Citigroup Inc.

In September 2010, salary stock was paid to the 2010 Top 25 (other thanthe CEO) in a manner consistent with the salary stock payments made in2009 pursuant to rulings issued by the Special Master for TARP ExecutiveCompensation (the Special Master). The salary stock paid for 2010, net of taxwithholdings, is transferable over a 12-month period beginning in January2011. There are no provisions for early release of these transfer restrictionsin the event of retirement, involuntary termination of employment, changein control, or any other reason. In 2009 and January 2010, the 2009 Top100 received salary stock payments that become transferrable in monthlyinstallments over periods of either one year or three years beginning inJanuary 2010.Incentive compensation in respect of 2009 performance for the 2009 Top100 was administered pursuant to structures approved by the Special Master.Pursuant to such structures, the affected employees did not participate in CAPand instead received equity compensation in the form of fully vested stockpayments, LTRS and other restricted and deferred stock awards subject tovesting requirements and sale restrictions. The other restricted and deferredstock awards vest ratably over three years pursuant to terms similar to CAPawards, but vested shares are subject to sale restrictions until the later of thefirst anniversary of the regularly scheduled vesting date or January 20, 2013.Unearned compensation expense associated with CAP and other stockawards described above represents the market value of Citigroup commonstock at the date of grant and is recognized as a charge to income ratablyover the vesting period, except for those awards granted to retirement-eligibleemployees and salary stock and other immediately vested awards. The chargeto income for awards made to retirement-eligible employees is acceleratedbased on the dates the retirement rules are met. Stock awards to retirementeligibleemployees and salary stock and other immediately vested awardsare recognized in the year prior to the grant in the same manner as cashincentive compensation is accrued. Certain stock awards with performanceconditions or clawback provisions may be subject to variable accounting.In connection with its agreement to repay $20 billion of its TARPobligations to the U.S. Treasury Department in December 2009, Citigroupannounced that $1.7 billion of incentive compensation that would haveotherwise been awarded in cash to employees in respect of 2009 performancewould instead be awarded as “common stock equivalent” (CSE) awards. CSEawards were denominated in U.S. dollars or in local currency and were settledby stock payments made in April 2010.The number of shares delivered to recipients was equal to their individualCSE award value divided by the fair market value of Citi common stock on thesettlement date ($4.93), less shares withheld for taxes, as applicable. For CSEsawarded to certain employees whose compensation structure was approved bythe Special Master, 50% of the shares delivered in April 2010 were subject torestrictions on sale and transfer until January 20, 2011. In lieu of 2010 CAPawards, certain retirement-eligible employees were instead awarded CSEsthat were settled by stock payments in April 2010, but the shares delivered aresubject to restrictions on sale or transfer that will lapse in four equal annualinstallments beginning January 20, 2011. CSE awards were generally accruedas compensation expense in the year 2009 and were recorded as a liabilityfrom the January 2010 grant date until the settlement date in April 2010. CSEawards were paid with new issues of common stock as an exception to theCompany’s then-current practice of delivering shares from treasury stock, andthe recorded liability was reclassified to equity at that time.Generally, in order to reduce the use of shares under Citigroup’sstockholder-approved stock incentive plan, the percentages of total annualincentives awarded pursuant to CAP in January 2009 and January 2010were reduced and were instead awarded as deferred cash awards in the U.S.and the U.K. The deferred cash awards are subject to two-year and fouryearvesting schedules, but the other terms and conditions are the same asCAP awards made in those years. The deferred cash awards earn a returnduring the vesting period based on LIBOR; in 2010 only, a portion of thedeferred cash award was denominated as a stock unit, the value of which willfluctuate based on the price of Citi common stock. In both cases, only cashwill be delivered at vesting.186