Citigroup (C)

Conversion of Interim Securities into Common Stock

We will issue some of the newly authorized shares to convert all of the Interim Securities into shares of common stock at a ratio of one million shares of common stock for each Interim Security. Our common stock is currently listed on the NYSE, and we intend to apply for the listing of these additional shares on the NYSE. The remaining newly authorized shares of common stock will remain unissued and may be used for general corporate purposes in the future.

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Because the number of authorized but unissued shares prior to the approval of the Authorized Share Increase will depend on the number of Public Preferred Depositary Shares and Trust Preferred Securities tendered and accepted for exchange for shares of common stock in the Exchange Offers, we are unable to determine as of the date of this proxy statement the number of newly authorized shares that will be used to convert the Interim Securities into common stock. The following table shows the approximate numbers of newly authorized shares that will be issued in connection with the conversion of the Interim Securities into common stock if the Authorized Share Increase is approved, based on the levels of participation in our Exchange Offers indicated below:

If our stockholders do not approve the Authorized Share Increase, the Interim Securities will not be converted into shares of common stock. If we are unable to convert the Interim Securities into common stock, we will be unable to fully realize the anticipated benefits of the Transactions.

In addition, each Interim Security will have a liquidation preference of $3.25 million and, pursuant to the terms of the Interim Securities, beginning on the Trigger Date, if the Authorized Share Increase has not been approved, each Interim Security will bear an annual cumulative dividend equal to the greater of (i) 9% (increasing by 2 percentage points per quarter up to a cap of 19% per annum) and (ii) the dividend actually paid on the shares of common stock into which such Interim Security is convertible. Prior to such time, each Interim Security will have the same dividend as is payable on the shares of common stock into which such Interim Security is convertible. The payment of these dividends could represent a significant reduction in Citigroup’s quarterly cash flow. If the Authorized Share Increase is not approved, Citigroup would be required to pay the following quarterly dividends on the Interim Securities:

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Furthermore, if the Authorized Share Increase is not approved before the Trigger Date, the warrants issued to the USG and Private Holders in connection with the USG/Private Holders Transactions will become exercisable after the Trigger Date to purchase 790 million shares of our common stock for their par value, which is $0.01 per share, and which represents a significant discount to the closing price of our stock on June 16, 2009, which was $3.25 per share. If these warrants are exercised, we expect to have the following approximate numbers of shares of common stock issued and outstanding based on the levels of participation in our Exchange Offers indicated below:

The warrants will expire if the Authorized Share Increase is approved. Therefore, as a result of the potential exercise of the warrants, shareholders may experience significant dilution if the Authorized Share Increase is not approved. The board of directors believes that the Authorized Share Increase is vital to put Citigroup in a position to implement the Exchange Offers and the USG/Private Holders Transactions and increase Citigroup’s TCE and TCE ratio.