Citigroup (C)

NM Not meaningful.

7

ALTERNATIVE INVESTMENTS

·                  Alternative Investments

·                  Revenue and net income declined as growth in client revenues, up 16%, was offset by significantly lower proprietary investment revenues.  Proprietary investment revenues declined primarily due to a decline in private equity gains, lower results from hedge fund activities, and a lower market value on Legg Mason shares.  Client capital under management increased 26%.  Client revenues and capital reflected organic growth and the acquisition of Old Lane Partners, L.P. in July 2007.

·                  Revenue and net income declined as growth in client revenues, up 16%, was offset by significantly lower proprietary investment revenues.  Proprietary investment revenues declined primarily due to a decline in private equity gains, lower results from hedge fund activities, and a lower market value on Legg Mason shares.  Client capital under management increased 26%.  Client revenues and capital reflected organic growth and the acquisition of Old Lane Partners, L.P. in July 2007.

·                  Alternative Investments

·                  Revenue and net income declined as strong growth in client revenues, up 75%, was offset by significantly lower proprietary investment revenues.  Proprietary investment revenues declined primarily due to a lower market value on Legg Mason shares, lower results from hedge fund activities, and the absence of a gain on sale of MetLife shares in the prior-year period.  Client capital under management increased 50%.  Client revenues and capital reflect organic growth and the acquisition of Old Lane Partners, L.P.

·                  Alternative Investments

·                  Revenues and net income declined as double-digit growth in client revenues and private equity results was more than offset by lower revenues from hedge funds, the absence of a gain on sale of The Travelers Companies shares and a $58 million tax benefit, both recorded in the prior-year period.  Client capital under management increased 52%.

·                  Alternative Investments

—           Revenues and net income were a record, driven by strong performance across all proprietary investments products, including increased results in private equity and hedge funds, and higher client revenues.  During the quarter, capital raising for a new $3.3 billion private equity fund was successfully completed.

ALTERNATIVE INVESTMENTS

        Alternative Investments (AI) manages capital on behalf of Citigroup, as well as for third-party institutional and high-net-worth investors. AI is an integrated alternative investment platform that manages a wide range of products across five asset classes, including private equity, hedge funds, real estate, structured products and managed futures. AI's business model is to enable its 14 investment centers to retain entrepreneurial qualities required to capitalize on evolving opportunities, while benefiting from the intellectual, operational and financial resources of Citigroup.

(1)

Includes fee income.

(2)

See footnote 3 to the table on page 4.

NM Not meaningful

42

1Q06 vs. 1Q05

        Total proprietary revenues, net of interest expense, were composed of revenues from private equity of $213 million, other investment activity of $264 million and hedge funds of $107 million. Private equity revenue declined $539 million from the first quarter 2005, primarily driven by the absence of prior-year realized gains from the sale of portfolio assets. Other investment activities revenue increased $242 million from the first quarter 2005, largely due to realized gains from the liquidation of Citigroup's investment in St. Paul shares. Hedge fund revenue increased $77 million, largely due to a higher net change in unrealized gains on a substantially increased asset base, along with improved investment performance. Client revenues increased $29 million, reflecting increased management and performance fees from a 40% growth in client capital under management.

        Operating expenses in the first quarter of 2006 of $181 million increased $76 million from the first quarter of 2005, primarily due to increased performance-driven compensation, investment spending in hedge funds and real estate, and the impact of SFAS 123(R).

        Minority interest, net of tax, in the first quarter of 2006 of $30 million declined $102 million from the first quarter of 2005, primarily due to the lack of private equity gains related to underlying investments held by consolidated majority-owned legal entities. The impact of minority interest is reflected in fees, dividends, and interest, and net realized gains/(losses) consistent with cash proceeds received by minority interests.

        Net Income in the first quarter of 2006 also reflected a tax benefit of $58 million resulting from the resolution of the Federal Tax Audit.

        Proprietary capital under management of $11.1 billion increased $2.3 billion from the first quarter 2005, primarily driven by the MetLife and Legg Mason shares acquired during 2005, as well as the funding of proprietary investments in hedge funds and real estate. These increases were partially offset by the sale of all of Citigroup's holdings of St. Paul shares.

        Client capital under management of $28.2 billion in the 2006 first quarter increased $8.0 billion from the 2005 first quarter, due to inflows from institutional and high-net-worth clients and the inclusion of $1.3 billion in assets for the former Travelers Life & Annuities business, following the July 1, 2005 sale to MetLife.

        Investments held by investment company subsidiaries (including CVC Brazil) are carried at fair value with the net change in unrealized gains and losses recorded in income. The Company's investment in CVC Brazil is subject to a variety of unresolved matters, including pending litigation involving some of its portfolio companies, which could affect future valuations of these companies.*

*

This is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 75.

        The sale of Citigroup's Life Insurance and Annuities business to MetLife, Inc. on July 1, 2005, included $1.0 billion, or 22.4 million shares, in MetLife equity securities in the sale proceeds. The investment in Legg Mason resulted from the sale of Citigroup's Asset Management business to Legg Mason, Inc. on December 1, 2005, which included $2.298 billion, a combination of Legg Mason common and convertible preferred equity securities in the sale proceeds. Total equivalent number of common shares was 18.7 million, of which 10.3 million were sold in March 2006. The MetLife and Legg Mason equity securities are classified on Citigroup's Consolidated Balance Sheet as Investments (available-for-sale). Citigroup's ownership position in St. Paul Travelers Companies Inc. common shares was liquidated in the 2006 first quarter, resulting in a pretax gain of $225 million.