Citigroup Inc.

Level 3 Roll ForwardThe reconciliations of the beginning and ending balances during the period for Level 3 assets are as follows:In millions of dollarsAsset categoriesBeginning Level 3market value atDec. 31, 2009Realizedgains(losses)Unrealizedgains(losses)U.S. pension and postretirement benefit plansPurchases, Transfers in Ending Level 3sales, and/or out of market value atissuancesLevel 3 Dec. 31, 2010Equity securitiesU.S. equity $ 1 $ (1) $ — $ — $ — $ —Non-U.S. equity 1 (1) — — — —Debt securitiesU.S. corporate bonds 1 — — 3 1 5Non-U.S corporate bonds — — — 1 — 1Hedge funds 1,235 (15) 85 (220) (71) 1,014Annuity contracts 215 (44) 55 (39) — 187Private equity 2,539 148 292 (59) — 2,920Other investments 148 (66) (66) (16) 4 4Total assets $4,140 $ 21 $366 $(330) $(66) $4,131In millions of dollarsAsset categoriesBeginning Level 3market value atDec. 31, 2009Realizedgains(losses)Unrealizedgains(losses)Non-U.S. pension and postretirement benefit plansPurchases, Transfers in Ending Level 3sales, and/or out of market value atissuancesLevel 3 Dec. 31, 2010Equity securitiesNon-U.S. equity $ 2 $— $ 1 $— $ — $ 3Debt securitiesNon-U.S. corporate bonds 91 — — 16 — 107Hedge funds 14 — — — — 14Annuity contracts 187 (5) (1) — — 181Other investments 18 — 4 — (14) 8Total assets $312 $ (5) $ 4 $ 16 $(14) $313Investment StrategyCitigroup’s global pension and postretirement funds’ investment strategies areto invest in a prudent manner for the exclusive purpose of providing benefitsto participants. The investment strategies are targeted to produce a totalreturn that, when combined with Citigroup’s contributions to the funds, willmaintain the funds’ ability to meet all required benefit obligations. Risk iscontrolled through diversification of asset types and investments in domesticand international equities, fixed-income securities and cash. The target assetallocation in most locations outside the U.S. is to have the majority of the assetsin either equity or debt securities. These allocations may vary by geographicregion and country depending on the nature of applicable obligations andvarious other regional considerations. The wide variation in the actual rangeof plan asset allocations for the funded non-U.S. plans is a result of differinglocal statutory requirements and economic conditions. For example, in certaincountries local law requires that all pension plan assets must be invested infixed-income investments, government funds, or local-country securities.Significant Concentrations of Risk in Plan AssetsThe assets of Citigroup’s pension plans are diversified to limit the impact ofany individual investment. The U.S. pension plan is diversified across multipleasset classes, with publicly traded fixed income, hedge funds and private equityrepresenting the most significant asset allocations. Investments in these threeasset classes are further diversified across funds, managers, strategies, vintages,sectors and geographies, depending on the specific characteristics of each assetclass. The pension assets for Citigroup’s largest non-U.S. plans are primarilyinvested in publicly traded fixed income and publicly traded equity securities.Risk Management PracticesRisk management oversight for Citigroup’s U.S. pension plans and largestnon-U.S. pension plans is performed by Citigroup’s Independent RiskManagement. The risk oversight function covers market risk, credit riskand operational risk. Although the specific components of risk oversightare tailored to the requirements of each region and of each country, thefollowing risk management elements are common to all regions:• Periodic asset/liability management and strategic asset allocation studies• Monitoring of funding levels and funding ratios• Monitoring compliance with asset allocation guidelines• Monitoring asset class performance against asset class benchmarks• Monitoring investment manager performance against benchmarks• Quarterly risk capital measurementRisk management for the remaining non-U.S. pension assets and liabilities isperformed by Citigroup’s local country management.197