Citigroup Inc.

Changes in Level 3 Fair Value CategoryThe following tables present the changes in the Level 3 fair value categoryfor the years ended December 31, 2010 and 2009. The Company classifiesfinancial instruments in Level 3 of the fair value hierarchy when there isreliance on at least one significant unobservable input to the valuationmodel. In addition to these unobservable inputs, the valuation models forLevel 3 financial instruments typically also rely on a number of inputs thatare readily observable either directly or indirectly. Thus, the gains and lossespresented below include changes in the fair value related to both observableand unobservable inputs.267The Company often hedges positions with offsetting positions that areclassified in a different level. For example, the gains and losses for assetsand liabilities in the Level 3 category presented in the tables below do notreflect the effect of offsetting losses and gains on hedging instruments thathave been classified by the Company in the Level 1 and Level 2 categories. Inaddition, the Company hedges items classified in the Level 3 category withinstruments also classified in Level 3 of the fair value hierarchy. The effects ofthese hedges are presented gross in the following tables.December 31,Net realized/unrealizedgains (losses) included inPrincipalTransfersin and/orout ofPurchases,issuancesand December 31,Unrealizedgains(losses)In millions of dollars2009 transactions Other (1)(2) Level 3 settlements2010 still held (3)AssetsFed funds sold and securities borrowed orpurchased under agreements to resell $ — $ 100 $ — $ 4,071 $ 740 $ 4,911 $ 374Trading securitiesTrading mortgage-backed securitiesU.S. government-sponsored agency guaranteed 972 (108) — 170 (203) 831 (48)Prime 384 77 — 255 (122) 594 27Alt-A 387 54 — 259 (315) 385 (51)Subprime 8,998 321 — (699) (7,495) 1,125 94Non-U.S. residential 572 47 — 528 (923) 224 39Commercial 2,451 64 — (308) (1,789) 418 55Total trading mortgage-backed securities $13,764 $ 455 $ — $ 205 $(10,847) $ 3,577 $ 116U.S. Treasury and federal agencies securitiesU.S. Treasury $ — $ — $ — $ — $ — $ — $ —Agency obligations — (3) — 63 12 72 (24)Total U.S. Treasury and federalagencies securities $ — $ (3) $ — $ 63 $ 12 $ 72 $ (24)State and municipal $ 222 $ 53 $ — $ 297 $ (364) $ 208 $ 7Foreign government 459 20 — (68) 155 566 (10)Corporate 8,620 225 — (757) (2,082) 6,006 266Equity securities 640 77 — 312 (253) 776 416Asset-backed securities 3,006 4 — 4,927 (1,319) 6,618 34Other debt securities 13,231 48 — 90 (12,064) 1,305 8Total trading securities $39,942 $ 879 — $ 5,069 $(26,762) $19,128 $ 813Derivatives, net (4)Interest rate contracts $ (374) $ 513 $ — $ 467 $ (1,336) $ (730) $ 20Foreign exchange contracts (38) 203 — (43) 42 164 (314)Equity contracts (1,110) (498) — (331) 300 (1,639) (589)Commodity and other contracts (529) (299) — (95) (100) (1,023) (486)Credit derivatives 5,159 (1,405) — (635) (1,274) 1,845 (867)Total derivatives, net (4) $ 3,108 $(1,486) — $ (637) $ (2,368) $ (1,383) $(2,236)InvestmentsMortgage-backed securitiesU.S. government-sponsored agency guaranteed $ 2 $ — $ (1) $ 21 $ — $ 22 $ —Prime 736 — (35) (493) (42) 166 —Alt-A 55 — 12 24 (90) 1 —Subprime 1 — (2) 1 — — —Commercial 746 — (443) 3 221 527 —Total investment mortgage-backeddebt securities $ 1,540 $ — $(469) $ (444) $ 89 $ 716 $ —U.S. Treasury and federal agencies securities $ 21 $ — $ (21) $ — $ 17 $ 17 $ (1)State and municipal 217 — — 481 (194) 504 (75)Foreign government 270 — 9 15 64 358 1Corporate 1,257 — (39) (49) (151) 1,018 (32)Equity securities 2,513 — 65 (1) (522) 2,055 (77)Asset-backed securities 8,272 — (123) (111) (2,614) 5,424 (15)Other debt securities 560 — (13) (13) 193 727 25Non-marketable equity securities 6,753 — 733 18 (1,037) 6,467 512Total investments $21,403 $ — $ 142 $ (104) $ (4,155) $17,286 $ 338