Citigroup (C)

The form of the proposed amendment to the certificates of designation of each of the series of Public Preferred Stock to modify the terms of the Public Preferred Stock to reflect the changes imposed by the Director Amendment is attached to this proxy statement as Annex B.

Currently, the certificates of designation of each of the series of Public Preferred Stock provide that, if dividends on such series of Public Preferred Stock remain unpaid for six quarterly dividend periods (or, in the case of the Series E Public Preferred Stock, for three semi-annual dividend periods), whether or not consecutive, the number of directors on the board of directors will automatically increase by two and the holders of that series of Public Preferred Stock, voting as a single class together with any other series of Public Preferred Stock similarly affected, will be entitled to elect two directors. The term of these two directors will end, and the number of directors on the board of directors will automatically decrease by two, at such time as all dividends on shares of each series of Public Preferred Stock have been paid in full or declared and set apart for payment for at least four consecutive quarterly periods following non-payment of a dividend (and cumulative dividends have been paid in full with respect to an equally ranked series of cumulative preferred stock).

Background and Reasons for the Director 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.

If the Director Amendment is not approved, and dividends are not paid on Public Preferred Depositary Shares for six quarterly dividend periods (or, in the case of the Series E Public Preferred Stock, for three semi-annual dividend periods), whether or not consecutive, the holders of our Public Preferred Depositary Shares remaining after the consummation of the Exchange Offers, voting as a single class, will be able to appoint two additional directors to the board of directors. The board of directors is currently composed of 14 directors and, given the possibility that only a fraction of our current holders of Public Preferred Depositary Shares could remain outstanding upon completion of the Exchange Offers, the right to appoint two additional directors would afford the remaining Public Preferred Depositary Shares a disproportionate influence over our governance and decision-making, compared to their economic investment.

This is especially true given that we expect the Exchange Offers to significantly reduce the number of outstanding Public Preferred Depositary Shares. If the Director Amendment is approved by two-thirds liquidation preference of the Public Preferred Stock, we believe it very likely that the approving holders of the Public Preferred Depositary Shares will have tendered their Public Preferred Depositary Shares in the Exchange Offers, thereby reducing the number of outstanding Public Preferred Depositary Shares by at least two-thirds and perhaps more. The more successful the Exchange Offers are, the more disproportionate the influence of the non-tendering holders of Public Preferred Depositary Shares would be, potentially creating an incentive for holders not to tender their shares in the Exchange Offers. This incentive is removed if the Director Amendment is approved.

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Effect of the Director Amendment on Stockholders

Upon the filing of the proposed Director Amendment with the Secretary of State of the State of Delaware and delisting of the applicable series of Public Preferred Stock (except in the case of the Series E Public Preferred Stock, in which case the Director Amendment will be effective immediately upon the filing of the Director Amendment with the Secretary of State of the State of Delaware), such delisted series of Public Preferred Stock will no longer have the right to appoint directors to Citigroup’s board upon Citigroup’s failure to pay dividends for six quarterly dividend periods (or, in the case of the Series E Public Preferred Stock, for three semi-annual dividend periods). Since the Series E Public Preferred Stock is not currently listed, the Director Amendment, if approved, will become effective immediately upon approval and filing of the amendment with the Delaware Secretary of State.

As noted above, 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 Director 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.

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 Public Preferred Stock Amendments because the Director Amendment, if approved, ensures that management of Citigroup remains with a board of directors elected by the holders of the common stock in the event that Citigroup determines that it is not in the best interest of stockholders to pay dividends on the Public Preferred Depositary Shares.

Delisting and Deregistration

The Public Preferred Depositary Shares (other than the Series E Public Preferred Depositary Shares) are currently listed for trading on the NYSE. The Director Amendment provides that upon the delisting of a series of Public Preferred Stock, the right in each certificate of designation of holders of Public Preferred Stock to elect two directors if dividends have not been paid for six quarterly dividend periods (or, in the case of the Series E Public Preferred Stock, for three semi-annual dividend periods), whether or not consecutive, terminates. Because under NYSE Listing Rule 313 certificates of designation of preferred stock listed for trading on the NYSE are required to provide such governance rights to holders of preferred stock, we can only eliminate this right of listed series of Public Preferred Depositary Shares to elect directors if we delist the applicable series of Public Preferred Stock. We currently intend to delist each listed series of Public Preferred Depositary Shares that remains outstanding following completion of the Exchange Offers from trading on the NYSE and we do not intend to apply for listing of any series of Public Preferred Depositary Shares on any other exchange. As a result, holders of Public Preferred Depositary Shares that remain outstanding following the Exchange Offers may be left with an illiquid security indefinitely. In addition, to the extent permitted by law, we currently intend to deregister each series of Public Preferred Stock and Public Preferred Depositary Shares under the Securities Exchange Act of 1934. If the Director Amendment is approved and becomes effective, the right in each certificate of designation of holders of listed series of Public Preferred Stock to elect two directors if dividends have not been paid for six quarterly dividend periods, whether or not consecutive, would be eliminated upon delisting of the applicable series of Public Preferred Stock. Since the Series E Public Preferred Depositary Shares are not listed on the NYSE, the amendment would become effective, and the right to elect two directors if dividends have not been paid for three semi-annual dividend periods would be eliminated for such series immediately upon approval of the amendment by the Delaware Secretary of State.

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 Director Amendment.

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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 a majority of the common stock, voting as a class, and two-thirds liquidation preference of the Public Preferred Depositary Shares, voting together as a class, are required to approve the Director Amendment.