Trading securities and loans priced internally generated valuation techniques are classified using such methods are generally classified as Level 2. according to the lowest level input or value driver that is However, when less liquidity exists for a security or loan, a significant to the valuation. Thus, an item may be classified in quoted price is stale or prices from independent sources vary, Level 3 even though there may be some significant inputs that a loan or security is generally classified as Level 3. are readily observable. Where the Company’s principal market for a portfolio of Where available, the Company may also make use of loans is the securitization market, the Company uses the quoted prices for recent trading activity in positions with the securitization price to determine the fair value of the portfolio. same or similar characteristics to that being valued. The The securitization price is determined from the assumed frequency and size of transactions and the amount of the bid- proceeds of a hypothetical securitization in the current market, ask spread are among the factors considered in determining adjusted for transformation costs (i.e., direct costs other than the liquidity of markets and the relevance of observed prices transaction costs) and securitization uncertainties such as from those markets. If relevant and observable prices are market conditions and liquidity. As a result of the severe available, those valuations would be classified as Level 2. If reduction in the level of activity in certain securitization prices are not available, other valuation techniques would be markets since the second half of 2007, observable used and the item would be classified as Level 3. securitization prices for certain directly comparable portfolios Fair value estimates from internal valuation techniques of loans have not been readily available. Therefore, such are verified, where possible, to prices obtained from portfolios of loans are generally classified as Level 3 of the independent vendors or brokers. Vendors and brokers’ fair value hierarchy. However, for other loan securitization valuations may be based on a variety of inputs ranging from markets, such as commercial real estate loans, pricing observed prices to proprietary valuation models. verification of the hypothetical securitizations has been The following section describes the valuation possible, since these markets have remained active. methodologies used by the Company to measure various Accordingly, these loan portfolios are classified as Level 2 in financial instruments at fair value, including an indication of the fair value hierarchy. the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description Trading account assets and liabilities—derivatives includes details of the valuation models, the key inputs to Exchange-traded derivatives are generally fair valued using those models and any significant assumptions. quoted market (i.e., exchange) prices and so are classified as Level 1 of the fair value hierarchy. Securities purchased under agreements to resell and The majority of derivatives entered into by the Company securities sold under agreements to repurchase are executed over the counter and so are valued using internal No quoted prices exist for such instruments and so fair value is valuation techniques as no quoted market prices exist for such determined using a discounted cash-flow technique. Cash instruments. The valuation techniques and inputs depend on flows are estimated based on the terms of the contract, taking the type of derivative and the nature of the underlying into account any embedded derivative or other features. instrument. The principal techniques used to value these Expected cash flows are discounted using market rates instruments are discounted cash flows, Black-Scholes and appropriate to the maturity of the instrument as well as the Monte Carlo simulation. The fair values of derivative nature and amount of collateral taken or received. Generally, contracts reflect cash the Company has paid or received (for when such instruments are held at fair value, they are example, option premiums paid and received). classified within Level 2 of the fair value hierarchy as the The key inputs depend upon the type of derivative and the inputs used in the valuation are readily observable. nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, the spot price of the underlying volatility and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the

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263 significant inputs to the model. Correlation and items with classified as Level 2 or Level 3 depending on the observability longer tenors are generally less observable. of significant inputs to the model. In the fourth quarter of 2011, the Company began incorporating overnight indexed swap (“OIS”) curves as fair Market valuation adjustments value measurement inputs for the valuation of certain Liquidity adjustments are applied to items in Level 2 and collateralized interest-rate related derivatives. The OIS curves Level 3 of the fair value hierarchy to ensure that the fair value reflect the interest rates paid on cash collateral provided reflects the price at which the entire position could be against the fair value of these derivatives. The Company liquidated in an orderly manner. The liquidity reserve is based believes using relevant OIS curves as inputs to determine fair on the bid-offer spread for an instrument, adjusted to take into value measurements provides a more representative reflection account the size of the position consistent with what Citibank of the fair value of these collateralized interest-rate related believes a market participant would consider. derivatives. Previously, the Company used the relevant Counterparty credit-risk adjustments are applied to benchmark curve for the currency of the derivative (e.g., the derivatives, such as over-the-counter derivatives, where the London Interbank Offered Rate for U.S. dollar derivatives) as base valuation uses market parameters based on the LIBOR the discount rate for these collateralized interest-rate related interest rate curves. Not all counterparties have the same credit derivatives. The Company recognized a pretax gain of risk as that implied by the relevant LIBOR curve, so it is approximately $193 million upon the change in this fair value necessary to consider the market view of the credit risk of a measurement input. For further information on derivative counterparty in order to estimate the fair value of such an instruments and hedging activities, see Note 20 to the item. Consolidated Financial Statements. Bilateral or “own” credit-risk adjustments are applied to reflect the Company’s own credit risk when valuing Subprime-related direct exposures in CDOs derivatives and liabilities measured at fair value. Counterparty The valuation of high-grade and mezzanine asset-backed and own credit adjustments consider the expected future cash security (ABS) CDO positions uses trader prices based on the flows between Citibank and its counterparties under the terms underlying assets of each high-grade and mezzanine ABS of the instrument and the effect of credit risk on the valuation CDO. The high-grade and mezzanine positions are now of those cash flows, rather than a point-in-time assessment of largely hedged through the ABX and bond short positions, the current recognized net asset or liability. Furthermore, the which are trader priced. This results in closer symmetry in the credit-risk adjustments take into account the effect of credit- way these long and short positions are valued by the risk mitigants, such as pledged collateral and any legal right of Company. Citibank uses trader marks to value this portion of offset (to the extent such offset exists) with a counterparty the portfolio and will do so as long as it remains largely through arrangements such as netting agreements. hedged. For most of the lending and structuring direct subprime Commercial real estate exposure exposures, fair value is determined utilizing observable Citibank reports a number of different exposures linked to transactions where available, other market data for similar commercial real estate at fair value with changes in fair value assets in markets that are not active and other internal reported in earnings, including securities and loans. valuation techniques. Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally Investments determines the fair value of securities and loans linked to The investments category includes available-for-sale debt and commercial real estate utilizing internal valuation techniques. marketable equity securities, whose fair value is determined Fair value estimates from internal valuation techniques are using the same procedures described for trading securities verified, where possible, to prices obtained from independent above or, in some cases, using vendor prices as the primary vendors. Vendors compile prices from various sources. Where source. available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same Short-term borrowings and long-term debt or similar characteristics to those being valued. Securities and Where fair value accounting has been elected, the fair value of loans linked to commercial real estate valued using these non-structured liabilities is determined by discounting methodologies are generally classified as Level 3 as a result of expected cash flows using the appropriate discount rate for the the reduced liquidity currently in the market for such applicable maturity. Such instruments are generally classified exposures. as Level 2 of the fair value hierarchy as all inputs are readily observable. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are

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Items Measured at Fair Value on a Recurring Basis been classified in the Level 3 category is not limited to other The following tables present for each of the fair value financial instruments that have been classified as Level 3, but hierarchy levels the Company’s assets and liabilities that are also instruments that have been classified as Level 1 or Level measured at fair value on a recurring basis at December 31, 2 of the fair value hierarchy. The effects of these hedges are 2011 and 2010. The Company’s hedging of positions that have presented gross in the following table.

Gross Net In millions of dollars at December 31, 2011 Level 1 Level 2 Level 3 inventory Netting (1) balance Assets Trading securities Trading mortgage-backed securities U.S. government-sponsored agency guaranteed $ — $ 3,456 $ 366 $ 3,822 $ — $ 3,822 Prime — — 12 12 — 12 Alt-A — — — — — — Subprime — — — — — — Non-U.S. residential — — 16 16 — 16 Commercial — — — — — — Total trading mortgage-backed securities $ — $ 3,456 $ 394 $ 3,850 $ — $ 3,850 U.S. Treasury and federal agency securities U.S. Treasury $1,691 $162 — $ 1,853 — $ 1,853 Agency obligations — — — — — — Total U.S. Treasury and federal agency securities $1,691 $ 162 $ — $ 1,853 $ — $ 1,853 State and municipal — $ 1,249 $ 43 $ 1,292 $ — $ 1,292 Foreign government 17,556 18,433 153 36,142 — 36,142 Corporate — 16,531 1,940 18,471 — 18,471 Equity securities 9,962 180 2 10,144 — 10,144 Asset-backed securities — 43 4 47 — 47 Other debt securities — 12,271 2,208 14,479 — 14,479 Total trading securities $29,209 $ 52,325 $ 4,744 $ 86,278 $ — $ 86,278 Trading account derivatives Interest rate contracts $ 67 $ 822,063 $ 1,359 $ 823,489 Foreign exchange contracts — 105,439 502 105,941 Equity contracts 8 12,142 1,017 13,167 Commodity contracts — 4,825 984 5,809 Credit derivatives — 80,717 8,726 89,443 Total gross trading account derivatives $ 75 $1,025,186 $12,588 $1,037,849 Gross cash collateral paid $59,288 Netting agreements and market value adjustments $(1,025,453) Total trading account derivatives $ 75 $1,025,186 $12,588 $1,097,137 $(1,025,453) $ 71,684 Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed $ — $ 43,069 $ 666 $43,735 $ — $ 43,735 Prime — 4 2 6 — 6 Alt-A — — — — — — Subprime — — — — — — Non-U.S. residential — 4,659 — 4,659 — 4,659 Commercial — — — — — — Total investment mortgage-backed securities $ — $ 47,732 $ 668 $48,400 $ — $ 48,400 U.S. Treasury and federal agency securities U.S. Treasury $11,620 $ 17,012 $ — $28,632 $ — $ 28,632 Agency obligations — 21,912 75 21,987 — 21,987 Total U.S. Treasury and federal agency securities $11,620 $ 38,924 $ 75 $50,619 $ — $ 50,619 State and municipal $ — $ 13,539 $ 336 $13,875 $ — $ 13,875 Foreign government 26,211 42,438 396 69,045 — 69,045 Corporate — 4,547 805 5,352 — 5,352 Equity securities 3,515 4 — 3,519 — 3,519 Asset-backed securities — 5,867 3,868 9,735 — 9,735 Other debt securities — 539 120 659 — 659 Non-marketable equity securities — — 50 50 — 50 Total investments $41,346 $ 153,590 $ 6,318 $201,254 $ — $201,254 Loans (2) $ — $ 588 $ 4,568 $ 5,156 $ — $ 5,156 Mortgage servicing rights — — 2,569 2,569 — 2,569

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Gross Net In millions of dollars at December 31, 2011 Level 1 Level 2 Level 3 inventory Netting (1) balance Nontrading derivatives and other financial assets measured on a recurring basis, gross $ — $ 6,989 $187 $ 7,176 Gross cash collateral paid 307 Netting agreements and market value adjustments $ — Nontrading derivatives and other financial assets measured on a recurring basis $ — $ 6,989 $ 187 $ 7,483 $ — $ 7,483 Total assets $70,630 $1,238,678 $30,974 $1,399,877 $(1,025,453) $374,424 Total as a percentage of gross assets (3) 5.3% 92.4% 2.3% 100.0%

Liabilities Interest-bearing deposits $ — $ 896 $ 431 $ 1,327 $ — $ 1,327 Trading account liabilities Securities sold, not yet purchased 8,370 149 34 8,553 — 8,553 Trading account derivatives Interest rate contracts 36 813,515 1,294 814,845 Foreign exchange contracts — 101,200 512 101,712 Equity contracts 118 12,744 2,143 15,005 Commodity contracts — 5,105 958 6,063 Credit derivatives — 77,064 7,254 84,318 Total trading account derivatives $ 154 $1,009,628 $12,161 $1,021,943 Gross cash collateral received 55,344 Netting agreements and market value adjustments $(1,020,899) Total trading account derivatives $ 154 $1,009,628 $12,161 $1,077,287 $(1,020,899) $56,388 Short-term borrowings — 89 3 92 — 92 Long-term debt — 1,439 1,706 3,145 — 3,145 Nontrading derivatives and other financial liabilities measured on a recurring basis, gross — $ 1,971 $3 $1,974 Gross cash collateral received 556 Netting agreements and market value adjustments $ — Nontrading derivatives and other financial liabilities measured on a recurring basis $ — $ 1,971 $ 3 $ 2,530 $ — $ 2,530 Total liabilities $ 8,524 $1,014,172 $14,338 $1,092,934 $(1,020,899) $72,035 Total as a percentage of gross liabilities (3) 0.8% 97.8% 1.4% 100.0%

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Gross Net In millions of dollars at December 31, 2010 Level 1 Level 2 Level 3 inventory Netting (1) balance Assets Trading securities Trading mortgage-backed securities U.S. government-sponsored agency guaranteed $ — $ 2,451 $ 577 $ 3,028 $ — $ 3,028 Prime — 82 64 146 — 146 Alt-A — — 27 27 — 27 Subprime — 14 3 17 — 17 Non-U.S. residential — 42 — 42 — 42 Commercial — 84 57 141 — 141 Total trading mortgage-backed securities $ — $ 2,673 $ 728 $ 3,401 $ — $ 3,401 U.S. Treasury and federal agency securities U.S. Treasury $ 7,415 $ 92 $ — $ 7,507 $ — $ 7,507 Agency obligations — 60 72 132 — 132 Total U.S. Treasury and federal agency securities $ 7,415 $ 152 $ 72 $ 7,639 $ — $ 7,639 State and municipal $ — $ 1,185 $ — $ 1,185 $ — $ 1,185 Foreign government 17,483 16,612 23 34,118 — 34,118 Corporate — 19,416 829 20,245 — 20,245 Equity securities 8,994 1,350 2 10,346 — 10,346 Asset-backed securities — 708 42 750 — 750 Other debt securities — 12,923 1,301 14,224 — 14,224 Total trading securities $33,892 $ 55,019 $ 2,997 $ 91,908 $ — $ 91,908 Trading account derivatives Interest rate contracts $ 157 $507,625 $ 2,010 $ 509,792 Foreign exchange contracts — 94,637 753 95,390 Equity contracts — 6,894 1,414 8,308 Commodity contracts — 3,985 853 4,838 Credit derivatives — 49,840 14,174 64,014 Total gross trading account derivatives $ 157 $662,981 $19,204 $ 682,342 Gross cash collateral paid 49,127 Netting agreements and market value adjustments $(674,018) Total trading account derivatives $ 157 $662,981 $19,204 $ 731,469 $(674,018) $ 57,451 Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed $ — $ 22,868 $ 22 $ 22,890 $ — $ 22,890 Prime — 1,472 16 1,488 — 1,488 Alt-A — — 1 1 — 1 Non-U.S. residential — 316 — 316 — 316 Commercial — 46 32 78 — 78 Total investment mortgage-backed securities $ — $ 24,702 $ 71 $ 24,773 $ — $ 24,773 U.S. Treasury and federal agency securities U.S. Treasury $13,279 $ 32,774 $ — $ 46,053 $ — $ 46,053 Agency obligations — 35,697 17 35,714 — 35,714 Total U.S. Treasury and federal agency securities $13,279 $ 68,471 $ 17 $ 81,767 $ — $ 81,767 State and municipal $ — $ 12,429 $ 40 $ 12,469 $ — $ 12,469 Foreign government 39,763 41,036 330 81,129 — 81,129 Corporate — 10,305 358 10,663 — 10,663 Equity securities 935 117 6 1,058 — 1,058 Asset-backed securities — 2,933 4,694 7,627 — 7,627 Other debt securities — 596 727 1,323 — 1,323 Non-marketable equity securities — 39 150 189 — 189 Total investments $53,977 $160,628 $ 6,393 $ 220,998 $ — $220,998 Loans (2) $ — $1,159 $ 3,050 $ 4,209 $ — $ 4,209 Mortgage servicing rights — — 4,554 4,554 — 4,554 Nontrading derivatives and other financial assets measured on a recurring basis, gross $ — $ 10,495 $ 30 $ 10,525 Gross cash collateral paid 12 Netting agreements and market value adjustments $ — Nontrading derivatives and other financial assets measured on a recurring basis $ — $ 10,495 $ 30 $ 10,537 $ — $ 10,537 Total assets $88,026 $890,282 $36,228 $1,063,675 $(674,018) $389,657 Total as a percentage of gross assets(3) 8.7% 87.8% 3.5% 100%

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Gross Net In millions of dollars at December 31, 2010 Level 1 Level 2 Level 3 inventory Netting (1) balance Liabilities Interest-bearing deposits $ — $ 987 $ 277 $ 1,264 $ — $ 1,264 Trading account liabilities Securities sold, not yet purchased 7,988 230 7 8,225 — 8,225

Trading account derivatives Interest rate contracts 167 505,568 1,642 507,377 Foreign exchange contracts 1 91,916 635 92,552 Equity contracts 82 8,518 2,037 10,637 Commodity contracts 3 4,301 1,038 5,342 Credit derivatives — 47,103 10,147 57,250 Total gross trading account derivatives $ 253 $657,406 $15,499 $673,158 Gross cash collateral received 44,032 Netting agreements and market value adjustments $(669,822) Total trading account derivatives $ 253 $657,406 $15,499 $717,190 $(669,822) $47,368 Short-term borrowings — 117 — 117 — 117 Long-term debt — 2,255 2,343 4,598 — 4,598 Nontrading derivatives and other financial liabilities measured on a recurring basis, gross $ 1 $ 6,398 $ 19 $ 6,418 Gross cash collateral received 598 Netting agreements and market value adjustments $ — Nontrading derivatives and other financial liabitlites measured on a recurring basis $ 1 $ 6,398 $ 19 $ 7,016 $ — $ 7,016 Total liabilities $ 8,242 $667,393 $18,145 $738,410 $(669,822) $68,588 Total as a percentage of total liabilities(3) 1.2% 96.2% 2.6% 100%

(1) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase, and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral, and the market value adjustment. (2) There is no allowance for loan losses recorded for loans reported at fair value. (3) Percentage is calculated based on total assets and liabilities measured at fair value on a recurring basis excluding collateral paid/received on derivatives.

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Changes in Level 3 Fair Value Category The Company often hedges positions with offsetting The following tables present the changes in the Level 3 fair positions that are classified in a different level. For example, value category for the years ended December 31, 2011 and the gains and losses for assets and liabilities in the Level 3 2010. The Company classifies financial instruments in Level 3 category presented in the tables below do not reflect the effect of the fair value hierarchy when there is reliance on at least of offsetting losses and gains on hedging instruments that have one significant unobservable input to the valuation model. In been classified by the Company in the Level 1 and Level 2 addition to these unobservable inputs, the valuation models for categories. In addition, the Company hedges items classified Level 3 financial instruments typically also rely on a number in the Level 3 category with instruments also classified in of inputs that are readily observable either directly or Level 3 of the fair value hierarchy. The effects of these hedges indirectly. Thus, the gains and losses presented below include are presented gross in the following tables. changes in the fair value related to both observable and unobservable inputs.

securities U.S. government-sponsored agency guaranteed $577 $(39) $— $— $— $107 $(81) $(198) $366 $(48) Prime 64 — — (33) 937 — (956) — 12 12 Alt-A 27 (41) — — 1,392 — (1,378) — — — Subprime 3 1 — (1) 3 — (6) — — — Non-U.S. residential — (1) — 17 — — — — 16 (5) Commercial 57 1 — (45) 3 — (16) — — — Total trading mortgage- backed securities $728 $(79) $— $(62) $2,335 $107 $(2,437) $(198) $394 $(41) U.S. Treasury and federal

agency securities U.S. Treasury $— $— $— $— $— $— $— $— $— $— Agency obligations 72 9 — (45) — — (36) — — — Total U.S. Treasury and federal agency securities $72 $9 $— $(45) $— $— $(36) $— $— $— State and municipal $— $— $— $14 $30 $— $(1) $— $43 $— Foreign government 23 — — (21) 349 — (90) (108) 153 — Corporate 829 (29) — 1,846 519 — (481) (744) 1,940 (14) Equity securities 2 (4) — 4 — — — — 2 — Asset-backed securities 42 18 — (1) 248 — (303) — 4 (2) Other debt securities 1,301 (90) — 506 1,555 — (658) (406) 2,208 14 Total trading securities $2,997 $(175) $— $2,241 $5,036 $107 $(4,006) $(1,456) $4,744 $(43) Derivatives, net(4) Interest rate contracts 368 (76) — (384) 20 — — 137 65 (108) Foreign exchange contracts 118 21 — (128) 11 — (3) (29) (10) (39) Equity contracts (623) (179) — (140) 2 — (6) (180) (1,126) (624) Commodity contracts (185) 258 — 123 — — (103) (67) 26 (29) Credit derivatives 4,027 1,042 — (5) 7 — — (3,599) 1,472 581 Total derivatives, net (4) $3,705 $1,066 $— $(534) $40 $— $(112) $(3,738) $427 $(219) Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed $22 $— $(1) $382 $270 $— $(7) $— $666 $1 Prime 16 — — (5) — — (7) (2) 2 — Alt-A 1 — (1) — — — — — — — Commercial 32 — — (32) — — — — — — Total investment mortgage- backed debt securities $71 $— $(2) $345 $270 $— $(14) $(2) $668 $1 U.S. Treasury and federal agency securities $17 $— $— $60 $— $— $(2) $— $75 $— State and municipal 40 — (3) 4 296 — (1) — 336 (2) Foreign government 330 — 14 (43) 349 — (16) (238) 396 6 Corporate 358 — (130) 200 715 — (32) (306) 805 (80) Equity securities 6 — (3) (3) — — — — — — Asset-backed securities 4,694 — — 4 79 — (8) (901) 3,868 —

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Net realized/unrealized gains (losses) included in Transfers Unrealized in and/or gains Dec. 31, Principal out of Dec. 31, (losses) In millions of dollars 2010 transactions Other (1)(2) Level 3 Purchases Issuances Sales Settlements 2011 still held(3) Other debt securities 727 — 26 122 35 — (289) (501) 120 (2) Non-marketable equity securities 150 — 1 (151) 50 — — — 50 — Total investments $6,393 $— $(97) $538 $1,794 $— $(362) $(1,948) $6,318 $(77) Loans $3,050 $— $(308) $391 $591 $1,661 $(102) $(715) $4,568 $(265) Mortgage servicing rights 4,554 — (1,465) — — 408 $(212) (716) 2,569 (1,465) Other financial assets measured on a recurring basis 30 — 142 14 57 554 (58) (552) 187 111 Liabilities Interest-bearing deposits $277 $— $45 $(112) $— $324 $— $(13) $431 $(35) Trading account liabilities Securities sold, not yet purchased 7 (7) — 18 — — 23 (21) 34 (1) Short-term borrowings — — — 2 — 3 — (2) 3 — Long-term debt 2,343 (24) 266 25 — 95 — (515) 1,706 215 Other financial liabilities measured on a recurring basis 19 — (19) 7 1 13 (1) (55) 3 (3)

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Net realized/unrealized Transfers Purchases, Unrealized gains (losses) included in in and/or issuances gains Dec. 31, Principal out of and Dec. 31, (losses) In millions of dollars 2009 transactions Other (1)(2) Level 3 settlements 2010 still held (3) Assets Trading securities Trading mortgage-backed securities U.S. government-sponsored agency guaranteed $ 1,022 $ (107) $ — $ 25 $ (363) $ 577 $ (81) Prime 46 10 — 134 (126) 64 (3) Alt-A 69 44 — — (86) 27 1 Subprime 7,105 1,863 — (24) (8,941) 3 — Non-U.S. residential — 23 — 844 (867) — — Commercial 544 9 — 58 (554) 57 1 Total trading mortgage-backed securities $ 8,786 $1,842 $ — $1,037 $(10,937) $ 728 $ (82) U.S. Treasury and federal agencies securities U.S. Treasury $ — $ — $ — $ — $ — $ — $ — Agency obligations — 2 — 52 18 72 (24) Total U.S. Treasury and federal agencies securities $ — $ 2 $ — $ 52 $ 18 $ 72 $ (24) State and municipal $ — $ — $ — $ — $ — $ — $ — Foreign government 52 5 — 43 (77) 23 1 Corporate 1,039 (28) — (96) (86) 829 48 Equity securities 66 1 — — (65) 2 — Asset-backed securities 33 (34) — 1,003 (960) 42 (288) Other debt securities 13,160 44 — 302 (12,205) 1,301 8 Total trading securities 23,136 $1,832 $ — $2,341 $(24,312) $2,997 $ (337) Derivatives, net (4) Interest rate contracts $ (34) $ (460) $ — $ 734 $ 128 $ 368 $ 467 Foreign exchange contracts (192) 370 — (14) (46) 118 178 Equity contracts 20 (77) — (493) (73) (623) (261) Commodity contracts (121) 49 — 69 (182) (185) 262 Credit Derivatives 880 665 — 2,095 387 4,027 (335) Total derivatives, net (4) $ 553 $ 547 $ — $2,391 $ 214 $3,705 $ 311 Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed $ 2 $ — $ 8 $ — $ 12 $ 22 $ — Prime 480 — 79 (522) (21) 16 — Alt-A 10 — 13 40 (62) 1 — Commercial 30 — — 2 — 32 — Total investment mortgage-backed debt securities $ 522 $ — $ 100 $(480) $ (71) $ 71 $ — U.S. Treasury and federal agencies securities $ 21 $ — $ (21) $ — $ 17 $ 17 $ (1) State and municipal 216 — 8 40 (224) 40 (1) Foreign government 246 — 27 1 56 330 1 Corporate 487 — 41 (55) (115) 358 (6) Equity securities 1 — — 5 — 6 — Asset-backed securities 6,399 — (334) (74) (1,297) 4,694 — Other debt securities 560 — (12) (13) 192 727 25 Non-marketable equity securities 158 — 34 (10) (32) 150 — Total investments $ 8,610 $ — $ (157) $ (586) $ (1,474) $6,393 $ 18

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Net realized/unrealized Transfers Purchases, Unrealized gains (losses) included in in and/or issuances gains Dec. 31, Principal out of and Dec. 31, (losses) In millions of dollars 2009 transactions Other(1)(2) Level 3 settlements 2010 still held(3) Loans $ 206 $ — $ (167) $ 693 $ 2,318 $3,050 $ (332) Mortgage servicing rights 6,530 — (1,146) — (830) 4,554 (1,146) Other financial assets measured on a recurring basis 196 — 77 (3) (240) 30 77 Liabilities Interest-bearing deposits $ 28 $ — $ 12 $ (41) $ 302 $ 277 $ (61) Trading account liabilities Securities sold, not yet purchased — — — 7 — 7 — Short-term borrowings — (4) — (117) 113 — — Long-term debt 416 (154) 459 430 1,802 2,343 450 Other financial liabilities measured on a recurring basis 13 — (52) — (46) 19 (20)

(1) Changes in fair value for available-for-sale investments (debt securities) are recorded in AOCI, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income. (2) Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income. (3) Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2011 and 2010. (4) Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

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respectively, related primarily to the reclassification The significant changes from December 31, 2010 to of certain securities to Trading under the fair value December 31, 2011 in Level 3 assets and liabilities are due to: option upon adoption of ASU 2010-11 on July 1, 2010, as described in Note 2 to the Consolidated • A net increase in Trading securities of $1.7 billion that Financial Statements (for purposes of the Level 3 included: roll-forward table above, Level 3 investments that were reclassified to Trading upon adoption of ASU — The reclassification of $2.8 billion of securities from 2010-11 have been classified as transfers to Level 3 Investments held-to-maturity to Trading account Trading securities); and assets. These reclassifications have been included in — Net settlements of non-U.S. residential mortgage- purchases in the Level 3 roll-forward table above. backed securities and Asset-backed securities of $0.9 The Level 3 assets reclassified, and subsequently billion and $1.0 billion, respectively, related mainly sold, included $2.3 billion of trading mortgage- to sales of securities transferred to Trading upon backed securities (of which $1.4 billion were Alt-A adoption of ASU 2010-11 as discussed above. and $0.9 billion were prime), $0.3 billion of — A decrease of $11.9 billion in Other debt trading corporate debt securities and $0.2 billion of asset- securities, due primarily to the impact of the backed securities. consolidation of the credit card securitization trusts by — Transfers of $2.2 billion from Level 2 to Level 3, the the Company upon adoption of SFAS 166/167 on majority of which related to transfers of corporate January 1, 2010. Upon consolidation of the trusts, the debt securities of $1.8 billion due primarily to less Company recorded the underlying credit card price transparency for these securities. receivables on its Consolidated Balance Sheet as — Purchases and sales of $1.6 billion and $0.7 billion, Loans accounted for at amortized cost. At January 1, respectively, of Other debt securities which consist 2010, the Company’s investments in the trusts and primarily of loans for which the fair value option has other inter-company balances were eliminated. At been elected. January 1, 2010, the Company’s investment in these newly consolidated VIEs, which is eliminated for • A net decrease in credit derivatives of $2.6 billion. The accounting purposes, included certificates issued by net decrease comprised gains of $1.0 billion recorded in these trusts of $11.1 billion that were classified as Principal transactions, which included gains of $0.6 Level 3 at December 31, 2009. The impact of the billion on total return swaps referencing returns on elimination of these certificates has been reflected as corporate loans, offset by losses on certain of the net settlements in the Level 3 roll-forward table above. referenced loans which are classified as Level 2. Settlements of $3.6 billion included $1.7 billion related to • The net increase in Loans of $2.8 billion is due largely to the settlement of certain contracts under which the the Company’s consolidation of certain VIEs upon the Company had purchased credit protection on commercial adoption of SFAS 167 on January 1, 2010, for which the mortgage-backed securities from a single counterparty. fair value option was elected. The impact from Settlements also included $1.4 billion relating to the consolidation of these VIEs on Level 3 loans has been unwinding of contracts under which the Company had reflected as purchases in the Level 3 roll-forward above. purchased credit protection from an affiliated company • The decrease in Mortgage servicing rights of $2.0 billion referencing interest rate derivative exposures. is due primarily to losses of $1.1 billion, due to a • A net increase in Loans of $1.5 billion, including transfers reduction in interest rates. from Level 2 to Level 3 of $0.4 billion, due to a lack of • The increase in Long-term debt of $1.9 billion is due observable prices. Issuances of $1.7 billion included new largely to the Company’s consolidation of certain VIEs margin loans advanced by the Company. upon the adoption of SFAS 167 on January 1, 2010, for • A net decrease in Mortgage servicing rights of $2.0 which the fair value option was elected. The impact from billion included losses of $1.5 billion, due primarily to a consolidation of these VIEs on long-term debt classified reduction in interest rates. as Level 3 loans has been reflected as net issuances in the Level 3 roll-forward above.

The significant changes from December 31, 2009 to Transfers between Level 1 and Level 2 of the Fair Value December 31, 2010 in Level 3 assets and liabilities are due to: Hierarchy The Company did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy • A net decrease in Trading securities of $20.1 billion which during 2011. included:

— A net decrease of $8.1 billion in trading mortgage- Items Measured at Fair Value on a Nonrecurring Basis backed securities, which was driven mainly by a net Certain assets and liabilities are measured at fair value on a decrease in subprime securities of $7.1 billion, nonrecurring basis and therefore are not included in the tables comprising $1.9 billion of gains recognized in above. These include assets measured at cost that have been Principal transactions and liquidations of $8.9 billion; written down to fair value during the periods as a result of an — Transfers to Level 3 of non-U.S. residential trading impairment. In addition, these assets include loans held-for- mortgage-backed securities and Asset-backed sale and other real estate owned that are measured at the lower securities of $0.8 billion and $1.0 billion, of cost or market (LOCOM). 90 CITIBANK N.A. 2010–2011 FINANCIALS

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The following tables present the carrying amounts of all assets that were still held as of December 31, 2011 and December 31, 2010, and for which a nonrecurring fair value measurement was recorded during the twelve months then ended:

In millions of dollars Fair value Level 2 Level 3 December 31, 2011 Loans held-for-sale $2,462 $1,587 $ 875 Other real estate owned 159 81 78 Loans (1) 3,145 2,657 488 Total assets at fair value on a nonrecurring basis $5,766 $4,325 $1,441

(1) Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate secured loans.

In millions of dollars Fair value Level 2 Level 3 December 31, 2010 (1) $2,813 $788 $2,025

(1) Excludes loans held for investment whose carrying amount is based on the fair value of underlying collateral.

The fair value of loans-held-for-sale is determined where possible using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques.

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Nonrecurring Fair Value Changes The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at December 31, 2011 and 2010.

In millions of dollars December 31, 2011 Loans held-for-sale $(135) Other real estate owned (70) Loans (1) (750) Total nonrecurring fair value gains/losses $(955)

(1) Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate loans.

In millions of dollars December 31, 2010 Total nonrecurring fair value gains/losses (1) $(51)

(1) Excludes loans held for investment whose carrying amount is based on the fair value of underlying collateral.

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23. FAIR VALUE ELECTIONS

The Company may elect to report most financial instruments and certain other items at fair value on an instrument-by- instrument basis with changes in fair value reported in earnings. The election is made upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made. The changes in fair value are recorded in current earnings. Additional discussion regarding the applicable areas in which fair value elections have been made is presented in Note 22 to the Consolidated Financial Statements. All servicing rights are recognized initially at fair value. The Company has elected fair value accounting for its mortgage servicing rights. See Note 2 and Note 19 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.

Changes in fair value gains (losses) for the years ended Fair value at December 31, December 31, In millions of dollars 2011 2010 2011 2010 Assets Trading account assets $14,174 $14,257 $(1,777) $ 613 Investments — 40 — — Loans Certain corporate loans(1) 3,830 2,464 100 (218) Certain consumer loans(1) 1,326 1,745 (281) 193 Total loans $ 5,156 $ 4,209 $ (181) $ (25) Other assets MSRs $ 2,569 $ 4,554 $(1,465) $(1,146) Certain mortgage loans (HFS) 6,212 7,223 172 9 Total other assets $ 8,781 $11,777 $(1,293) $(1,137) Total assets $28,111 $30,283 $(3,251) $ (549) Liabilities Interest-bearing deposits $ 1,327 $ 1,264 $ 116 $ 23 Trading account liabilities 22 43 11 (35) Short-term borrowings 92 117 (2) 7 Long-term debt 3,145 4,598 524 666 Total liabilities $ 4,586 $ 6,022 $ 649 $ 661

(1) Includes mortgage loans held by mortgage loan securitization VIEs consolidated upon the adoption of SFAS 167 on January 1, 2010.

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Own Debt Valuation Adjustment The notional amount of these unfunded letters of credit was Own debt valuation adjustments are recognized on the $0.6 billion and $1.1 billion as of December 31, 2011 and Company’s debt liabilities for which the fair value option has 2010, respectively. The amount funded was insignificant with been elected using the Company’s credit spreads observed in no amounts 90 days or more past due or on non-accrual status the bond market. The fair value of debt liabilities for which at December 31, 2011 and 2010, respectively. the fair value option is elected (other than non-recourse and These items have been classified in Trading account assets similar liabilities) is impacted by the narrowing or widening of or Trading account liabilities on the Consolidated Balance the Company’s credit spreads. The estimated change in the Sheet. Changes in fair value of these items are classified in fair value of these debt liabilities due to such changes in the Principal transactions in the Company’s Consolidated Company’s own credit risk (or instrument-specific credit risk) Statement of Income. was a gain of $78 million and a loss of $199 million for the years ended December 31, 2011 and 2010, respectively. Certain loans and other credit products Changes in fair value resulting from changes in instrument- Citibank has elected the fair value option for certain originated specific credit risk were estimated by incorporating the and purchased loans, including certain unfunded loan Company’s current credit spreads observable in the bond products, such as guarantees and letters of credit, executed by market into the relevant valuation technique used to value Citibank’s trading businesses. None of these credit products is each liability as described above. a highly leveraged financing commitment. Significant groups of transactions include loans and unfunded loan products that The Fair Value Option for Financial Assets and Financial are expected to be either sold or securitized in the near term, Liabilities or transactions where the economic risks are hedged with derivative instruments, such as purchased credit default swaps Selected letters of credit and revolving loans hedged by credit or total return swaps where the Company pays the total return default swaps or participation notes on the underlying loans to a third party. Citibank has elected The Company has elected the fair value option for certain the fair value option to mitigate accounting mismatches in letters of credit that are hedged with derivative instruments or cases where hedge accounting is complex and to achieve participation notes. Citibank elected the fair value option for operational simplifications. Fair value was not elected for these transactions because the risk is managed on a fair value most lending transactions across the Company, including basis and mitigates accounting mismatches. where management objectives would not be met.

The following table provides information about certain credit products carried at fair value at December 31, 2011 and 2010, respectively: December 31, 2011 December 31, 2010 Trading Trading In millions of dollars assets Loans assets Loans Carrying amount reported on the Consolidated Balance Sheet $14,145 $3,706 $14,209 $1,720 Aggregate unpaid principal balance in excess of fair value 540 (21) 166 (86) Balance of non-accrual loans or loans more than 90 days past due 134 — 221 — Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due 43 — 57 —

In addition to the amounts reported above, $648 million and $621 million of unfunded loan commitments related to certain credit products selected for fair value accounting were outstanding as of December 31, 2011 and 2010, respectively. Changes in fair value of funded and unfunded credit products are classified in Principal transactions in the Company’s Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue on Trading account assets or loan interest depending on the balance sheet classifications of the credit products. The changes in fair value for the years ended December 31, 2011 and 2010 due to instrument-specific credit risk totaled to a gain of $54 million and a loss of $5 million, respectively.

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Certain mortgage loans (HFS) Citibank has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable- rate first mortgage loans HFS. These loans are intended for sale or securitization and are hedged with derivative instruments. The Company has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications.

The following table provides information about certain mortgage loans HFS carried at fair value at December 31, 2011 and 2010, respectively:

In millions of dollars December 31, 2011 December 31, 2010 Carrying amount reported on the Consolidated Balance Sheet $6,212 $7,223 Aggregate fair value in excess of unpaid principal balance 274 81 Balance of non-accrual loans or loans more than 90 days past due — 1 Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due — 1

The changes in fair values of these mortgage loans are Level 2. Otherwise, the mortgage loans of a VIE are classified reported in Other revenue in the Company’s Consolidated as Level 3. Statement of Income. The changes in fair value for the years With respect to the consolidated mortgage VIEs for which ended December 31, 2011 and 2010 due to instrument-specific the fair value option was elected, the mortgage loans are credit risk resulted in a $0.1 million loss and a $1 million loss, classified as Loans on Citibank’s Consolidated Balance Sheet. respectively. Related interest income continues to be The changes in fair value of the loans are reported as Other measured based on the contractual interest rates and reported revenue in the Company’s Consolidated Statement of Income. as such in the Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue in the Certain consolidated VIEs Company’s Consolidated Statement of Income. Information The Company has elected the fair value option for all qualified about these mortgage loans is included in the table below. assets and liabilities of certain VIEs that were consolidated The change in fair value of these loans due to instrument- upon the adoption of SFAS 167 on January 1, 2010, including specific credit risk was a loss of $274 million and a gain of certain private-label mortgage securitizations and mutual fund $189 million for the years ended December 31, 2011 and deferred sales commissions VIEs. The Company elected the 2010, respectively. fair value option for these VIEs as the Company believes this The debt issued by these consolidated VIEs is classified method better reflects the economic risks, since substantially as long-term debt on Citibank’s Consolidated Balance Sheet. all of the Company’s retained interests in these entities are The changes in fair value for the majority of these liabilities carried at fair value. are reported in Other revenue in the Company’s Consolidated With respect to the consolidated mortgage VIEs, the Statement of Income. Related interest expense is measured Company determined the fair value for the mortgage loans and based on the contractual interest rates and reported as such in long-term debt utilizing internal valuation techniques. The the Consolidated Statement of Income. The aggregate unpaid fair value of the long-term debt measured using internal principal balance of long-term debt of these consolidated VIEs valuation techniques is verified, where possible, to prices exceeded the aggregate fair value by $838 million and $787 obtained from independent vendors. Vendors compile prices million as of December 31, 2011 and 2010, respectively. from various sources and may apply matrix pricing for similar securities when no price is observable. Security pricing associated with long-term debt that is valued using observable inputs is classified as Level 2 and non-verified debt that is valued using one or more significant observable imputs is classified as Level 3. The fair value of mortgage loans of each VIE is derived from the security pricing. When substantially all of the long-term debt of a VIE is valued using Level 2 inputs, the corresponding mortgage loans are classified as

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The following table provides information about Corporate and Consumer loans of consolidated VIEs carried at fair value at December 31, 2011 and December 31, 2010:

December 31, 2011 December 31, 2010 In millions of dollars Corporate loans Consumer loans Corporate loans Consumer loans Carrying amount reported on the Consolidated Balance Sheet $118 $1,292 $290 $1,718 Aggregate unpaid principal balance in excess of fair value 247 436 227 527 Balance of non-accrual loans or loans more than 90 days past due — 86 — 133 Aggregate unpaid principal balance in excess of fair value for non- accrual loans or loans more than 90 days past due — 120 — 139

Certain structured liabilities Certain non-structured liabilities The Company has elected the fair value option for certain The Company has elected the fair value option for certain non- structured liabilities whose performance is linked to interest structured liabilities with fixed and floating interest rates (non- rates, inflation, currency, equity, referenced credit or structured liabilities). The Company has elected the fair value commodity risks (structured liabilities). The Company elected option where the interest-rate risk of such liabilities is the fair value option because these exposures are considered to economically hedged with derivative contracts or the proceeds be trading-related positions and, therefore, are managed on a are used to purchase financial assets that will also be fair value basis. These positions will continue to be classified accounted for at fair value through earnings. The election has as debt, deposits or derivatives (Trading account liabilities) on been made to mitigate accounting mismatches and to achieve the Company’s Consolidated Balance Sheet according to their operational simplifications. These positions are reported in legal form. Short-term borrowings and Long-term debt on the Company’s The change in fair value for these structured liabilities is Consolidated Balance Sheet. The change in fair value for these reported in Principal transactions in the Company’s non-structured liabilities is reported in Principal transactions Consolidated Statement of Income. Changes in fair value for in the Company’s Consolidated Statement of Income. structured debt with embedded equity, referenced credit or Related interest expense continues to be measured based commodity underlyings includes an economic component for on the contractual interest rates and reported as such in the accrued interest. For structured debt that contains embedded Consolidated Statement of Income. interest rate, inflation or currency risks, related interest expense is measured based on the contracted interest rates and reported as such in the Consolidated Statement of Income.

The following table provides information about long-term debt, excluding the debt issued by the consolidated VIEs, carried at fair value at December 31, 2011 and 2010:

In millions of dollars December 31, 2011 December 31, 2010 Carrying amount reported on the Consolidated Balance Sheet $1,803 $2,728 Aggregate unpaid principal balance in excess of fair value 91 20

The following table provides information about short-term borrowings carried at fair value at December 31, 2011 and 2010:

In millions of dollars December 31, 2011 December 31, 2010 Carrying amount reported on the Consolidated Balance Sheet $92 $ 117 Aggregate unpaid principal balance in excess of fair value (18) (20)

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24. FAIR VALUE OF FINANCIAL INSTRUMENTS 2010 2011 Carrying Estimated Carrying Estimated Estimated Fair Value of Financial Instruments In billions of dollars at year end value fair value value fair value The table below presents the carrying value and fair value of Assets Citibank’s financial instruments. The disclosure excludes Investments $215.3 $214.7 $253.5 $254.3 leases, affiliate investments, pension and benefit obligations Federal funds sold and and insurance policy claim reserves. In addition, contract- securities borrowed or holder fund amounts exclude certain insurance contracts. Also purchased under as required, the disclosure excludes the effect of taxes, any agreements to resell 74.7 74.7 43.3 43.3 Trading account assets 158.0 158.0 149.4 149.4 premium or discount that could result from offering for sale at (1) one time the entire holdings of a particular instrument, excess Loans 555.0 546.9 532.2 516.1 Other financial assets (2) 218.0 217.7 fair value associated with deposits with no fixed maturity and 212.8 212.5 other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial 2011 2010 assets and liabilities, as well as a wide range of franchise, In billions of dollars Carrying Estimated Carrying Estimated relationship and intangible values (but includes MSRs), which at year end value fair value value fair value are integral to a full assessment of Citibank’s financial Liabilities Deposits $879.7 $878.7 $843.9 $842.1 position and the value of its net assets. Federal funds purchased and The fair value represents management’s best estimates securities loaned or sold based on a range of methodologies and assumptions. The under agreements to carrying value of short-term financial instruments not repurchase and short-term accounted for at fair value, as well as receivables and payables borrowings 62.1 62.1 53.0 53.0 arising in the ordinary course of business, approximates fair Trading account liabilities 64.9 64.9 55.6 55.6 Long-term debt 78.6 79.8 117.2 117.0 value because of the relatively short period of time between (3) their origination and expected realization. Quoted market Other financial liabilities 22.1 22.1 20.9 20.9 prices are used when available for investments and for both (1) The carrying value of loans is net of the Allowance for loan losses of trading and end-user derivatives, as well as for liabilities, such $24.7 billion for 2011 and $33.0 billion for 2010. In addition, the as long-term debt, with quoted prices. For loans not accounted carrying values exclude $2.0 billion and $2.0 billion of lease finance for at fair value, cash flows are discounted at quoted receivables in 2011 and 2010, respectively. secondary market rates or estimated market rates if available. (2) Includes cash and due from banks, deposits with banks, MSRs, and other financial instruments included in Other assets on the Consolidated Otherwise, sales of comparable loan portfolios or current Balance Sheet, for all of which the carrying value is a reasonable market origination rates for loans with similar terms and risk estimate of fair value. characteristics are used. Expected credit losses are either (3) Includes acceptance outstanding and other financial instruments embedded in the estimated future cash flows or incorporated included in Other liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value. as an adjustment to the discount rate used. The value of collateral is also considered. For liabilities such as long-term Fair values vary from period to period based on changes debt not accounted for at fair value and without quoted market in a wide range of factors, including interest rates, credit prices, market borrowing rates of interest are used to discount quality, and market perceptions of value and as existing assets contractual cash flows. and liabilities run off and new transactions are entered into. The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citibank’s loans, in aggregate, by $8.1 billion and $16.1 billion in 2011 and 2010, respectively. At December 31, 2011, the carrying values, net of allowances, exceeded the estimated values by $6.1 billion and $2.0 billion for Consumer loans and Corporate loans, respectively. The estimated fair values of the Company’s Corporate unfunded lending commitments at December 31, 2011 and 2010 were liabilities of $4.7 billion and $5.1 billion, respectively. The Company does not estimate the fair values of Consumer unfunded lending commitments, which are generally cancellable by providing notice to the borrower.

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25. PLEDGED ASSETS, COLLATERAL, Lease Commitments COMMITMENTS AND GUARANTEES Rental expense (principally for offices and computer equipment) was $1.0 billion and $1.1 billion for the years Pledged Assets ended December 31, 2011 and 2010, respectively. In connection with the Company’s financing and trading Future minimum annual rentals under noncancelable activities, the Company has pledged assets to collateralize its leases, net of sublease income, are as follows: obligations under repurchase agreements, securities financing agreements, secured liabilities of consolidated VIEs and other In millions of dollars borrowings. At December 31, 2011 and 2010, the approximate 2012 $ 758 carrying values of the significant components of pledged 2013 689 assets recognized on the Company’s balance sheet include: 2014 617 2015 547 2016 443 In millions of dollars 2011 2010 Thereafter 1,143 Investment securities $125,764 $146,722 Total $4,197 Loans 218,563 251,052 Trading account assets 2,496 7,645 Guarantees Total $346,823 $405,419 The Company provides a variety of guarantees and indemnifications to Citibank customers to enhance their credit Collateral standing and enable them to complete a wide variety of At December 31, 2011 and 2010, the approximate market business transactions. For certain contracts meeting the value of collateral received by the Company that may be sold definition of a guarantee, the guarantor must recognize, at or repledged by the Company, excluding the impact of inception, a liability for the fair value of the obligation allowable netting, was $923 million and $643 million, undertaken in issuing the guarantee. respectively. This collateral was received in connection with In addition, the guarantor must disclose the maximum resale agreements, securities borrowings and loans. potential amount of future payments the guarantor could be At December 31, 2011 and 2010, a substantial portion of required to make under the guarantee, if there were a total the collateral received by the Company had been sold or default by the guaranteed parties. The determination of the repledged in connection with repurchase agreements, maximum potential future payments is based on the notional securities sold, not yet purchased, securities borrowings and amount of the guarantees without consideration of possible loans, pledges to clearing organizations, segregation recoveries under recourse provisions or from collateral held or requirements under securities laws and regulations and bank pledged. Such amounts bear no relationship to the anticipated loans. losses, if any, on these guarantees. The following tables In addition, at December 31, 2011 and 2010, the present information about the Company’s guarantees at Company had pledged $340 billion and $399 billion, December 31, 2011 and December 31, 2010, respectively: respectively, of collateral that may not be sold or repledged by the secured parties.

Maximum potential amount of future payments In billions of dollars at December 31, Expire within Expire after Total amount Carrying value except carrying value in millions 1 year 1 year outstanding (in millions) 2011 Financial standby letters of credit $ 24.5 $ 78.0 $102.5 $ 417.5 Performance guarantees 7.5 4.3 11.8 43.9 Derivative instruments considered to be guarantees 9.8 9.2 19.0 1,846.2 Loans sold with recourse — 0.3 0.3 40.0 Securities lending indemnifications (1) 82.1 — 82.1 — Credit card merchant processing (1) 64.0 — 64.0 — Custody indemnifications and other — 28.0 28.0 30.7 Total $187.9 $119.8 $307.7 $2,378.3

(1) The carrying values of guarantees of securities lending indemnifications and credit card merchant processing are not material, as the Company has determined that the amount and probability of potential liabilities arising from these guarantees are not significant.

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Maximum potential amount of future payments Expire within Expire after Total amount Carrying value In billions of dollars at December 31, except carrying value in millions 1 year 1 year outstanding (in millions) 2010 Financial standby letters of credit $25.4 $ 65.6 $ 91.0 $ 225.9 Performance guarantees 8.5 4.5 13.0 35.8 Derivative instruments considered to be guarantees 6.3 5.8 12.1 1,047.2 Loans sold with recourse — 0.1 0.1 69.4 Securities lending indemnifications (1) 62.9 — 62.9 — Credit card merchant processing (1) 59.5 — 59.5 — Custody indemnifications and other — 28.2 28.2 253.8 Total $162.6 $104.2 $266.8 $1,632.1

Financial standby letters of credit the Company are excluded from this presentation, as they are Citibank issues standby letters of credit which substitute its disclosed separately in Note 20. In addition, non-credit own credit for that of the borrower. If a letter of credit is derivative contracts that are cash settled and for which the drawn down, the borrower is obligated to repay Citibank. Company is unable to assert that it is probable the Standby letters of credit protect a third party from defaults on counterparty held the underlying instrument at the inception of contractual obligations. Financial standby letters of credit the contract also are excluded from the disclosure above. include guarantees of payment of insurance premiums and In instances where the Company’s maximum potential reinsurance risks that support industrial revenue bond future payment is unlimited, the notional amount of the underwriting and settlement of payment obligations to clearing contract is disclosed. houses, and also support options and purchases of securities or are in lieu of escrow deposit accounts. Financial standbys also Loans sold with recourse backstop loans, credit facilities, promissory notes and trade Loans sold with recourse represent the Company’s obligations acceptances. to reimburse the buyers for loan losses under certain circumstances. Recourse refers to the clause in a sales Performance guarantees agreement under which a lender will fully reimburse the Performance guarantees and letters of credit are issued to buyer/investor for any losses resulting from the purchased guarantee a customer’s tender bid on a , for example, loans. This may be accomplished by the seller’s taking back construction or systems-installation project or to guarantee any loans that become delinquent. completion of such projects in accordance with contract terms. In addition to the amounts shown in the table above, the They are also issued to support a customer’s obligation to repurchase reserve for Consumer mortgages representations supply specified products, commodities, or maintenance or and warranties was $1,188 million and $969 million at warranty services to a third party. December 31, 2011 and 2010, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Derivative instruments considered to be guarantees Sheet. Derivatives are financial instruments whose cash flows are The repurchase reserve estimation process is subject to based on a notional amount and an underlying instrument, numerous estimates and judgments. The assumptions used to where there is little or no initial investment, and whose terms calculate the repurchase reserve contain a level of uncertainty require or permit net settlement. Derivatives may be used for a and risk that, if different from actual results, could have a variety of reasons, including risk management, or to enhance material impact on the reserve amounts. The key assumptions returns. Financial institutions often act as intermediaries for are: their clients, helping clients reduce their risks. However, • loan documentation requests; derivatives may also be used to take a risk position. • repurchase claims as a percentage of loan documentation The derivative instruments considered to be guarantees, requests; which are presented in the tables above, include only those • claims appeal success rate; and instruments that require Citibank to make payments to the • estimated loss per repurchase or make-whole. counterparty based on changes in an underlying instrument that is related to an asset, a liability, or an equity security held by the For example, Citibank estimates that if there were a guaranteed party. More specifically, derivative instruments simultaneous 10% adverse change in each of the significant considered to be guarantees include certain over-the-counter assumptions, the repurchase reserve would increase by written put options where the counterparty is not a bank, hedge approximately $620 million as of December 31, 2011. This fund or broker-dealer (such counterparties are considered to be potential change is hypothetical and intended to indicate the dealers in these markets, and may therefore not hold the sensitivity of the repurchase reserve to changes in the key underlying instruments). However, credit derivatives sold by assumptions. Actual changes in the key assumptions may not occur at the same time or to the same degree (i.e., an adverse 99 CITIBANK N.A. 2010–2011 FINANCIALS

282 change in one assumption may be offset by an improvement in credit card transactions that meet the requirements to be valid another). Citibank does not believe it has sufficient charge back transactions at any given time. At December 31, information to estimate a range of reasonably possible loss (as 2011 and December 31, 2010, this maximum potential defined under ASC 450) relating to its Consumer exposure was estimated to be $64 billion and $60 billion, representations and warranties. respectively. However, the Company believes that the maximum Securities lending indemnifications exposure is not representative of the actual potential loss Owners of securities frequently lend those securities for a fee exposure based on the Company’s historical experience. This to other parties who may sell them short or deliver them to contingent liability is unlikely to arise, as most products and another party to satisfy some other obligation. Banks may services are delivered when purchased and amounts are administer such securities lending programs for their clients. refunded when items are returned to merchants. The Company Securities lending indemnifications are issued by the bank to assesses the probability and amount of its contingent liability guarantee that a securities lending customer will be made related to merchant processing based on the financial strength whole in the event that the security borrower does not return of the primary guarantor, the extent and nature of unresolved the security subject to the lending agreement and collateral charge-backs and its historical loss experience. At December held is insufficient to cover the market value of the security. 31, 2011 and December 31, 2010, the estimated losses incurred and the carrying amounts of the Company’s Credit card merchant processing contingent obligations related to merchant processing Credit card merchant processing guarantees represent the activities were immaterial Company’s indirect obligations in connection with the processing of private label and bank card transactions on Other guarantees and indemnifications behalf of merchants. Citibank’s primary credit card business is the issuance of Credit Card Protection Programs credit cards to individuals. In addition, the Company: (a) The Company, through its credit card business, provides provides transaction processing services to various merchants various cardholder protection programs on several of its card with respect to its private-label cards and (b) has potential products, including programs that provide insurance coverage liability for bank card transaction processing services. The for rental cars, coverage for certain losses associated with nature of the liability in either case arises as a result of a purchased products, price protection for certain purchases and billing dispute between a merchant and a cardholder that is protection for lost luggage. These guarantees are not included ultimately resolved in the cardholder’s favor. The merchant is in the table, since the total outstanding amount of the liable to refund the amount to the cardholder. In general, if the guarantees and the Company’s maximum exposure to loss credit card processing company is unable to collect this cannot be quantified. The protection is limited to certain types amount from the merchant, the credit card processing of purchases and certain types of losses and it is not possible company bears the loss for the amount of the credit or refund to quantify the purchases that would qualify for these benefits paid to the cardholder. at any given time. The Company assesses the probability and With regard to (a) above, the Company continues to have amount of its potential liability related to these programs the primary contingent liability with respect to its portfolio of based on the extent and nature of its historical loss experience. private-label merchants. The risk of loss is mitigated as the At December 31, 2011 and 2010, the actual and estimated cash flows between the Company and the merchant are settled losses incurred and the carrying value of the Company’s on a net basis and the Company has the right to offset any obligations related to these programs were immaterial. payments with cash flows otherwise due to the merchant. To further mitigate this risk the Company may delay settlement, Other Representation and Warranty Indemnification require a merchant to make an escrow deposit, include event In the normal course of business, the Company provides triggers to provide the Company with more financial and standard representations and warranties to counterparties operational control in the event of the financial deterioration in contracts in connection with numerous transactions of the merchant, or require various credit enhancements and also provides indemnifications, including (including letters of credit and bank guarantees). In the indemnifications that protect the counterparties to the unlikely event that a private-label merchant is unable to contracts in the event that additional taxes are owed due either deliver products, services or a refund to its private-label to a change in the tax law or an adverse interpretation of the cardholders, the Company is contingently liable to credit or tax law. Counterparties to these transactions provide the refund cardholders. Company with comparable indemnifications. While such With regard to (b) above, the Company has a potential representations, warranties and indemnifications are essential liability for bank card transactions where Citi provides the components of many contractual relationships, they do not transaction processing services as well as those where a third represent the underlying business purpose for the transactions. party provides the services and Citibank acts as a secondary The indemnification clauses are often standard contractual guarantor, should that processor fail to perform. terms related to the Company’s own performance under the The Company’s maximum potential contingent liability terms of a contract and are entered into in the normal course of related to both bank card and private-label merchant business based on an assessment that the risk of loss is remote. processing services is estimated to be the total volume of Often these clauses are intended to ensure that terms of a 100 CITIBANK N.A. 2010–2011 FINANCIALS

283 contract are met at inception. No compensation is received for Collateral these standard representations and warranties, and it is not Cash collateral available to the Company to reimburse losses possible to determine their fair value because they rarely, if realized under these guarantees and indemnifications ever, result in a payment. In many cases, there are no stated or amounted to $34 billion and $34 billion at December 31, 2011 notional amounts included in the indemnification clauses and and December 31, 2010, respectively. Securities and other the contingencies potentially triggering the obligation to marketable assets available as collateral amounted to $56 indemnify have not occurred and are not expected to occur. billion and $34 billion, respectively, the majority of which These indemnifications are not included in the tables above. collateral is for reimbursing losses realized under securities lending indemnifications. Additionally, letters of credit in Value-Transfer Networks favor of the Company held as collateral amounted to $1.5 The Company is a member of, or shareholder in, hundreds of billion and $1.9 billion at December 31, 2011 and value-transfer networks (VTNs) (payment clearing and December 31, 2010, respectively. Other property may also be settlement systems as well as securities exchanges) around the available to the Company to cover losses under certain world. As a condition of membership, many of these VTNs guarantees and indemnifications; however, the value of such require that members stand ready to pay a pro rata share of the property has not been determined. losses incurred by the organization due to another member’s default on its obligations. The Company’s potential Performance risk obligations may be limited to its purchased subordinated Citibank evaluates the performance risk of its guarantees based classes in the VTNs, contributions to the VTN’s funds, or, in on the assigned referenced counterparty internal or external limited cases, the obligation may be unlimited. The maximum ratings. Where external ratings are used, investment-grade exposure cannot be estimated as this would require an ratings are considered to be Baa/BBB and above, while assessment of future claims that have not yet occurred. We anything below is considered non-investment grade. The believe the risk of loss is remote given historical experience Citibank internal ratings are in line with the related external with the VTNs. Accordingly, the Company’s participation in rating system. On certain underlying referenced credits or VTNs is not reported in the Company’s guarantees tables entities, ratings are not available. Such referenced credits are above and there are no amounts reflected on the Consolidated included in the not rated category. The maximum potential Balance Sheet as of December 31, 2011 or December 31, 2010 amount of the future payments related to guarantees and credit for potential obligations that could arise from the Company’s derivatives sold is determined to be the notional amount of these involvement with VTN associations. contracts, which is the par amount of the assets guaranteed. Presented in the tables below are the maximum potential Carrying Value—Guarantees and Indemnifications amounts of future payments classified based upon internal and At December 31, 2011 and December 31, 2010, the total external credit ratings as of December 31, 2011 and 2010, carrying amounts of the liabilities related to the guarantees and respectively. As previously mentioned, the determination of indemnifications included in the guarantees table above the maximum potential future payments is based on the amounted to approximately $2,378 million and $1,632 notional amount of the guarantees without consideration of million, respectively. The carrying value of derivative possible recoveries under recourse provisions or from instruments is included in either Trading liabilities or Other collateral held or pledged. Such amounts bear no relationship liabilities, depending upon whether the derivative was entered to the anticipated losses, if any, on these guarantees. into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities. In addition, at December 31, 2011 and December 31, 2010, Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $1,052 million and $943 million, respectively, relating to letters of credit and unfunded lending commitments.

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Maximum potential amount of future payments Investment Non-investment Not In billions of dollars as of December 31, 2011 grade grade rated Total Financial standby letters of credit $ 78.5 $ 16.0 $ 8.0 $102.5 Performance guarantees 6.9 3.2 1.7 11.8 Derivative instruments deemed to be guarantees — — 19.0 19.0 Loans sold with recourse — — 0.3 0.3 Securities lending indemnifications — — 82.1 82.1 Credit card merchant processing — — 64.0 64.0 Custody indemnifications and other 28.0 — — 28.0 Total $113.4 $ 19.2 $175.1 $307.7

Maximum potential amount of future payments Investment Non-investment Not In billions of dollars as of December 31, 2010 grade grade rated Total Financial standby letters of credit $56.6 $11.3 $ 23.1 $ 91.0 Performance guarantees 6.7 3.3 3.0 13.0 Derivative instruments deemed to be guarantees — — 12.1 12.1 Loans sold with recourse — — 0.1 0.1 Securities lending indemnifications — — 62.9 62.9 Credit card merchant processing — — 59.5 59.5 Custody indemnifications and other 28.2 — — 28.2 Total $91.5 $14.6 $160.7 $266.8

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Credit Commitments and Lines of Credit The table below summarizes Citibank’s credit commitments as of December 31, 2011 and December 31, 2010:

December 31, December 31, In millions of dollars 2011 2010 Commercial and similar letters of credit $8,670 $8,826 One- to four-family residential mortgages 3,504 2,980 Revolving open-end loans secured by one- to four-family residential properties 19,147 20,711 Commercial real estate, construction and land development 1,821 2,076 Credit card lines 621,904 105,442 Commercial and other consumer loan commitments 214,465 194,093 Total $869,511 $334,128

The majority of unused commitments are contingent upon Credit card lines customers’ maintaining specific credit standards. Commercial Citibank provides credit to customers by issuing credit cards. commitments generally have floating interest rates and fixed The credit card lines are unconditionally cancellable by the expiration dates and may require payment of fees. Such fees issuer. (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if Commercial and other consumer loan commitments exercise is deemed remote, amortized over the commitment Commercial and other consumer loan commitments include period. overdraft and liquidity facilities, as well as commercial commitments to make or purchase loans, to purchase third- Commercial and similar letters of credit party receivables, to provide note issuance or revolving A commercial letter of credit is an instrument by which underwriting facilities and to invest in the form of equity. Citibank substitutes its credit for that of a customer to enable Amounts include $59 billion and $70 billion with an original the customer to finance the purchase of goods or to incur other maturity of less than one year at December 31, 2011 and commitments. Citibank issues a letter on behalf of its client to December 31, 2010, respectively. a supplier and agrees to pay the supplier upon presentation of In addition, included in this line item are highly leveraged documentary evidence that the supplier has performed in financing commitments, which are agreements that provide accordance with the terms of the letter of credit. When a letter funding to a borrower with higher levels of debt (measured by of credit is drawn, the customer is then required to reimburse the ratio of debt capital to equity capital of the borrower) than Citibank. is generally considered normal for other companies. This type of financing is commonly employed in corporate acquisitions, One- to four-family residential mortgages management buy-outs and similar transactions. A one- to four-family residential mortgage commitment is a written confirmation from Citibank to a seller of a property that the bank will advance the specified sums enabling the buyer to complete the purchase.

Revolving open-end loans secured by one- to four-family residential properties Revolving open-end loans secured by one- to four-family residential properties are essentially home equity lines of credit. A home equity line of credit is a loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt outstanding for the first mortgage.

Commercial real estate, construction and land development Commercial real estate, construction and land development include unused portions of commitments to extend credit for the purpose of financing commercial and multifamily residential properties as well as land development projects. Both secured-by-real-estate and unsecured commitments are included in this line, as well as undistributed loan proceeds, where there is an obligation to advance for construction progress payments. However, this line only includes those extensions of credit that, once funded, will be classified as Total loans, net on the Consolidated Balance Sheet.

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26. REGIONAL DETAILS

The following is a geographic distribution of Citibank’s operations on a legal vehicle basis. The accounting policies of these regions are the same as those disclosed in Note 2 to the Consolidated Financial Statements.

Provision Revenues, Operating for credit losses and Citibank Assets net of interest expense expenses for benefits and claims Net income at year end In millions of dollars, except assets in billions 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 North America(1) $26,214 $33,119 $15,612 $13,873 $7,182 $18,082 $ 3,276 $1,146 $ 361 $ 337 EMEA(2) 10,675 11,530 7,276 6,723 960 1,802 1,626 2,039 358 388 Latin America 6,284 5,096 3,543 3,000 918 581 1,300 1,287 156 143 Asia 13,680 13,017 7,306 6,885 751 736 4,307 3,952 414 407 Total $56,853 $62,762 $33,737 $30,481 $9,811 $21,201 $10,509 $8,424 $1,289 $1,275

(1) North America includes the United States, Canada and Puerto Rico. (2) Europe, Middle East and Africa.

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27. RELATED PARTY TRANSACTIONS

Citicorp, a direct, wholly owned subsidiary of Citigroup, owns 100% of the outstanding common stock of the Company. Pursuant to various intercompany agreements, a number of significant transactions are carried out between the Company and Citigroup and/or their affiliates. Management believes that the terms under which these transactions and services are provided are no less favorable to the Company than those that could be obtained from unaffiliated third parties. Detailed below is a summary of the Company’s transactions with other Citigroup affiliates which are included in the accompanying Consolidated Statement of Income and Balance Sheet at December 31, 2011 and 2010. These amounts exclude intercompany balances that eliminate in consolidation.

INCOME STATEMENT ITEMS Year ended December 31 In millions of dollars 2011 2010 Revenues Net interest revenue (expense) $ (1,021) $ (631) Commissions and fees $ 236 $ 330 Principal transactions (1,029) (848) Other revenue (expense) 621 (951) Total non-interest revenue (172) $(1,469) Total revenues, net of interest expense $ (1,193) $(2,100) Operating expenses Compensation and benefits $ (354) $ (710) Premises and equipment 130 63 Other operating(1) 2,386 2,810 Total operating expenses $ 2,162 $ 2,163

(1) Includes charges from parent company for shared services.

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BALANCE SHEET ITEMS December 31, In millions of dollars 2011 2010 Assets Cash and due from banks $ 212 $ 56 Deposits with banks 492 345 Federal funds sold and securities purchased under agreements to resell 24,483 7,202 Trading account assets 19,899 12,428 Loans, net of unearned income 10,105 5,562 Interest and fees receivable 67 69 Other assets 8,526 10,281 Total assets $63,784 $35,943 Liabilities Non-interest-bearing deposits in U.S. offices $ 9,987 $ 8,734 Interest-bearing deposits in U.S. offices 954 965 Non-interest-bearing deposits in offices outside the U.S. 1,941 2,147 Interest-bearing deposits in offices outside the U.S. 39,721 33,624 Total deposits $52,603 $45,470 Trading account liabilities 20,385 10,024 Purchased funds and other borrowings 6,334 6,086 Accrued taxes and other expenses — 206 Subordinated notes and other long-term debt 2,037 4,145 Other liabilities 7,037 11,912 Total liabilities $88,396 $77,843

Stock-based Compensation Other Intercompany Agreements As discussed in Note 7, the Company participates in various Citigroup and its subsidiaries engage in other transactions and Citigroup stock-based compensation programs under which servicing activities with the Company, including cash Citigroup stock or stock options are granted to certain of the management, data processing, telecommunications, payroll Company’s employees. The Company has no stock-based processing, and administration, facilities procurement, compensation programs in which its own stock is granted. The underwriting and others. Company pays Citigroup directly for participation in certain of its stock-based compensation programs, but receives a capital Section 23A of the Federal Reserve Act contribution for those awards related to participation in the Citibank can lend to Citigroup and Citigroup’s nonbank employee incentive stock option program. subsidiaries in accordance with Section 23A of the Federal Reserve Act. As of December 31, 2011, the amount available Retirement Benefits for lending was approximately $20.4 billion, provided the As discussed in Note 8 to the Consolidated Financial funds are appropriately collateralized. Statments, the Company participates in several non- contributory defined benefit pension plans and a defined contribution plan sponsored by Citigroup covering certain eligible employees.

Citibank Tax-sharing Agreement As discussed in Note 9, the Company is included in the Citigroup consolidated federal tax return and is a party to a tax-sharing agreement with Citigroup. Under such agreement, the Company is entitled to a tax benefit for its losses and credits that are recognized in Citigroup's Consolidated Financial Statements. Settlements between the Company and Citigroup of current taxes occur throughout the year. The Company also files its consolidated and combined state income tax returns with Citigroup and/or other of its subsidiaries.

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28. CONTINGENCIES particularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the Overview early stages, or the matters involve novel legal theories or a In addition to the matters described below, in the ordinary large number of parties, Citigroup cannot predict the timing or course of business, Citibank, its parent entity Citigroup, and ultimate resolution of litigation and regulatory matters, and the their affiliates and subsidiaries, as well as their respective actual costs of resolving litigation and regulatory matters may current and former officers, directors and employees (for be substantially higher or lower than the amounts accrued for purposes of this section, sometimes collectively referred to as those matters. Citigroup and Related Parties), routinely are named as Subject to the foregoing, it is the opinion of Citigroup’s defendants in, or as parties to, various legal actions and management, based on current knowledge and after taking into proceedings. Certain of these actions and proceedings assert account its current legal accruals, that the eventual outcome of claims or seek relief in connection with alleged violations of all matters described in this Note would not be likely to have a consumer protection, securities, banking, antifraud, antitrust, material adverse effect on the consolidated financial condition anti-money laundering, employment and other statutory and of Citibank. Nonetheless, given the substantial or common laws. Certain of these actual or threatened legal indeterminate amounts sought in certain of these matters, and actions and proceedings include claims for substantial or the inherent unpredictability of such matters, an adverse indeterminate compensatory or punitive damages, or for outcome in certain of these matters could, from time to time, injunctive relief, and in some instances seek recovery on a have a material adverse effect on Citibank’s consolidated class-wide basis. results of operations or cash flows in particular quarterly or In the ordinary course of business, Citigroup and Related annual periods. Parties also are subject to governmental and regulatory Citibank or its subsidiaries are named as defendants or examinations, information-gathering requests, investigations otherwise directly involved in certain, but not all, of the and proceedings (both formal and informal), certain of which matters disclosed below. In addition, certain of the matters may result in adverse judgments, settlements, fines, penalties, below relate principally to banking activity, while other injunctions or other relief. In addition, Citigroup is a bank matters relate principally to broker-dealer or other Citigroup holding company, Citibank is a bank, and certain affiliates and activities in which Citibank or its subsidiaries had no direct subsidiaries of Citibank are banks, registered broker-dealers, involvement. For a discussion of Citigroup’s material legal futures commission merchants, investment advisers or other and regulatory proceedings, of which the below matters are a regulated entities and, in those capacities, are subject to part, see Citigroup’s Annual Report on Form 10-K for the year regulation by various U.S., state and foreign securities, ended December 31, 2011, filed with the U.S. Securities and banking, commodity futures and other regulators. In Exchange Commission on February 24, 2012. connection with formal and informal inquiries by these regulators, Citigroup and Related Parties receive numerous Credit Crisis-Related Litigation and Other Matters requests, subpoenas and orders seeking documents, testimony Citigroup and Related Parties have been named as defendants and other information in connection with various aspects of in numerous legal actions and other proceedings asserting their regulated activities. claims for damages and related relief for losses arising from Because of the global scope of Citigroup’s operations, the global financial credit crisis that began in 2007. Such and its presence in countries around the world, Citigroup and matters include, among other types of proceedings, claims Related Parties are subject to litigation, and governmental and asserted by: (i) individual investors and purported classes of regulatory examinations, information-gathering requests, investors in Citigroup’s common and preferred stock and debt, investigations and proceedings (both formal and informal), in alleging violations of the federal securities laws and state multiple jurisdictions with legal and regulatory regimes that securities and fraud laws; (ii) participants and purported may differ substantially, and present substantially different classes of participants in Citigroup’s retirement plans, alleging risks, from those Citigroup and Related Parties are subject to violations of the Employee Retirement Income Security Act in the United States. In some instances Citigroup and Related (ERISA); (iii) counterparties to transactions adversely affected Parties may be involved in proceedings involving the same by developments in the credit and mortgage markets; (iv) subject matter in multiple jurisdictions, which may result in individual investors and purported classes of investors in overlapping, cumulative or inconsistent outcomes. securities and other investments underwritten, issued or Citigroup and Citibank seek to resolve all litigation and marketed by Citigroup, including collateralized debt regulatory matters in the manner management believes is in obligations (CDOs), mortgage-backed securities (MBS), the best interests of Citigroup and its shareholders and auction-rate securities (ARS), investment funds, and other Citibank and its depositors, and contest liability, allegations of structured or leveraged instruments, that have suffered losses wrongdoing and, where applicable, the amount of damages or as a result of the credit crisis; and (v) individual borrowers scope of any penalties or other relief sought as appropriate in asserting claims related to their loans. These matters have each pending matter. been filed in state and federal courts across the country, as In accordance with ASC 450 (formerly SFAS 5), well as in arbitrations before the Financial Industry Regulatory Citigroup establishes accruals for litigation and regulatory Authority (FINRA) and other arbitration associations. matters when it is probable that a loss has been incurred and In addition to these litigations and arbitrations, Citigroup the amount of the loss can be reasonably estimated. Once continues to cooperate fully in response to subpoenas and established, accruals are adjusted from time to time, as requests for information from the Securities and Exchange appropriate, in light of additional information. In view of the Commission (SEC), FINRA, state attorneys general, the inherent unpredictability of litigation and regulatory matters, Department of Justice and subdivisions thereof, bank 107 CITIBANK N.A. 2010–2011 FINANCIALS

290 regulators, and other government agencies and authorities, in Federal Reserve Board and the Office of Comptroller of the connection with various formal and informal (and, in many Currency. While Citigroup expects to incur additional instances, industry-wide) inquiries concerning Citigroup’s operating expenses in implementing these standards, it does mortgage-related conduct and business activities, as well as not currently expect that the impact of these expenses will be other business activities affected by the credit crisis. These material. business activities include, but are not limited to, Citigroup’s Citigroup is receiving legal releases in connection with sponsorship, packaging, issuance, marketing, servicing and the National Mortgage Settlement. These releases will address underwriting of MBS and CDOs and its origination, sale or a broad range of, but not all, potential claims related to other transfer, servicing, and foreclosure of residential mortgage servicing and origination. Citigroup will not receive mortgages, including its compliance with the Servicemembers releases related to securitizations or whole loan sales, nor will Civil Relief Act (SCRA). it receive releases from criminal, tax, environmental, and certain other categories of liability. Mortgage-Related Litigation and Other Matters In conjunction with the National Mortgage Settlement, Beginning in November 2007, Citigroup and Related Parties Citigroup and Related Parties also entered into a settlement have been named as defendants in numerous legal actions and with the United States Attorney’s Office for the Southern other proceedings brought by Citigroup shareholders, District of New York of a “qui tam” action. This action investors, counterparties, regulators and others concerning alleged that, as a participant in the Direct Endorsement Lender Citigroup’s activities relating to mortgages, including program, CitiMortgage had certified to the United States Citigroup’s involvement with CDOs, MBS and structured Department of Housing and Urban Development (HUD) and investment vehicles, Citigroup’s underwriting activity for the Federal Housing Administration (FHA) that certain loans mortgage lenders, and Citigroup’s more general mortgage- were eligible for FHA insurance when in fact they were not. and credit-related activities. The settlement releases Citigroup from claims arising out of Regulatory Actions: On February 9, 2012, Citigroup its acts or omissions relating to the origination, underwriting, announced that CitiMortgage, along with other major or endorsement of all FHA-insured loans prior to the effective mortgage servicers, had reached an agreement in principle date of the settlement. Under the settlement, Citigroup will with the United States and with the Attorneys General for 49 pay the United States $158.3 million, for which Citigroup had states (Oklahoma did not participate) and the District of fully provided as of December 31, 2011 (see Note 29 to the Columbia to settle a number of related investigations into Consolidated Financial Statements). CitiMortgage will residential loan servicing and origination practices (the continue to participate in the Direct Endorsement Lender National Mortgage Settlement). The agreement is subject to program. Additional information relating to this action is the satisfaction of certain conditions, including final court publicly available in court filings under the docket number 11 approval. Civ. 5423 (S.D.N.Y.) (Marrero, J.). Under the National Mortgage Settlement, Citigroup and Federal and state regulators have served subpoenas or Related Parties commits to make payments and provide otherwise requested information concerning a variety of financial relief to homeowners in three categories: (1) cash aspects of Citigroup’s mortgage origination and mortgage payments payable to the states and federal agencies in the servicing practices, including with respect to ancillary aggregate amount of $415 million, a portion of which will be insurance products or practices. The subjects of such inquiries used by the states for payments to homeowners affected by have included, among other things, Citigroup’s compliance foreclosure practices; (2) customer relief in the form of loan with the SCRA and analogous state statutes. Many, but not all, modifications for delinquent borrowers, including principal of these inquiries are within the scope of the claims released in reductions, to be completed over three years, with a total value the National Mortgage Settlement. In some instances, of $1,411 million; and (3) refinancing concessions to enable Citigroup is also a defendant in purported class actions, “qui current borrowers whose properties are worth less than the tam” actions, or other actions addressing the same or similar value of their loans to reduce their interest rates, to be subject matters, including the SCRA. Such actions by private completed over three years, with a total value of $378 million. litigants or counties and municipalities are not released in the The total amount of the financial consideration to be paid by National Mortgage Settlement. Citigroup and Related Parties is $2.2 billion. As of December Federal and state regulators, including the SEC, also have 31, 2011, Citigroup had fully provided for the cash payments served subpoenas or otherwise requested information related called for under the National Mortgage Settlement (see Note to Citigroup’s issuing, sponsoring, or underwriting of MBS. 29 to the Consolidated Financial Statements). Citigroup These inquiries include a subpoena from the Civil Division of expects that its loan loss reserves as of December 31, 2011 the Department of Justice that Citigroup received on January will be sufficient to cover the customer relief payments to 27, 2012. delinquent borrowers. The impact of the refinancing ERISA Actions: Beginning in November 2007, numerous concessions will be recognized over a period of years in the putative class actions were filed in the United States District form of lower interest income. What impact, if any, the Court for the Southern District of New York by current or National Mortgage Settlement will have on the behavior of former Citigroup employees asserting claims under ERISA borrowers in general, however, whether or not their loans are against Citigroup and Related Parties alleged to have served as within the scope of the settlement, is uncertain and difficult to ERISA plan fiduciaries. On August 31, 2009, the district court predict. granted defendants’ motion to dismiss the consolidated class The National Mortgage Settlement also provides for action complaint, captioned IN RE CITIGROUP ERISA mortgage servicing standards in addition to those previously LITIGATION. Plaintiffs appealed the dismissal and, on agreed in Consent Orders dated April 13, 2011 with the October 19, 2011, the United States Court of Appeals for the 108 CITIBANK N.A. 2010–2011 FINANCIALS

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Second Circuit affirmed the district court’s order dismissing improperly serviced mortgage loans in those trusts, and that the case. Additional information relating to this action is Citigroup affiliates have repurchase obligations. The letter publicly available in court filings under the docket number 07 further threatens to instruct trustees of the trusts to assert Civ. 9790 (S.D.N.Y.) (Stein, J.) and 09-3804 (2d Cir.). claims against Citigroup based on these allegations. Citigroup Beginning on October 28, 2011, several putative class is also a trustee of securitization trusts for MBS issued by actions were filed in the United States District Court for the unaffiliated issuers that have received similar letters from Southern District of New York by current or former Citigroup Gibbs & Bruns, LLP. employees asserting claims under ERISA against Citigroup Given the continued and increased focus on mortgage- and Related Parties alleged to have served as ERISA plan related matters, as well as the increasing level of litigation and fiduciaries from 2008 to 2009. Additional information relating regulatory activity relating to mortgage loans and mortgage- to these actions is publicly available in court filings under the backed securities, the level of inquiries and assertions docket numbers 11 Civ. 7672, 7943, 8982, 8990 and 8999 respecting securitizations may further increase. These (S.D.N.Y.) (Koeltl, J.). inquiries and assertions could lead to actual claims for Mortgage-Backed Securities and CDO Investor Actions breaches of representations and warranties, or to litigation and Repurchase Claims: Beginning in July 2010, several relating to such breaches or other matters. investors, including Cambridge Place Investment Management, The Charles Schwab Corporation, the Federal Counterparty and Investor Actions Home Loan Bank of Chicago, the Federal Home Loan Bank of Citigroup and Related Parties have been named as defendants in Boston, Allstate Insurance Company and affiliated entities, actions brought in various state and federal courts, as well as in Union Central Life Insurance Co. and affiliated entities, the arbitrations, by counterparties and investors that claim to have Federal Housing Finance Agency, the Western & Southern suffered losses as a result of the credit crisis. Life Insurance Company and affiliated entities, Moneygram In August 2011, two Saudi nationals and related entities Payment Systems, Inc., and Loreley Financing (Jersey) No. 3 commenced a FINRA arbitration against Citigroup Global Ltd. and affiliated entities, have filed lawsuits against Markets, Inc. (CGMI) alleging $380 million in losses resulting Citigroup and Related Parties alleging actionable from certain options trades referencing a portfolio of hedge misstatements or omissions in connection with the issuance funds and certain credit facilities collateralized by a private and underwriting of MBS and CDOs. These actions are in equity portfolio. CGMI did not serve as the counterparty or early stages. As a general matter, plaintiffs in these actions are credit facility provider in these transactions. In September seeking rescission of their investments or other damages. 2011, CGMI commenced an action in the United States Additional information relating to these actions is publicly District Court for the Southern District of New York seeking available in court filings under the docket numbers 10-2741- to enjoin the arbitration. Simultaneously with that filing, the BLS1 (Mass. Super. Ct.) (Lauriat, J.), 11-0555-BLS1 (Mass. Citigroup entities that served as the counterparty or credit Super. Ct.) (Lauriat, J.), CGC-10-501610 (Cal. Super. Ct.) facility provider to the transactions commenced actions in (Kramer, J.), 10 CH 45033 (Ill. Super. Ct.) (Allen, J.), London and Switzerland for declaratory judgments of no LC091499 (Cal. Super. Ct.) (Mohr, J.), 11 Civ. 10952 (D. liability. Mass.) (O’Toole, J.), 11 Civ. 1927 (S.D.N.Y.) (Sullivan, J.), 11 Civ. 2890 (S.D.N.Y.) (Daniels, J.), 11 Civ. 6188 Lehman Structured Notes Matters (S.D.N.Y.) (Cote, J.), 11 Civ. 6196 (S.D.N.Y.) (Cote, J.), 11 Like many other financial institutions, Citigroup, through Civ. 6916 (S.D.N.Y.) (Cote, J.), 11 Civ. 7010 (S.D.N.Y.) certain of its affiliates and subsidiaries, distributed structured (Cote, J.), A 1105042 (Ohio Ct. Common Pleas) (Myers, J.), notes (Notes) issued and guaranteed by Lehman entities to No. 27-CB-11-21348 (Minn. Dist. Ct.) (Howard, J.) and retail customers in various countries outside the United States, 650212/12 (N.Y. Sup. Ct.). Other purchasers of MBS or principally in Europe and Asia. After the relevant Lehman CDOs sold or underwritten by Citigroup affiliates have entities filed for bankruptcy protection in September 2008, threatened to file lawsuits asserting similar claims, some of certain regulators in Europe and Asia commenced which Citigroup has agreed to toll pending further discussions investigations into the conduct of financial institutions with these investors. involved in such distribution, including Citigroup entities. In addition, various parties to MBS securitizations, among Some of those regulatory investigations have resulted in others, have asserted that certain Citigroup affiliates breached adverse findings against Citigroup entities. Some purchasers representations and warranties made in connection with of the Notes have filed civil actions or otherwise complained mortgage loans placed into securitization trusts. Citigroup also about the sales process. Citigroup has resolved the vast has experienced an increase in the level of inquiries relating to majority of such actions or complaints either on an individual these securitizations, particularly requests for loan files from basis or through settlement offers, made without admission of trustees of securitization trusts and others. Beginning in liability, to all eligible purchasers of Notes distributed by December 2011, Citigroup received letters from the law firm Citigroup in certain countries. Gibbs & Bruns LLP, which purports to represent a group of In Belgium, criminal charges were brought against a investment advisers and others which allegedly hold 25% or Citigroup subsidiary (CBB) and three current or former more of the voting rights in 70 MBS trusts issued and/or employees. On December 1, 2010, the court acquitted all underwritten by Citigroup affiliates with an aggregate defendants of fraud and anti-money laundering charges but outstanding balance in excess of $24 billion. The letters allege convicted all defendants under the Prospectus Act, and that certain mortgages in these trusts were sold or deposited convicted CBB under Fair Trade Practices legislation. CBB into the trusts based on misrepresentations by the mortgage was fined 165,000 Euro and was ordered to compensate 63 originators, sellers and/or depositors, that Citigroup non-settling claimants for the par value of their Notes (2.4 109 CITIBANK N.A. 2010–2011 FINANCIALS

292 million Euro in the aggregate), net of any recovery they proprietary assets and cash of LBIE. During the course of receive in the Lehman bankruptcies. Both CBB and the Public LBIE’s administration, Citigroup and Related Parties asserted Prosecutor have appealed the judgment. The appellate court a contractual right to retain the proprietary assets and cash as has indicated that it will render its decision on April 2, 2012. security for amounts owed to Citigroup and Related Parties by LBIE and its affiliates (including LBHI and LBI), a right that Lehman Brothers Bankruptcy Proceedings the administrators for LBIE disputed. On June 28, 2011, On March 18, 2011, Citigroup and Related Parties were Citigroup and Related Parties entered into a settlement named as defendants in an adversary proceeding captioned agreement with LBIE resolving the parties’ disputes with LEHMAN BROTHERS INC. v. CITIBANK, N.A., ET AL. In respect to the LBIE proprietary assets and cash held by the complaint, which asserts claims under federal bankruptcy Citigroup and Related Parties as custodians. Under the terms and state law, the Securities Investor Protection Act Trustee of the settlement, Citigroup and Related Parties have alleges that a $1 billion cash deposit Lehman Brothers Inc. undertaken the return of LBIE’s proprietary assets and cash (LBI) placed with Citibank prior to the commencement of and released all claims in respect of those assets and cash in liquidation proceedings should be returned to the bankruptcy exchange for releases, the payment of fees and preservation of estate, that Citibank’s setoff against the $1 billion deposit to certain claims asserted by Citigroup and Related Parties in satisfy its claims against LBI should be set aside, and that LBIE’s insolvency proceeding in England. The settlement approximately $342 million in additional deposits by LBI does not affect the deposits, claims or setoff rights at issue in currently held by Citibank and its affiliates should be returned the disputes with LBI and LBHI described above. Additional to the estate. Citigroup has moved to dismiss the adversary information relating to the administration of LBIE is available complaint. Additional information relating to this adversary at www.pwc.co.uk/eng/issues/lehman_updates.html. proceeding is publicly available in court filings under the docket number 11-01681 (Bankr. S.D.N.Y.) (Peck, J.). Terra Firma Litigation Additional information relating to the LBI liquidation In December 2009, plaintiffs, general partners of two related proceeding, captioned IN RE LEHMAN BROTHERS INC., is private equity funds, filed a complaint in New York state publicly available in court filings under the docket number 08- court, subsequently removed to the Southern District of New 01420 (Bankr. S.D.N.Y.) (Peck, J.). York, against certain Citigroup affiliates. Plaintiffs allege that On February 8, 2012, Citigroup and Related Parties were during the May 2007 auction of the music company EMI, named as defendants in an adversary proceeding captioned Citigroup, as advisor to EMI and as a potential lender to LEHMAN BROTHERS HOLDINGS INC. v. CITIBANK, plaintiffs’ acquisition vehicle Maltby, fraudulently or N.A., ET AL. The proceeding principally concerns proofs of negligently orally misrepresented the intentions of another claim Citigroup entities have filed against Lehman Brothers potential bidder regarding the auction. Plaintiffs alleged that, Holdings Inc. (LBHI) and its affiliates, in which Citigroup but for the oral misrepresentations, Maltby would not have entities have claimed they are owed more than $2.6 billion acquired EMI for approximately 4.2 billion British pounds. under derivatives contracts, loan documents, and clearing Plaintiffs further alleged that, following the acquisition of agreements, among other arrangements. Citigroup has further EMI, certain Citigroup entities tortiously interfered with asserted a right to offset approximately $2.3 billion of these plaintiffs’ business relationship with EMI. Plaintiffs sought claims against $2 billion deposited by LBHI with Citibank, billions of dollars in damages. On September 15, 2010, the N.A. in June 2008, as well as certain other LBHI deposits and district court issued an order granting in part and denying in other payables owed by the Citigroup entities. part Citigroup’s motion for summary judgment. Plaintiffs’ The complaint asserts claims under state and federal law claims for negligent misrepresentation and tortious to recover the $2 billion deposit and obtain a declaration that it interference were dismissed. On October 18, 2010, a jury trial may not be used to offset any Citigroup entities’ claims, to commenced on plaintiffs’ remaining claims for fraudulent avoid a $500 million transfer and an amendment to a misrepresentation and fraudulent concealment. The court guarantee in favor of Citigroup, and for other relief. The dismissed the fraudulent concealment claim before sending the complaint also raises objections to proofs of claim filed by case to the jury. On November 4, 2010, the jury returned a Citigroup entities against LBHI and its affiliates. The claim verdict on the fraudulent misrepresentation claim in favor of objections seek to reduce or avoid approximately $2 billion in Citigroup. Judgment dismissing the complaint was entered on claims relating to terminated derivatives contracts and to December 9, 2010. Plaintiffs have appealed the judgment as to disallow all claims against LBHI to the extent they seek to the negligent misrepresentation claim, the fraudulent recover against the disputed deposit or guarantee. Additional concealment claim and the fraudulent misrepresentation claim. information relating to this adversary proceeding is publicly Additional information relating to this action is publicly available in court filings under the docket number 12-01044 available in court filings under the docket numbers 09 Civ. (Bankr. S.D.N.Y.) (Peck, J.). 10459 (S.D.N.Y.) (Rakoff, J.) and 11-0126 (2d Cir.). Additional information relating to the Chapter 11 bankruptcy proceedings of LBHI and its subsidiaries, Interbank Offered Rates-Related Litigation and Other captioned IN RE LEHMAN BROTHERS HOLDINGS INC., Matters is publicly available in court filings under the docket number Government agencies in the U.S., including the Department of 08-13555 (Bankr. S.D.N.Y.) (Peck, J.). Justice, the Commodity Futures Trading Commission and the On September 15, 2008, LBHI subsidiary Lehman Securities and Exchange Commission, as well as agencies in Brothers International (Europe) (LBIE) entered administration other jurisdictions, including the European Commission, the under English law. Since that time, Citigroup and Related U.K. Financial Services Authority, the Japanese Financial Parties have held as custodians approximately $2 billion of Services Agency (JFSA), the Canadian Competition Bureau 110 CITIBANK N.A. 2010–2011 FINANCIALS

293 and the Swiss Competition Commission, are conducting Tribune Company Bankruptcy investigations or making inquiries regarding submissions Certain Citigroup affiliates have been named as defendants in made by panel banks to bodies that publish various interbank adversary proceedings related to the Chapter 11 cases of offered rates. As members of a number of such panels, Tribune Company (Tribune) pending in the United States Citigroup subsidiaries have received requests for information Bankruptcy Court for the District of Delaware. The and documents. Citigroup is cooperating with the complaints, which arise out of the approximate $11 billion investigations and inquiries and is responding to the requests. leveraged buyout (LBO) of Tribune in 2007, were stayed by On December 16, 2011, the JFSA took administrative court order pending a confirmation hearing on competing action against Citigroup Global Markets Japan Inc. (CGMJ) plans of reorganization. On October 31, 2011, the bankruptcy for, among other things, certain communications made by two court denied confirmation of both the competing plans. A third CGMJ traders about the Euroyen Tokyo interbank offered rate amended plan of reorganization was then proposed, and (TIBOR) and the yen London interbank offered rate (LIBOR). confirmation proceedings are expected to take place in 2012. The JFSA issued a business improvement order and suspended Additional information relating to these actions is publicly CGMJ’s trading in derivatives related to yen LIBOR and available in court filings under the lead docket number 08- Euroyen and yen TIBOR from January 10 to January 23, 13141 (Bankr. D. Del.) (Carey, J.). Certain Citigroup affiliates 2012. On the same day, the JFSA also took administrative also have been named as defendants in actions brought by action against Citibank Japan Ltd. (CJL) for conduct arising Tribune creditors alleging state law constructive fraudulent out of CJL’s retail business and also noted that the conveyance claims relating to the Tribune LBO. These actions communications made by the CGMJ traders to employees of have been stayed pending confirmation of a plan of CJL about Euroyen TIBOR had not been properly reported to reorganization. Additional information relating to these CJL’s management team. The inquiries by government actions is publicly available in court filings under the docket agencies into various interbank offered rates are ongoing. number 11 MD 02296 (S.D.N.Y.) (Holwell, J.). Additionally, beginning in April 2011, a number of purported class actions and other private civil suits were filed Interchange Fees Litigation in various courts against banks that served on the LIBOR Beginning in 2005, several putative class actions were filed panel and their affiliates, including certain Citigroup against Citigroup and Related Parties, together with Visa, subsidiaries. The actions, which assert various federal and MasterCard and other banks and their affiliates, in various state law claims relating to the setting of LIBOR, have been federal district courts. These actions were consolidated with consolidated into a multidistrict litigation proceeding before other related cases in the Eastern District of New York and Judge Buchwald in the Southern District of New York. captioned IN RE PAYMENT CARD INTERCHANGE FEE Additional information relating to these actions is publicly AND MERCHANT DISCOUNT ANTITRUST available in court filings under docket number 1:11-md-2262 LITIGATION. The plaintiffs in the consolidated class action (S.D.N.Y.) (Buchwald, J.). are merchants that accept Visa- and MasterCard-branded payment cards, as well as membership associations that claim KIKOs to represent certain groups of merchants. The pending Several local banks in Korea, including a Citigroup subsidiary complaint alleges, among other things, that defendants have (CKI), entered into foreign exchange derivative transactions engaged in conspiracies to set the price of interchange and with small and medium-size export businesses (SMEs) to merchant discount fees on credit and debit card transactions in enable the SMEs to hedge their currency risk. The derivatives violation of Section 1 of the Sherman Act. The complaint also had “knock-in, knock-out” features. Following the devaluation alleges additional Sherman Act and California law violations, of the Korean won in 2008, many of these SMEs incurred including alleged unlawful maintenance of monopoly power significant losses on the derivative transactions and filed civil and alleged unlawful contracts in restraint of trade pertaining lawsuits against the banks, including CKI. The claims to various Visa and MasterCard rules governing merchant generally allege that the products were not suitable and that conduct (including rules allegedly affecting merchants’ ability, the risk disclosure was inadequate. As of December 31, 2011, at the point of sale, to surcharge payment card transactions or there were 83 civil lawsuits filed by SMEs against CKI. To steer customers to particular payment cards). In addition, date, 79 decisions have been rendered at the district court supplemental complaints filed against defendants in the class level, and CKI has prevailed in 63 of those decisions. In the action allege that Visa’s and MasterCard’s respective initial other 16 decisions, plaintiffs were awarded only a portion of public offerings were anticompetitive and violated Section 7 the damages sought. The damage awards total in the aggregate of the Clayton Act, and that MasterCard’s initial public approximately $19.5 million. CKI is appealing the 16 adverse offering constituted a fraudulent conveyance. decisions. A significant number of plaintiffs that had decisions Plaintiffs seek injunctive relief as well as joint and several rendered against them are also filing appeals, including liability for treble their damages, including all interchange fees plaintiffs that were awarded less than all of the damages they paid to all Visa and MasterCard members with respect to Visa sought. In the single plaintiff’s appeal that has been decided, and MasterCard transactions in the U.S. since at least January the decision was in CKI’s favor. 1, 2004. Certain publicly available documents estimate that Korean prosecutors undertook a criminal investigation of Visa- and MasterCard-branded cards generated approximately local banks, including CKI, based on allegations of fraud in $40 billion in interchange fees industry wide in 2009. the sale of these products. In July 2011 prosecutors decided Defendants dispute that the manner in which interchange and not to proceed with indictments. That decision has been merchant discount fees are set, or the rules governing affirmed on appeal. merchant conduct, are anticompetitive. Fact and expert discovery has closed. Defendants’ motions to dismiss the 111 CITIBANK N.A. 2010–2011 FINANCIALS

294 pending class action complaint and the supplemental Justice (STJ), the highest appellate court for federal law in complaints are pending. Also pending are plaintiffs’ motion to Brazil. The 4th Section of the STJ ruled 3-2 in favor of Citi in certify nationwide classes consisting of all U.S. merchants that November 2008. CIIP appealed the decision to the Special accept Visa- and MasterCard-branded payment cards and Court of the STJ on procedural grounds. In December 2009, motions by both plaintiffs and defendants for summary the Special Court of the STJ decided 9-0 in favor of CIIP on judgment. The parties have been engaged in mediation for the procedural issue, overturning the 3-2 merits decision in several years, including recent settlement conferences held at favor of Citi. Citi Brazil filed a motion for clarification with the direction of the court. Additional information relating to the Special Court of the STJ, and on May 4, 2011, the Special these consolidated actions is publicly available in court filings Court ruled 5-3 in favor of Citi Brazil. This ruling has the under the docket number MDL 05-1720 (E.D.N.Y.) effect of reinstating the 3-2 decision of the 4th Section of the (Gleeson, J.). STJ in favor of Citi Brazil rendered in November 2008, which had reversed the adverse judgment of the trial court. The only Parmalat Litigation and Related Matters procedural recourse remaining to CIIP would be to file a On July 29, 2004, Dr. Enrico Bondi, the Extraordinary constitutional claim with the Supreme Court of Brazil. Commissioner appointed under Italian law to oversee the administration of various Parmalat companies, filed a Allied Irish Bank Litigation complaint in New Jersey state court against Citigroup and In 2003, Allied Irish Bank (AIB) filed a complaint in the Related Parties alleging, among other things, that the Southern District of New York seeking to hold Citibank and defendants “facilitated” a number of frauds by Parmalat Bank of America, former prime brokers for AIB’s subsidiary insiders. On October 20, 2008, following trial, a jury rendered Allfirst Bank (Allfirst), liable for losses incurred by Allfirst as a verdict in Citigroup’s favor on Parmalat’s claims and in a result of fraudulent and fictitious foreign currency trades favor of Citibank on three counterclaims. The court entered entered into by one of Allfirst’s traders. AIB seeks judgment for Citibank on the counterclaims in the amount of compensatory damages of approximately $500 million, plus $431 million, which is accruing interest. On December 22, punitive damages, from Citibank and Bank of America 2011, the intermediate appellate court unanimously affirmed collectively. In 2006, the Court granted in part and denied in the judgment. On January 23, 2012, Bondi petitioned the New part defendants’ motion to dismiss. In 2009, AIB filed an Jersey Supreme Court to review the decisions of the lower amended complaint. In 2011, the parties completed fact courts. Additional information concerning this matter is discovery. Additional information concerning this matter is publicly available in court filings under docket number publicly available in court filings under docket number A-2654-08T2 (N.J. Sup. Ct.). 03 Civ. 3748 (S.D.N.Y.) (Batts, J.). In addition, prosecutors in Parma and Milan, Italy, have commenced criminal proceedings against certain current and Settlement Payments former Citigroup employees (along with numerous other Payments required in settlement agreements described above investment banks and certain of their current and former have been made or are covered by existing litigation accruals. employees, as well as former Parmalat officers and * * * accountants). In the event of an adverse judgment against the Additional matters asserting claims similar to those described individuals in question, it is possible that the authorities could above may be filed in the future. seek administrative remedies against Citigroup. On April 18, 2011, the Milan criminal court acquitted the sole Citigroup defendant of market-rigging charges. The Milan prosecutors have appealed part of that judgment and seek administrative remedies against Citigroup, which may include disgorgement of 70 million Euro and a fine of 900,000 Euro. Additionally, Bondi has purported to file a civil complaint against Citigroup in the context of the Parma criminal proceedings, seeking 14 billion Euro in damages. In January 2011, certain Parmalat institutional investors filed a civil complaint seeking damages of approximately 130 million Euro against Citigroup and other financial institutions.

Companhia Industrial de Instrumentos de Precisão Litigation A commercial customer, Companhia Industrial de Instrumentos de Precisão (CIIP), filed a lawsuit against Citibank, N.A., Brazil branch (Citi Brazil), in 1992, alleging damages arising from an unsuccessful attempt by Citi Brazil in 1975 to declare CIIP bankrupt after CIIP defaulted on a loan owed to Citi Brazil. The trial court ruled in favor of CIIP and awarded damages that Citigroup had estimated at more than $330 million after taking into account interest, currency adjustments, and current exchange rates. Citi Brazil lost its appeal but filed a special appeal to the Superior Tribunal of 112 CITIBANK N.A. 2010–2011 FINANCIALS

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29. SUBSEQUENT EVENTS

Investment in Akbank Impairment Charge On March 23, 2012, Citigroup announced that as part of Citi’s ongoing capital planning efforts and in light of general improvement in equity capital markets globally, Citibank plans to reduce its ownership interest in Akbank T.A.S. (Akbank) to below 10%, subject to appropriate market conditions and required approvals. Citibank currently holds a 20% equity interest in Akbank, which it purchased in January 2007. The current carrying value of the equity method investment is $3.4 billion; in addition, hedging costs and translation losses reflected in other comprehensive income (OCI), a component of equity, total approximately $1.0 billion. As a result of this decision, in the first quarter of 2012 Citibank expects to record an impairment charge related to its total investment in Akbank amounting to approximately $1.1 billion pre-tax ($0.7 billion after-tax). This impairment charge is primarily driven by the recognition of all respective net investment foreign currency hedging and translation losses previously reflected in OCI as well as a reduction in carrying value of the total investment to reflect closing market price as of March 23, 2012.

Sale of Shanghai Pudong Development Bank On March 18, 2012, Citi announced that it has sold its 2.71% equity stake in Shanghai Pudong Development Bank via block trade to institutional investors. Total proceeds from the transaction are expected to be $668 million at the current exchange rate, resulting in an after-tax gain of approximately $349 million in the first quarter of 2012.

Agreement in Principle with Certain U.S. Federal Government Agencies and State Attorneys General On February 9, 2012, Citigroup announced that it had reached an agreement in principle with the United States and state attorneys general regarding the settlement of a number of related investigations into residential loan servicing and origination practices, as well as the resolution of related mortgage litigation. See Note 28 to the Consolidated Financial Statements.

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296 EXHIBIT C

INFORMATION RELATING TO DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

DERIVATIVE INSTRUMENTS

Derivatives are an integral element of the world’s financial and commodity markets. Globalization of economic activity has brought more market participants in contact with foreign exchange and interest rate risk at a time when market volatility has increased. The Company has developed many techniques using derivatives to enhance the efficiency of capital and trading risk management.

DERIVATIVE INSTRUMENTS – OVERVIEW

Derivative instruments are contractual commitments or payment exchange agreements between counterparties that “derive” their value from some underlying asset price, index, interest rate or exchange rate. The markets for these instruments have grown tremendously over the past decade. A vast increase in the types of derivative users and their motivations in using these products has resulted in an expansion of geographic coverage, transaction volume and liquidity, and the number of underlying products and instruments.

Derivatives have been used quite successfully by multinational corporations to hedge foreign currency exposure, by financial institutions to manage gaps in maturities between assets and liabilities, by investment companies to reduce transaction costs and take positions in foreign markets without assuming currency risk and by non-financial companies to fix the prices of inputs into the manufacturing process or prices of the products they sell. Derivatives are also used by investors when, considering such factors as taxes, regulations, capital and liquidity, they provide the most efficient means of taking a desired market position. These are just a few of the business objectives for which derivatives are used.

Derivatives are accounted for and settled differently than cash instruments and their use requires special management oversight. Such oversight should ensure that management understands the transactions to which it commits their firm and that the transactions are executed in accordance with sensible corporate risk policies and procedures.

Derivatives activities, like the Company’s other ongoing business activities, give rise to market, credit, and operational risks. Market risk represents the risk of loss from adverse market price movements. While market risk relating to derivatives is clearly an important consideration for intermediaries such as the Company, such risk represents only a component of the Company’s overall market risk, which arises from activities in non-derivative instruments as well. Consequently, the scope of the Company’s market risk management procedures extends beyond derivatives to include all financial instruments and commodities. Credit risk is the loss that the Company would incur if counterparties failed to perform pursuant to their contractual obligations. While credit risk is not a principal consideration with respect to exchange-traded instruments, it is a major factor with respect to non-exchange-traded OTC instruments. Whenever possible, the Company uses industry master netting agreements to reduce aggregate credit exposure. Swap and foreign exchange agreements are generally documented utilizing counterparty master netting agreements supplemented by trade confirmations. The Company’s funding and risk management of its derivatives activities is enhanced through the use of bilateral security agreements. See “Risk Management” for discussions of the Company’s management of market, credit, and operational risks.

NATURE AND TERMS OF DERIVATIVE INSTRUMENTS

The Company enters into various financial contracts involving future settlement, which are based upon a predetermined principal or par value (referred to as the “notional” amount). Such instruments include swaps, swap options, caps and floors, futures contracts, forward purchase and sale agreements,

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option contracts and warrants. Transactions are conducted either through organized exchanges or OTC. For a discussion of the nature and terms of these instruments see Note 10, “Derivatives Activities,” to the consolidated financial statements.

THE COMPANY’S USE OF DERIVATIVE INSTRUMENTS

The Company’s use of derivatives can be broadly classified between trading and non-trading activities. The vast majority of the Company’s derivatives use is in its trading activities, which include market-making activities for customers and the execution of trading strategies for its own account (“proprietary trading”). The Company’s derivative counterparties consist primarily of other major derivative dealers, financial institutions, insurance companies, pension funds and investment companies, and other corporations. The scope of permitted derivatives activities both for trading and non-trading purposes for each of the Company’s businesses is defined by senior management.

Trading Activities

A fundamental activity of the Company is to provide market liquidity to its customers across a broad range of financial instruments, including derivatives. The Company also seeks to generate returns by executing proprietary trading strategies. By their very nature, proprietary trading activities represent the assumption of risk. However, trading positions are constructed in a manner that seeks to define and limit risk taking only to those risks that the Company intends to assume. The most significant derivatives-related activity conducted by the Company is in fixed-income derivatives, which include interest rate swaps, financial futures, swap options, and caps and floors. Other derivative transactions, such as currency swaps, forwards and options as well as derivatives linked to equities, are also regularly executed by the Company. The Company generally earns a spread from market-making transactions involving derivatives, as it generally does from its market-making activities for non-derivative transactions. The Company also utilizes derivatives to manage the market risk inherent in the securities inventories and derivative portfolios which it maintains for market-making purposes as well as its “book” of swap agreements and related transactions with customers. The Company conducts its commodities dealer activities in spot and forward physical markets, organized futures exchanges as well as in OTC financially-settled markets where the Company executes transactions involving commodities options, forwards and swaps, much in the same manner as it does in the financial markets.

Non-Trading Activities

The Company also makes use of financial derivatives for non-trading, or end user, purposes. These instruments include interest rate swaps, cross-currency swaps and forward currency contracts, which provide the Company with added flexibility in the management of its capital and funding costs. Interest rate swaps are utilized to effectively convert the majority of the Company’s fixed-rate term debt to variable-rate obligations. Cross-currency swaps are utilized to effectively convert a portion of its non-U.S. dollar denominated term debt to U.S. dollar denominated obligations. Forward currency contracts are utilized to minimize the variability in equity otherwise attributable to exchange rate movements.

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RISK MANAGEMENT

Effective management of the risks inherent in the Company’s businesses is critical. The following section discusses certain aspects of the risks inherent in the Company’s businesses, procedures in place to manage such risks, and initiatives underway to continue to enhance the Company’s management of risk.

MARKET RISK MANAGEMENT PROCESS

Market risk encompasses liquidity risk, price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.

Market risks are measured in accordance with established standards to ensure consistency across businesses and the ability to aggregate risk. Each business is required to establish, with approval from independent market risk management, a market risk limit framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of CGMHI’s overall risk appetite.

In all cases, the businesses are ultimately responsible for the market risks they take and for remaining within their defined limits.

Valuation and Control of Trading Positions

The Company operates within the Institutional Clients Group (ICG) and Broker and Asset Management segments of Citigroup Inc. The ICG Risk Management Committee provides independent risk management and oversight of ICG’s trading positions (financial instruments, commodities and contractual commitments). This Committee, chaired by the Co-Head of ICG Risk Management, includes the Chief Executive Officer and Chief Financial Officer of ICG, the Citigroup Senior Risk Officer and senior management from the trading businesses, Audit, Legal, Financial Control and Treasury. The Risk Management Committee reviews risk tolerances, limits utilization, material positions and risk exposures, stress analysis, and audit and regulatory issues.

Trading positions are necessary for an active market maker, but can be a major source of liquidity risk. Monitoring the Company’s trading inventory levels and composition is the responsibility of ICG Risk Management and various support units, which monitor trading positions on a position by position level. Independent oversight of pricing is the responsibility of Financial Control, with review by ICG Risk Management. The Company also provides for liquidity risk by imposing markdowns for illiquid concentrated positions. Additionally, inventory event risk, both for issuer credit and emerging markets, is analyzed with the involvement of senior traders, economists and credit department personnel. Market scenarios for the major emerging markets are maintained and updated to reflect the event risk for the emerging market positions. In addition, the Company, as a dealer of securities in the global capital markets, has risk to issuers of fixed income securities for the timely payment of principal and interest. Principal risk is reviewed by ICG Risk Management, which identifies and reports major risks undertaken by the trading businesses. The ICG Credit Department (the Department) combines principal risk positions with credit risks resulting from counterparty pre-settlement and settlement risk to review aggregate exposures by counterparty, industry and country.

Tools for Risk Management and Reporting

The Company’s market risk measurement begins with the identification of relevant market risk factors. These core risk factors vary from market to market, and region to region. Risk factors are used in three types of analysis: stress analysis, scenario analysis and value-at-risk analysis.

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Stress Analysis The Company performs stress analysis by using risk sensitivity of inventory positions for specified upward and downward moves in risk factors, and computing the revenue implications of these repricings. Stress analysis is a useful tool for identifying exposures that appear to be relatively small in the current environment but grow more than proportionately with changes in risk factors. Such risk is typical of a number of derivative instruments, including options sold, mortgage derivatives and structured products. Stress analysis provides for the measurement of the potential impact of extremely large moves in risk factors, which, though infrequent, can be expected to occur from time to time.

Scenario Analysis Scenario analysis is a tool that generates forward-looking “what-if” simulations for specified changes in market factors. For example, the scenario analysis simulates the impact of significant changes in domestic and foreign interest rates. The revenue implications of the specified scenario are quantified on a business unit and geographic basis.

Value at Risk Analysis; Value at risk (VAR) estimates, at a 99% confidence level, the potential decline in the value of a position or a portfolio under normal market conditions. VAR statistics can be materially different across firms due to differences in portfolio composition, differences in VAR methodologies, and differences in model parameters. Due to these inconsistencies, Citi believes VAR statistics can be used more effectively as indicators of trends in risk taking within a firm, rather than as a basis for inferring differences in risk taking across firms.

Citi uses full Monte Carlo simulation, which it believes is conservatively calibrated to incorporate the greater of short-term (most recent month) and long-term (three years) market volatility. The Monte Carlo simulation involves approximately 300,000 market factors, making use of 180,000 time series, with market factors updated daily and model parameters updated weekly.

The conservative features of the VAR calibration contribute approximately 20% add-on to what would be a VAR estimated under the assumption of stable and perfectly normally distributed markets. Under normal and stable market conditions, Citi would thus expect the number of days where trading losses exceed its VAR to be less than two or three exceptions per year. Periods of unstable market conditions could increase the number of these exceptions. During the last four quarters, there was one back-testing exception where trading losses exceeded the VAR estimate at the Citigroup level (back-testing is the process in which the daily VAR of a portfolio is compared to the actual daily change in the market value of transactions).

Measuring market risk using statistical risk management models has recently become the main focus of risk management efforts by many companies whose earnings are exposed to changes in the fair value of financial instruments. Management believes that statistical models alone do not provide a reliable method of monitoring and controlling risk. While VAR models are relatively sophisticated, they have several known limitations. Most significantly, standard VAR models do not incorporate the potential loss caused by very unusual market events. Stress testing is necessary as a complement to VAR to measure this potential risk.

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The following table summarizes VAR to the Company in the CGMHI trading portfolios as of December 31, 2011 and 2010, including the total VAR, the specific risk-only component of VAR, and total – general market factors only, along with the yearly averages:

1 Year December Rolling 1 Year 1 Year December (in millions of dollars) 30, 2011 Average High Low 30, 2010 Interest rate $130 $140 $208 $100 $136 Equity 32 44 104 22 45 Commodity 16 22 39 16 16 Foreign exchange 13 15 26 8 14 Covariance adjustment (59) (87) N/A N/A (90) Total − all market risk factors, including general and specific risk $132 $134 $ 193 $ 87 $121 Specific risk-only component 34 25 – – 14 Total – general market factors only $ 98 $109 – – $107 Incremental Impact of CVA (30) (7) – – (25) Total Trading & CVA 102 127 214 71 96

The specific risk-only component represents the level of equity and debt issuer-specific risk embedded in VAR. The Company’s VAR model is subject to extensive hypothetical back-testing annually.

The following describes the components of market risk:

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect the value of financial instruments. In connection with the Company’s dealer and proprietary trading activities, including market-making in OTC derivative contracts, the Company is exposed to interest rate risk arising from changes in the level or volatility of interest rates, mortgage prepayment speeds or the shape and slope of the yield curve. The Company’s corporate bond activities expose it to the risk of loss related to changes in credit spreads. When appropriate, the Company attempts to hedge its exposure to interest rate risk by entering into transactions such as interest rate swaps, options, U.S. and non-U.S. government securities and futures and forward contracts designed to mitigate such exposure.

Equity Price Risk

The Company is exposed to equity price risk as a consequence of making markets in equity securities and equity derivatives. Equity price risk results from changes in the level or volatility of equity prices, which affect the value of equity securities, or instruments that derive their value from a particular stock, a basket of stocks or a stock index. The Company attempts to reduce the risk of loss inherent in its inventory in equity securities by entering into hedging transactions, including equity options and futures, designed to mitigate the Company’s market risk profile.

Commodity Price Risk

Commodity price risk results from the possibility that the price of the underlying commodity (principally oil, natural gas, electricity and metals) may rise or fall.

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Foreign Exchange Risk

Foreign exchange risk arises from the possibility that changes in foreign exchange rates will impact the value of financial instruments. When the Company buys or sells a foreign currency or financial instrument denominated in a currency other than the local currency of the trading center, exposure exists from a net open currency position. Until the position is covered by selling or buying an equivalent amount of the same currency or by entering into a financing arrangement denominated in the same currency, the Company is exposed to a risk that the exchange rate may move against it.

CREDIT RISK

Credit risk represents the loss the Company could incur if a debtor, an issuer or a counterparty is unable or unwilling to perform on its commitments, including the timely payment of principal and interest or settlement of swap and foreign exchange transactions, repurchase agreements, securities purchases and sales, and other contractual obligations. The Company’s credit risk management process considers the many factors that influence the probability of a potential loss, including, but not limited to, the issuer’s or counterparty’s financial profile, its business prospects and reputation, the specific terms and duration of the transactions, the pledging of collateral, the exposure of the transactions to market risk, macroeconomic developments and sovereign risk.

Origin of Credit Risk

In the normal course of its operations, the Company enters into various transactions that may give rise to various types of credit risk. The different forms of credit risk to which the Company may be exposed include:

¼ Lending Credit Risk: The risk that an obligor may default on principal or interest payments of a loan.

¼ Issuer Credit Risk: The risk that the issuer of a security will default on principal or interest payments. One component of the market risk of securities and derivatives on particular securities is that caused by the credit risk of the issuer. This component of market risk is also called the specific risk component of market risk.

¼ Counterparty Credit Risk: The risk that a counterparty to a trade will default on its obligations. Counterparty credit risk takes two forms:

¼ Settlement Risk: The risk that a counterparty will fail to perform during an exchange of cash or other assets. This risk arises from the requirement, in certain circumstances, to release cash or securities before receiving payment.

¼ Pre-settlement Credit Risk: The risk that a counterparty to a forward, derivative or repurchase transaction will default prior to the final cash settlement of the transaction. The magnitude of pre-settlement credit exposure depends on the potential market value of the contracts and on the presence of any legally enforceable risk mitigating agreements that have been entered into, such as netting, margin or an option to early termination.

For both forms of counterparty credit risk, the Company sets credit limits or requires specific approvals that attempt to anticipate the potential exposure of transactions.

Credit Risk Management

The Citigroup Senior Risk Officer, who is independent of any revenue-generating function, manages the Department, whose professionals assess, approve, monitor, and coordinate the extension of credit on a global basis. In considering such risk, the Department evaluates the risk/return trade-offs as

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well as current and potential credit exposures to a counterparty or to groups of counterparties that are related because of industry, geographic, or economic characteristics. The Department also has established various credit policies and control procedures used singularly or in combination, depending upon the circumstances.

Credit Risk Management of Commodities-Related Transactions

Credit limits for counterparties in commodities-related activities are determined by independent credit management. Exposure reports, which contain detailed information about cash flows with customers, goods in transit and pre-settlement and settlement exposures, are reviewed daily.

Credit Exposure from Derivatives Activities

The Company’s credit exposure for swap agreements, swap options, caps and floors and foreign exchange contracts and options at June 30, 2011, as represented by amounts reported on the Company’s consolidated statement of financial condition, is primarily with investment grade counterparties. These amounts do not present potential credit exposure that may result from factors that influence market risk or from the passage of time. Severe changes in market factors may cause credit exposure to increase suddenly and dramatically. Swap agreements, swap options, caps and floors include transactions with both short- and long-term periods of commitment. See Note 10, “Derivatives Activities,” to the consolidated financial statements for further discussion of derivative activities.

OPERATIONAL RISK MANAGEMENT PROCESS

Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems or human factors, or from external events. It includes the reputation and franchise risk associated with business practices or market conduct in which the Company is involved. Operational risk is inherent in Citigroup’s and the Company’s global business activities and, as with other risk types, is managed through an overall framework designed to balance strong corporate oversight with well-defined independent risk management. This framework includes:

¼ recognized ownership of the risk by the businesses;

¼ oversight by independent risk management; and

¼ independent review by Audit and Risk Review.

The goal is to keep operational risk at appropriate levels relative to the characteristics of our businesses, the markets in which we operate, our capital and liquidity, and the competitive, economic and regulatory environment. Notwithstanding these controls, the Company incurs operational losses.

Framework

To monitor, mitigate and control operational risk, Citigroup maintains a system of comprehensive policies and has established a consistent, value-added framework for assessing and communicating operational risk and the overall effectiveness of the internal control environment across Citigroup. An Operational Risk Council has been established to provide oversight for operational risk across Citigroup. The Council’s membership includes senior members of the Chief Risk Officer’s organization covering multiple dimensions of risk management with representatives of the Business and Regional Chief Risk Officers’ organizations and the Business Management Group. The Council’s focus is on further advancing operational risk management at Citigroup with focus on proactive identification and mitigation of operational risk and related incidents. The Council works with the business segments and the control functions to help ensure a transparent, consistent and comprehensive framework for managing operational risk globally.

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Each major business segment must implement an operational risk process consistent with the requirements of this framework. The process for operational risk management includes the following steps:

¼ identify and assess key operational risks;

¼ establish key risk indicators;

¼ produce a comprehensive operational risk report; and

¼ prioritize and assure adequate resources to actively improve the operational risk environment and mitigate emerging risks.

The operational risk standards facilitate the effective communication and mitigation of operational risk both within and across businesses. As new products and business activities are developed, processes are designed, modified or sourced through alternative means and operational risks are considered. Information about the businesses’ operational risk, historical losses, and the control environment is reported by each major business segment and functional area, and summarized for Senior Management and the Citigroup Board of Directors.

Measurement and Basel II

To support advanced capital modeling and management, the businesses are required to capture relevant operational risk capital information. An enhanced version of the risk capital model for operational risk has been developed and implemented across the major business segments as a step toward readiness for Basel II capital calculations. The risk capital calculation is designed to qualify as an “Advanced Measurement Approach” under Basel II. It uses a combination of internal and external loss data to support statistical modeling of capital requirement estimates, which are then adjusted to reflect qualitative data regarding the operational risk and control environment.

Information Security and Continuity of Business

Information security and the protection of confidential and sensitive customer data are a priority of CGMHI. CGMHI, through Citigroup, has implemented an Information Security Program that complies with the Gramm-Leach-Bliley Act and other regulatory guidance. The Information Security Program is reviewed and enhanced periodically to address emerging threats to customers’ information.

The Corporate Office of Business Continuity, with the support of Senior Management, continues to coordinate global preparedness and mitigate business continuity risks by reviewing and testing recovery procedures.

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LEGAL PROCEEDINGS

For a discussion of material litigation and related matters relating to the Issuer, see Note 17 to the Issuer’s Consolidated Financial Statements set out in Exhibit A.

For a discussion of material litigation and related matters relating to the Guarantor, see Note 28 to the Guarantor’s Consolidated Financial Statements set out in Exhibit B.

For a discussion of Citigroup’s material legal and regulatory matters, of which the matters discussed in Note 17 to the Issuer’s Consolidated Financial Statements and Note 28 to the Guarantor’s Consolidated Financial Statements are a part, see Citigroup’s Annual Report on Form 10-K for the fiscal year ended 31 December 2011, filed with the U.S. Securities and Exchange Commission on 24 February 2012.

Citigroup’s Form 10-K is available for review at http://www.citigroup.com/citigroup/fin/ under the section headed “All SEC Fillings”.

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The following information supplements and amends, as applicable, the disclosures in Note 17 to the audited financial statements of Citigroup Global Markets Holdings Inc. (CGMHI) for the year ended December 31, 2011.

CGMHI or its subsidiaries are named as defendants or otherwise directly involved in certain, but not all, of the matters disclosed below. In addition, certain of the matters below relate principally to broker-dealer activity, while other matters relate principally to lending or other Citigroup Inc. (Citigroup) activities in which CGMHI or its subsidiaries had no direct involvement.

Credit Crisis-Related Litigation and Other Matters

Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission, the Department of Justice and subdivisions thereof, bank regulators, and other government agencies and authorities in connection with formal and informal (and, in many instances, industry-wide) inquiries concerning Citigroup’s mortgage-related conduct and business activities, financial disclosures, and other matters related to the credit crisis.

Mortgage-Related Litigation and Other Matters

Regulatory Actions: On March 15, 2012, the United States Court of Appeals for the Second Circuit granted a stay of the district court proceedings pending resolution of the appeals in SEC v. CGMI. Additional information relating to this matter is publicly available in court filings under docket numbers 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.) and 11-5227 (2d Cir.).

On April 4, 2012, the United States District Court for the District of Columbia approved the National Mortgage Settlement. Additional information relating to this matter is publicly available in court filings under the caption UNITED STATES OF AMERICA, ET AL. v. BANK OF AMERICA CORP., ET AL., Civil Action No. 12 0381 (Collyer, J.). In addition, Citi settled separately with the State of Oklahoma, the one state that did not participate in the National Mortgage Settlement, for $1.5 million. The United States District Court for the District of Oklahoma approved the Oklahoma settlement on March 12, 2012. Additional information relating to this matter is publicly available in court filings under docket number CJ-2012-1537 (Owens, J.).

305 EXHIBIT D

Derivative Actions and Related Proceedings: On March 5, 2012, the Delaware Chancery Court dismissed IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION in its entirety. Additional information relating to this action is publicly available in court filings under docket number 3338-VCG (Del. Ch.) (Glasscock, V.C.).

Underwriting Matters: On March 21, 2012, the United States Court of Appeals for the Second Circuit granted the underwriters’ motion to dismiss an appeal seeking to challenge the district court’s approval of the underwriters’ settlement of IN RE AMBAC FINANCIAL GROUP, INC. SECURITIES LITIGATION. Additional information relating to this action is publicly available in court filings under docket numbers 08 Civ. 0411 (S.D.N.Y.) (Buchwald, J.) and 11-4643 (2d Cir.).

On May 2, 2012, the United States District Court for the Southern District of New York entered a judgment approving a stipulation of settlement with the underwriter defendants, including Citigroup, in IN RE LEHMAN BROTHERS EQUITY/DEBT SECURITIES LITIGATION. Additional information relating to this action is publicly available in court filings under docket number 08 Civ. 0411 (S.D.N.Y.) (Kaplan, J.).

Mortgage-Backed Securities and CDO Investor Actions and Repurchase Claims: On January 27, 2012, in THE CHARLES SCHWAB CORP. v. BNP PARIBAS SECURITIES CORP., ET AL., the court overruled the demurrers as to all claims involving Citigroup. Plaintiff filed an amended complaint on April 5, 2012. Additional information relating to this action is publicly available in court filings under docket number CGC-10-501610 (Cal. Super. Ct.) (Kramer, J.).

Auction Rate Securities-Related Litigation and Other Matters

Securities Actions: On March 27, 2012, the United States Court of Appeals for the Second Circuit affirmed the district court’s dismissal of plaintiffs’ complaint in IN RE CITIGROUP AUCTION RATE SECURITIES LITIGATION. Additional information relating to this action is publicly available in court filings under docket numbers 08 Civ. 3095 (S.D.N.Y.) (Swain, J.) and 11 Civ. 1270 (2d Cir.).

Tribune Company Bankruptcy

Confirmation proceedings on the third amended plan of reorganization have been scheduled for June 7, 2012. Additional information is publicly available in court filings under docket number 08-13141 (Bankr. D. Del.) (Carey, J.).

Research Analyst Litigation

On February 3, 2012, the Illinois Appellate Court dismissed plaintiff’s appeal in DISHER v. CITIGROUP GLOBAL MARKETS INC. for lack of a final, appealable judgment, and the Circuit Court entered a final judgment dismissing the action on February 14, 2012. No appeal from that judgment has been filed. Additional information relating to this action is publicly available in court filings under docket numbers 04-L-265 (Ill.Cir.) (Hylla, J.) and 5-11-0504 (Ill. App. Ct. 5 Dist.).

Settlement Payments

Payments required in settlement agreements described above have been made or are covered by existing litigation accruals.

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Additional matters asserting claims similar to those described above may be filed in the future.

306 Head Office of the Issuer:

Citigroup Global Markets Holdings Inc. 388 Greenwich Street New York New York 10013 United States of America

Principal Place of Business of the Guarantor:

Citibank, N.A. 399 Park Avenue New York New York 10022 United States of America

Registrar, Agent and Transfer Office:

Citigroup Global Markets Asia Limited 10/F Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong

Independent Auditors of the Issuer:

KPMG LLP 345 Park Avenue New York N.Y. 10154 United States of America

Legal advisers to the Issuer:

As to Hong Kong law and US law Allen & Overy 9th Floor Three Exchange Square Central Hong Kong Printed by EQUITY FINANCIAL PRESS LIMITED 12041126