Citigroup (C)

Selected portfolios of securities purchased under agreements to resell, securities sold under agreements to repurchase, and certain non-collateralized short-term borrowings

The Company has elected the fair value option for our United States, United Kingdom and certain Japan portfolios of fixed income securities purchased under agreements to resell and fixed income securities sold under agreements to repurchase (and certain non-collateralized short-term borrowings), because these positions are managed on a fair value basis. Specifically, related interest rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings.  Previously, these positions were accounted for on the accrual basis.

The cumulative effect of $58 million pretax ($37 million after-tax) from adopting the fair value option was recorded as an increase in the January 1, 2007 retained earnings balance.  $25 million pretax of that cumulative effect related to securities purchased under agreements to resell, while $40 million pretax related to securities sold under agreements to

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repurchase, offset by a reduction of  $7 million pretax for non-collateralized short-term borrowings.

The June 30, 2007 net balance of $108.0 billion for securities purchased under agreements to resell and $263.3 billion for securities sold under agreements to repurchase are included in their respective accounts in the Consolidated Balance Sheet.  The uncollateralized short-term borrowings of $3.8 billion are recorded in that account in the Consolidated Balance Sheet.

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 Income.

Selected portfolios of securities purchased under agreements to resell, securities sold under agreements to repurchase, and certain non-collateralized short-term borrowings

        The Company has elected the fair value option for our United States and United Kingdom portfolios of fixed income securities purchased under agreements to resell, and fixed income securities sold under agreements to repurchase (and related non-collateralized short-term borrowings) because these positions are managed on a fair value basis. Specifically, related interest rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings. Previously, these positions were accounted for on the accrual basis.

        The cumulative effect of $58 million pretax ($37 million after-tax) from adopting the fair value option was recorded as an increase in the January 1, 2007 retained earnings balance. $25 million pretax of that cumulative effect related to

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securities purchased under agreements to resell, while $40 million pretax related to securities sold under agreements to repurchase, offset by a reduction of $7 million pretax for non-collateralized short-term borrowings. The change in fair value for the first quarter of 2007, a $111 million pretax gain, was recorded in Principal transactions on the Company's Consolidated Statement of Income, $137 million gain related to securities purchased under agreement to resell, offset by a $23 million loss for securities sold under an agreement to repurchase, and a $3 million loss for related non-collateralized short-term borrowings.

        The related interest income 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 Income.

        The March 31, 2007 gross balance of $159 billion for securities purchased under agreements to resell and $262 billion for securities sold under agreements to repurchase are included in their respective accounts in the Consolidated Balance Sheet. Furthermore, uncollateralized short-term borrowings of $4 billion are recorded in that account in the Consolidated Balance Sheet.