Citigroup (C)

DIVIDEND BLOCKER AMENDMENT

On June 9, 2009, the board of directors unanimously adopted resolutions (1) declaring that an amendment to the restated certificate of incorporation and the certificates of designation of the Public Preferred Stock modifying certain rights of the Public Preferred Stock was advisable and (2) directing that a proposal to approve the Dividend Blocker Amendment be submitted to our stockholders for their written consent.

The form of the proposed amendment to our restated certificate of incorporation and the certificates of designation of each series of Public Preferred Stock to reflect the changes imposed by the Dividend Blocker Amendment is attached to this proxy statement as Annex A.

Currently, our restated certificate of incorporation and the certificates of designation of each series of Public Preferred Stock provide that, as to a dividend payment date, unless Citigroup pays or declares and sets apart for payment full dividends on shares of each series of preferred stock, Citigroup may not declare, set apart or pay dividends on, make any distributions relating to, or redeem, purchase, acquire or make any liquidation payment relating to, shares of stock of any class or series that is junior to that series of preferred stock anytime during the next succeeding dividend period. In addition, Citigroup may not declare, pay or set apart dividends for the holders of common stock before full dividends have been declared, paid or set apart on the preferred stock. The certificates of designation of the Public Preferred Stock also currently require Citigroup to declare dividends proportionally on all Public Preferred Stock and all securities ranking equally with such series of Public Preferred Stock if dividends are not paid in full on such series of Public Preferred Stock.

The proposed Dividend Blocker Amendment will not change the other terms of any series of Public Preferred Stock relating to dividends, including the rate at which dividends accrue, the payment dates for dividends or provisions of our restated certificate of incorporation that require us, upon a liquidation or dissolution or winding up of Citigroup, to pay the full preferential amounts to the holder of each series of Public Preferred Stock pro rata, based, in part, on the respective amounts of unpaid dividends that are payable on each such share of Public Preferred Stock for such period.

Background and Reasons for the Dividend Blocker Amendment

On April 17, 2009, we announced that we intend to continue to pay full dividends on our preferred stock, including the Public Preferred Stock, through and until the closing of the Exchange Offers, at which point these dividends will be suspended. As previously announced, it is our intention not to pay common stock dividends during this period. When dividends on the Public Preferred Stock are suspended, we will be required to also suspend dividends on our common stock unless the Dividend Blocker Amendment has been approved.

The Dividend Blocker Amendment is integral to our goal of making Citigroup one of the best capitalized banks on a TCE and Tier 1 Common basis. The Dividend Blocker Amendment will permit the board greater flexibility in reinstating the common dividend without incurring additional dividend expense related to any Public Preferred Depositary Shares that remain outstanding after the settlement of the Exchange Offers. This would permit us to strengthen our common stock and significantly enhance our ability to maximize the efficiency of Citigroup’s capital structure going forward. The board believes that reinstating the common dividend is an important corporate objective, as it will make our common stock more attractive to a number of institutional investors, some of which are prohibited from investing in stock that does not pay a dividend. Making our common stock more attractive to these investors, as well as other investors who wish to realize returns on their investment through dividends, we believe will increase the price and liquidity of our common stock and strengthen our common stock as a long-term investment instrument. The Dividend Blocker Amendment permits this and at the same time saves the expense of paying dividends on any remaining Public Preferred Depositary Shares.

Under agreements previously entered into with the USG, Citigroup is not permitted to pay quarterly dividends in excess of $0.01 per share of common stock. While we have no current plans to reinstate the common dividend, we believe that payment of even a $0.01 dividend could potentially enhance the value of our common stock in the market. The annual cost of such a dividend, assuming consummation of all of the Transactions (including the USG/Private Holders Transactions and conversion of all Interim Securities into common stock)

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would range from $7.6 million per quarter (if a reverse stock split of 30:1 is effected) to $229.5 million per quarter (if no reverse stock split is effected), assuming 100% participation in the Exchange Offers. However, if the Dividend Blocker Amendment is not approved, this cost would increase by the amount of dividends payable in respect of the Public Preferred Stock that remains outstanding after the Exchange Offers. The table below demonstrates the amount of dividends on Public Preferred Stock that would be payable annually assuming the stated levels of participation in the Exchange Offers if the Dividend Blocker Amendment is not approved. Potentially paying out such a large amount of preferred dividends would add significantly to the cost of a $0.01 common dividend and is inconsistent with our goal of strengthening TCE and Tier 1 Common.

A similar calculation was used for each of the other participation scenarios in the table above.

In addition, eliminating the clause in each certificate of designation of the Public Preferred Stock requiring that dividends be declared on a proportional basis with respect to all equally ranking series of preferred stock will also give us more flexibility in future financings involving preferred stock, as new series of preferred stock could be issued that give the holders thereof preferential rights to dividends. Preferred stock has historically been a component of our Tier 1 regulatory capital, which we believe remains an important measure of our financial strength. We think this additional flexibility to effect financings involving preferred stock is important to our ability to optimize our capital structure going forward.

We believe that a large majority of the holders of Public Preferred Depositary Shares will find the economic terms of the applicable Exchange Offer attractive and will tender their securities. If, as we anticipate, more than two-thirds of the Public Preferred Depositary Shares are tendered in the Exchange Offers, and the Dividend Blocker Amendment is approved in accordance with the terms of the relevant certificate of designation and Delaware law, only a fraction of our current holders of Public Preferred Depositary Shares will be affected by this change in the terms of their securities.

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To the extent that the Dividend Blocker Amendment provides further encouragement to holders to tender their Public Preferred Depositary Shares in the Exchange Offers, this is also positive for Citigroup, as greater participation in the Exchange Offers will lead to an improved capital structure by increasing our TCE and Tier 1 Common. We believe this will improve public and market perception of our financial strength.

Effect of the Dividend Blocker Amendment on Stockholders

Upon effectiveness of the Dividend Blocker Amendment, each series of Public Preferred Depositary Shares will no longer be entitled to receive dividends prior to payment of dividends to holders of common stock. Additionally, new series of preferred stock could be created which could be senior to the Public Preferred Stock in rights to dividends.

Public Preferred Depositary Shares that are tendered and accepted for exchange in the Exchange Offers will be exchanged for shares of common stock on the settlement date of the Exchange Offers. Therefore, although holders of these securities will be entitled to vote on the Public Preferred Stock Amendments as holders of Public Preferred Depositary Shares because the Record Date will occur prior to the settlement date, they will only be affected by the Dividend Blocker Amendment, if approved, as holders of common stock. Holders of any Public Preferred Depositary Shares that are not tendered, or that are not accepted for exchange, in the Exchange Offers will be affected by these amendments as holders of Public Preferred Depositary Shares.

The table below shows the liquidation preference of Public Preferred Depositary Shares that will be affected by the Dividend Blocker Amendment, based on the levels of acceptance of the Exchange Offers indicated below:

Approximately 5,509,820,439 shares of common stock were issued and outstanding as of the close of business on the Record Date. Each of these shares of common stock will be affected by the Dividend Blocker Amendment. The proposed Dividend Blocker Amendment would eliminate each of the other restrictions described above and allow Citigroup to declare and pay dividends on shares of common stock or any other series of junior stock or make other payments to holders of junior or parity stock without paying or setting apart for payment any dividends on shares of any series of Public Preferred Stock.

No Appraisal Rights

Under Delaware law and our restated certificate of incorporation, neither holders of our common stock nor holders of Public Preferred Depositary Shares will be entitled to dissenter’s rights or appraisal rights with respect to the Dividend Blocker Amendment.

Required Vote and Recommendation

Under Delaware law and our restated certificate of incorporation, the affirmative written consent of holders as of the close of business on the Record Date of each of a majority of the common stock, voting as a class, and two-thirds of the Public Preferred Depositary Shares, voting together as a class, are required to approve the Dividend Blocker Amendment. In addition, two-thirds of each series of USG Preferred Stock are required to approve the amendments to our restated certificate of incorporation described in the third bullet of the Dividend Blocker Amendment.