CITIGROUP INC - 10-Q Quarterly Report

Back to GetFilings.com

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 1-9924

CITIGROUP INC.
(Exact name of registrant as specified in its charter)

DELAWARE 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

399 PARK AVENUE, NEW YORK, NEW YORK 10043
(Address of principal executive offices) (Zip Code)

(212) 559-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:

Common stock outstanding as of July 31, 2002: 5,060,938,138

AVAILABLE ON THE WEB AT WWW.CITIGROUP.COM

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

CITIGROUP INC.
TABLE OF CONTENTS

CITIGROUP INC. AND SUBSIDIARIES

THE COMPANY

Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company)
is a diversified global financial services holding company whose businesses
provide a broad range of financial services to consumer and corporate customers
with some 200 million customer accounts in over 100 countries and territories.

The Company's activities are conducted through the Global Consumer, Global
Corporate and Investment Bank, Global Investment Management, Proprietary
Investment Activities, Corporate/Other, and Property and Casualty segments.

The Company is a bank holding company within the meaning of the U.S. Bank
Holding Company Act of 1956 (BHC Act) registered with, and subject to
examination by, the Federal Reserve Board (FRB). Certain of the Company's
subsidiaries are subject to supervision and examination by their respective
federal and state authorities. Additional information on the Company's
regulation and supervision can be found within Citigroup's 2001 Annual Report
and Form 10-K. Additional information is available on the Company's web site at
(http://www.citigroup.com).

BUSINESS SEGMENT PRESENTATION AND OPERATING UNIT FORMAT

Citigroup's internal management reporting was realigned to follow its
recently-announced organizational changes; Citigroup has modified the Company's
financial reporting format to be consistent with this internal reporting. These
modifications are intended to simplify disclosure by emphasizing global
products, while providing a regional breakdown of the businesses. All prior
periods have been reclassified to conform to the current period's presentation.

PRODUCT DISCLOSURE

Financial disclosure is organized by segments along product lines:

GLOBAL CONSUMER--CARDS, CONSUMER FINANCE, and RETAIL BANKING.
GLOBAL CORPORATE AND INVESTMENT BANK--CAPITAL MARKETS AND BANKING,
PRIVATE CLIENT, and TRANSACTION SERVICES.
GLOBAL INVESTMENT MANAGEMENT--LIFE INSURANCE AND ANNUITIES, PRIVATE
BANKING, and ASSET MANAGEMENT.
PROPERTY AND CASUALTY
PROPRIETARY INVESTMENT ACTIVITIES
CORPORATE/OTHER

REGIONAL DISCLOSURE

Supporting this product structure is disclosure of Citigroup's net income by
region, including:

NORTH AMERICA (EXCLUDING MEXICO)
MEXICO
WESTERN EUROPE
JAPAN
LATIN AMERICA
ASIA (EXCLUDING JAPAN)
CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA (CEEMEA)

Net income for each region is disclosed by Global Consumer, Global
Corporate and Investment Bank, and Global Investment Management. Net income
for Property and Casualty and Corporate/ Other is primarily derived from
North America (excluding Mexico). Proprietary Investment Activities is
centrally managed and not allocated to any region. Net income by region is
fully reflected in the product disclosures described above.

The following changes to the format have impacted individual lines of
business as follows:

- Mexico, formerly reported in its entirety within the Global Consumer
segment, has been apportioned to each of Citigroup's product groups.

- Emerging Markets Retirement Services, previously included in Emerging
Markets Consumer Banking, is now reported as part of ASSET MANAGEMENT
within Global Investment Management.

- Emerging Markets Corporate Banking is now reported as part of CAPITAL
MARKETS AND BANKING product group within the Global Corporate and
Investment Bank.

1

- International Insurance Manufacturing, previously reported in Global
Consumer, is now reported as part of LIFE INSURANCE AND ANNUITIES within
Global Investment Management.

The following provides details on the lines of business included within each
global segment.

GLOBAL CONSUMER

Global Consumer delivers a wide array of banking, lending, insurance and
investment services through a network of local branches, offices and electronic
delivery systems, including ATMs, ALMs (Automated Lending Machines) and the
World Wide Web. The Global Consumer businesses serve individual consumers as
well as small proprietorships.

CARDS provides MasterCard, VISA and private label credit and charge cards
issued to customers in 47 countries around the world. North America Cards
includes the operations of CitiCards, the company's primary brand in North
America, as well as Diners Club N.A. and Mexico Cards. International Cards
provides credit and charge cards to customers in Western Europe, Japan, Asia,
CEEMEA, and Latin America.

CONSUMER FINANCE provides community-based lending services through branch
networks, regional sales offices and cross-selling initiatives with other
Citigroup businesses. The business of CitiFinancial is included in North America
Consumer Finance. As of June 30, 2002, North America Consumer Finance maintained
2,410 offices, including 2,199 CitiFinancial offices in the U.S. and Canada,
while International Consumer Finance maintained 1,198 offices, including 940 in
Japan. Japan also maintained 587 ALMs at June 30, 2002. CONSUMER FINANCE offers
real estate-secured loans, unsecured and partially secured personal loans, auto
loans and loans to finance consumer goods purchases. In addition, CitiFinancial,
through certain subsidiaries and third parties, makes available various credit-
related and other insurance products to its U.S. CONSUMER FINANCE customers.

RETAIL BANKING provides banking, lending, and investment and insurance
services to customers through retail branches and electronic delivery systems.
In North America, RETAIL BANKING includes the operations of Citibanking North
America, Consumer Assets, Primerica Financial Services (Primerica) and Mexico
Retail Banking. Citibanking North America delivers banking, lending, and
investment and insurance services through 459 branches in the U.S. and Puerto
Rico and through Citibank Online, an Internet banking site on the World Wide
Web. The Consumer Assets business originates and services mortgages and student
loans for customers across the U.S. The business operations of Primerica involve
the sale, mainly in North America, of life insurance and other products
manufactured by its affiliates, including Smith Barney mutual funds,
CitiFinancial mortgages and personal loans and the products of LIFE INSURANCE
AND ANNUITIES. The Primerica sales force is composed of over 100,000 independent
representatives. Mexico Retail Banking consists of the branch banking operations
of Banamex. International Retail Banking provides full-service banking and
investment services in Western Europe, Japan, Asia, CEEMEA and Latin America.

GLOBAL CORPORATE AND INVESTMENT BANK

The Global Corporate and Investment Bank provides corporations, governments,
institutions and investors in over 100 countries and territories with a broad
range of financial products and services, including investment advice, financial
planning and retail brokerage services, as well as banking and financial
services. The Global Corporate and Investment Bank includes CAPITAL MARKETS AND
BANKING, PRIVATE CLIENT and TRANSACTION SERVICES.

CAPITAL MARKETS AND BANKING offers a wide array of investment banking and
commercial banking services and products in over 100 countries, including the
underwriting and distribution of fixed income and equity securities for U.S. and
multinational corporations and for state, local and other governmental and
government-sponsored authorities. In addition, CAPITAL MARKETS AND BANKING also
provides capital raising, advisory, research and other brokerage services to its
customers, acts as a market-maker and executes securities and commodities
futures brokerage transactions on all major U.S. and international exchanges on
behalf of customers and for its own account. CAPITAL MARKETS AND BANKING is a
major participant in foreign exchange and in the over-the-counter (OTC) market
for derivative instruments involving a wide range of products, including
interest rate, equity and currency swaps, caps and floors, options, warrants and
other derivative products. It also creates and sells various types of structured
securities. CAPITAL MARKETS AND BANKING also provides loans, leasing and
equipment finance. The primary businesses in CAPITAL MARKETS AND BANKING include
Fixed Income, Equities, Investment Banking, CitiCapital and Lending.

PRIVATE CLIENT provides investment advice, financial planning and brokerage
services to affluent individuals, small and mid-size companies, non-profits and
large corporations by leveraging a network of 12,808 Smith Barney Financial
Consultants in more than 500 offices worldwide. A significant portion of PRIVATE
CLIENT'S revenues is generated from the commissions earned as a broker for its
clients in the purchase and sale of securities. PRIVATE CLIENT generates
additional revenue by financing customers' securities transactions through
secured margin lending. PRIVATE CLIENT also receives commissions and other sales
and service revenues through the sale of proprietary mutual funds and
third-party mutual funds.

2

TRANSACTION SERVICES is composed of e-Business and Global Securities
Services (GSS). e-Business provides comprehensive cash management, trade finance
and e-commerce services for corporations and financial institutions worldwide.
GSS provides custody services to investors such as insurance companies and
pension funds, clearing services to intermediaries such as broker/dealers and
depository and agency and trust services to multinational corporations and
governments globally.

GLOBAL INVESTMENT MANAGEMENT

GLOBAL INVESTMENT MANAGEMENT comprises LIFE INSURANCE AND ANNUITIES, PRIVATE
BANKING and ASSET MANAGEMENT. These businesses offer a broad range of life
insurance, annuity, asset management and personalized wealth management products
and services distributed to institutional, high net worth and retail clients.

LIFE INSURANCE AND ANNUITIES includes Travelers Life and Annuity and
International Insurance Manufacturing. These businesses offer individual
annuity, group annuity, individual life insurance and corporate owned life
insurance (COLI) products. The individual products include fixed and variable
deferred annuities, payout annuities, and term and universal life insurance.
These products are primarily distributed through Citigroup businesses, a
nationwide network of independent agents and unaffiliated broker dealers. The
COLI product is a variable universal life product distributed through
independent specialty brokers. The group annuity products offered include
institutional pension products, including guaranteed investment contracts,
payout annuities, structured finance, and group annuities to U.S.
employer-sponsored retirement and savings plans through direct sales and
various intermediaries. The International Insurance Manufacturing business
primarily has operations in Latin America, Mexico, Western Europe and Asia.

PRIVATE BANKING provides personalized wealth management services for high
net worth clients through 90 offices in 29 countries and territories, generating
fee and interest income from investment funds management and customer trading
activity, trust and fiduciary services, custody services, and traditional
banking and lending activities. Through its Private Bankers and Product
Specialists, PRIVATE BANKING leverages its extensive experience with clients'
needs and its access to Citigroup to provide clients with comprehensive
investment and banking services tailored to the way they create and manage their
wealth and lifestyles in today's economy.

ASSET MANAGEMENT includes Smith Barney Asset Management, Salomon Brothers
Asset Management, and Citibank Asset Management along with the pension
administration businesses of Global Retirement Services. Clients include private
and public retirement plans, endowments, foundations, banks, central banks,
insurance companies, other corporations, government agencies and high net worth
and other individuals. Client relationships may be introduced through the cross
marketing and distribution channels within Citigroup, through ASSET MANAGEMENT'S
own sales force or through independent sources.

PROPRIETARY INVESTMENT ACTIVITIES

PROPRIETARY INVESTMENT ACTIVITIES comprises Citigroup's venture capital
activities, realized investment gains (losses) from sales or write-downs of
certain insurance-related investments (excludes gains/losses relating to the
Property and Casualty segment), results from certain proprietary investments,
the results of certain investments in countries that refinanced debt under the
1989 Brady Plan or plans of a similar nature, and, since August 2001, the
Banamex investment portfolio.

CORPORATE/OTHER

CORPORATE/OTHER includes net corporate treasury results, corporate expenses,
certain intersegment eliminations, the Internet-related development activities,
cumulative effect of accounting changes and taxes not allocated to the
individual businesses, and the gain on the sale of stock by a subsidiary
relating to the Travelers Property Casualty Corp. (TPC) initial public offering
(IPO) in the 2002 first quarter.

PROPERTY AND CASUALTY

PROPERTY AND CASUALTY primarily reflects the operations of TPC including the
results of its Personal Lines business, Commercial Lines business, Realized
Investment Portfolio Gains (Losses), and Interest and Other.

PERSONAL LINES had approximately 5.5 million policies in force at June 30,
2002. The primary coverages are personal automobile and homeowners insurance
sold to individuals, which are distributed through approximately 7,600
independent agencies located throughout the United States. Personal Lines also
uses additional distribution channels, including sponsoring organizations such
as employers' and consumer associations, and joint marketing arrangements with
other insurers.

COMMERCIAL LINES offers a broad array of property and casualty insurance and
insurance-related services, which it distributes through approximately 6,300
brokers and independent agencies located throughout the United States. TPC is
the third largest writer

3

of commercial lines insurance in the U.S. based on 2001 direct written
premiums published by A.M. Best Company. Commercial Lines is organized into
five marketing and underwriting groups, each of which focuses on a particular
client base or product grouping to provide products and services that
specifically address clients' needs: National Accounts, primarily serving
large national corporations; Commercial Accounts, serving mid-size
businesses; Select Accounts, serving small businesses; Bond, providing
specialty products which include surety bonds and executive liability; and
Gulf, providing a variety of specialty coverages. Environmental, asbestos and
other cumulative injury claims are segregated from other claims and are
handled separately by TPC's Special Liability Group, a separate unit staffed
by dedicated legal, claim, finance, and engineering professionals.

REALIZED INVESTMENT PORTFOLIO GAINS (LOSSES) comprises Property and
Casualty's realized investment gains (losses) on sales and write-downs of
investments.

4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

ACQUISITION OF GOLDEN STATE BANCORP

On May 21, 2002, Citigroup announced that it will acquire Golden State
Bancorp (Golden State) in a transaction in which Citigroup will pay
approximately $16.40 in cash and .5234 Citigroup shares for each share of
Golden State delivered at closing, subject to certain adjustments. Golden
State stockholders will be entitled to elect to receive the merger
consideration in shares of Citigroup common stock or cash, subject to certain
limitations. Based on the average prices for the four trading days ended May
23, 2002, the total transaction value is approximately $5.8 billion.

Golden State is the parent company of California Federal Bank, the second
largest thrift in the U.S. and, through its First Nationwide Mortgage business,
the eighth largest mortgage servicer. As of June 30, 2002, it had $24 billion in
deposits, $52 billion in assets and 355 branches in California and Nevada.

The transaction is expected to close in the third quarter of 2002. It is
subject to a number of regulatory approvals and the approval of Golden State
stockholders.

IMPACT FROM WORLDCOM

As a result of WorldCom's announced financial problems, Citigroup's results
were reduced by $275 million after-tax. These charges consisted of writedowns of
WorldCom bonds held in Citigroup's insurance investment portfolio, and losses in
credit and trading-related losses primarily in the Global Corporate and
Investment Bank.

IMPACT FROM ARGENTINA'S ECONOMIC CHANGES

FIRST QUARTER 2002

During the first quarter of 2002, Argentina continued to experience
significant political and economic changes. The government of Argentina
implemented substantial economic changes, including abandoning the country's
fixed U.S. dollar-to-peso exchange rate, as well as the redenomination of
substantially all remaining loans and deposits and certain other assets and
liabilities denominated in U.S. dollars into pesos. As a result of the impact of
these government actions on operations, the Company changed its functional
currency in Argentina from the U.S. dollar to the Argentine peso. Additionally,
the government announced the terms of certain compensation instruments it has
committed to issue to financial institutions, to compensate them in part for
losses incurred as a result of the redenomination events. The government also
announced a 180 day moratorium against creditors filing foreclosures or
bankruptcy proceedings against borrowers. The government actions, combined with
the severe recessionary economic situation and the devaluation of the peso, have
adversely impacted Citigroup's consumer and commercial borrowers in Argentina.

To reflect the impact of economic events in Argentina, Citigroup recorded a
total of $858 million net in pretax charges in the 2002 first quarter, as
follows: a $475 million addition to the allowance for credit losses,
$269 million in loan and investment write-downs, a $72 million net charge for
currency redenomination and other foreign currency items, and a $42 million
restructuring charge. The $72 million net charge includes a benefit from the
compensation instruments the Argentine government has committed to issue. In
addition, the impact of the devaluation of the peso during the first quarter
produced foreign currency translation losses that reduced Citigroup's equity by
$512 million, net of tax.

SECOND QUARTER 2002

During the second quarter of 2002, Argentina continued to experience
severe recessionary conditions, high inflation and political uncertainty. As
a result of these conditions, Citigroup recorded a total of $84 million net
in pretax charges in the 2002 second quarter, as follows: a $76 million loss
relating to Amparos (representing judicial orders requiring previously dollar
denominated deposits to be repaid at market exchange rates); a net loss of $5
million relating to CER adjustments (representing inflation-indexed interest
accruals to be paid to depositors and received on certain loans); Proprietary
Investment Activities' impairment charges of $53 million; and reductions in
the Company's consumer loan loss reserve of $50 million resulting from the
declining size of the consumer loan portfolio due to the devaluation of the
Argentine peso. In addition, the impact of the devaluation of the peso since
April 1, 2002 resulted in foreign currency translation losses that reduced
Citigroup's equity by $77 million, net of tax.

As the economic situation, financial regulations and implementation issues
in Argentina remain fluid, we continue to work with the government and our
customers and continue to monitor conditions closely. Additional losses may be
incurred. In particular, we continue to monitor the potential additional impact
that the continued economic crisis may have on our commercial borrowers, and we
will continue to assess government announcements and actions with respect to the
compensation instruments the government has

5

committed to issue to the banks. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 38.

INITIAL PUBLIC OFFERING AND TAX-FREE DISTRIBUTION OF TRAVELERS PROPERTY CASUALTY
CORP.

TPC (an indirect wholly-owned subsidiary of Citigroup on December 31, 2001)
sold 231 million shares of its class A common stock representing approximately
23.1% of its outstanding equity securities at $18.50 per share in an initial
public offering on March 27, 2002. Citigroup recognized an after-tax gain of
$1.061 billion as a result of the TPC offering.

On August 1, 2002, Citigroup announced that it will make a tax-free
distribution to its stockholders of a portion of its remaining ownership
interest in TPC on or about August 20, 2002. Following the distribution,
Citigroup will remain a holder of approximately 9.9% of TPC's outstanding equity
securities. Income statement minority interest was recognized on the initial
public offering portion beginning on April 1, 2002. The distribution will be
tax-free to Citigroup, its stockholders and TPC.

The distribution of TPC will be treated as a dividend to stockholders for
accounting purposes that will reduce stockholders' equity by approximately
$7 billion. Prior to the initial public offering during 2002, TPC paid dividends
to Citigroup in the form of notes in the aggregate amount of $5.095 billion.

In connection with the initial public offering, Citigroup entered into an
agreement with TPC that provides that, in any fiscal year in which TPC
records asbestos-related income statement charges in excess of $150 million,
net of any reinsurance, Citigroup will pay to TPC the amount of any such
excess up to a cumulative aggregate of $800 million, reduced by the tax
effect of the highest applicable federal income tax rate. A portion of the
gain as a result of the offering was deferred to offset any payments arising
in connection with this agreement.

Citigroup and TPC are currently reviewing whether Citigroup business units
will continue to offer certain TPC products. The two companies plan to enter
into an agreement under which Citigroup businesses will provide investment
advisory and certain back office services to TPC during a transition period.
Ongoing revenues on our remaining ownership in TPC following the distribution
are not expected to be significant.

ACCOUNTING CHANGES

BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Effective July 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" (SFAS
No. 141) and certain provisions of SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142), as required for goodwill and indefinite-lived intangible
assets resulting from business combinations consummated after June 30, 2001. The
new rules require that all business combinations consummated after June 30, 2001
be accounted for under the purchase method. The nonamortization provisions of
the new rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after
June 30, 2001.

6

On January 1, 2002, when the rules became effective for calendar year
companies, Citigroup adopted the remaining provisions of SFAS No. 142. Under
the new rules, effective January 1, 2002, goodwill and intangible assets
deemed to have indefinite lives are no longer amortized, but are subject to
annual impairment tests. Other intangible assets will continue to be
amortized over their useful lives. During the three and six months ended June
30, 2001, the after-tax amortization expense related to goodwill and
indefinite-lived intangible assets which are no longer amortized was as
follows:

The Company has performed the required impairment tests of goodwill and
indefinite-lived intangible assets. There was no impairment of goodwill upon
adoption of SFAS No. 142. The initial adoption resulted in a cumulative
adjustment of $47 million after-tax recorded as a charge to earnings related to
the impairment of certain intangible assets. See Note 2 to Unaudited
Consolidated Financial Statements for additional information about this
accounting change.

ADOPTION OF EITF 99-20

During the second quarter of 2001, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets"
(EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and
identification and determination of impairment on certain asset-backed
securities. The initial adoption resulted in a cumulative adjustment of
$116 million after-tax, recorded as a charge to earnings, and an increase of
$93 million included in stockholders' equity from non-owner sources.

DERIVATIVES AND HEDGE ACCOUNTING

On January 1, 2001, Citigroup adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133
changed the accounting treatment of derivative contracts (including foreign
exchange contracts) that are employed to manage risk outside of Citigroup's
trading activities, as well as certain derivative instruments embedded in other
contracts. SFAS No. 133 requires that all derivatives be recorded on the balance
sheet at their fair value. The treatment of changes in the fair value of
derivatives depends on the character of the transaction, including whether it
has been designated and qualifies as part of a hedging relationship. The
majority of Citigroup's derivatives are entered into for trading purposes and
were not impacted by the adoption of SFAS No. 133. The cumulative effect of
adopting SFAS No. 133 at January 1, 2001 was an after-tax charge of $42 million
included in net income and an increase of $25 million included in other changes
in stockholders' equity from nonowner sources.

7

BUSINESS FOCUS

The following tables show the net income (loss) for Citigroup's businesses
both on a Product View and on a Regional View:

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Includes Realized Insurance Investment Portfolio Gains (Losses) primarily
from the LIFE INSURANCE AND ANNUITIES, and Primerica businesses.

(3) Includes the following cumulative effect of accounting changes: 2002 first
quarter adoption of the remaining provisions of SFAS No. 142, 2001 first
quarter adoption of SFAS No. 133 and the 2001 second quarter adoption of
EITF 99-20. See Note 2 to Unaudited Consolidated Financial Statements.

(4) TPC sold 231 million shares of its class A common stock at $18.50 per share
in an initial public offering on March 27, 2002. Citigroup recognized an
after-tax gain of $1.061 billion as a result of the TPC offering. See
Note 3 to Unaudited Consolidated Financial Statements.

8

BUSINESS FOCUS

- --------------------------
(1) Proprietary Investment Activities is centrally managed and not allocated to
any region.

(2) Reclassified to conform to the current period's presentation.

(3) Mexico's results include the operations of Banamex from August 2001 forward.

(4) Includes cumulative effect of accounting changes. See Note 2 to Unaudited
Consolidated Financial Statements.

(5) TPC sold 231 million shares of its class A common stock at $18.50 per share
in an initial public offering on March 27, 2002. Citigroup recognized an
after-tax gain of $1.061 billion as a result of the TPC offering. See
Note 3 to Unaudited Consolidated Financial Statements.

(6) Operations of Property and Casualty, and Corporate/Other are not allocated
to any region; however, they are primarily concentrated within North America
(excluding Mexico).

9

RESULTS OF OPERATIONS

FINANCIAL SUMMARY

- ------------------------

(1) Revenues, Net of Interest Expense, and Benefits, Claims, and Credit Losses
in the table above are disclosed on an owned basis (under Generally Accepted
Accounting Principles). If this table were prepared on a managed basis,
which includes certain effects of securitization activities including
receivables held for securitization and receivables sold with servicing
retained, revenues and benefits, claims, and credit losses would have been
increased by $1.081 billion and $2.102 billion in the 2002 second quarter
and six months and increased $930 million and $1.696 billion in the
comparable 2001 periods. Although a managed basis presentation is not in
conformity with GAAP, it provides a representation of the volumes in the
credit card business. Net Income on a managed basis is equal to GAAP Net
Income.

INCOME AND EARNINGS PER SHARE

Citigroup reported net income of $4.084 billion or $0.78 per diluted
share in the 2002 second quarter, up 15% and 13% from $3.536 billion or $0.69
per diluted share in the 2001 second quarter. Net income in the 2002 second
quarter included an after-tax benefit of $25 million for
restructuring-related items. Net income in the 2001 second quarter included
an after-tax charge of $133 million (or $0.03 per diluted share) for
restructuring-related items and an after-tax charge of $116 million (or $0.02
per diluted share), reflecting the cumulative effect of adopting EITF 99-20
(as described in Notes 2 and 8 of Notes to Unaudited Consolidated Financial
Statements). Return on common equity was 19.5% compared to 20.9% a year ago.

Net income for the 2002 six months of $8.927 billion or $1.71 per diluted
share was up 26% and 25% from $7.074 billion or $1.37 per diluted share in the
2001 six months. Net income in the 2002 six months included an after-tax gain of
$1.061 billion (or $0.20 per diluted share) on the sale of TPC's stock offering
and an after-tax charge of $47 million (or $0.01 per diluted share), reflecting
the cumulative effect of adopting the remaining provisions of SFAS No. 142 (as
described in Notes 2, 3 and 8 of Notes to Unaudited Consolidated Financial
Statements).

Net income in the 2001 six months included an after-tax charge of
$213 million (or $0.04 per diluted share) for restructuring-related items and an
after-tax charge of $158 million (or $0.03 per diluted share), reflecting the
cumulative effect of adopting SFAS No. 133 and EITF 99-20 (as described in Notes
2 and 8 of Notes to Unaudited Consolidated Financial Statements). Return on
common equity was 21.7% and 21.3% in the six months of 2002 and 2001,
respectively.

Global Consumer net income increased $477 million or 31% and $785 million or
26% in the 2002 second quarter and six months compared to the 2001 periods.
Global Corporate and Investment Bank (GCIB) increased $125 million or 9% from
the 2001 second quarter and was essentially flat in the six-month comparison.
Global Investment Management grew $100 million or 25% and $131 million or 16%
from the respective 2001 periods, while Proprietary Investment Activities
decreased $398 million and $353 million from the 2001 second quarter and
six-month periods. See individual segment and product discussions on pages
13 - 37 for additional discussion and analysis of the Company's results and
operations.

10

REVENUES, NET OF INTEREST EXPENSE

Total revenues, net of interest expense, of $21.3 billion and $42.3 billion
in the 2002 second quarter and six months were up $1.9 billion or 10% and
$2.6 billion or 7%, respectively, from the 2001 periods. Global Consumer
revenues were up $1.3 billion or 17% in the 2002 second quarter to
$8.9 billion, and were up $2.6 billion or 17% in the 2002 six months to
$17.7 billion. Increases in RETAIL BANKING revenues of $639 million or 25% and
$1.5 billion or 29% from the 2001 second quarter and six months, respectively,
were due to the impact of acquisitions, combined with growth primarily in
Citibanking North America and Consumer Assets. Compared to the 2001 periods,
CARDS was up $486 million or 18% in the 2002 second quarter and $748 million or
13% in the 2002 six months, while CONSUMER FINANCE experienced growth of
$234 million or 11% in the 2002 second quarter and $394 million or 9% in the
2002 six months. Both businesses experienced improved spreads and strong growth
in receivables.

Compared to the 2001 periods, GCIB revenues were up $333 million or 5% in
the 2002 second quarter and were down $381 million or 3% in the 2002 six months,
driven by CAPITAL MARKETS AND BANKING, up $356 million or 9% in the 2002 second
quarter but down $185 million or 2% in the 2002 six-month period. CAPITAL
MARKETS AND BANKING growth in the 2002 second quarter reflected increases in
Fixed Income and Sales & Trading while the declines in the six months were due
to strong results in the 2001 first quarter and Argentina redenomination losses
in the 2002 first quarter.

Global Investment Management revenues of $2.2 billion in the 2002 second
quarter and $4.1 billion in the 2002 six months were up $284 million or 15% and
$150 million or 4% from the comparable 2001 periods, primarily due to growth in
asset-based fee revenues and the impact of acquisitions in the six-month
comparison. Revenues in Proprietary Investment Activities decreased
$565 million and $489 million from the 2001 second quarter and six months,
respectively, primarily reflecting lower venture capital results and higher
impairment write-downs.

Citigroup securitizes credit card receivables as part of the management of
its funding and liquidity needs. After securitization of the receivables, the
Company continues to maintain credit card customer account relationships and
provides servicing for receivables transferred to the special purpose entity
trusts set up to facilitate securitization activities. See Note 12 of Notes to
Unaudited Consolidated Financial Statements. The Company manages the receivables
securitized as if the receivables had neither been held for securitization nor
sold (managed basis). On a managed basis, including securitized receivables,
both revenues and provisions for benefits, claims, and credit losses would have
increased by $1.081 billion and $2.102 billion in the 2002 second quarter and
six months and increased by $930 million and $1.696 billion in the comparable
2001 periods. Total managed revenues were $22.4 billion in the 2002 second
quarter and $44.4 billion in the 2002 six months, up $2.0 billion or 10% and
$3.0 billion or 7% from the comparable 2001 periods. Net income on a managed
basis is equal to GAAP net income.

SELECTED REVENUE ITEMS

Net interest revenue rose $1.5 billion or 18% from the 2001 second quarter
to $9.8 billion and increased $3.6 billion or 22% from the 2001 six months to
$19.5 billion, reflecting increases in fixed income trading and investment
positions, acquisitions, the impact of a changing rate environment and business
volume growth. Total commissions, asset management and administration fees of
$5.6 billion were up $507 million or 10% from the 2001 second quarter, primarily
as a result of volume-related growth in customer activities. Insurance premiums
of $3.7 billion and $7.1 billion in the 2002 second quarter and six months were
up $471 million or 15%, and $474 million or 7%, respectively, from the 2001
periods, reflecting strong growth in Personal Lines and Commercial Lines.

Principal transactions revenues of $1.1 billion and $2.8 billion for the
2002 second quarter and six months were down $318 million or 22% from the 2001
second quarter and $977 million or 26% from the 2001 six-month period,
reflecting declines in Global Equities, and Fixed Income, whose declines were
offset by growth in net interest revenue. Realized gains (losses) from sales of
investments were down $272 million from the 2001 second quarter and
$669 million from the 2001 six-months, resulting primarily from the Company's
insurance investment portfolio. Other income as shown in the Consolidated
Statements of Income of $1.3 billion in the 2002 second quarter decreased
$25 million from the year-ago quarter, and was down $142 million from the 2001
six months, primarily reflecting venture capital activity and increased credit
losses on securitized credit card receivables.

OPERATING EXPENSES

Operating expenses of $9.9 billion and $19.7 billion in the 2002 second
quarter and six months, respectively, were up $305 million or 3% in the 2002
second quarter and down $384 million or 2% in the 2002 six months, compared to
year-ago levels. The change in expenses reflects the impact of acquisitions
which was offset by expense control initiatives, lower incentive compensation,
and the absence of goodwill and indefinite-lived intangible asset amortization
in the 2002 second quarter due to the adoption of SFAS No. 141 and SFAS
No. 142, which reduced operating expenses by $155 million in the 2002 second
quarter and $307 million in the six-month period. The absence of this
goodwill amortization increased the Company's net income by $122 million in
the 2002 second quarter and $242 million in the six month period.

11

Global Consumer expenses increased 7% in the 2002 second quarter and 6%
in the 2002 six months. GCIB expenses were flat in the quarter and down 9% in
the six months while Property and Casualty expenses decreased 3% in the
quarter and 2% in the six-month comparison. Global Investment Management
expenses were essentially unchanged from year-ago levels.

Operating expenses included restructuring-related releases of $39 million
($25 million after-tax) in the 2002 second quarter and restructuring-related
charges of $8 million ($5 million after-tax) in the 2002 six months related
principally to a reduction in the reserve due to changes in estimates in the
2002 second quarter and to severance and other costs associated with the
reduction of staff within the Latin American consumer and corporate
businesses in the six-month period. Restructuring-related items of $213
million ($133 million after-tax) in the 2001 second quarter and $345 million
($213 million after-tax) in the 2001 six months related principally to
severance and reduction of staff primarily in the Global Consumer and GCIB
businesses.

BENEFITS, CLAIMS, AND CREDIT LOSSES

Benefits, claims, and credit losses were $5.1 billion and $10.4 billion in
the 2002 second quarter and six months, up $910 million and $2.1 billion from
the 2001 second quarter and six months, respectively. Policyholder benefits and
claims in the 2002 second quarter increased 13% from the 2001 second quarter to
$3.0 billion, and were up 7% to $5.8 billion in the 2002 six months, primarily
as a result of increases in Personal Lines and Commercial Lines. The provision
for credit losses increased 39% from the 2001 second quarter to $2.1 billion in
the 2002 second quarter and increased 56% from the 2001 six months to
$4.6 billion in the 2002 six months.

Global Consumer provisions for benefits, claims and credit losses of
$1.8 billion in the 2002 second quarter were up 29% from the 2001 second
quarter, primarily reflecting increases in CARDS and CONSUMER FINANCE. Total net
credit losses were $1.682 billion and the related loss ratio was 2.65% in the
2002 second quarter, as compared to $1.643 billion and 2.71% in the preceding
quarter and $1.224 billion and 2.19% in the year-ago quarter. The consumer loan
delinquency ratio (90 days or more past due) decreased to 2.62% at June 30, 2002
from 2.78% at March 31, 2002 and increased from 2.30% a year ago.

The Global Corporate and Investment Bank provision for credit losses of
$460 million and $1.1 billion in the 2002 second quarter and six months
increased $172 million and $575 million from year-ago levels, primarily due to
an addition to the loan loss reserve for Argentina in the 2002 first quarter and
higher than expected write-offs in CAPITAL MARKETS AND BANKING related to the
telecommunications industry.

Commercial cash-basis loans at June 30, 2002 and 2001 were $4.573 billion
and $2.606 billion, respectively, while the commercial Other Real Estate Owned
(OREO) portfolio totaled $259 million and $310 million, respectively. The
increase in cash-basis loans from the 2001 second quarter was primarily related
to the Banamex acquisition and increases attributable to borrowers in the
telecommunications industry and in Argentina. Commercial cash-basis loans at
June 30, 2002 increased $578 million from March 31, 2002 primarily due to
exposures in the telecommunications industry and Argentina. The improvements in
OREO were primarily related to the North America real estate portfolio.

CAPITAL

Total capital (Tier 1 and Tier 2) was $80.8 billion or 11.75% of net
risk-adjusted assets, and Tier 1 capital was $63.3 billion or 9.20% at June 30,
2002, compared to $78.9 billion or 11.59% and $62.2 billion or 9.13% of
risk-adjusted assets at March 31, 2002.

12

The Net Income line in the following business segments and operating unit
discussions excludes the cumulative effect of adopting SFAS No. 142, EITF 99-20
and SFAS No. 133. The cumulative effect of accounting changes is included within
the Corporate/Other business segment. See Note 2 to Unaudited Consolidated
Financial Statements.

GLOBAL CONSUMER

- ------------------------

(1) Reclassified to conform to the current period's presentation.

GLOBAL CONSUMER -- which provides banking, lending, including credit and
charge cards, and investment and personal insurance products and services to
customers around the world--reported net income of $2.030 billion and
$3.831 billion in the 2002 second quarter and six months, up $477 million or 31%
and $785 million or 26% from the comparable 2001 periods, reflecting double
digit growth in CARDS, RETAIL BANKING AND CONSUMER FINANCE. CARDS net income
increased $204 million or 37% in the 2002 second quarter and $214 million or 19%
in the 2002 six months from the prior-year periods, reflecting strong growth in
CitiCards and the acquisition of Banamex. RETAIL BANKING net income increased
$192 million or 34% in the 2002 second quarter and $348 million or 31% in the
2002 six months from the prior-year periods, as the impact of the Banamex and
European American Bank (EAB) acquisitions, prior-year restructuring charges and
growth in North America and Western Europe were partially offset by losses in
Argentina. CONSUMER FINANCE net income increased $89 million or 19% in the 2002
second quarter and $233 million or 27% in the 2002 six months from the
prior-year periods, mainly driven by revenue growth and continued expense
savings in North America.

Global Consumer net income in the 2002 second quarter included a net
restructuring reserve release of $21 million ($32 million pretax), resulting
from changes in estimates in CitiCards and Citibanking North America. Net
income in the 2002 six months also included $11 million ($18 million pretax)
of restructuring-related charges in the first quarter of 2002, including $8
million related to severance and other costs associated with the reduction of
staff in Argentina. Net income in the 2001 second quarter included
restructuring-related charges of $58 million ($92 million pretax), mainly
related to the downsizing of various functions across all products and
geographies. Net income in the 2001 six months also included
restructuring-related charges of $12 million ($19 million pretax), consisting
of accelerated depreciation in North America.

- ------------------------

(1) Reclassified to conform to the current period's presentation.

NM Not meaningful

Growth in Global Consumer in the 2002 second quarter and six months was led
by North America (excluding Mexico), Mexico, and Western Europe, partially
offset by a decline in Latin America. North America (excluding Mexico) grew 26%
and 24% in the 2002 second quarter and six months, respectively, with increases
in all product segments. Mexico contributed growth of $192 million in

13

the 2002 second quarter and $348 million in the six months, primarily
reflecting the acquisition of Banamex. Western Europe experienced growth of
47% and 38% in the 2002 periods, mainly reflecting the strengthening of the
Euro combined with higher loan volumes in RETAIL BANKING and CONSUMER
FINANCE. Growth in Japan of 9% in the 2002 second quarter and 13% in the six
months principally reflected the acquisitions of Taihei Co., Ltd. (Taihei)
and Marufuku Co., Ltd. (Marufuku), partially offset by the impact of foreign
currency translation and increased credit losses. The decline in Latin
America of $64 million in the 2002 second quarter and $213 million in the six
months was primarily due to economic conditions in Argentina including
charges taken in the first quarter of 2002, the impact of government decrees
and judicial orders and continued devaluation of the Argentine peso.

CARDS

- ------------------------

(1) Reclassified to conform to the current period's presentation.

CARDS--which includes bankcards, private-label cards and charge cards in 47
countries around the world--reported net income of $756 million and
$1.352 billion in the 2002 second quarter and six months, respectively, up
$204 million or 37% and $214 million or 19% from the 2001 periods, led by North
America, which benefited from the August 2001 acquisition of Banamex, as well as
revenue growth, expense management and a 2002 second quarter restructuring
reserve release of $12 million (after-tax) in CitiCards.

As shown in the following table, average managed loans grew 6% in the 2002
second quarter and six months, reflecting growth in North America of 5% in both
periods and growth in International Cards of 8% and 7%, respectively. CitiCards,
reflecting base business momentum, and Mexico, which included the impact of the
acquisition of Banamex, drove growth in North America. Growth in International
Cards reflected broad-based increases in Asia and growth in Western Europe, led
by the UK, Greece and Spain, all of which benefited from strengthening
currencies in the 2002 second quarter. Growth in International Cards was
partially offset by a decline in Latin America, which reflected the negative
impact of foreign currency translation and lower volumes in Argentina. Sales
grew 8% in the 2002 second quarter, reflecting growth in CitiCards, which
benefited from higher balance consolidation activity, and Mexico, which included
the impact of the Banamex acquisition, and Western Europe and Asia, which
benefited from increased marketing efforts.

- ------------------------

(1) Reclassified to conform to the current period's presentation.

Revenues, net of interest expense, of $3.259 billion and $6.396 billion in
the 2002 second quarter and six months, were up $486 million or 18% and
$748 million or 13% from the 2001 periods. Revenue on securitized loans is
recorded monthly as realized over the term of each securitization transaction.
Credit losses on securitized loans are deducted in determining the net revenue
from credit card securitizations, which is included in Other Income. These
losses were $989 million and $1.924 billion in the 2002 second quarter and six
months, respectively, up $177 million or 22% and $444 million or 30% from the
2001 periods, reflecting increased securitization levels and higher loss ratios.
Excluding securitization-related credit losses, revenues in the 2002 second
quarter and six months grew $665 million or 18% and $1.209 billion or 17% from
the comparable prior-year periods, reflecting growth in North America, Asia and
Western Europe, partially offset by a decline in Latin America. Revenue growth
in North America was primarily due to spread improvements resulting from lower
cost of funds and repricing actions in CitiCards, combined with the benefit of

14

receivable growth, which included the acquisition of Banamex. In addition,
CitiCards revenues included $94 million in the 2002 second quarter and $115
million in the 2002 six months from an increase in the amortization period
for certain direct loan origination costs while Diners Club N.A. revenues
benefited from a $40 million release of a reserve related to unused travelers
checks. Led by Korea, the Philippines and Malaysia, growth in Asia reflected
increased volumes across the region and the positive impact of foreign
currency translation. The increase in Western Europe was primarily due to
growth in the U.K., Greece, and Spain, along with the impact of foreign
currency translation. The decline in Latin America reflected continued
weakness in Argentina due to reduced business activity as well as the
negative impact of foreign currency translation.

Operating expenses of $1.372 billion in the 2002 second quarter increased
$54 million or 4% from the 2001 second quarter, reflecting growth of 5% in North
America and 2% in International Cards. Operating expenses in the 2002 second
quarter included a net restructuring reserve release of $19 million, mainly in
CitiCards. Excluding restructuring-related items, growth in North America was
driven by Mexico, which included the effect of the Banamex acquisition, and
CitiCards, with increased advertising and marketing costs partially offset by
disciplined expense management. Operating expenses of $2.694 billion in the 2002
six months increased $21 million or 1% from the 2001 period, as increases in
Mexico, Western Europe and Asia were partially offset by lower advertising and
marketing costs in CitiCards and Diners Club N.A., the impact of foreign
currency translation in Latin America and Japan and the 2002 second quarter
restructuring reserve release.

The provision for credit losses in the 2002 second quarter and six months
was $737 million and $1.635 billion, respectively, compared to $580 million and
$1.171 billion in the 2001 periods, primarily reflecting increased credit losses
in CitiCards and Asia, primarily Hong Kong, and, in the six-month comparison, an
addition to the loan loss reserve resulting from deteriorating credit in
Argentina. Net credit losses in the 2002 second quarter were $761 million and
the related loss ratio was 6.51%, compared to $780 million and 7.11% in the 2002
first quarter and $601 million and 5.34% in the prior-year quarter. The decline
in the net credit loss ratio from the 2002 first quarter reflected improvements
in CitiCards, mainly due to a change in the mix of loans on the balance sheet,
and in Mexico which benefited from higher recoveries. CitiCards net credit
losses in the prior-year quarter included a recovery of $55 million from the
sale of certain bankrupt accounts which resulted in a 48 basis point reduction
of the net credit loss ratio. Loans delinquent 90 days or more were
$944 million or 1.91% of loans at June 30, 2002, compared to $1.018 billion or
2.25% at March 31, 2002 and $933 million or 2.09% at June 30, 2001. The decline
compared to the prior quarter was primarily due to improvement in CitiCards and
Mexico. Net credit losses and the related loss ratio may increase from the 2002
second quarter as bankruptcy losses in the U.S. could be accelerated if proposed
U.S. bankruptcy legislation is approved. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 38.

The securitization of credit card receivables is limited to the CitiCards
business within North America. At June 30, 2002, securitized credit card
receivables were $65.8 billion, compared with $61.4 billion as of June 30, 2001.
Credit card receivables held-for-sale were $6.5 billion compared to
$9.0 billion a year ago. Revenue on securitized receivables is recorded monthly
as realized over the term of each securitization transaction. The revolving
nature of the receivables sold and the monthly recognition of revenue result in
a pattern of recognition that is similar to the pattern that would be
experienced if the receivables had not been sold. However, because
securitization changes Citigroup's role from that of a lender to that of a loan
servicer, it removes the receivables from Citigroup's balance sheet and affects
the manner in which revenue and the provision for credit losses are classified
in the income statement. For securitized receivables and receivables
held-for-sale, amounts that would otherwise be reported as net interest revenue,
as fee and commission revenue, and as credit losses on loans are instead
reported as fee and commission revenue (for servicing fees) and as other revenue
(for the remaining cash flows, net of credit losses). Because credit losses are
a component of these cash flows, revenues over the terms of these transactions
may vary depending upon the credit performance of the securitized receivables.
However, Citigroup's exposure to credit losses on the securitized receivables is
contractually limited to these cash flows. Including securitized receivables and
receivables held-for-sale, net credit losses would have been $1.842 billion for
the 2002 second quarter with a related loss ratio of 6.23% compared to
$1.793 billion and 6.17% for the 2002 first quarter and $1.503 billion and 5.37%
for the 2001 second quarter. Adjusting for securitization activity, loans
delinquent 90 days or more would have been $2.248 billion or 1.85% at June 30,
2002, compared to $2.488 billion or 2.11% at March 31, 2002 and $1.938 billion
or 1.68% at June 30, 2001.

15

CONSUMER FINANCE

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

CONSUMER FINANCE--which provides community-based lending services through
branch networks, regional sales offices and cross-selling initiatives with other
Citigroup businesses--reported net income of $565 million and $1.098 billion in
the 2002 second quarter and six months, respectively, up $89 million or 19% and
$233 million or 27% from the 2001 periods, principally reflecting revenue growth
in North America and efficiencies resulting from the integration of Associates
First Capital Corporation (Associates) into CitiFinancial. Net income growth in
the 2002 second quarter and six months also included after-tax benefits of
$32 million and $64 million, respectively, due to the absence of goodwill and
other indefinite-lived intangible asset amortization.

As shown in the following table, average loans grew 9% compared to the 2001
second quarter resulting from the cross-selling of products through Primerica,
an increase in auto loans in the U.S. and the acquisitions of Taihei and
Marufuku in Japan. Average auto loans for the 2002 second quarter increased
$1.7 billion or 39% from 2001, reflecting a shift in strategy to fund business
volumes internally rather than externally through the securitization of
receivables. In Japan, average loans of $12 billion in the 2002 second quarter
grew $1.9 billion or 19% from the prior-year quarter, reflecting, in part, the
acquisitions of Taihei and Marufuku which added $1.0 billion to average loans,
primarily personal loans, in the 2002 second quarter.

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

As shown in the following table, the average net interest margin of
11.22% in the 2002 second quarter increased 43 basis points from the 2001
second quarter, mainly due to lower cost of funds. In North America, the
average net interest margin was 8.50% in the 2002 second quarter, increasing
32 basis points from the prior-year quarter as the benefit of lower cost of
funds was partially offset by lower yields, both reflecting a lower interest
rate environment. The average net interest margin for International Consumer
Finance was 21.92% in the 2002 second quarter, down 18 basis points from the
prior year reflecting lower yields, including the impact of growth in
lower-yielding real estate-secured loans, partially offset by a decline in
cost of funds.

Revenues, net of interest expense, of $2.406 billion and $4.704 billion in
the 2002 second quarter and six months, respectively, increased $234 million or
11% and $394 million or 9% from the 2001 periods, mainly reflecting growth in
the U.S. and Japan, partially offset by a decline in Latin America. Revenue
growth in the U.S. was primarily driven by growth in receivables and improved
net interest margins. Increases in Japan included the impact of acquisitions,
partially offset by the impact of foreign currency translation. The decline in
Latin America was due to continued weakness in Argentina.

16

Operating expenses of $764 million and $1.496 billion in the 2002 second
quarter and six months, respectively, decreased $74 million or 9% and $277
million or 16% from the prior-year periods, primarily reflecting efficiencies
resulting from the integration of Associates in the U.S., the absence of
goodwill and other indefinite-lived intangible asset amortization, the impact
of foreign currency translation and prior-year restructuring-related charges
of $25 million ($15 million after-tax) and $38 million ($23 million
after-tax) in the 2001 second quarter and six months, respectively.
Restructuring charges in 2001 mainly reflected actions in CitiFinancial.

The provisions for benefits, claims, and credit losses were $763 million
in the 2002 second quarter, up from $737 million in the 2002 first quarter
and $588 million in the prior-year quarter. The net credit loss ratio of
3.71% in the 2002 second quarter was up from 3.63% in the 2002 first quarter
and 2.91% in the 2001 second quarter. In North America, the net credit loss
ratio of 3.10% in the 2002 second quarter was up from 3.00% in the 2002 first
quarter and 2.49% in the 2001 second quarter. The net credit loss ratio for
International Consumer Finance was 6.12% in the 2002 second quarter, down
from 6.41% in the 2002 first quarter and up from 4.72% in the 2001 second
quarter. The decline from the prior quarter was mainly due to the
acquisitions in Japan which did not include any loans that were 90 days or
more past due at the time of acquisition. The increase compared to the prior
year was due to increased bankruptcy filings and deteriorating credit quality
in Japan.

Loans delinquent 90 days or more were $2.131 billion or 2.72% of loans at
June 30, 2002, compared to $2.213 billion or 2.97% at March 31, 2002 and
$1.943 billion or 2.74% a year ago. The decrease in the delinquency ratio
versus the prior year and prior quarter was mainly due to the impact of
acquisitions in Japan and improvements in the U.S. In Japan, net credit
losses and the related loss ratio are expected to increase from the 2002
second quarter as a result of economic conditions and credit performance of
the portfolios, including bankruptcy filings. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 38.

RETAIL BANKING

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

RETAIL BANKING--which delivers banking, lending, and investment and
insurance services to customers through retail branches, electronic delivery
systems and the network of Primerica independent agents--reported net income of
$754 million and $1.473 billion in the 2002 second quarter and six months,
respectively, up $192 million or 34% and $348 million or 31% from the 2001
periods. The increases in RETAIL BANKING primarily reflect growth in North
America Retail Banking of $210 million or 62% and $378 million or 56% in the
2002 second quarter and six months, partially offset by decreases in
International Retail Banking of $18 million or 8% and $30 million or 7%,
respectively. The growth in North America Retail Banking was primarily due to
the acquisitions of Banamex and EAB in the 2001 third quarter along with revenue
growth in Citibanking North America and Consumer Assets. The decline in
International Retail Banking primarily reflects losses in Argentina, partially
offset by growth in Western Europe and prior-year restructuring-related charges.

As shown in the following table, RETAIL BANKING grew average loans and
customer deposits compared to 2001. The growth in North America primarily
reflects the acquisitions of Banamex and EAB, which added $24.7 billion and
$7.9 billion, respectively, to average customer deposits and $7.7 billion and
$3.8 billion, respectively, to average loans. In addition, North America
Retail Banking experienced customer deposit growth in Citibanking North
America and average loan growth in Consumer Assets, primarily due to
increased student loans. The growth in International Retail Banking customer
deposits reflects growth in Japan and CEEMEA, partially offset by a decline
in Argentina. The increase in International Retail Banking average loans
reflects growth in Western Europe, primarily in Germany, partially offset by
a decline in Argentina.

17

- ------------------------------

(1) Includes loans held-for-sale.

Revenues, net of interest expense, of $3.207 billion and $6.542 billion in
the 2002 second quarter and six months, respectively, increased $639 million or
25% and $1.484 billion or 29% from the 2001 periods. The increase in revenues
reflected growth in North America, partially offset by a decline in
International. Revenue growth in North America was driven by the acquisitions of
Banamex and EAB, the benefit of customer deposit growth in Citibanking North
America and increased net servicing revenue in Consumer Assets, where mortgage
originations in the 2002 six months increased 48% from 2001 to $21.1 billion.
North America Retail Banking also benefited from revenue growth in Primerica
which was driven by insurance premiums, and increased commissions.
International Retail Banking revenues declined 9% and 1% in the 2002 second
quarter and six months, respectively, as a decline in Latin America was
partially offset by growth in Western Europe and CEEMEA. The decline in Latin
America was due to events in Argentina which included losses and reserves on
Amparos, reduced business activity due to the economic situation, the
negative impact of foreign currency translation and losses resulting from
government-mandated inflation indexed interest accruals. Increased loan
volumes and improved spreads, mainly in Germany, combined with the impact of
foreign currency translation across the region, primarily drove revenue
growth in Western Europe. Revenue growth in CEEMEA was primarily due to
growth in investment product fees and increased business volumes.

Operating expenses for the 2002 second quarter and six months increased
$305 million or 21% and $718 million or 25% from the comparable 2001 periods.
Operating expenses in 2002 included a second quarter net restructuring reserve
release of $9 million ($6 million after-tax), mainly in Citibanking North
America and Japan, and first quarter 2002 restructuring-related charges of
$13 million ($7 million after-tax), primarily resulting from actions in
Argentina. Operating expenses in 2001 included second quarter
restructuring-related charges of $50 million ($32 million after-tax) with
$42 million in International Retail Banking and $8 million in North America.
Excluding restructuring-related items, the growth in expenses was primarily due
to the acquisitions of Banamex and EAB and increases in Western Europe and
CEEMEA, and was partially offset by a decline in Latin America. The growth in
Western Europe and CEEMEA was mainly due to volume-related increases, higher
advertising and marketing costs in Western Europe and the impact of foreign
currency translation. The decline in Latin America was primarily due to the
impact of foreign currency translation and expense reduction initiatives across
the region.

The provisions for benefits, claims and credit losses were $295 million
and $730 million in the 2002 second quarter and six months, up from $230
million and $467 million in the 2001 periods. The increase in the provisions
for benefits, claims and credit losses was mainly due to the impact of
acquisitions and, in the six-month comparison, an addition to the loan loss
reserve resulting from deteriorating credit in Argentina. Net credit losses
were $212 million and the related loss ratio was 0.80% in the 2002 second
quarter, compared to $203 million and 0.78% in the 2002 first quarter and
$120 million and 0.53% in the prior-year quarter. The increase in net credit
losses from the prior year was mainly due to the acquisition of Banamex.

Loans delinquent 90 days or more were $3.561 billion or 3.31% of loans at
June 30, 2002, compared to $3.481 billion or 3.34% at March 31, 2002, and
$2.475 billion or 2.71% a year ago. The increase in delinquent loans from the
prior year mainly reflects the acquisitions of EAB and Banamex, as well as
increases in Western Europe and Consumer Assets. The increase in delinquent
loans from the prior quarter mainly reflects increases in Consumer Assets and
Western Europe, partially offset by improvements in Mexico. The increase in
Western Europe compared to the prior year and prior quarter occurred mainly in
Germany and reflected the impact of statutory changes and foreign currency
translation. The increase in Consumer Assets compared to the prior year and
prior quarter mainly reflected increases in government guaranteed student loans
and a higher level of buy backs from GNMA pools where credit risk is maintained
by government agencies.

Average assets of $171 billion and $172 billion in the 2002 second quarter
and six months increased $52 billion and $53 billion from the comparable 2001
periods, primarily reflecting the acquisitions of Banamex and EAB.

18

OTHER CONSUMER

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

OTHER CONSUMER--which includes e-Consumer, the business responsible for
developing and implementing Global Consumer Internet financial services products
and e-commerce solutions, and also includes certain treasury and other
unallocated staff functions, global marketing and other programs--reported
losses of $45 million and $92 million for the 2002 second quarter and six months
compared to losses of $37 million and $82 million in the 2001 second quarter and
six months. The increase in losses from 2001 was primarily due to a pension
curtailment gain in the prior-year period related to the acquisition of
Associates combined with an increase in legal reserves in 2002. Revenues,
expenses and the provisions for benefits, claims, and credit losses reflect
offsets to certain line-item reclassifications reported in other Global Consumer
businesses.

CONSUMER PORTFOLIO REVIEW

In the consumer portfolio, credit loss experience is often expressed in
terms of annualized net credit losses as a percentage of average loans. Pricing
and credit policies reflect the loss experience of each particular product.
Consumer loans are generally written off no later than a predetermined number of
days past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set according to loan product and country.

The following table summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolios in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans. The
managed loan portfolio includes loans held-for-sale and certain securitized
loans. See Note 12 to Unaudited Consolidated Financial Statements.

19

CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS

- ------------------------------

(1) The ratios of 90 days or more past due and net credit losses are calculated
based on end-of-period and average loans, respectively, both net of unearned
income.

(2) Reclassified to conform to current period's presentation.

20

CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME

Total delinquencies 90 days or more past due in the managed portfolio were
$8.133 billion or 2.41% of loans at June 30, 2002, compared to $8.326 billion or
2.56% at March 31, 2002 and $6.426 billion or 2.11% at June 30, 2001. Total
managed net credit losses in the 2002 second quarter were $2.763 billion and the
related loss ratio was 3.34%, compared to $2.664 billion and 3.32% in the 2002
first quarter and $2.155 billion and 2.86% in the 2001 second quarter. For a
discussion of trends by business, see business discussions on pages 14 - 19.

Citigroup's allowance for credit losses of $10.437 billion is available
to absorb probable credit losses inherent in the entire portfolio. For
analytical purposes only, the portion of Citigroup's allowance for credit
losses attributed to the consumer portfolio was $5.756 billion at June 30,
2002, $5.732 billion at March 31, 2002, and $4.914 billion at June 30, 2001.
The increase in the allowance for credit losses attributed to the consumer
portfolio from a year ago includes the impact of the acquisitions of Banamex
and EAB along with increases in the first quarter of 2002 related to
Argentina. The allowance as a percentage of loans on the balance sheet was
2.21% at June 30, 2002, up from 2.18% at June 30, 2001 and down from 2.32% at
March 31, 2002. The increase in the allowance as a percentage of loans from a
year ago was primarily due to the increase in the allowance related to
Argentina. The decline in the allowance as a percentage of loans from March
31, 2002 primarily reflects the growth in consumer loans as well as stricter
lending standards in individual businesses. On balance sheet consumer loans
of $261 billion grew $14 billion or 6% from March 31, 2002 and $36 billion or
16% from a year ago. The increase from March 31, 2002 was primarily driven by
growth in CitiCards, Western Europe Retail Banking, Consumer Assets, Japan
Consumer Finance and North America Consumer Finance. The increase in Western
Europe Retail Banking reflected growth in Germany and the impact of foreign
currency translation. Growth in Consumer Assets was primarily due to
increases in CitiMortgage. The increase in Japan Consumer Finance included
approximately $500 million from the acquisition of Marufuku combined with the
impact of foreign currency translation. Growth in North America Consumer
Finance was mainly due to an increase in real estate secured loans in the
U.S. The increase in loans from a year ago also includes the impact of the
Banamex and EAB acquisitions.

Net credit losses, delinquencies, and the related ratios may increase
from the 2002 second quarter as a result of the credit performance of the
portfolios, including bankruptcies, global economic conditions, portfolio
growth, and seasonal factors. In Japan, net credit losses and the related
loss ratio are expected to increase from the 2002 second quarter reflecting
current economic conditions in Japan, including rising unemployment rates and
bankruptcy filings. Net credit losses and the related loss ratio in the U.S.,
particularly in CitiCards, may increase from the 2002 second quarter as
bankruptcy losses in the U.S. could be accelerated if proposed U.S.
bankruptcy legislation is enacted. Net credit losses and delinquencies
relating to Argentina may be impacted by the local economic situation,
including such factors as unemployment levels, inflation and foreign exchange
rates. This paragraph contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 38.

GLOBAL CORPORATE AND INVESTMENT BANK

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

NM Not meaningful

21

THE GLOBAL CORPORATE AND INVESTMENT BANK (GCIB) serves corporations,
financial institutions, governments, investors and other participants in
capital markets throughout the world and consists of CAPITAL MARKETS AND
BANKING, PRIVATE CLIENT, and TRANSACTION SERVICES.

GCIB net income of $1.449 billion and $2.727 billion in the 2002 second
quarter and six months was up $125 million or 9% from the 2001 second
quarter, but down $5 million from the 2001 six months, respectively. The 2002
second quarter primarily reflects net income growth from the comparable 2001
quarter of $101 million or 98% in TRANSACTION SERVICES, $89 million or 9% in
CAPITAL MARKETS AND BANKING and $3 million or 1% in PRIVATE CLIENT. The 2002
six months primarily reflects net income growth of $91 million or 47% in
TRANSACTION SERVICES and $5 million or 1% in PRIVATE CLIENT, partially offset
by a decrease of $23 million or 1% in CAPITAL MARKETS AND BANKING. GCIB Other
reported net losses of $33 million and $55 million in the 2002 second quarter
and six months, respectively, compared with net income of $35 million and $23
million in the comparable prior-year periods.

TRANSACTION SERVICES net income growth in the 2002 second quarter and six
months primarily reflects an investment gain, higher business volumes, higher
spreads in Latin America, the benefit of the Banamex acquisition, continued
rationalization of expenses in North America and Europe, and 2001 restructuring
charges. The first quarter of 2002 included write-offs on trade finance
exposures in Argentina. The CAPITAL MARKETS AND BANKING increase in the 2002
second quarter primarily reflects growth in Fixed Income, Sales & Trading and
Equities and 2001 restructuring charges, partially offset by a higher provision
for credit losses. The decrease in the 2002 six months primarily reflects
declines in Equities, and Investment Banking and a higher provision for credit
losses partially offset by 2001 restructuring charges. PRIVATE CLIENT increases
in the 2002 second quarter and six months primarily reflect higher earnings on
the bank deposit program, higher managed account revenue and 2001 restructuring
charges, partially offset by reduced revenue from margin lending and a decline
in client transactional volumes. GCIB Other income declined in the 2002 second
quarter and six months, compared to the prior-year periods, mainly due to 2001
tax benefits and a second quarter 2001 gain on the sale of a building in Asia.

The businesses of the GCIB are significantly affected by the levels of
activity in the global capital markets which, in turn, are influenced by
macro-economic and political policies and developments, among other factors, in
the over 100 countries in which the businesses operate. Global economic and
market events can have both positive and negative effects on the revenue
performance of the businesses and can affect credit performance. Losses on
corporate lending activities and the level of cash-basis loans can vary widely
with respect to timing and amount, particularly within any narrowly-defined
business or loan type. The businesses of the GCIB may be impacted by weak global
economic conditions, stress in the telecommunications industry, market turmoil
in Brazil, sovereign or regulatory actions, litigation expenses, settlements,
continued crisis in Argentina, and other related factors. This paragraph
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 38.

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

NM Not meaningful

Growth in GCIB in the 2002 second quarter and six months was led by North
America (excluding Mexico), Mexico and CEEMEA, partially offset by a decline
in Western Europe (in the six months) and Japan. North America (excluding
Mexico) grew $45 million in the 2002 second quarter and $276 million in the
2002 six months, primarily reflecting increases in Fixed Income and 2001
restructuring charges, partially offset by a higher provision for credit
losses. Mexico growth of $23 million in the 2002 second quarter and $102
million in the 2002 six months primarily reflects the acquisition of Banamex.
Western Europe net income increased $13 million in the 2002 second quarter
primarily due to 2001 restructuring charges, but decreased $120 million in
the 2002 six months primarily due to lower revenue from derivatives and a
higher provision for credit losses in the telecommunications industry. Japan
net income declined $6 million in the 2002 second quarter and $79 million in
the 2002 six months reflecting lower earnings from the investment in Nikko
Cordial and strong trading results in the first quarter of 2001. Asia net
income declined $28 million in the 2002 second quarter but increased $19
million in the 2002 six months due to a building sale in the 2001 second
quarter, partially offset by growth in Sales & Trading. Latin America net
income increased $37 million in the 2002 second quarter but declined $224
million in the 2002 six months primarily reflecting credit actions and
redenomination losses in Argentina in the 2002 first quarter.

22

CEEMEA net income increased $41 million in the 2002 second quarter and $21
million in the 2002 six months primarily due to strong Sales & Trading
results in the 2002 second quarter.

CAPITAL MARKETS AND BANKING

- ------------------------------

(1) Reclassified to conform to the current period's presentation.

CAPITAL MARKETS AND BANKING delivers a full range of global financial
services and products including investment banking, institutional brokerage,
research and advisory services, foreign exchange, structured products,
derivatives, loans, leasing and equipment finance. The primary businesses in
CAPITAL MARKETS AND BANKING include Fixed Income, Equities, Investment Banking,
Sales & Trading (which mainly operates in Asia, Latin America, Mexico and
CEEMEA), CitiCapital and Lending.

CAPITAL MARKETS AND BANKING net income of $1.074 billion and $2.096 billion
in the 2002 second quarter and six months was up $89 million or 9% from the 2001
second quarter, but down $23 million or 1% from the 2001 six months. The
increase in the 2002 second quarter primarily reflects increases in Fixed
Income, Sales & Trading and Equities and 2001 restructuring charges of
$48 million (after-tax), partially offset by a higher provision for credit
losses. The decrease in the 2002 six months primarily reflects decreases in
Equities and Investment Banking as well as a higher provision for credit losses,
partially offset by 2001 restructuring charges of $115 million (after-tax).
WorldCom-related charges in CAPITAL MARKETS AND BANKING in the second quarter of
2002 included write-downs of bonds in Fixed Income and an increase in the loan
loss reserve, partially offset by gains recognized under credit default swaps.

Revenues, net of interest expense, of $4.509 billion and $9.140 billion
in the 2002 second quarter and six months increased $356 million or 9% from
the 2001 second quarter, but decreased $185 million or 2% from the 2001 six
months, respectively. The increase in the 2002 second quarter was primarily
due to increases in Fixed Income, Equities, Sales & Trading and the
acquisition of Banamex. Fixed Income and Sales & Trading benefited from low
interest rates and also included strong foreign exchange trading results.
Growth in Equities primarily reflects market share gains in underwriting. The
decrease in the 2002 six months primarily reflects declines in Equities and
Investment Banking relative to strong levels in the first quarter of 2001 and
decreases in Latin America mainly due to the 2002 first quarter
redenomination losses in Argentina, partially offset by growth in Sales &
Trading and Fixed Income combined with the acquisition of Banamex.

Operating expenses were $2.394 billion in the 2002 second quarter, up $87
million or 4% primarily due to increases in compensation and benefits as a
result of increases in production-related compensation and the acquisition of
Banamex, partially offset by expense controls, a benefit from the absence of
goodwill and other indefinite-lived intangible asset amortization of $42
million (pretax) and 2001 restructuring charges of $80 million (pretax).
Operating expenses were down $563 million or 10% to $4.840 billion for the
2002 six months primarily due to lower compensation and benefits, declines in
other operating and administrative expenses and 2001 restructuring charges of
$192 million (pretax), partially offset by the acquisition of Banamex.
Compensation and benefits decreased primarily due to declines in
production-related compensation, savings from restructuring actions initiated
in 2001 as well as prior-year restructuring charges. Other operating and
administrative expenses declined primarily due to expense controls and a
benefit from the absence of goodwill and other indefinite-lived intangible
asset amortization of $82 million (pretax).

The provision for credit losses was $455 million in the 2002 second quarter,
up $169 million from 2001 primarily due to exposures in the telecommunications
industry. The provision for credit losses increased $510 million to
$1.066 billion for the 2002 six months primarily due to exposures in the
telecommunications industry and provisions for Argentina in the first quarter of
2002.

Cash basis loans were $4.104 billion at June 30, 2002, $3.621 billion at
March 31, 2002, $3.068 billion at December 31, 2001, and $2.469 billion at
June 30, 2001. Cash basis loans were up $1.635 billion from June 30, 2001
primarily due to borrowers in the telecommunications industry combined with
increases in Mexico and Argentina. The increase in Mexico primarily reflects the
acquisition of Banamex and includes exposures in steel, textile, food products
and other industries. Cash basis loans increased $483 million from March 31,
2002 primarily due to borrowers in the telecommunications industry and
Argentina.

23

PRIVATE CLIENT

- ------------------------
(1) Reclassified to conform to the current period's presentation.

NM Not meaningful.

PRIVATE CLIENT provides investment advice and financial planning and
brokerage services, primarily through the network of Smith Barney Financial
Consultants.

PRIVATE CLIENT net income was $204 million in the 2002 second quarter, up
$3 million from the prior year, primarily reflecting higher earnings on the bank
deposit program, higher managed account revenue and a prior-year restructuring
charge of $5 million (after-tax), partially offset by reduced revenue from
margin lending. Net income was $401 million in the 2002 six months, up
$5 million from the prior year, mainly due to higher managed account revenue,
higher revenue from the bank deposit program and a prior-year restructuring
charge of $6 million (after-tax), partially offset by lower revenue from margin
lending and a decline in client transactional volumes.

Revenues, net of interest expense, of $1.523 billion in the 2002 second
quarter increased $15 million or 1% from the comparable prior-year period,
primarily reflecting higher revenue from managed accounts and the bank deposit
program, partially offset by a decline in revenue from margin lending. Revenues
of $3.000 billion in the 2002 six months declined $57 million or 2%, mainly due
to lower customer transactional activity and lower revenue from margin lending,
partially offset by higher revenue from the bank deposit program and managed
accounts.

Total assets under fee based management were $186.9 billion as of June
30, 2002, down $19 billion or 9% from the prior-year period, primarily
reflecting declining market values. Total client assets of $939 billion in
the 2002 second quarter decreased $42 billion or 4% compared to the prior
year primarily reflecting declining market values, partially offset by
positive net flows. Net inflows were $9.4 billion in the 2002 second quarter
and $25 billion in the 2002 six months compared to $3.7 billion and $21
billion in the comparable prior-year periods, respectively. PRIVATE CLIENT
had 12,808 financial consultants as of June 30, 2002, compared with 12,802 as
of June 30, 2001, and annualized revenue per financial consultant was
$473,000 as of June 30, 2002, unchanged from the prior year.

- ------------------------

(1) Reclassified to conform to the current period's presentation.

Operating expenses increased $11 million or 1% to $1.198 billion in the 2002
second quarter and decreased $60 million or 2% to $2.363 billion in the 2002 six
months compared to the respective 2001 periods. The increase in the 2002 second
quarter primarily reflects higher variable compensation, partially offset by a
prior-year restructuring charge of $8 million (pretax). Operating expenses
declined in the 2002 six months mainly due to lower variable compensation
resulting from a decline in revenue combined with the impact of expense control
initiatives and a prior-year restructuring charge of $9 million (pretax). The
provision for credit losses totaled $2 million in both the 2002 second quarter
and six months, up $3 million from the respective 2001 periods.

24

TRANSACTION SERVICES

- ------------------------

(1) Reclassified to conform to the current period's presentation.

NM Not meaningful.

TRANSACTION SERVICES--which provides cash management, trade finance,
custody, clearing and depository services globally--reported net income of
$204 million in the 2002 second quarter, up $101 million or 98% from 2001, and
net income of $285 million for the 2002 six months, up $91 million or 47% from
2001, in each case reflecting the impact of an investment gain, higher volumes
including the benefit of the Banamex acquisition, higher spreads in Latin
America, continued rationalization of expenses in North America and Europe and
prior-year restructuring-related charges of $13 million (after-tax). Net income
in the 2002 six months included $44 million (after-tax) in trade finance
write-offs in Argentina.

As shown in the following table, average liability balances and assets under
custody experienced strong growth versus the prior year. Average liability
balances grew 12% led by Asia, Japan and Mexico. Assets under custody grew 20%
with the improvement primarily in North America and Europe.

Revenues, net of interest expense, of $939 million in the 2002 second
quarter increased $48 million or 5% from the comparable 2001 period, reflecting
an investment gain, higher volumes including the benefit of the Banamex
acquisition and higher spreads in Latin America, partially offset by lower
spreads in all other regions. Total revenues, net of interest expense, of
$1.774 billion in the six months ending June 30, 2002 decreased $19 million or
1% from the comparable 2001 period, primarily reflecting lower spreads in all
regions except Latin America, partially offset by an investment gain, higher
volumes including the benefit of the Banamex acquisition and higher spreads in
Latin America.

Operating expenses of $626 million and $1.270 billion in the 2002 second
quarter and six months decreased $89 million or 12% and $194 million or 13% from
the comparable 2001 periods, reflecting continued expense reductions in
operations and technology as well as in the front office in North America and
Europe, foreign currency translation benefits in Latin America and 2001
restructuring-related charges of $17 million (pretax) in both the 2001 second
quarter and six months.

The provision for credit losses of $3 million in the 2002 second quarter was
unchanged from the comparable 2001 period. Provision for credit losses of
$72 million for the six months ending June 30, 2002 was up $62 million from the
comparable 2001 period, reflecting first quarter 2002 trade finance write-offs
in Argentina.

Cash-basis loans, which in the TRANSACTION SERVICES business are primarily
trade finance receivables, were $380 million at June 30, 2002, $335 million at
March 31, 2002, $444 million at December 31, 2001 and $100 million at June 30,
2001. Cash-basis loans at June 30, 2002 were up $280 million from June 30, 2001
principally due to the Banamex acquisition.

25

OTHER CORPORATE

- ------------------------

(1) Reclassified to conform to the current period's presentation.

OTHER CORPORATE--which includes intra-GCIB segment eliminations, certain
one time non-recurring items and tax amounts not allocated to GCIB
products--reported a net loss of $33 million and $55 million for the 2002
second quarter and six months, respectively, compared to net income of $35
million and $23 million in the 2001 second quarter and six months. The net
income in the prior-year periods was primarily due to a 2001 second quarter
building sale in Asia and tax benefits in the first and second quarters of
2001.

CORPORATE PORTFOLIO REVIEW

Corporate loans are identified as impaired and placed on a nonaccrual basis
when it is determined that the payment of interest or principal is doubtful of
collection or when interest or principal is past due for 90 days or more, except
when the loan is well-secured and in the process of collection. Impaired
corporate loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are carried at the lower of
cost or collateral value. The following table summarizes corporate cash-basis
loans at period-end and net credit losses for the corresponding three-month
period.

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) JENA includes Japan, Western Europe, and North America.

(3) Other International includes Asia (excluding Japan), Mexico, Latin America,
and CEEMEA.

(4) Includes Banamex cash-basis loans and net credit losses in the 2002 first
and second quarters and the 2001 fourth quarter.

Corporate cash-basis loans were $4.573 billion, $3.995 billion,
$3.533 billion, and $2.606 billion at June 30, 2002, March 31, 2002,
December 31, 2001 and June 30, 2001, respectively. Cash-basis loans increased
$1.967 billion from June 30, 2001 primarily due to increases in JENA, Other
International, and CitiCapital. JENA increased primarily due to exposures in the
telecommunications industry. Other International increased primarily due to
increases in Mexico and Argentina. The increase in Mexico primarily reflects the
acquisition of Banamex and includes exposures in steel, textile, food products
and other industries. CitiCapital increased primarily due to equipment finance
loans. Cash basis loans increased $578 million from March 31, 2002 primarily due
to increases in JENA and Other International. JENA increased primarily due to
borrowers in the telecommunications industry, and Other International increased
primarily due to Argentina.

Total corporate net credit losses of $485 million in the 2002 second
quarter increased $198 million from the 2001 second quarter primarily due to
an increase of $196 million in CAPITAL MARKETS AND BANKING primarily
reflecting higher net credit losses in the telecommunications industry, in
equipment finance and in Argentina.

26

Brazil is experiencing market turmoil as a result of uncertainty about the
upcoming presidential elections and its ability to service its government and
external debt. Citigroup continues to monitor the situation closely. For further
details on Citigroup's cross-border exposure to Brazil, please see Management of
Cross-Border Risk on page 41.

Citigroup's allowance for credit losses of $10.437 billion is available to
absorb probable credit losses inherent in the entire portfolio. For analytical
purposes only, the portion of Citigroup's allowance for credit losses attributed
to the corporate portfolio was $4.681 billion at June 30, 2002 compared to
$4.788 billion at March 31, 2002, and $4.003 billion at June 30, 2001. The
allowance attributed to the corporate portfolio as a percentage of loans was
3.28% at June 30, 2002, as compared to 3.37% at March 31, 2002 and 2.79% at
June 30, 2001. The $107 million or 9 basis point decrease in the allowance from
the 2002 first quarter primarily reflects Argentina write-offs, the
reclassification of $60 million to "Other Liabilities" for reserves related to
letters of credit, the impact of declining foreign exchange rates in Mexico, and
a decrease in reserves in CitiCapital due to improvements in credit quality in
the transportation leasing portfolio, partially offset by additional reserves
for the telecommunications industry. The $678 million or 49 basis point increase
from the 2001 second quarter primarily reflects the acquisition of Banamex and
additional reserves for Argentina. Losses on corporate lending activities and
the level of cash-basis loans can vary widely with respect to timing and amount,
particularly within any narrowly-defined business or loan type. Corporate net
credit losses and cash-basis loans may increase from the 2002 second quarter
levels due to weak global economic conditions, stress in the telecommunications
industry, market turmoil in Brazil, sovereign or regulatory actions, the
continued economic crisis in Argentina, and other factors. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements "on page 38.

GLOBAL INVESTMENT MANAGEMENT

- ------------------------

(1) Reclassified to conform to the current period's presentation.

GLOBAL INVESTMENT MANAGEMENT comprises LIFE INSURANCE AND ANNUITIES, PRIVATE
BANKING and ASSET MANAGEMENT. These businesses offer a broad range of life
insurance, annuity, asset management and personalized wealth management products
and services distributed to institutional, high net worth and retail clients.

Global Investment Management net income of $505 million in the 2002
second quarter and $937 million in the 2002 six months was up $100 million or
25% and $131 million or 16% from the comparable 2001 periods. LIFE INSURANCE
AND ANNUITIES net income was $255 million in the 2002 second quarter and $459
million in the 2002 six months, up $19 million or 8% and $8 million or 2%
from the comparable 2001 periods. The $19 million increase in net income at
LIFE INSURANCE AND ANNUITIES from the 2001 second quarter primarily reflects
the Banamex acquisition, the benefit from the release of an Amparos reserve
and higher insurance premium revenues due to increased business volumes,
partially offset by lower net investment income including the absence of
prior-year real estate transactions. The $8 million increase in net income at
LIFE INSURANCE AND ANNUITIES from the 2001 six months primarily reflects the
Banamex acquisition and higher earnings in Latin America, partially offset by
lower net investment income. PRIVATE BANKING net income was $113 million in
the 2002 second quarter and $223 million in the 2002 six months, up $25
million or 28% and $40 million or 22% from the comparable 2001 periods. The
increase in net income at PRIVATE BANKING from the 2001 periods primarily
reflects continued customer revenue momentum across a range of products,
including client trading activity and lending, and the impact of lower
interest rates, partially offset by increased expenses due to higher
employee-related and technology costs. ASSET MANAGEMENT net income was $137
million in the 2002 second quarter and $255 million in the 2002 six months,
up $56 million or 69% and $83 million or 48% from the comparable 2001
periods. The increase in net income at ASSET MANAGEMENT from the 2001 periods
primarily reflects the Banamex acquisition, increased asset-based fees and
lower expenses, partially offset by the impact of weak global equity markets
and a decline in the Latin America region, primarily due to the continuing
economic crisis in Argentina.

27

GLOBAL INVESTMENT MANAGEMENT
NET INCOME - REGIONAL VIEW

- ------------------------

(1) Reclassified to conform to the current period's presentation.

NM Not meaningful

GLOBAL INVESTMENT MANAGEMENT net income increased $100 million in the 2002
second quarter and $131 million in the 2002 six months from the comparable 2001
periods primarily driven by Mexico, Latin America, Asia and Japan in the quarter
over quarter comparison and by Mexico, North America, Japan and Asia, partially
offset by a decline in Latin America, in the six-month comparison.

Mexico net income increased $60 million and $101 million in the 2002
second quarter and six months from the comparable 2001 periods, primarily
reflecting the Banamex acquisition, which impacted the LIFE INSURANCE AND
ANNUITIES and the ASSET MANAGEMENT businesses. Latin America net income
increased $15 million and decreased $21 million in the 2002 second quarter
and six-month periods, respectively, over the comparable 2001 periods. The
quarter over quarter comparison increase includes the release of an Amparos
reserve (which was offset by a change in Retail Banking) and the benefit
of lower benefits and claims expense due to changes in Argentine regulations
and the impact of the peso devaluation, partially offset by a decline in
Asset Management relating to the economic crisis in Argentina. The six-month
period decline primarily relates to an overall decrease in Argentina business
levels and includes the impact of the peso devaluation. Asia net income
increased $14 million in both the 2002 second quarter and six months over the
comparable 2001 periods, primarily relating to investment income in LIFE
INSURANCE AND ANNUITIES and increased client trading activity and lending in
PRIVATE BANKING. Japan net income increased $10 million and $18 million in
the 2002 second quarter and six months, respectively, over the comparable
2001 periods primarily reflecting increased client trading activity and
placement fees in PRIVATE BANKING. North America net income was flat in the
2002 second quarter and increased $30 million in the 2002 six-month period
over the comparable 2001 periods. The $30 million increase reflects continued
customer revenue momentum in PRIVATE BANKING and increased asset-based fees
and lower expenses in ASSET MANAGEMENT, partially offset by lower net
investment income in LIFE INSURANCE AND ANNUITIES.

LIFE INSURANCE AND ANNUITIES

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Excludes investment gains/losses included in Proprietary Investment
Activities segment.

LIFE INSURANCE AND ANNUITIES comprises Travelers Life and Annuity and
International Insurance Manufacturing. These businesses offer a broad range of
life insurance and annuity products and services including individual life
insurance and COLI products, and individual annuity and group annuity products,
including fixed and variable annuities. The International Insurance
Manufacturing business primarily has operations in Latin America, Mexico,
Western Europe, and Asia.

LIFE INSURANCE AND ANNUITIES net income was $255 million and $459 million in
the 2002 second quarter and six months, respectively, up $19 million or 8% and
$8 million or 2% from the comparable periods of 2001. The $19 million increase
in net income from the 2001 second quarter reflects an increase of $43 million
for International Insurance Manufacturing, partially offset by a decrease of
$24 million in Travelers Life and Annuity. The $8 million increase in net income
from the 2001 six months reflects an increase of $41 million at International
Insurance Manufacturing, partially offset by a decrease in net income of
$33 million in Travelers Life and Annuity.

28

Net income for Travelers Life and Annuity of $206 million and $406
million in the 2002 second quarter and six months declined $24 million or 10%
and $33 million or 8% from the comparable periods of 2001, as lower net
investment income, which included the absence of prior-year real estate
transactions, were partially offset by business volume growth and continued
expense management, including a change in deferred policy acquisition costs.
Business volumes were strong during the 2002 second quarter with double-digit
growth in group annuity account balances and net written premiums, and in
individual life net written premiums versus the prior-year second quarter.
These increases reflected growth in retirement savings and estate planning
products, primarily in Guaranteed Investment Contracts (GICs), and were
partially offset by a decline in individual annuity net written premiums due
to negative market action.

Net income for International Insurance Manufacturing of $49 million and
$53 million in the 2002 second quarter and six months increased $43 million
and $41 million, respectively, from the comparable periods in 2001. The $43
million increase in net income from the 2001 second quarter primarily
reflects a $23 million increase in Latin America, a $13 million increase in
Mexico due to the Banamex acquisition and a $6 million increase in Asia. The
$23 million increase in Latin America is due to a release of an Amparos
reserve and the benefit of lower benefits and claims expense due to changes
in Argentine regulations and the impact of the peso devaluation. The $41
million increase from the 2001 six months primarily reflects an $18 million
increase in Mexico due to the Banamex acquisition, a $16 million increase in
Latin America and a $7 million increase in Asia. The increase in Latin
America primarily resulted from lower benefits and claims expense, and a
benefit in the 2002 six months from a redenomination gain.

TRAVELERS LIFE AND ANNUITY

The majority of the annuity business and a substantial portion of the life
business written by Travelers Life and Annuity are accounted for as investment
contracts, such that the premiums are considered deposits and are not included
in revenues.

The following table shows net written premiums and deposits by product line:

Individual annuities account balances were $29.2 billion at June 30, 2002,
slightly down from $30.0 billion at December 31, 2001 and $29.7 at June 30,
2001, primarily reflecting declines in market values of variable annuity
investments, partially offset by good in force retention. Net written premiums
and deposits for individual annuities in the 2002 second quarter and six months
were $1.531 billion and $3.057 billion, respectively, down from $1.655 billion
and $3.200 billion in the comparable periods of 2001. The decrease in individual
annuity net written premiums and deposits was driven by a decline in variable
annuity sales due to current market conditions, but was partially offset by
fixed annuity sales increases over the prior-year periods. Continued penetration
into outside broker-dealer channels reflect the ongoing effort to build market
share during declining market conditions.

Group annuity account balances and benefit reserves reached $22.5 billion at
June 30, 2002, up from $21.0 billion at December 31, 2001 and $19.4 billion at
June 30, 2001. The group annuity business experienced continued strong sales
momentum in structured settlement products and both variable and fixed rate
GICs. Net written premiums and deposits (excluding Citigroup's employee pension
plan deposits) were $2.350 billion and $3.875 billion in the 2002 second quarter
and six months, respectively, compared to $1.397 billion and $3.899 billion in
the comparable periods of 2001.

Total premiums and deposits for individual life insurance of $221 million
and $504 million in the 2002 second quarter and six months, respectively, were
33% ahead of the $166 million and $378 million for the comparable periods of
2001, driven by independent agent, high end, and retirement and estate planning.
Life insurance in force was $79.6 billion at June 30, 2002, up from
$75.0 billion at year-end 2001 and $71.0 billion at June 30, 2001.

29

PRIVATE BANKING

- ------------------------

(1) Reclassified to conform to the current period's presentation.

PRIVATE BANKING provides personalized wealth management services for high
net worth clients around the world. PRIVATE BANKING net income was $113 million
in the 2002 second quarter and $223 million in the 2002 six months, up
$25 million or 28% and $40 million or 22% from the 2001 periods, primarily
reflecting continued customer revenue momentum across most products and the
impact of lower interest rates, partially offset by increased expenses.

Client business volumes under management, which include custody accounts,
client assets under fee-based management, deposits, and loans, were
$163 billion at the end of the 2002 second quarter, up $12 billion or 8% from
$151 billion at the end of the 2001 second quarter and reflects increases in
most major product lines, including an increase of $5 billion in banking and
fiduciary deposits and $4 billion in loans. Regionally, the increase primarily
reflects continued growth in North America, Asia and Japan.

Revenues, net of interest expense, were $427 million in the 2002 second
quarter and $850 million in the six months, up $51 million or 14% and
$82 million or 11% from the respective 2001 periods. Revenue growth was
primarily driven by continued customer revenue momentum across a range of
products including client trading activity, lending, and the benefit of lower
interest rates. In the 2002 second quarter and six months, the increase in
revenues reflects continued favorable trends in North America (including
Mexico), up $30 million or 19% and $64 million and 21%, respectively, from the
comparable 2001 periods. International revenues increased $21 million or 9% from
the 2001 second quarter and $18 million or 4% from the 2001 six months,
primarily due to growth in Japan and Asia.

Operating expenses of $261 million and $518 million in the 2002 second
quarter and six months were up $24 million or 10% and $42 million or 9% from the
respective 2001 periods, primarily reflecting higher levels of employee-related
expenses (including European severance costs) partially due to increased
front-end sales and servicing capabilities and investment spending in
technology. Operating expenses include restructuring charges of $3 million
pretax ($2 million after-tax) in the 2002 first quarter and $7 million pretax
($4 million after-tax) in the 2001 second quarter, primarily relating to North
America and Latin America.

The provision for credit losses was $6 million in the 2002 six months, up
$3 million from the year-ago period, primarily reflecting higher write-offs.
Loans 90 days or more past due at the 2002 quarter-end were $193 million or
0.67% of total loans outstanding, compared with $64 million or 0.26% at the
end of the 2001 second quarter, and reflects increases in North America,
Western Europe, Japan and CEEMEA.

Average assets of $29 billion in the 2002 second quarter increased
$3 billion or 12% from $26 billion in the 2001 second quarter, primarily due to
higher mortgage financing, and margin and tailored lending.

30

ASSET MANAGEMENT

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Includes $29 billion and $28 billion in 2002 and 2001, respectively, for
PRIVATE BANKING clients.

ASSET MANAGEMENT comprises the substantial resources that are available
through its three primary asset management business platforms--Smith Barney
Asset Management, Salomon Brothers Asset Management, and Citibank Asset
Management--along with the pension administration businesses of Global
Retirement Services. These businesses offer institutional, high net worth, and
retail clients a broad range of investment alternatives from investment centers
located around the world. Products and services offered include mutual funds,
closed-end funds, separately managed accounts, unit investment trusts,
alternative investments, variable annuities (through affiliated and third-party
insurance companies), and pension administration.

Net income of $137 million and $255 million in the 2002 second quarter and
six months was up $56 million or 69% and $83 million or 48% from the comparable
2001 periods, primarily due to the Banamex acquisition, which impacted both
ASSET MANAGEMENT and Global Retirement Services, decreased expenses and
increased asset-based fees, partially offset by the impact of negative market
action, the cumulative impact of outflows of U.S. retail Money Market funds to
the Bank Deposit Program and a decline in Latin America Retirement Services due
to the continuing economic crisis in the region. The six-month period was
additionally impacted by the absence of prior-year one-time fees.

Assets under management for the 2002 second quarter rose 6% from the 2001
second quarter to $442 billion, primarily reflecting strong net flows of $54
billion and the impact of the Banamex acquisition, partially offset by
negative market action of $33 billion and the cumulative impact of the
transfers of U.S. retail Money Market assets to the Bank Deposit Program.
Institutional client assets were $162 billion at June 30, 2002, up $31
billion or 24% compared to the 2001 second quarter reflecting the cumulative
impact of institutional money market funds and long-term product flows,
partially offset by negative market action. Retail and Private Bank client
assets were $220 billion, down $12 billion or 5% compared to a year ago,
primarily reflecting the impact of negative market action and the cumulative
impact of the Bank Deposit Program, partially offset by the Banamex
acquisition. Citigroup Alternative Investments assets were $50 billion at
June 30, 2002, up $2 billion or 4% from the prior-year period. Retirement
Services assets were $10 billion at June 30, 2002, up $3 billion or 38% from
the prior-year period, primarily due to the Banamex acquisition, partially
offset by a decline in Latin America Retirement Services due to the
continuing economic crisis in the region.

Sales of proprietary mutual funds and managed account products at SSB were
$6.4 billion in the 2002 second quarter, down 13% from the 2001 second quarter
and represented 51% of SSB's retail channel sales. Sales of mutual and money
funds through Global Consumer's banking network decreased 23% to $2.3 billion in
the 2002 second quarter compared to the prior-year quarter, representing 45% of
total sales, including $1.3 billion in International and $1.0 billion in the
U.S., of which Primerica sold $0.6 billion of proprietary U.S. mutual and money
funds, representing 74% of Primerica's total U.S. mutual and money funds sales
in the 2002 second quarter compared to 66% in the 2001 second quarter.

Revenues, net of interest expense, of $522 million and $1.041 billion in the
2002 second quarter and six months increased $31 million or 6% and $34 million
or 3% from the 2001 second quarter and six months, respectively, primarily due
to the Banamex acquisition and increased asset-based fees, partially offset by a
decline in Latin America Retirement Services due to the continuing economic
crisis in the region, the impact of negative market action and the cumulative
impact of outflows of U.S. retail Money Market funds to the Bank Deposit
Program. The six-month period was additionally impacted by the absence of
prior-year one-time fees.

Operating expenses of $317 million and $654 million in the 2002 second
quarter and six months declined $36 million or 10% and $60 million or 8% from
the comparable 2001 periods, primarily reflecting a decline in Latin America
Retirement Services due to the continuing economic crisis in the region, the
absence of goodwill and indefinite-lived intangible asset amortization in 2002
and reduced advertising and marketing expenses, partially offset by the impact
of the Banamex acquisition. Operating expenses include

31

restructuring charges of $12 million pretax ($8 million after-tax) in the
2002 first quarter, relating to Latin America, and $6 million pretax ($3
million after-tax) in the 2001 second quarter, primarily relating to Western
Europe.

PROPRIETARY INVESTMENT ACTIVITIES

- ------------------------

(1) Reclassified to conform to the current period's presentation.

PROPRIETARY INVESTMENT ACTIVITIES comprises Citigroup's venture capital
activities, realized investment gains (losses) from sales or write-downs of
certain insurance-related investments (excludes gains/losses relating to the
Property and Casualty segment), results from certain proprietary investments,
the results of certain investments in countries that refinanced debt under the
1989 Brady Plan or plans of a similar nature, and, since August 2001, the
Banamex investment portfolio.

Revenues, net of interest expense, are comprised of ($69) million and
$310 million from proprietary investments and ($185) million and $1 million
from net realized gains (losses) from insurance-related investments for the
2002 second quarter and 2001 second quarter, respectively. In the six-month
periods, revenues, net of interest expense, are comprised of $23 million and
$236 million from proprietary investments and ($160) million and $116 million
from net realized gains (losses) from insurance-related investments for 2002
and 2001, respectively.

Revenues, net of interest expense, of ($254) million for the 2002 second
quarter decreased $565 million from the 2001 second quarter, primarily
reflecting higher impairment write-downs in insurance-related and other
proprietary investments, including $203 million in pretax write-downs on
WorldCom-related investments and lower venture capital results, partially offset
by higher realized gains in the insurance-related investments.

For the 2002 six months, revenues, net of interest expense, of ($137)
million decreased $489 million from the 2001 six-month period, primarily
reflecting higher impairment write-downs in insurance-related and other
proprietary investments, including $203 million on WorldCom and $153 million on
certain investments in Argentina, and lower venture capital results, partially
offset by realized gains from sales in the venture capital portfolio.

Operating expenses of $29 million and $62 million in the 2002 second quarter
and six months increased $11 million and $12 million, respectively, from the
comparable 2001 periods, primarily due to increased venture capital costs,
partially related to a majority-owned venture capital fund which was established
in late 2001.

Minority interest, net of tax, increased in both the 2002 second quarter and
six-month periods from the comparable 2001 periods, primarily due to the net
impact of majority-owned investment funds established in late 2001.

Proprietary Investment Activities results may fluctuate in the future as a
result of market and asset-specific factors. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 38.

32

CORPORATE/OTHER

- ------------------------

(1) Reclassified to conform to the current period's presentation.

CORPORATE/OTHER includes net corporate treasury results, corporate
expenses, certain intersegment eliminations, the Internet-related development
activities, cumulative effect of accounting changes and taxes not allocated
to the individual businesses, and the gain on the sale of stock by a
subsidiary relating to the TPC IPO in the 2002 first quarter.

Revenues, net of interest expense, of $273 million and $369 million in
the 2002 second quarter and six months increased $378 million and $606
million, respectively, from the 2001 periods, primarily reflecting lower net
treasury costs and the impact of higher intersegment eliminations. The lower
net treasury costs primarily relate to favorable interest rate positioning
and lower funding costs, including the impacts of lower interest rates and
earnings on the cash received from the TPC initial public offering, partially
offset by the impact of increased borrowing levels. Operating expenses of
$217 million and $403 million in the 2002 second quarter and six months
increased $57 million and $99 million from the respective prior-year periods
primarily due to higher intersegment eliminations, partially offset by lower
employee related costs and a decrease in certain net unallocated corporate
costs. The decreases in the provisions for benefits, claims, and credit
losses in both the 2002 second quarter and six months from the comparable
2001 periods are the result of higher intersegment eliminations.

The gain on sale of stock by a subsidiary of $1.270 billion ($1.061 billion
after-tax) is the result of TPC's IPO of 231 million shares of its class A
common stock in the 2002 first quarter (see Note 3 to Unaudited Consolidated
Financial Statements). The cumulative effect of accounting changes of
$47 million in the 2002 six-month period reflects the 2002 first quarter impact
of adopting SFAS No. 142 relating to goodwill and indefinite-lived intangible
assets. The cumulative effect of accounting changes of $116 million in the 2001
second quarter reflects the impact of adopting EITF 99-20. The 2001 six-month
period also reflects a $42 million charge related to the 2001 first quarter
adoption of SFAS No. 133. See Note 2 of Notes to Unaudited Consolidated
Financial Statements for further details of the cumulative effect of accounting
changes.

PROPERTY AND CASUALTY

- ------------------------

(1) Reclassified to conform to the current period's presentation.

PROPERTY AND CASUALTY--which primarily reflects the operations of TPC
including the results of its Personal Lines business, Commercial Lines business,
Interest and Other, which includes interest expense, certain corporate income
and expenses which have not been allocated to the business lines and Realized
Investment Portfolio Gains (Losses)--reported net income of $255 million and
$600 million in the 2002 second quarter and six months, respectively, compared
to $341 million and $809 million in the comparable periods of 2001. Net income
for the 2002 second quarter and six months reflects the recognition of minority
interest resulting from

33

the sale of 23.1% of TPC to the public in the 2002 first quarter. Also
contributing to the decrease in net income in the 2002 second quarter and six
months compared to the 2001 periods were increased loss cost trends,
unfavorable prior-year reserve development in the current periods versus
favorable prior-year reserve development in the prior-year periods, lower net
investment income and lower realized investment portfolio gains, partially
offset by the benefit of rate increases, lower catastrophe losses and lower
interest expense.

In late March 2002, TPC completed its initial public offering of
231 million shares of its class A common stock, representing approximately 23.1%
of its outstanding equity securities, for net proceeds after underwriting
discount of $4.1 billion. Citigroup recognized an after-tax gain of
$1.061 billion ($1.270 billion pretax) as a result of the TPC offering.
Citigroup will make a tax-free distribution to its stockholders of a portion of
its remaining ownership interest in TPC in August 2002, such that following the
distribution, Citigroup will remain a holder of approximately 9.9% of TPC's
outstanding equity securities. Income statement minority interest was recognized
on the initial public offering portion beginning on April 1, 2002.

PERSONAL LINES

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Excludes investment gains/losses included in Property and Casualty Realized
Investment Portfolio gains (loss) table.

PERSONAL LINES--which writes all types of property and casualty insurance
covering personal risks--reported net income of $53 million and $123 million in
the 2002 second quarter and six months, respectively, compared to $45 million
and $140 million in the prior-year periods. Net income for the 2002 second
quarter and six months reflects the recognition of minority interest resulting
from the sale of 23.1% of TPC to the public in the 2002 first quarter. The
increase in income before minority interest for the 2002 second quarter compared
to the 2001 second quarter was principally due to lower catastrophe losses.
Earnings also benefited from rate increases that continue to exceed loss cost
trends, the absence of goodwill and indefinite-lived intangible asset
amortization in 2002 and the ongoing focus on expense management. These factors
were partly offset by unfavorable prior-year reserve development in the current
quarter versus favorable prior-year reserve development in the prior-year
quarter and by lower net investment income. Income before minority interest for
the 2002 six-month period was essentially flat compared to the 2001 six-month
period, reflecting the effects of increased loss cost trends, unfavorable
prior-year reserve development in the current six-month period versus favorable
prior-year reserve development in the prior-year six-month period and lower net
investment income, offset by the benefit of rate increases, lower catastrophe
losses, the absence of goodwill and indefinite-lived intangible asset
amortization and the ongoing focus on expense management.

The following table shows net written premiums by product line:

Personal Lines net written premiums for the 2002 second quarter and six
months were $1.174 billion and $2.211 billion, respectively, compared to
$1.073 billion and $2.035 billion in the prior-year periods. The increase in net
written premiums in the 2002 second quarter and six months compared to the 2001
second quarter and six months, primarily reflects rate increases implemented in
both the automobile and homeowners product lines. The business retention levels
in the 2002 second quarter and six months remain consistent with the comparable
periods in 2001.

Catastrophe losses, net of taxes and reinsurance, were $14 million and
$25 million in the 2002 second quarter and six months, respectively, compared to
$42 million in both of the comparable periods of 2001. Catastrophe losses in
2002 were primarily due to

34

winter storms in the Midwest and New York in the first quarter, a wind and
hailstorm in Maryland and Virginia in the second quarter. Catastrophe losses
in 2001 were primarily due to Tropical Storm Allison and wind and hailstorms
in Texas and the Midwest in the second quarter.

The statutory combined ratio for Personal Lines in the 2002 second quarter
and six months was 100.4% and 100.8%, respectively, compared to 104.4% and
101.4% in the comparable periods of 2001. The GAAP combined ratio for Personal
Lines in the 2002 second quarter and six months was 99.5% and 100.9%,
respectively, compared to 103.7% and 101.4% in the comparable periods of 2001.
GAAP combined ratios for Personal Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.

The decrease in the statutory and GAAP combined ratios for the 2002 second
quarter and six months from the comparable 2001 periods was primarily due to the
benefit of rate increases, lower catastrophe losses and expense management,
largely offset by increased loss cost trends and unfavorable prior-year reserve
development in the 2002 second quarter and six months versus favorable
prior-year reserve development in the 2001 second quarter and six months.

The impact of prior-year reserve development was an increase in both the
2002 second quarter and six months statutory and GAAP combined ratios of
0.4%, compared to a decrease of 1.4% and 1.0% in the comparable periods of
2001.

COMMERCIAL LINES

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Excludes investment gains/losses included in Property and Casualty Realized
Investment Portfolio gains (loss) table.

COMMERCIAL LINES--which offers a broad array of property and casualty
insurance and insurance-related services through brokers and independent
agencies--reported net income of $239 million and $517 million in the 2002
second quarter and six months compared to $302 million and $598 million in
the prior-year periods. Net income for the 2002 second quarter and six months
reflects the recognition of minority interest resulting from the sale of
23.1% of TPC to the public in the 2002 first quarter. The decrease in net
income for the 2002 second quarter and six months compared to the 2001 second
quarter and six months was largely due to minority interest. The increase in
income before minority interest for the 2002 second quarter compared to the
2001 second quarter was driven by rate increases considerably in excess of
loss cost trends, higher production levels, no catastrophe losses in the 2002
second quarter compared to $13 million in the 2001 second quarter, the
absence of goodwill and indefinite-lived intangible asset amortization and
the ongoing focus on expense management. These factors were partly offset by
unfavorable prior-year reserve development in the current quarter versus
favorable prior-year reserve development in the prior-year quarter and by
lower net investment income. Income before minority interest for the 2002
six-month period compared to the 2001 six-month period reflects the effects
of unfavorable prior-year reserve development in the current six-month period
versus favorable prior-year reserve development in the comparable prior-year
period and lower net investment income, largely offset by the benefit of rate
increases in excess of loss cost trends, no catastrophe losses in the 2002
six-month period compared to $21 million in the 2001 six-month period, the
absence of goodwill and indefinite-lived intangible asset amortization and
the ongoing focus on expense management.

Net written premiums by market were as follows:

- ------------------------

(1) Reclassified to conform to the current period's presentation.
NM Not meaningful

35

Commercial Lines net written premiums for the 2002 second quarter and six
months were $1.922 billion and $3.609 billion, respectively, compared to
$1.556 billion and $3.215 billion in the prior-year periods. The trend in
written premiums for National Accounts, Commercial Accounts and Select Accounts
reflects the impact of an improving rate environment as evidenced by the
favorable pricing on new and renewal business. The increase in National Accounts
net written premiums also reflects the renewal of certain assumed reinsurance
contracts previously written by Gulf. National Accounts net written premiums
also increased as more businesses turned to state residual market pools for
workers' compensation. The increase in Commercial Accounts net written premiums
also reflects the termination of certain reinsurance contracts during the 2002
second quarter.

National Accounts business retention ratio in the 2002 second quarter was
significantly higher than the 2001 comparable period and for the 2002 six months
was moderately higher than the 2001 comparable period, reflecting the Company's
reputation for quality of service given the current market conditions.

Commercial Accounts new business in the 2002 second quarter and six months
was significantly higher than in the comparable periods of 2001, reflecting
renewal rate increases and new business. Commercial Accounts business
retention ratio in the 2002 second quarter and six months was moderately higher
than the 2001 comparable periods.

New premium business in Select Accounts in the 2002 second quarter was flat
and in the 2002 six months was moderately lower than in the comparable periods
of 2001. Select Accounts business retention ratio in the 2002 second quarter and
six months remained strong and fairly consistent with the 2001 comparable
periods.

Bond provides a variety of fidelity and surety bonds and executive
liability coverages to clients of all sizes through independent agents and
brokers. The 2002 six-month net written premiums amount is lower by $18
million due to a change in the Bond Executive Liability excess of loss
reinsurance treaty that was effective January 1, 2002. In addition, the 2001
six-month amount is higher by $34 million due to the termination of the
Master Bond Liability reinsurance treaty effective January 1, 2001. Excluding
these two reinsurance adjustments, Bond net written premiums increased $33
million during the 2002 six months compared to the 2001 six months. Higher
prices in professional liability and in fidelity and surety helped to
increase net written premiums in the 2002 second quarter and six months,
partially offset by higher reinsurance costs.

Gulf markets products to national, mid-size and small customers and
distributes them through both wholesale brokers and retail agents and brokers
throughout the United States. Reductions in exposures in certain programs,
including assumed reinsurance, transportation and property, offset increases in
Gulf's core specialty lines, resulting in an overall decrease in Gulf's net
written premiums.

There were no catastrophe losses in the 2002 second quarter and six months.
Catastrophe losses, net of taxes and reinsurance, were $13 million and
$21 million in the 2001 second quarter and six months. Catastrophe losses in
2001 were primarily due to the Seattle earthquake in the first quarter and
Tropical Storm Allison in the second quarter.

The statutory combined ratio before policyholder dividends for Commercial
Lines in the 2002 second quarter and six months was 98.3% and 99.7%,
respectively, compared to 101.3% and 100.9% in the comparable periods of 2001.
The GAAP combined ratio before policyholder dividends for Commercial Lines in
the 2002 second quarter and six months was 94.8% and 96.9%, respectively,
compared to 101.5% and 99.9% in the comparable periods of 2001. GAAP combined
ratios for Commercial Lines differ from statutory combined ratios primarily due
to the deferral and amortization of certain expenses for GAAP reporting purposes
only.

The decrease in the 2002 second quarter and six-month statutory and GAAP
combined ratios before policyholder dividends from the comparable 2001 periods,
was primarily due to the benefit of rate increases in excess of loss cost
trends, lower catastrophe losses, underwriting discipline and expense
management, partially offset by unfavorable prior-year reserve development in
the 2002 second quarter and six months versus favorable prior-year reserve
development in the 2001 second quarter and six months. The impact of
prior-year reserve development was an increase in the 2002 second quarter and
six months statutory and GAAP combined ratios of 5.4% and 5.8%, compared to a
decrease of 1.0% and 0.9% in the comparable periods of 2001.

PROPERTY AND CASUALTY REALIZED INVESTMENT PORTFOLIO GAINS (LOSSES)

- ------------------------

(1) Reclassified to conform to the current period's presentation.

36

Realized investment portfolio gains (losses) comprises Property and
Casualty's realized investment gains (losses) on sales and write-downs of
investments.

Revenues of ($36) million and ($7) million for the 2002 second quarter
and six months decreased $86 million and $249 million, respectively, from the
comparable periods of 2001, primarily reflecting higher impairment
write-downs, including $69 million in pretax write-downs on WorldCom-related
investments in the 2002 second quarter. Revenues in the 2002 second quarter
also reflect higher realized gains as compared to the 2001 second quarter,
primarily related to fixed income investments.

Results may fluctuate in the future as a result of market and asset-specific
factors. This statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 38.

INTEREST AND OTHER

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Excludes investment gains/losses included in Property and Casualty Realized
Investment Portfolio gains (loss) table.
NM Not meaningful

INTEREST AND OTHER includes interest expense and certain corporate-related
income and expenses that have not been allocated to the Personal Lines and
Commercial Lines businesses.

Interest and Other reported losses of $19 million and $41 million in the
2002 second quarter and six months, respectively, compared to $38 million and
$86 million in the comparable periods of 2001. The decrease in the loss in the
2002 second quarter and six months compared to the 2001 second quarter and six
months is due to lower average interest-bearing debt levels, and the impact
of minority interest. The decrease in interest-bearing debt levels was
primarily due to repayments of debt obligations to Citigroup.

UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES

The reserves for environmental claims are not established on a
claim-by-claim basis. An aggregate bulk reserve is carried for all of the
environmental claims that are in dispute, until the dispute is resolved. This
bulk reserve is established and adjusted based upon the aggregate volume of
in-process environmental claims and the Company's experience in resolving such
claims. At June 30, 2002, approximately 76% of the net environmental reserve
(approximately $265 million) is carried in a bulk reserve and includes
unresolved and incurred but not reported environmental claims for which the
Company has not received any specific claims as well as for the anticipated cost
of coverage of litigation disputes relating to these claims. The balance,
approximately 24% of the net environmental reserve (approximately $86 million),
consists of case reserves for resolved claims.

In general, the Company posts case reserves for pending asbestos claims
within approximately 30 business days of receipt of these claims. At June 30,
2002, approximately 75% (approximately $562 million) of the net asbestos reserve
represents incurred but not reported losses for which the Company has not
received any specific claims. The balance, approximately 25% of the net asbestos
reserve (approximately $185 million), is for pending asbestos claims.

It is difficult to estimate the reserves for environmental and
asbestos-related claims due to the vagaries of court coverage decisions,
plaintiffs' expanded theories of liability, the risks inherent in major
litigation, and other uncertainties. Conventional actuarial techniques are not
used to estimate these reserves.

The reserves carried for environmental and asbestos claims at June 30, 2002
are the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the uncertainties surrounding
the final resolution of these claims continue. These include, without
limitation, the risks inherent in major litigation, any impact from the
bankruptcy protection sought by various asbestos producers and other asbestos
defendants, a further increase or decrease in asbestos and environmental claims
which cannot now be anticipated, the role of any umbrella or excess policies the
Company has issued, whether or not an asbestos claim is a product/ completed
operation claim subject to an aggregate limit and the available coverage, if
any, for

37

that claim, the resolution or adjudication of some disputes pertaining to
the amount of available coverage for asbestos claims in a manner inconsistent
with the Company's previous assessment of these claims, the number and outcome
of direct actions against the Company, unanticipated developments pertaining to
the Company's ability to recover reinsurance for environmental and asbestos
claims, and the willingness of parties, including the Company, to related
litigation to settle. It is also not possible to predict changes in the legal
and legislative environment and their impact on the future development of
asbestos and environmental claims. This development will be affected by future
court decisions and interpretations, as well as changes in applicable
legislation. In addition, particularly during the last few months of 2001 and
continuing into 2002, the asbestos-related trends have both accelerated and
become more visible. These trends include, but are not limited to, the filing of
additional claims, more intensive advertising by lawyers seeking asbestos
claimants, more aggressive litigation based on novel theories of liability and
litigation against new and previously peripheral defendants, including insurers,
and developments in existing and pending bankruptcy proceedings.

Because of the uncertainties set forth above, additional liabilities may
arise for amounts in excess of the current related reserves. These additional
amounts, or a range of these additional amounts, cannot now be reasonably
estimated and could result in a liability exceeding the related by an amount
that could be material to the Company's operating results in future periods.
However, in the opinion of the Company's management, it is not likely that these
claims will have a material adverse effect on its financial condition or
liquidity. This paragraph contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" below.

FORWARD-LOOKING STATEMENTS

Certain of the statements contained herein that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially
from those included in the forward-looking statements. Forward-looking
statements are typically identified by words or phrases such as "believe,"
"expect," "anticipate," "intend," "estimate," "may increase," "may
fluctuate," and similar expressions or future or conditional verbs such as
"will," "should," "would," and "could." These forward-looking statements
involve risks and uncertainties including, but not limited to, weak global
economic conditions including the economic crisis in Argentina and market
turmoil in Brazil; government decrees and judicial orders in Argentina;
rising unemployment rates and an increase in bankruptcy filings in Japan;
sovereign or regulatory actions, and political conditions and developments;
credit performance of the portfolios, including bankruptcies, portfolio
growth, and seasonal factors; stress in the telecommunications industry;
subsidiaries' dividending capability; asbestos-related and
environmental-related developments including any impact from the bankruptcy
protection sought by various asbestos producers and other asbestos
defendants, the role of any umbrella or excess policies the Company has
issued, unanticipated developments pertaining to the Company's ability to
recover reinsurance for asbestos and environmental claims, changes in the
legal and legislative environment and their impact on the future development
of asbestos and environmental claims, more intensive advertising by lawyers
seeking asbestos claimants and the increasing focus by plaintiffs on new and
previously peripheral defendants, including insurers; the effect of banking
and financial services reforms and of rules regarding the regulatory capital
treatment of recourse, direct credit substitutes and residual interest in
asset securitizations; possible amendments to, and interpretations of,
risk-based capital guidelines and reporting instructions; the effect proposed
U.S. bankruptcy legislation would have if enacted; the resolution of legal
proceedings and related matters; and the Company's success in managing the
costs associated with the expansion of existing distribution channels and
developing new ones, and in realizing increased revenues from such
distribution channels, including cross-selling initiatives and electronic
commerce-based efforts.

MANAGING GLOBAL RISK

The Citigroup Risk Management framework recognizes the wide range and
diversity of global business activities by balancing strong corporate oversight
with defined independent risk management functions at the business level. The
Citigroup Risk Management Framework is described in detail in Citigroup's 2001
Annual Report and Form 10-K.

THE CREDIT RISK MANAGEMENT PROCESS

The credit risk management process at Citigroup relies on corporate-wide
standards to ensure consistency and integrity, with business-specific policies
and practices to ensure applicability and ownership. Citigroup's credit risk
management process is described in detail in Citigroup's 2001 Annual Report and
Form 10-K.

THE MARKET RISK MANAGEMENT PROCESS

Market risk at Citigroup--like credit risk--is managed through
corporate-wide standards and business policies and procedures.

Market risks are measured in accordance with established standards to ensure
consistency across businesses and the ability to aggregate like risks at the
Citigroup-level.

38

Each business is required to establish, and have approved by independent
Market Risk Management, a market risk limit framework, including risk
measures, limits and controls, that clearly defines approved risk profiles
and is within the parameters of Citigroup's overall risk appetite.

Businesses, working in conjunction with independent Market Risk Management,
must ensure that market risks are independently measured, monitored and
reported, to ensure transparency in risk-taking activities and integrity in risk
reports.

In all cases, the businesses are ultimately responsible for the market risks
that they take, and for remaining within their defined limits. Market risk
encompasses liquidity risk and price risk, both of which arise in the normal
course of business of a global financial intermediary. Liquidity risk is the
risk that some entity, in some location and in some currency, may be unable
to meet a financial commitment to a customer, creditor, or investor when due.
Liquidity Risk is discussed in the Liquidity and Capital Resources section.
Price risk is the risk to earnings that arises from changes in interest
rates, foreign exchange rates, equity and commodity prices, and in their
implied volatilities. Price risk arises in Non-Trading Portfolios, as well as
in Trading Portfolios.

NON-TRADING PORTFOLIOS

Price risk in non-trading portfolios is measured predominantly through
Earnings-at-Risk and Factor Sensitivity techniques. These measurement techniques
are supplemented with additional tools, including stress testing and
cost-to-close analysis.

Business units manage the potential earnings effect of interest rate
movements by managing the asset and liability mix, either directly or through
the use of derivative financial products. These include interest rate swaps and
other derivative instruments that are designated and effective as hedges. The
utilization of derivatives is managed in response to changing market conditions
as well as to changes in the characteristics and mix of the related assets and
liabilities.

Earnings-at-Risk is the primary method for measuring price risk in
Citigroup's non-trading portfolios (excluding the insurance companies).
Earnings-at-Risk measures the pretax earnings impact of a specified upward and
downward parallel shift in the yield curve for the appropriate currency. The
Earnings-at-Risk is calculated separately for each currency and reflects the
repricing gaps in the position as well as option positions, both explicit and
embedded. U.S. dollar exposures are calculated by multiplying the gap between
interest sensitive items, including assets, liabilities, derivative instruments
and other off-balance sheet instruments, by 100 basis points. Non-U.S. dollar
exposures are calculated utilizing the statistical equivalent of a 100 basis
point change in interest rates and assuming no correlation between exposures in
different currencies.

Citigroup's primary non-trading price risk exposure is to movements in the
U.S. dollar and Mexican peso interest rates. Citigroup also has Earnings-at-Risk
in various other currencies; however, there are no significant risk
concentrations in any other individual non-U.S. dollar currency.

The following table illustrates the impact to Citigroup's pretax earnings
from a 100 basis point increase or decrease in the U.S. dollar yield curve. As
of June 30, 2002, the potential impact on pretax earnings over the next
12 months is a decrease of $468 million from an interest rate increase and an
increase of $489 million from an interest rate decrease. The potential impact on
pretax earnings for periods beyond the first 12 months is an increase of
$760 million from an increase in interest rates and a decrease of
$1,278 million from an interest rate decrease. The change in Earnings-at-Risk
from the prior year and prior year-end primarily reflects an increase in the
proportion of floating rate funding and the change in the mix of assets and
liabilities to reflect Citigroup's view of interest rates.

The statistical equivalent of a 100 basis point increase in Mexican peso
interest rates would have a potential positive impact on Citigroup's pretax
earnings of approximately $299 million over the next 12 months and a potential
positive impact of $187 million for the years thereafter. The statistical
equivalent of a 100 basis points decrease in Mexican peso interest rates would
have a potential negative impact on Citigroup's pretax earnings of approximately
$299 million for the next 12 months and potential negative impact of
$187 million for the years thereafter. The change in Earnings-at-Risk from the
prior year primarily represents the inclusion of Banamex's Mexican peso exposure
while the change in Earnings-at-Risk from the prior year-end reflects the
repricing characteristics of the portfolio.

Excluding the impact of changes in Mexican peso interest rates, the
statistical equivalent of a 100 basis point increase in other non-U.S. dollar
interest rates would have a potential negative impact on Citigroup's pretax
earnings of $189 million over the next twelve months and potential positive
impact of $174 million for the years thereafter. The statistical equivalent of a
100 basis point decrease in other non-U.S. dollar interest rates would have a
potential positive impact on Citigroup's pretax earnings of $192 million over
the next twelve months and a potential negative impact of $159 million for the
years thereafter. The change in Earnings-at-Risk from the prior year and the
prior year-end primarily represents changes in the asset and liability mix
across a range of currencies to reflect Citigroup's current view of interest
rates.

39

CITIGROUP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS)(1)(2)

- ------------------------

(1) Excludes the insurance companies (see below).

(2) Prior year amounts have been restated to conform with the current period's
presentation.

INSURANCE COMPANIES

The table below reflects the estimated decrease in the fair value of
financial instruments held in the insurance companies, as a result of a 100
basis point increase in interest rates.

A significant portion of insurance companies' liabilities (e.g., insurance
policy and claims reserves) are not financial instruments and are excluded from
the above sensitivity analysis. Corresponding changes in fair value of these
accounts, based on the present value of estimated cash flows, would materially
mitigate the impact of the net decrease in values implied above. The analysis
reflects the estimated gross change in value resulting from a change in interest
rates only and is not comparable to the Earnings-at-Risk used for the Citigroup
non-trading portfolios described above or the Value-at-Risk used for the trading
portfolios described below.

TRADING PORTFOLIOS

Price risk in trading portfolios is measured through a complementary set of
tools, including Factor Sensitivities, Value-at-Risk, and Stress Testing. Each
trading portfolio has its own market risk limit framework, encompassing these
measures and other controls, including permitted product lists and a new,
complex product approval process, established by the business, and approved by
independent market risk management.

Factor Sensitivities are defined as the change in the value of a position
for a defined change in a market risk factor (e.g., the change in the value of a
Treasury bill for a 1 basis point change in interest rates). It is the
responsibility of independent market risk management to ensure that factor
sensitivities are calculated, monitored, and, in some cases, limited for all
relevant risks taken in a trading portfolio. Value-at-Risk estimates the
potential decline in the value of a position or a portfolio, under normal market
conditions, over a one-day holding period, at a 99% confidence level. The
Value-at-Risk method incorporates the Factor Sensitivities of the trading
portfolio with the volatilities and correlations of those factors.

Stress Testing is performed on trading portfolios on a regular basis, to
estimate the impact of extreme market movements. Stress Testing is performed on
individual trading portfolios, as well as on aggregations of portfolios and
businesses, as appropriate. It is the responsibility of independent market risk
management, in conjunction with the businesses, to develop stress scenarios,
review the output of periodic stress testing exercises, and utilize the
information to make judgments as to the ongoing appropriateness of exposure
levels and limits.

New and/or complex products in trading portfolios are required to be
reviewed and approved by the Capital Markets Approval

40

Committee (CMAC). The CMAC is responsible for ensuring that all relevant
risks are identified and understood, and can be measured, managed, and
reported in accordance with applicable business policies and practices. The
CMAC is made up of senior representatives from market and credit risk
management, legal, accounting, operations, and other support areas, as
required.

The level of price risk exposure at any given point in time depends on the
market environment and expectations of future price and market movements, and
will vary from period to period.

For Citigroup's major trading centers, the aggregate pretax Value-at-Risk in
the trading portfolios was $64 million at June 30, 2002. Daily exposures
averaged $63 million during the second quarter and ranged from $55 million to
$76 million.

The following table summarizes Value-at-Risk in the trading portfolios as of
June 30, 2002 and December 31, 2001, along with the averages.

The table below provides the range of Value-at-Risk in the trading
portfolios that was experienced during the second quarter of 2002 and all of
2001.

MANAGEMENT OF CROSS-BORDER RISK

Cross-border risk is the risk that Citigroup will be unable to obtain
payment from customers on their contractual obligations as a result of actions
taken by foreign governments such as exchange controls, debt moratoria, and
restrictions on the remittance of funds. Citigroup manages cross-border risk as
part of the risk management framework described in the 2001 Annual Report and
Form 10-K.

Except as described below for cross-border resale agreements and the netting
of certain long and short securities positions, the following table presents
total cross-border outstandings and commitments on a regulatory basis in
accordance with Federal Financial Institutions Examination Council's (FFIEC)
guidelines. In regulatory reports under FFIEC guidelines, cross-border resale
agreements are presented based on the domicile of the issuer of the securities
that are held as collateral. However, for purposes of the following table,
cross-border resale agreements are presented based on the domicile of the
counterparty because the counterparty has the legal obligation for repayment.
Similarly, under FFIEC guidelines, long securities positions are required to be
reported on a gross basis. However, for purposes of the following table, certain
long and short securities positions are presented on a net basis consistent with
internal cross-border risk management policies, reflecting a reduction of risk
from offsetting positions.

41

Total cross-border outstandings include cross-border claims on third parties
as well as investments in and funding of local franchises. Countries with FFIEC
outstandings greater than 0.75% of Citigroup assets at June 30, 2002 and
December 31, 2001 include:

- ----------------------------------
(1) Trading and short-term claims include cross-border debt and equity
securities held in the trading account, trade finance receivables, net
revaluation gains on foreign exchange and derivative contracts, and other
claims with a maturity of less than one year.

(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments and
contingencies as defined by the FFIEC.

Total cross-border outstandings for June 30, 2002 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral and long securities positions
reported on a gross basis, amounted to $20.0 billion for France, $26.2 billion
for Germany, $9.8 billion for the United Kingdom, $11.7 billion for Mexico,
$9.4 billion for Japan, $17.6 billion for Italy, $11.3 billion for Brazil, and
$8.6 billion for Canada.

Total cross-border outstandings for December 31, 2001 under FFIEC
guidelines, including cross-border resale agreements based on the domicile of
the issuer of the securities that are held as collateral and long securities
positions reported on a gross basis, amounted to $13.5 billion for France,
$19.5 billion for Germany, $9.3 billion for the United Kingdom, $13.2 billion
for Mexico, $6.5 billion for Japan, $12.8 billion for Italy, $11.9 billion for
Brazil, and $8.9 billion for Canada.

LIQUIDITY AND CAPITAL RESOURCES

Citigroup's primary source of capital resources is its net earnings. Other
sources include proceeds from the issuance of trust preferred securities, senior
debt, subordinated debt and commercial paper. Citigroup can also generate funds
by securitizing various financial assets including credit card receivables and
other receivables generally secured by collateral such as automobiles and real
estate.

Citigroup uses these capital resources to pay dividends to its stockholders,
to repurchase its shares in the market pursuant to Board-of-Directors approved
plans, to support organic growth, to make acquisitions and to service its debt
obligations. As a financial holding company, substantially all of Citigroup's
net earnings are generated within its operating subsidiaries including Citibank,
Salomon Smith Barney Inc., The Travelers Insurance Company (TIC), and TPC. Each
of these subsidiaries makes these funds available to Citigroup in the form of
dividends. The subsidiaries' dividend paying abilities are limited by certain
covenant restrictions in credit agreements and/or by regulatory requirements.
Certain of these subsidiaries are also subject to rating agency considerations
that also impact their capitalization levels.

During 2002, it is not anticipated that any restrictions on the
subsidiaries' dividending capability will restrict Citigroup's ability to meet
its obligations as and when they become due. It is also anticipated that
Citigroup will maintain its share repurchase program during 2002. This paragraph
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 38.

In late March 2002, TPC completed its initial public offering of
231 million shares of its class A common stock, representing approximately 23.1%
of its outstanding equity securities, for net proceeds after underwriting
discount of $4.1 billion. Citigroup recognized an after-tax gain of
$1.061 billion ($1.270 billion pretax) as a result of the TPC offering.
Citigroup will make a tax-free distribution to its stockholders of a portion of
its remaining ownership interest in TPC in August 2002, such that following the
distribution, Citigroup will remain a holder of approximately 9.9% of TPC's
outstanding equity securities. The distribution of TPC will be treated as a
dividend to stockholders for accounting purposes that will reduce stockholders'
equity by approximately $7 billion.

42

Citigroup, Citicorp and certain other subsidiaries issue commercial paper
directly to investors. Citigroup and Citicorp, both of which are bank holding
companies, maintain combined liquidity reserves of cash, securities and unused
bank lines of credit to support their combined outstanding commercial paper.

Citigroup has unutilized bilateral committed revolving credit facilities in
the amount of $1.2 billion, of which $950 million expires in 2003 and
$250 million in 2002. Under these facilities, Citigroup is required to maintain
a certain level of consolidated stockholders' equity (as defined in the
agreements). Citigroup exceeded this requirement by approximately $60.7 billion
at June 30, 2002.

Associates, a subsidiary of Citicorp, has a combination of unutilized credit
facilities with unaffiliated banks of $6.4 billion as of June 30, 2002 which
have maturities ranging from 2002 to 2005. All of these facilities are
guaranteed by Citicorp. In connection with the facilities, Citicorp is required
to maintain a certain level of consolidated stockholder's equity (as defined in
the agreements). At June 30, 2002, this requirement was exceeded by
approximately $52.5 billion. Citicorp has also guaranteed various debt
obligations of Associates and CitiFinancial Credit Company (CCC), an indirect
subsidiary of Citicorp.

Borrowings under bank lines of credit may be at interest rates based on
LIBOR, CD rates, the prime rate, or bids submitted by the banks. Each company
pays its banks facility fees for its lines of credit.

Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have
credit facilities with Citicorp's subsidiary banks, including Citibank, N.A.
Borrowings under these facilities must be secured in accordance with
Section 23A of the Federal Reserve Act.

MANAGEMENT OF LIQUIDITY

Management of liquidity at Citigroup is the responsibility of the Corporate
Treasurer. A uniform liquidity risk management policy exists for Citigroup and
its major operating subsidiaries. Under this policy, there is a single set of
standards for the measurement of liquidity risk in order to ensure consistency
across businesses, stability in methodologies and transparency of risk.
Management of liquidity at each operating subsidiary and/or country is performed
on a daily basis and is monitored by Corporate Treasury. Each major operating
subsidiary and/or country must prepare an annual liquidity and funding plan for
approval by the Corporate Treasurer. Under the annual liquidity and funding
plan, liquidity limits, triggers and ratios are established. Contingency Funding
Plans are prepared on a periodic basis for Citigroup and each major operating
subsidiary and country. These plans include stress testing of assumptions about
significant changes in key funding sources, credit ratings, contingent uses of
funding, and political and economic conditions in certain countries.

Citigroup's funding sources are well-diversified across funding types and
geography, a benefit of the strength of the global franchise. Funding for the
Parent and its major operating subsidiaries includes a large geographically
diverse retail and corporate deposit base, a significant portion of which is
considered core. Other sources of funding include collateralized borrowings,
securitizations (primarily credit card and mortgages), long-term debt, and
purchased/wholesale funds. This funding is significantly enhanced by Citigroup's
strong capital position. Each of Citigroup's major operating subsidiaries
finances its operations on a basis consistent with its capitalization,
regulatory structure and the operating environment in which it operates.

Other liquidity and capital resource considerations for Citigroup and its
major operating facilities follow.

OFF-BALANCE SHEET ARRANGEMENTS

Citigroup and its subsidiaries are involved with several types of
off-balance sheet arrangements, including special purpose entities (SPEs). In
some of these arrangements (primarily credit card receivable and mortgage
loan securitization), Citigroup securitizes assets previously recorded in its
statement of financial position. In other arrangements, Citigroup acts as
intermediary or agent for its corporate clients, assisting them in obtaining
sources of funding and liquidity by arranging the sale of the clients' trade
receivables or other financial assets to an SPE. The Company also securitizes
clients' debt obligations in transactions involving SPEs that issue
collateralized debt obligations. In addition, the Company packages and
securitizes assets purchased in the financial markets in order to create new
security offerings for institutional and private bank clients as well as
retail customers. In connection with such arrangements, Citigroup may
purchase, and temporarily hold assets designated for subsequent
securitization.

In the second quarter of 2002, Citigroup securitized $2.2 billion of
credit card receivables and $10.5 billion of mortgage and other receivables,
thereby our assets and the related funding by $12.7 billion. At June 30,
2002, total assets in credit card trusts were $77 billion, $65 billion of
which were accounted for as sales and removed from the balance sheet. In
addition, mortgages and other loans which have been securitized and are
outstanding totaled $86 billion. The impact to net income resulting from
these securitizations was not significant.

Under generally accepted accounting principles (GAAP) the assets and
liabilities of these SPEs do not appear in Citigroup's consolidated statement
of financial position. See Note 12 to Unaudited Consolidated Financial
Statements.

43

The Company may be the counterparty to any such derivative. The
securitization process enhances the liquidity of the financial markets, may
spread credit risk among several market participants, and makes new funds
available to extend credit to consumers and commercial entities.

SECURITIZATION OF CITIGROUP'S ASSETS

Citigroup and its subsidiaries are involved with several types of
off-balance sheet arrangements, including special purpose entities (SPEs). In
some of these arrangements (credit card receivable and mortgage loan
securitizations), Citigroup is securitizing assets that were previously
recorded in its statement of financial position. In other arrangements,
Citigroup acts as intermediary or agent for its corporate clients, assisting
them in obtaining sources of liquidity by selling the clients' trade
receivables or other financial assets to an SPE. The Company also securitizes
clients' debt obligations in transactions involving SPEs that issue
collateralized debt obligations. In yet other arrangements, the Company
packages and securities assets purchased in the financial markets in order to
create new security offerings for institutional and private bank clients as
well as retail customers. In connection with such arrangements, Citigroup may
purchase, and temporarily hold assets designated for subsequent
securitization.

In the second quarter of 2002, Citigroup securitized $2.2 billion of
credit card receivables and $10.5 billion of mortgage and other receivables,
thereby reducing our assets and the related funding by $12.7 billion in the
quarter. At June 30, 2002, total assets in credit card trusts were $77
billion, $65 billion of which has been removed from the balance sheet. In
addition, mortgages and other loans which have been securitized and are
outstanding totaled $86 billion. The impact to net income resulting from
these securitizations was not significant. See Note 12 to Unauditied
Consolidated Financial Statements.

Under GAAP, these securitizations are not included in Citigroup's
consolidated financial statements. As a result, the assets and liabilities of
these SPEs do not appear in Citigroup's consolidated statement of financial
position.

CREDIT CARD RECEIVABLES

Credit card receivables are securitized through a trust, which is
established to purchase the receivables. Citigroup sells receivables into the
trust on a non-recourse basis.

After securitization of credit card receivables, the Company continues to
maintain credit card customer account relationships and provides servicing for
receivables transferred to the SPE trusts. As a result, the Company considers
both the securitized and unsecuritized credit card receivables to be part of the
business it manages. The documents establishing the trusts generally require the
Company to maintain an ownership interest in the trusts. The Company also
arranges for third parties to provide credit enhancement to the trusts,
including cash collateral accounts, subordinated securities, and letters of
credit. As specified in certain of the sale agreements, the net revenue with
respect to the investors' interest collected by the trusts each month is
accumulated up to a predetermined maximum amount, and is available over the
remaining term of that transaction to make payments of interest to trust
investors, fees, and transaction costs in the event that net cash flows from the
receivables are not sufficient. If the net cash flows are insufficient,
Citigroup's loss is limited to its retained interest. When the predetermined
amount is reached, net revenue with respect to the investors' interest is passed
directly to the Citigroup subsidiary that sold the receivables. Credit card
securitizations are revolving securitizations; that is, as customers pay their
credit card balances, the cash proceeds are used to replenish the receivables in
the trust. Salomon Smith Barney is one of several underwriters that distribute
securities issued by the trusts to investors. The Company relies on
securitizations to fund approximately 60% of its CitiCard business.

At June 30, 2002, total assets in the credit card trusts were $77 billion.
Of that amount, $65 billion has been sold to investors via trust-issued
securities, and the remaining seller's interest of $12 billion is recorded in
Citigroup's Consolidated Statement of Financial Position as Consumer Loans.
Citigroup retains credit risk on its seller's interests. Amounts receivable from
the trusts were $973 million and amounts due to the trusts were $833 million at
June 30, 2002. During the quarter ended June 30, 2002, finance charges and
interchange fees of $2.5 billion were collected by the trusts. Also for the
quarter ended June 30, 2002, the trusts recorded $1.6 billion in coupon interest
paid to third-party investors, servicing fees, and other costs.

MORTGAGES, HOME EQUITY AND AUTO LOANS

The Company provides a wide range of mortgage, home equity and auto loan
products to a diverse customer base. In addition to providing a source of
liquidity and less expensive funding, securitizing these assets also reduces the
Company's credit exposure to the borrowers. In connection with the
securitization of these loans, servicing rights entitle the Company to a future
stream of cash flows based on the outstanding principal balances of the loans
and the contractual servicing fee. Failure to service the loans in accordance
with contractual servicing obligations may lead to a termination of the
servicing rights and the loss of future servicing fees. In non-recourse
servicing, the principal credit risk to the servicer arises from temporary
advances of funds. In recourse servicing, the servicer agrees to share credit
risk with the owner of the mortgage loans, such as FNMA, FHLMC, GNMA, or with a
private investor, insurer or guarantor. Our mortgage loan securitizations are
primarily non-recourse, thereby effectively transferring the risk of future
credit losses to the purchasers of the securities issued by the trust. Home
equity loans may be revolving lines of credit under which borrowers have the
right to draw on the line of credit up to their maximum amount for a specified
number of years. In addition to servicing rights, the Company also retains a
residual interest in its home equity, manufactured housing and auto loan
securitizations, consisting of seller's interest and interest-only strips that
arise from the calculation of gain or loss at the time assets are sold to the
SPE. At June 30, 2002, total loans securitized and outstanding were
$86 billion.

The following table summarizes certain cash flows received from and paid to
securitization trusts during the quarter ended June 30, 2002:

44

SECURITIZATIONS OF CLIENT ASSETS

The Company acts as intermediary or agent for its corporate clients,
assisting them in obtaining sources of liquidity, by selling the clients' trade
receivables or other financial assets to an SPE.

The Company administers several third-party owned, special purpose,
multi-seller finance companies that purchase pools of trade receivables,
credit cards, and other financial assets from third-party clients of the
Company. As administrator, the Company provides accounting, funding, and
operations services to these conduits. The Company has no ownership interest
in the conduits. The clients continue to service the transferred assets. The
conduits' asset purchases are funded by issuing commercial paper and
medium-term notes. Clients absorb the first losses of the conduit by
providing collateral in the form of excess assets. The Company along with
other financial institutions provides liquidity facilities, such as
commercial paper back-stop lines of credit to the conduits. The Company also
provides second loss enhancement in the form of letters of credit and other
guarantees. All fees are charged on a market basis. At June 30, 2002, total
assets in the conduits were $51 billion.

The Company also securitizes clients' debt obligations in transactions
involving SPEs that issue collateralized debt obligations (CDOs). A majority of
the transactions are on behalf of clients where the Company first purchases the
assets at the request of the clients and warehouses them until the
securitization transaction is executed. Other CDOs are structured where the
underlying debt obligations are purchased directly in the open market or from
issuers. Some CDOs have static unmanaged portfolios of assets, while others have
a more actively managed portfolio of financial assets. The Company receives fees
for structuring and distributing the CDO securities to investors.

CREATION OF OTHER INVESTMENT PRODUCTS

The Company packages and securitizes assets purchased in the financial
markets in order to create new security offerings, including hedge funds, mutual
funds, and other investment funds, for institutional and private bank clients as
well as retail customers, that match the clients' investment needs and
preferences. The SPEs may be credit-enhanced by excess assets in the investment
pool or by third party insurers assuming the risks of the underlying assets,
thus reducing the credit risk assumed by the investors and diversifying
investors' risk to a pool of assets as compared with investments in individual
assets. The Company typically manages the SPE for market-rate fees. In addition,
the Company may be one of several liquidity providers to the SPE and may place
the securities with investors. The Company has no ownership interest in these
entities.

CREDIT COMMITMENTS AND LINES OF CREDIT

The table below summarizes Citigroup's credit commitments as of June 30,
2002 and December 31, 2001.

- ------------------------

(1) Credit card lines are unconditionally cancelable by the issuer.

(2) Includes $130 billion and $138 billion with original maturity less than one
year at June 30, 2002 and December 31, 2001, respectively.

CAPITAL

CITIGROUP INC. (CITIGROUP)

Citigroup is subject to risk-based capital guidelines issued by the Board
of Governors of the Federal Reserve System (FRB). These guidelines are used
to evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as well as certain off-balance sheet
exposures such as unused loan commitments, letters of credit, and derivative
and foreign exchange contracts. The risk-based capital guidelines are
supplemented by a leverage ratio requirement.

45

CITIGROUP RATIOS

- ------------------------

(1) Tier 1 capital divided by adjusted average assets.

Citigroup maintained a strong capital position during the second quarter of
2002. Total capital (Tier 1 and Tier 2) amounted to $80.8 billion at June 30,
2002, representing 11.75% of net risk-adjusted assets. This compares with
$78.9 billion and 11.59% at March 31, 2002 and $75.8 billion and 10.92% at
December 31, 2001. Tier 1 capital of $63.3 billion at June 30, 2002 represented
9.20% of net risk-adjusted assets, compared to $62.2 billion and 9.13% at
March 31, 2002 and $58.4 billion and 8.42% at December 31, 2001. Citigroup's
leverage ratio was 5.93% at June 30, 2002 compared to 5.89% at March 31, 2002
and 5.64% at December 31, 2001.

COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES

- ------------------------

(1) The increase from December 31, 2001 primarily reflects the minority interest
related to the TPC Initial Public Offering.

(2) Tier 1 capital excludes unrealized gains and losses on debt securities
available for sale in accordance with regulatory risk-based capital
guidelines. The federal bank regulatory agencies permit institutions
to include in Tier 2 capital up to 45% of pretax net unrealized
holding gains on available-for-sale equity securities with
readily determinable fair values. Institutions are required to deduct from
Tier 1 capital net unrealized holding losses on available-for-sale equity
securities with readily determinable fair values net of tax.

(3) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.

(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.

(5) Includes qualifying senior and subordinated debt in an amount not exceeding
50% of Tier 1 capital, and subordinated capital notes subject to certain
limitations.

(6) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $29.6 billion for interest rate, commodity,
and equity derivative contracts and foreign exchange contracts as of
June 30, 2002, compared to $25.0 billion as of March 31, 2002 and
$26.2 billion as of December 31, 2001. Market risk-equivalent assets
included in net risk-adjusted assets amounted to $32.4 billion at June 30,
2002, $34.4 billion at March 31, 2002, and $31.4 billion at December 31,
2001. Net risk-adjusted assets also includes the effect of other off-balance
sheet exposures such as unused loan commitments and letters of credit and
reflects deductions for intangible assets and any excess allowance for
credit losses.

Common stockholders' equity increased a net $4.6 billion during the first
six months of 2002 to $84.3 billion at June 30, 2002, representing 7.8% of
assets, compared to $79.7 billion and 7.6% at year-end 2001. The net increase in
common stockholders' equity during the first six months of 2002 principally
reflected net income of $8.9 billion and the issuance of shares pursuant to
employee benefit plans and other activity of $1.5 billion which was offset by
treasury stock acquired of $2.4 billion, dividends declared on common and
preferred stock of $1.8 billion, $0.9 billion related to the net change in
foreign currency translation adjustment, change in hedging activities, and
unrealized gains and losses on investment securities, and the net issuance of
restricted stock of $0.7 billion. The increase in the common stockholders'
equity ratio during the first six months of 2002 also reflected the above items,
partially offset by the increase in total assets.

46

During July 2002, the Board of Directors of Citigroup granted approval for
the repurchase of an additional $5 billion of Citigroup common stock, continuing
the Company's long-standing repurchase program of buying back shares in the
market from time to time.

The total mandatorily redeemable securities of subsidiary trusts (trust
securities) which qualify as Tier 1 capital at June 30, 2002 were
$6.768 billion, which includes $4.435 billion of parent-obligated securities and
$2.333 billion of subsidiary-obligated securities.

The final rules governing the regulatory capital treatment of nonfinancial
equity investments, which became effective April 1, 2002, were adopted for the
quarter ended June 30, 2002. The implementation was neutral to Citigroup's
capital ratios. The capital ratio impact of the $275 million capital charge was
offset by the $3.4 billion net reduction in risk-adjusted assets for the
nonfinancial equity investments.

Citigroup's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At June 30, 2002,
all of Citigroup's subsidiary depository institutions were "well capitalized"
under the federal bank regulatory agencies' definitions.

In December 2001, the Basel Committee on Banking Supervision (Committee)
announced that a new consultative package on the new Basel Capital Accord (new
Accord) would not be issued in early 2002, as previously indicated. Instead, the
Committee will first seek to complete a comprehensive impact assessment of the
draft proposal, after which a new consultative package will be issued. On
July 10, 2002, the Committee announced that it will launch a Quantitative Impact
Study on October 1, 2002 which will allow banks to perform a concrete and
comprehensive assessment of how the Committee's proposals will affect their
organization. Banks will be asked to submit their findings by December 20, 2002.
The new Accord, which will apply to all "significant" banks, as well as to
holding companies that are parents of banking groups, is intended to be
finalized in the fourth quarter of 2003, with implementation of the new
framework by year-end 2006. The Company is monitoring the status and progress of
the proposed rule.

On November 29, 2001, the FRB issued final rules regarding the regulatory
capital treatment of recourse, direct credit substitutes and residual interest
in asset securitizations. The rules require a deduction from Tier 1 capital for
the amount of credit-enhancing interest-only strips (a type of residual
interest) that exceeds 25% of Tier 1 capital, as well as requiring
dollar-for-dollar capital for residual interests not deducted for Tier 1
capital. On May 17, 2002, the FRB issued guidance that requires institutions to
treat accrued interest receivables related to credit card securitizations as
residual interest, which will also require dollar-for-dollar capital. These
rules, which require full implementation in the fourth quarter of 2002, are not
expected to have a significant impact on Citigroup.

Additionally, from time to time, the FRB and the FFIEC propose amendments
to, and issue interpretations of, risk-based capital guidelines and reporting
instructions. Such proposals or interpretations could, if implemented in the
future, affect reported capital ratios and net risk-adjusted assets. This
paragraph and the preceding two paragraphs contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 38.

CITICORP

The in-country forum for liquidity issues is the Asset/Liability
Management Committee (ALCO), which includes senior executives within each
country. The ALCO reviews the current and prospective funding requirements
for all businesses and legal entities within the country, as well as the
capital position and balance sheet. The businesses within the country are
represented on the committee with the focal point being the Country
Treasurer. The Country Corporate Officer and the Country Treasurer ensure
that all funding obligations in each country are met when due. The Citigroup
Corporate Treasurer, in concert with the Country Corporate Officer and the
Regional Market Risk Manager, appoints the Country Treasurer.

Each Country Treasurer must prepare a liquidity plan at least annually that
is approved by the Country Corporate Officer, the Regional Treasurer, and the
Citigroup Corporate Treasurer. The liquidity profile is monitored on an on-going
basis and reported monthly. Limits are established on the extent to which
businesses in a country can take liquidity risk. The size of the limit depends
on the depth of the market, experience level of local management, the stability
of the liabilities, and liquidity of the assets. Finally, the limits are subject
to the evaluation of the entities' stress test results. Generally, limits are
established such that in stress scenarios, entities need to be self-funded or
providers of liquidity to Citicorp.

Regional Treasurers generally have responsibility for monitoring liquidity
risk across a number of countries within a defined geography. They are also
available for consultation and special approvals, especially in unusual or
volatile market conditions. Citicorp's assets and liabilities are diversified
across many currencies, geographic areas, and businesses. Particular attention
is paid to those businesses which for tax, sovereign risk, or regulatory reasons
cannot be freely and readily funded in the international markets.

A diversity of funding sources, currencies, and maturities is used to gain a
broad access to the investor base. Citicorp's deposits, which represent 60% of
total funding at June 30, 2002 and 59% of funding at December 31, 2001, are
broadly diversified by both geography and customer segments.

47

Stockholders' equity, which grew $2.6 billion during the first six months of
2002 to $66.0 billion at June 30, 2002, continues to be an important component
of the overall funding structure. In addition, long-term debt is issued by
Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at the
end of the 2002 second quarter was $69.7 billion, compared with $81.1 billion at
year-end 2001.

Asset securitization programs remain an important source of liquidity. Loans
securitized during the first six months of 2002 included $5.7 billion of U.S.
credit cards and $14.3 billion of U.S. consumer mortgages. As credit card
securitization transactions amortize, newly originated receivables are recorded
on Citicorp's balance sheet and become available for asset securitization.
During the first six months of 2002, the scheduled amortization of certain
credit card securitization transactions made available $4.3 billion of new
receivables. In addition, at least $6.3 billion of credit card securitization
transactions are scheduled to amortize during the rest of 2002.

Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. There are various legal limitations on the
extent to which Citicorp's banking subsidiaries may extend credit, pay dividends
or otherwise supply funds to Citicorp. The approval of the Office of the
Comptroller of the Currency is required if total dividends declared by a
national bank in any calendar year exceed net profits (as defined) for that year
combined with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's undivided
profits. State-chartered bank subsidiaries are subject to dividend limitations
imposed by applicable state law.

Citicorp's national and state-chartered bank subsidiaries can declare
dividends to their respective parent companies in 2002, without regulatory
approval, of approximately $7.9 billion, adjusted by the effect of their net
income (loss) for 2002 up to the date of any such dividend declaration. In
determining whether and to what extent to pay dividends, each bank subsidiary
must also consider the effect of dividend payments on applicable risk-based
capital and leverage ratio requirements as well as policy statements of the
federal regulatory agencies that indicate that banking organizations should
generally pay dividends out of current operating earnings. Consistent with
these considerations, Citicorp estimates that its bank subsidiaries could
have distributed dividends to Citicorp, directly or through their parent
holding company, of approximately $7.6 billion of the available $7.9 billion,
adjusted by the effect of their net income (loss) up to the date of any such
dividend declaration.

Citicorp also receives dividends from its nonbank subsidiaries. These
nonbank subsidiaries are generally not subject to regulatory restrictions on
their payment of dividends except that the approval of the Office of Thrift
Supervision may be required if total dividends declared by a savings association
in any calendar year exceed amounts specified by that agency's regulations.

Citicorp is subject to risk-based capital and leverage guidelines issued by
the FRB.

CITICORP RATIOS

- ------------------------

(1) Tier 1 capital divided by adjusted average assets.

Citicorp maintained a strong capital position during the 2002 second
quarter. Total capital (Tier 1 and Tier 2) amounted to $63.4 billion at
June 30, 2002, representing 12.53% of net risk-adjusted assets. This compares
with $63.2 billion and 12.82% at March 31, 2002 and $62.9 billion and 12.41% at
December 31, 2001. Tier 1 capital of $42.5 billion at June 30, 2002 represented
8.40% of net risk-adjusted assets, compared with $42.2 billion and 8.55% at
March 31, 2002 and $42.2 billion and 8.33% at December 31, 2001. Citicorp's Tier
1 capital ratio at June 30, 2002 was above Citicorp's target range of 8.00% to
8.30%.

SALOMON SMITH BARNEY HOLDINGS INC. (SALOMON SMITH BARNEY)

Salomon Smith Barney manages liquidity and monitors and evaluates capital
adequacy through a well-defined process described in Citigroup's 2001 Annual
Report and Form 10-K. Total assets were $304 billion at June 30, 2002, compared
to $301 billion at year-end 2001. Due to the nature of Salomon Smith Barney's
trading activities, it is not uncommon for asset levels to fluctuate from period
to period.

Salomon Smith Barney has a $5.0 billion 364-day committed uncollateralized
revolving line of credit with unaffiliated banks that extends through May 2003,
with any borrowings under this facility maturing in May 2005. Salomon Smith
Barney also has a $100 million 364-day committed uncollateralized revolving line
of credit with an unaffiliated bank that extends through June 2003, with

48

any borrowings under this facility maturing in June 2004. Salomon Smith Barney
may borrow under these revolving credit facilities at various interest rate
options (LIBOR or base rate) and compensates the banks for these facilities
through facility fees. At June 30, 2002, there were no borrowings outstanding
under these facilities. Salomon Smith Barney also has committed long-term
financing facilities with unaffiliated banks. At June 30, 2002, Salomon Smith
Barney had drawn down the full $1.4 billion then available under these
facilities. A bank can terminate its facility by giving Salomon Smith Barney
one year's notice. Salomon Smith Barney compensates the banks for the
facilities through facility fees. Under all of these facilities, Salomon
Smith Barney is required to maintain a certain level of consolidated adjusted
net worth (as defined in the respective agreements). At June 30, 2002, these
requirements were exceeded by approximately $4.6 billion. Salomon Smith
Barney also has substantial borrowing arrangements consisting of facilities
that it has been advised are available, but where no contractual lending
obligation exists. These arrangements are reviewed on an ongoing basis to
ensure flexibility in meeting short-term requirements.

Unsecured term debt is a significant component of Salomon Smith Barney's
long-term capital. Long-term debt totaled $26.6 billion at June 30, 2002 and
$26.8 billion at December 31, 2001. Salomon Smith Barney utilizes interest rate
swaps to convert the majority of its fixed-rate long-term debt used to fund
inventory-related working capital requirements into variable rate obligations.
Long-term debt issuances denominated in currencies other than the U.S. dollar
that are not used to finance assets in the same currency are effectively
converted to U.S. dollar obligations through the use of cross-currency swaps and
forward currency contracts.

TRAVELERS PROPERTY CASUALTY CORP.

TPC's insurance subsidiaries are subject to various regulatory restrictions
that limit the maximum amount of dividends available to be paid to their parent
without prior approval of insurance regulatory authorities. A maximum of
$1.0 billion will be available by the end of 2002 for such dividends without
prior approval of the Connecticut Insurance Department. However, the payment of
a significant portion of this amount is likely to be subject to such approval
depending upon the amount and timing of the payments. TPC's insurance
subsidiaries paid $550 million of dividends during the first six months of 2002.

THE TRAVELERS INSURANCE COMPANY (TIC)

At June 30, 2002, TIC had $36.9 billion of life and annuity product deposit
funds and reserves. Of that total, $20.7 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $16.2 billion is for life and
annuity products that are subject to discretionary withdrawal by the
contractholder. Included in the amount that is subject to discretionary
withdrawal is $5.1 billion of liabilities that is surrenderable with market
value adjustments. Also included is an additional $5.0 billion of the life
insurance and individual annuity liabilities which is subject to discretionary
withdrawals and an average surrender charge of 4.51%. In the payout phase, these
funds are credited at significantly reduced interest rates. The remaining
$6.1 billion of liabilities is surrenderable without charge. More than 9.75% of
this relates to individual life products. These risks would have to be
underwritten again if transferred to another carrier, which is considered a
significant deterrent against withdrawal by long-term policyholders. Insurance
liabilities that are surrendered or withdrawn are reduced by outstanding policy
loans, and related accrued interest prior to payout.

TIC is subject to various regulatory restrictions that limit the maximum
amount of dividends available to its parent without prior approval of the
Connecticut Insurance Department. A maximum of $586 million of statutory surplus
is available by the end of the year 2002 for such dividends without the prior
approval of the Connecticut Insurance Department, of which $428 million was paid
during the first six months of 2002.

49

CONSOLIDATED FINANCIAL STATEMENTS

CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

See Notes to Unaudited Consolidated Financial Statements.

50

CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

See Notes to Unaudited Consolidated Financial Statements.

51

CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

- ------------------------

(1) Common dividends declared were 16 cents per share and 18 cents per share in
the first and second quarters of 2002, respectively, and 14 cents per share
in both the first and second quarters of 2001.

(2) Refers to the adoption of SFAS No. 133 in the first quarter of 2001 and the
adoption of EITF 99-20 in the second quarter of 2001, resulting in increases
to equity from nonowner sources of $25 million and $93 million,
respectively.

See Notes to Unaudited Consolidated Financial Statements.

52

CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

See Notes to Unaudited Consolidated Financial Statements.

53

CITIGROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements as of June 30,
2002 and for the three- and six-month periods ended June 30, 2002 and 2001 are
unaudited and include the accounts of Citigroup Inc. (Citigroup) and its
subsidiaries (collectively, the Company). In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation have been reflected. The accompanying unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in Citigroup's 2001 Annual
Report and Form 10-K.

Certain financial information that is normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, but is not required for interim reporting
purposes, has been condensed or omitted.

Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.

2. ACCOUNTING CHANGES

BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141
and certain provisions of SFAS No. 142 as required for goodwill and intangible
assets resulting from business combinations consummated after June 30, 2001. The
new rules require that all business combinations consummated after June 30, 2001
be accounted for under the purchase method. The nonamortization provisions of
the new rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after
June 30, 2001.

On January 1, 2002, Citigroup adopted the remaining provisions of SFAS
No. 142, when the rules became effective for calendar year companies. Under the
new rules, effective January 1, 2002, goodwill and intangible assets deemed to
have indefinite lives are no longer amortized, but are subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives.

The Company has performed the required impairment tests of goodwill and
indefinite-lived intangible assets. There was no impairment of goodwill upon
adoption of SFAS No. 142. The initial adoption resulted in a cumulative
adjustment of $47 million after-tax recorded as a charge to earnings related to
the impairment of certain intangible assets.

Net income and earnings per share for the second quarter and first six
months of 2002 and 2001 and the full years 2001, 2000 and 1999 adjusted to
exclude amortization expense (net of taxes) related to goodwill and indefinite
lived intangible assets which are no longer amortized are as follows:

During the first six months of 2002, no goodwill was impaired or written
off. The Company recorded goodwill of $41 million during

54

the 2002 second quarter and $74 million during the 2002 first quarter in
connection with the consumer finance acquisitions of Marufuku Co., Ltd. and
Taihei Co., Ltd., respectively, in Japan. Additionally, in February 2002,
Banamex completed the purchase of the remaining 48% interest in Seguros
Banamex, a life insurance business, and AFORE Banamex, a pension fund
management business, from AEGON for $1.24 billion which resulted in
additional goodwill of $1.07 billion in the Global Investment Management
segment.

The changes in goodwill during the second quarter of 2002 were as follows:

- ------------------------

(1) Other changes in goodwill includes foreign exchange effects on non-dollar
denominated goodwill, purchase accounting adjustments and certain other
reclassifications.

At June 30, 2002, $1.245 billion of the Company's acquired intangible
assets, including $760 million of asset management and administration contracts,
$440 million of trade names and $45 million of other intangible assets, were
considered to be indefinite- lived and not subject to amortization. All other
acquired intangible assets are subject to amortization.

The components of intangible assets were as follows:

- ------------------------

(1) Primarily contract-related intangible assets.

The intangible assets recorded during the first six months of 2002 and their
respective amortization periods were as follows:

- ------------------------

(1) Present value of future profits acquired during the six months of 2002 will
be amortized on an accelerated basis over 22 years.

(2) There was no significant residual value estimated for the intangible assets
recorded during the first six months of 2002.

Intangible assets amortization expense was $206 million and $223 million for
the three months ended June 30, 2002 and 2001, respectively, and $410 million
and $425 million for the six months ended June 30, 2002 and 2001, respectively.
Intangible assets amortization expense is estimated to be $450 million for the
remainder of 2002, $890 million in 2003, $840 million in 2004, $770 million in
2005, $710 million in 2006, and $660 million in 2007.

55

ADOPTION OF EITF 99-20

During the second quarter of 2001, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Asset"
(EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and
identification and determination of impairment on certain asset-backed
securities. The initial adoption resulted in a cumulative adjustment of
$116 million after-tax, recorded as a charge to earnings, and an increase of
$93 million included in other changes in stockholders' equity from nonowner
sources.

DERIVATIVES AND HEDGE ACCOUNTING

On January 1, 2001, Citigroup adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133
changed the accounting treatment of derivative contracts (including foreign
exchange contracts) that are employed to manage risk outside of Citigroup's
trading activities, as well as certain derivative instruments embedded in other
contracts. SFAS No. 133 requires that all derivatives be recorded on the balance
sheet at their fair value. The treatment of changes in the fair value of
derivatives depends on the character of the transaction, including whether it
has been designated and qualifies as part of a hedging relationship. The
majority of Citigroup's derivatives are entered into for trading purposes and
were not impacted by the adoption of SFAS No. 133. The cumulative effect of
adopting SFAS No. 133 at January 1, 2001 was an after-tax charge of $42 million
included in net income and an increase of $25 million included in other changes
in stockholders' equity from nonowner sources.

TRANSFERS AND SERVICING OF FINANCIAL ASSETS

In September 2000, the Financial Accounting Standards Board (FASB) issued
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, a replacement of FASB Statement No. 125"
(SFAS No. 140). In July 2001, FASB issued Technical Bulletin No. 01-1,
"Effective Date for Certain Financial Institutions of Certain Provisions of
Statement 140 Related to the Isolation of Transferred Assets."

Certain provisions of SFAS No. 140 require that the structure for transfers
of financial assets to certain securitization vehicles be modified to comply
with revised isolation guidance for institutions subject to receivership by the
Federal Deposit Insurance Corporation. These provisions were effective for
transfers taking place after December 31, 2001, with an additional transition
period ending no later than September 30, 2006 for transfers to certain master
trusts. It is not expected that these provisions will materially affect the
financial statements. SFAS No. 140 also provides revised guidance for an entity
to be considered a qualifying special purpose entity.

IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

On January 1, 2002, Citigroup adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), when the rule
became effective for calendar year companies. SFAS No. 144 established
additional criteria for determining when a long-lived asset is held-for-sale. It
also broadens the definition of "discontinued operations," but does not allow
for the accrual of future operating losses, as was previously permitted.

The provisions of the new standard are generally to be applied
prospectively. The provisions of SFAS No. 144 will affect the timing of
discontinued operations treatment for the planned tax-free distribution of
Travelers Property Casualty Corp.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (SFAS No. 146). SFAS No. 146 requires that a
liability for costs associated with exit or disposal activities be recognized
when the liability is incurred. Existing generally accepted accounting
principles provide for the recognition of such costs at the date of management's
commitment to an exit plan. In addition, SFAS No. 146 requires that the
liability be measured at fair value and be adjusted for changes in estimated
cash flows.

The provisions of the new standard are effective for exit or disposal
activities initiated after December 31, 2002. It is not expected that SFAS
No. 146 will materially affect the financial statements.

56

3. BUSINESS DEVELOPMENTS

ACQUISITION OF GOLDEN STATE BANCORP

On May 21, 2002, Citigroup announced that it will acquire Golden State
Bancorp (Golden State) in a transaction in which Citigroup will pay
approximately $16.40 in cash and .5234 Citigroup shares for each share of
Golden State delivered at closing, subject to certain adjustments. Golden
State stockholders will be entitled to elect to receive the merger
consideration in shares of Citigroup common stock or cash, subject to certain
limitations. Based on the average prices for the four trading days ended May
23, 2002, the total transaction value is approximately $5.8 billion.

Golden State is the parent company of California Federal Bank, the second
largest thrift in the U.S. and, through its First Nationwide Mortgage business,
the eighth largest mortgage servicer. As of June 30, 2002, it had $24 billion in
deposits, $52 billion in assets and 355 branches in California and Nevada.

The transaction is expected to close in the third quarter of 2002. It is
subject to a number of regulatory approvals and the approval of Golden State
stockholders.

INITIAL PUBLIC OFFERING AND TAX-FREE DISTRIBUTION OF TRAVELERS PROPERTY CASUALTY
CORP.

TPC (an indirect wholly-owned subsidiary of Citigroup on December 31, 2001)
sold 231 million shares of its class A common stock representing approximately
23.1% of its outstanding equity securities at $18.50 per share in an initial
public offering on March 27, 2002. Citigroup recognized an after-tax gain of
$1.061 billion as a result of the TPC offering.

On August 1, 2002, Citigroup announced that it will make a tax-free
distribution to its stockholders of a portion of its remaining ownership
interest in TPC on or about August 20, 2002. Following the distribution,
Citigroup will remain a holder of approximately 9.9% of TPC's outstanding equity
securities. Income statement minority interest was recognized on the initial
public offering portion beginning on April 1, 2002. The distribution will be
tax-free to Citigroup, its stockholders and TPC.

The distribution of TPC will be treated as a dividend to stockholders for
accounting purposes that will reduce stockholders' equity by approximately
$7 billion. Prior to the initial public offering during 2002, TPC paid dividends
to Citigroup in the form of notes in the aggregate amount of $5.095 billion.

In connection with the initial public offering, Citigroup entered into an
agreement with TPC that provides that, in any fiscal year in which TPC records
asbestos-related income statement charges in excess of $150 million, net of any
reinsurance, Citigroup will pay to TPC the amount of any such excess up to a
cumulative aggregate of $800 million, reduced by the tax effect of the highest
applicable federal income tax rate. A portion of the gain as a result of the
offering was deferred to offset any payments arising in connection with this
agreement.

Citigroup and TPC are currently reviewing whether Citigroup business units
will continue to offer certain TPC products. The two companies plan to enter
into an agreement under which Citigroup businesses will provide investment
advisory and certain back office services to TPC during a transition period.
Ongoing revenues on our remaining ownership in TPC following the distribution
are not expected to be significant.

57

4. BUSINESS SEGMENT INFORMATION

The following table presents certain information regarding the Company's
business segments:

- ------------------------

(1) Results in the 2002 second quarter and six-month periods reflect after-tax
restructuring-related credits (charges) in Global Consumer of $21 million
and $10 million and in Global Corporate and Investment Bank of $4 million
and ($4) million, respectively, in Global Investment Management of ($10) in
the six-month period, in Property and Casualty of ($1) million and ($2)
million, respectively, and in Corporate/Other of $1 million in both periods.
The 2001 second quarter and six-month periods results reflect after-tax
restructuring-related credits (charges) in Global Consumer of ($58) million
and ($70) million and in Global Corporate and Investment Bank of ($66)
million and ($134) million, respectively, in Global Investment Management of
($7) million in both periods, and in Property and Casualty of ($2) million
in both periods.

(2) Results in the 2002 second quarter and six-month periods include pretax
provisions (credits) for benefits, claims, and credit losses in Global
Consumer of $1.8 billion and $3.9 billion, in Global Corporate and
Investment Bank of $0.5 billion and $1.1 billion, in Global Investment
Management of $0.7 billion and $1.4 billion, in Property and Casualty of
$2.1 billion and $4.1 billion, and in Corporate/Other of ($8) million and
($18) million, respectively. The 2001 second quarter and six-month period
results reflect pretax provisions (credits) for benefits, claims, and credit
losses in Global Consumer of $1.4 billion and $2.8 billion, in Global
Corporate and Investment Bank of $0.3 billion and $0.6 billion, in Global
Investment Management of $0.6 billion and $1.3 billion, in Property and
Casualty of $1.9 billion and $3.7 billion, respectively, and in
Corporate/Other of ($2) million in both periods.

(3) Restated to conform to the current period's presentation reflecting the
Company's recently announced changes in business segments.

5. INVESTMENTS

- ------------------------

(1) For the six months ended June 30, 2002, net gains on investments held by
venture capital subsidiaries totaled $231 million, of which $281 million and
$222 million represented gross unrealized gains and losses, respectively.
For the six months ended June 30, 2001, net gains on investments held by
venture capital subsidiaries totaled $323 million, of which $722 million and
$493 million represented gross unrealized gains and losses, respectively.

58

The amortized cost and fair value of investments in fixed maturities and
equity securities at June 30, 2002 and December 31, 2001 were as follows:

- ------------------------
(1) At December 31, 2001, gross pretax unrealized gains and losses on fixed
maturities and equity securities totaled $3.004 billion and $1.527 billion,
respectively.

(2) Recorded at amortized cost.

(3) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.

6. TRADING ACCOUNT ASSETS AND LIABILITIES

Trading account assets and liabilities at market value consisted of the
following:

- ------------------------
(1) Net of master netting agreements and securitization.

7. DEBT

Investment banking and brokerage borrowings consisted of the following:

59

Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:

Long-term debt, including its current portion, consisted of the following:

8. RESTRUCTURING-RELATED ITEMS

- ------------------------

(1) Represents additions to restructuring liabilities arising from acquisitions.

(2) Utilization amounts include translation effects on the restructuring
reserve.

During the first quarter of 2002, Citigroup recorded restructuring charges
of $42 million, primarily consisting of the downsizing of Global Consumer and
Global Corporate and Investment Bank operations in Argentina. Through June 30,
2002, the 2002 reserve utilization included $4 million of severance and other
costs which were paid in cash. As of June 30, 2002, approximately 150 gross
staff positions have been eliminated under these programs.

During 2001, Citigroup recorded restructuring charges of $448 million. Of
the $448 million, $319 million related to the downsizing of certain functions in
the Global Corporate and Investment Bank and Global Consumer businesses in order
to align their cost structures with current market conditions and $129 million
related to the acquisition of Banamex and the integration of its operations. In
addition, a restructuring reserve of $112 million was recorded in connection
with the acquisition of Banamex and recognized as a liability in the purchase
price allocation of Banamex. The total Banamex reserves of $241 million include
costs related to downsizings, the reconfiguration of branch operations in
Mexico, and the integration of operations and operating platforms. These
restructuring initiatives are expected to be implemented this year. The reserves
included $423 million related to employee severance, $72 million related to
exiting leasehold and other contractual obligations, and $65 million of asset
impairment charges.

The $423 million related to employee severance reflects the cost of
eliminating approximately 12,500 positions, including 4,200 in Citigroup's
Global Consumer business and 3,600 in Banamex related to the acquisition, and
1,300 in the Global Consumer business and 3,400 in the Global Corporate and
Investment Bank business related to other restructuring initiatives.
Approximately 3,200 of these positions were in the United States.

Through June 30, 2002, the 2001 restructuring reserve utilization included
$65 million of asset impairment charges as well as $338 million of severance and
other costs (of which $286 million of employee severance and $18 million of
leasehold and other exit costs have been paid in cash and $34 million is legally
obligated), together with translation effects. Utilization of the 2001
restructuring reserve in the 2002 second quarter and six months was $36 million
and $51 million, respectively. Through June 30, 2002, approximately 10,900 gross
staff positions have been eliminated under these programs, including
approximately 1,400 in the 2002 second quarter and 2,300 in the first six months
of 2002.

60

During 2000, Citigroup recorded restructuring charges of $579 million,
primarily consisting of exit costs related to the acquisition of Associates. The
charges included $241 million related to employee severance, $154 million
related to exiting leasehold and other contractual obligations, and
$184 million of asset impairment charges.

Of the $579 million charge, $474 million related to the acquisition of
Associates and included the reconfiguration of certain branch operations, the
exit from non-strategic businesses and from activities as mandated by federal
bank regulations, and the consolidation and integration of corporate, middle and
back office functions. In the Global Consumer business, $51 million includes the
reconfiguration of certain branch operations outside the U.S. and the downsizing
and consolidation of certain back office functions in the U.S. Approximately
$440 million of the $579 million charge related to operations in the United
States.

The $241 million portion of the charge related to employee severance
reflects the costs of eliminating approximately 5,800 positions, including
approximately 4,600 in Associates and 700 in the Global Consumer business.
Approximately 5,000 of these positions related to the United States. In 2000, a
reserve of $23 million was recorded, $20 million of which related to the
elimination of 1,600 non-U.S. positions of an acquired entity.

Through June 30, 2002, the 2000 restructuring reserve utilization included
$184 million of asset impairment charges and $355 million of severance and other
exit costs (of which $176 million of employee severance and $120 million of
leasehold and other exit costs have been paid in cash and $59 million is legally
obligated), together with translation effects. Utilization of the 2000
restructuring reserve in the 2002 second quarter and six months was $23 million
and $53 million, respectively. Through June 30, 2002, approximately 6,400 staff
positions have been eliminated under these programs including approximately 550
in the 2002 second quarter and 950 in the first six months of 2002.

The implementation of these restructuring initiatives also caused certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets were shortened, and accelerated depreciation
charges (in addition to normal scheduled depreciation on those assets) of
$4 million and $22 million were recognized in the second quarter of 2002 and
2001, respectively, and $9 million and $44 million were recognized in the
six-month periods, respectively.

Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. Changes in estimates
attributable to lower than anticipated costs of implementing certain projects
and a reduction in the scope of certain initiatives during the second quarter of
2002 resulted in a reduction of the reserve for 2001 restructuring initiatives
of $6 million, a reduction of the reserve for 2000 restructuring initiatives of
$24 million and a reduction of reserves for prior restructuring initiatives of
$13 million. Changes in estimates during 2001 resulted in a reduction of the
reserve for 2001 restructuring initiatives of $18 million during the second
quarter of 2001 and a reduction of $29 million for 2000 restructuring
initiatives during the fourth quarter of 2001.

Additional information about restructuring-related items, including the
business segments affected, may be found in Citigroup's 2001 Annual Report and
Form 10-K.

61

9. CHANGES IN EQUITY FROM NONOWNER SOURCES

Changes in each component of "Accumulated Other Changes in Equity from
Nonowner Sources" for the six-month period ended June 30, 2002 are as follows:

- ------------------------

(1) Primarily reflects the impact of a rising interest rate yield curve on
fixed-income securities.

(2) Includes the $512 million after-tax impact of translating Argentina's net
assets into the U.S. dollar equivalent. As a result of government actions in
Argentina, which began in the fourth quarter of 2001 and continue, the
functional currency of the Argentine branch and subsidiaries was changed in
the 2002 first quarter from the U.S. dollar to the Argentine peso.

(3) Primarily reflects the impact of a declining interest rate yield curve on
fixed-income securities.

(4) Primarily reflects the decline in the Mexican peso against the U.S. dollar,
and includes the $77 million after-tax impact of translating Argentina's
operations into the U.S. dollar equivalent.

10. EARNINGS PER SHARE

The following reflects the income and share data used in the basic and
diluted earnings per share computations for the three and six months ended
June 30, 2002 and 2001:

62

11. DERIVATIVES AND OTHER ACTIVITIES

The following table summarizes certain information related to the Company's
hedging activities for the three months and six months ended June 30, 2002 and
2001:

- ------------------------

(1) Net losses on net investment hedges for the three months ended June 30, 2002
are primarily related to instruments hedging net investments which have as
their functional currency the Japanese yen, the British pound or the Euro.

The accumulated other changes in equity from nonowner sources from cash flow
hedges for the six months ended June 30, 2002 and 2001 can be summarized as
follows (net of taxes):

- ------------------------

(1) Balance at January 1, 2001 results from the cumulative effect of the
accounting change for cash-flow hedges.

12. SECURITIZATIONS

ACCOUNTING POLICIES

For each securitization entity with which the Company is involved, the
Company makes a determination of whether the entity should be considered a
subsidiary of the Company and be consolidated into the Company's financial
statements or whether the entity is sufficiently independent that it does not
need to be consolidated. If the securitization entity's activities are
sufficiently restricted to meet certain accounting requirements to be a
qualifying special purpose entity, the securitization entity is not
consolidated by Citigroup as seller of the transferred assets. For all other
securitizations in which Citigroup participates, an evaluation is made of
whether the Company controls the entity by considering several factors,
including how much of the entity's ownership is in the hands of third-party
investors, who controls the securitization entity, and who reaps the rewards
and bears the risks of the entity. Only securitization entities controlled by
Citigroup are consolidated.

For a transfer of financial assets to be considered a sale: financial assets
transferred by the Company must have been isolated from the seller, even in
bankruptcy or other receivership; the purchaser must have the right to sell the
assets transferred, or the purchaser must be a qualifying special purpose entity
meeting certain significant restrictions on its activities, whose investors have
the right to sell their ownership interests in the entity; and the seller does
not continue to control the assets transferred through an agreement to
repurchase them or have a right to cause the assets to be returned (known as a
call option). A transfer of financial assets that meets the sale requirements is
removed from the Company's consolidated statement of financial position. If the
conditions for sale are not met, the transfer is considered to be a secured
borrowing, the asset remains on the Company's consolidated statement of
financial position and the proceeds are recognized as the Company's liability.

In determining whether financial assets transferred have, in fact, been
isolated from the Company, an opinion of legal counsel is obtained for complex
transactions or where the Company has continuing involvement with the assets
transferred or with the securitization entity. For sale treatment to be
appropriate, those opinions must state that the asset transfer would be
considered a sale and that the assets transferred would not be consolidated with
the Company's other assets in the event of the Company's insolvency.

63

In the case of asset transfers to certain master trust securitization
entities, the Company has until no later than June 30, 2006 to make the changes
needed in the master trusts' organizational structure and governing documents
that are necessary to meet these isolation requirements.

The Company values its securitized retained interests at fair value as
determined using generally accepted valuation techniques at the time of
securitization and subsequently. The Company retains a seller's interest in the
credit card receivables transferred to the trusts, which is not in securitized
form. Accordingly, the seller's interest is carried on a historical cost basis
and classified as consumer loans.

SECURITIZATION ACTIVITIES

Citigroup and its subsidiaries securitize primarily credit card receivables
and mortgages. Other types of loans securitized include home equity loans, auto
loans and student loans.

After securitizations of credit card receivables, the Company continues
to maintain credit card customer account relationships and provides servicing
for receivables transferred to the trusts. The Company also arranges for
third parties to provide credit enhancement to the trusts, including cash
collateral accounts, subordinated securities and letters of credit. As
specified in certain of the sale agreements, the net revenue collected each
month is accumulated up to a predetermined maximum amount, and is available
over the remaining term of that transaction to make payments of yield, fees,
and transaction costs in the event that net cash flows from the receivables
are not sufficient. When the predetermined amount is reached, net revenue is
passed directly to the Citigroup subsidiary that sold the receivables.

The Company provides a wide range of mortgage and home equity products to
a diverse customer base. In connection with these loans, the servicing rights
entitle the Company to a future stream of cash flows based on the outstanding
principal balances of the loans and the contractual servicing fee. Failure to
service the loans in accordance with contractual requirements may lead to a
termination of the servicing rights and the loss of future servicing fees. In
non-recourse servicing, the principal credit risk to the servicer is the cost
of temporary advances of funds. In recourse servicing, the servicer agrees to
share credit risk with the owner of the mortgage loans such as FNMA or FHLMC
or with a private investor, insurer or guarantor. Losses on recourse
servicing occur primarily when foreclosure sale proceeds of the property
underlying a defaulted mortgage or home equity loan are less than the
outstanding principal balance and accrued interest of such mortgage loan and
the cost of holding and disposing of the underlying property.

The Company also originates and sells first mortgage loans in the ordinary
course of its mortgage banking activities. The Company sells certain of these
loans to the Government National Mortgage Association (GNMA) with the servicing
rights retained. GNMA has the primary recourse obligation on the individual
loans; however, GNMA's recourse obligation is capped at a fixed amount per loan.
Any losses above that fixed amount are borne by Citigroup as the
seller/servicer.

The following table summarizes certain cash flows received from and paid to
securitization trusts during the three and six-month periods ended June 30, 2002
and 2001:

- ------------------------

(1) Other includes auto loans in all periods and student loans in the six months
ended June 30, 2002.

The Company recognized gains on securitizations of $63 million and
$71 million for the three months ended June 30, 2002 and

64

2001, respectively, and $100 million and $95 million for the six months ended
June 30, 2002 and 2001, respectively, primarily related to mortgage loans.

Key assumptions used for mortgages during the six months ended June 30, 2002
in measuring the fair value of retained interests at the date of sale or
securitization follow:

Discount rate............................................... 5.0% to 11.2%
Constant prepayment rate.................................... 6.9% to 40.0%
Anticipated net credit losses............................... 0.03% to 5.0%
==============

As required by SFAS No. 140, the effect of two negative changes in each of
the key assumptions used to determine the fair value of retained interests must
be disclosed. The negative effect of each change in each assumption must be
calculated independently, holding all other assumptions consistent. Because the
key assumptions may not in fact be independent, the net effect of simultaneous
adverse changes in the key assumptions may be less than the sum of the
individual effects shown below.

At June 30, 2002, for mortgages, auto loans and manufactured housing loans,
the key assumptions, presented by product groups, and the sensitivity of the
fair value of retained interests to two adverse changes in each of the key
assumptions were as follows:

65

MANAGED LOANS

For the loan portfolios where the Company continues to manage loans after
they have been securitized, the following table presents the total loan amounts
managed, the portion of those portfolios securitized, and delinquencies (loans
which are 90 days or more past due) at June 30, 2002 and December 31, 2001, and
credit losses, net of recoveries, for the three and six-month periods ended
June 30, 2002 and 2001.

- ------------------------

(1) Includes home equity loans and auto loans.

(2) Includes loans held-for-sale.

66

SERVICING RIGHTS

The fair value of capitalized mortgage loan servicing rights was
$1.381 billion, $1.173 billion and $1.092 billion at June 30, 2002,
December 31, 2001 and June 30, 2001, respectively. The following table
summarizes the changes in capitalized mortgage servicing rights (MSR):

The following table summarizes the changes in the valuation allowance for
capitalized mortgage servicing rights:

13. CONTINGENCIES

The Company's insurance policy and claims reserves include $1.098 billion
and $1.216 billion for asbestos and environmental related claims net of
reinsurance at June 30, 2002 and December 31, 2001, respectively. It is
difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation, and other
uncertainties. Conventional actuarial techniques are not used to estimate
such reserves.

The reserves carried for environmental and asbestos claims at June 30, 2002
are the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the uncertainties surrounding
the final resolution of these claims continue. These include, without
limitation, the risks inherent in major litigation, any impact from the
bankruptcy protection sought by various asbestos producers and other asbestos
defendants, a further increase or decrease in asbestos and environmental claims
which cannot now be anticipated, the role of any umbrella or excess policies the
Company has issued for these claims, whether or not an asbestos claim is a
product/completed operation claim subject to an aggregate limit and the
available coverage, if any, for that claim, the resolution or adjudication of
some disputes pertaining to the amount of available coverage for asbestos claims
in a manner inconsistent with the Company's previous assessment of these claims,
the number and outcome of direct actions against the Company, unanticipated
developments pertaining to the Company's ability to recover reinsurance for
environmental and asbestos claims, and the willingness of parties, including the
Company, to related litigation to settle. It is also not possible to predict
changes in the legal and legislative environment and their impact on the future
development of asbestos and environmental claims. This development will be
affected by future court decisions and interpretations, as well as changes in
applicable legislation. In addition, particularly during the last few months of
2001 and continuing into 2002, the asbestos-related trends have both accelerated
and become more visible. These trends include, but are not limited to, the
filing of additional claims, more intensive advertising by lawyers seeking
asbestos claimants, more aggressive litigation based on novel theories of
liability and litigation against new and previously peripheral defendants,
including insurers, and developments in existing and pending bankruptcy
proceedings.

For a discussion of certain legal proceedings, see Part II, Item I of this
Form 10-Q. In addition, in the ordinary course of business, Citigroup and its
subsidiaries are defendants or co-defendants in various litigation and
regulatory matters incidental to and typical of the businesses in which they are
engaged. In the opinion of the Company's management, the ultimate resolution of
these legal proceedings would not be likely to have a material adverse effect on
the results of the Company and its subsidiaries' operations, financial
condition, or liquidity.

67

FINANCIAL DATA SUPPLEMENT

CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are no
other available and reliable sources of repayment, in which case the loans
are written down to the lower of cost or collateral value.

(3) Substantially all consumer loans, of which $1,257 million, $1,106 million,
and $973 million are government-guaranteed student loans and mortgages at
June 30, 2002, March 31, 2002, and June 30, 2001, respectively.

OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS

- ------------------------

(1) Reclassified to conform to the current period's presentation.

(2) Represents repossessed real estate, carried at lower of cost or fair value,
less costs to sell.

(3) Primarily commercial transportation equipment and manufactured housing,
carried at lower of cost or fair value, less costs to sell.

68

DETAILS OF CREDIT LOSS EXPERIENCE

- ------------------------

(1) Includes amounts recognized under credit default swaps purchased from third
parties.

(2) Primarily includes foreign currency translation effects and the addition of
allowance for credit losses related to acquisitions.

69

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

ENRON CORP.

In April 2002, Citigroup and, in one case, Salomon Smith Barney Inc. (SSB)
were named as defendants along with, among others, commercial and/or investment
banks, certain current and former Enron officers and directors, lawyers and
accountants in two putative consolidated class action complaints that were filed
in the United States District Court for the Southern District of Texas seeking
unspecified damages. One action, brought on behalf of individuals who purchased
Enron securities (NEWBY, ET AL. V. ENRON CORP., ET AL.), alleges violations of
Sections 11 and 15 of the Securities Act of 1933, as amended, and Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, as amended, and the other
action, brought on behalf of current and former Enron employees (TITTLE, ET AL.
V. ENRON CORP., ET AL.), alleges violations of the Employment Retirement Income
Security Act of 1974, as amended (ERISA), and the Racketeer Influenced and
Corrupt Organizations Act (RICO), as well as negligence and civil conspiracy. On
May 8, 2002, Citigroup and SSB filed motions to dismiss the complaints, which
are pending.

In July 2002, Citigroup, SSB and various of its affiliates and certain of
their officers and other employees were named as defendants, along with, among
others, commercial and/or investment banks, certain current and former Enron
officers and directors, lawyers and accountants in a putative class action filed
in the United States District Court for the Southern District of New York on
behalf of purchasers of the Yosemite Notes and Enron Credit-Linked Notes, among
other securities (HUDSON SOFT CO., LTD. V. CREDIT SUISSE FIRST BOSTON
CORPORATION, ET AL.). The complaint alleges violations of RICO and seeks
unspecified damages.

Additional actions have been filed against Citigroup and certain of its
affiliates, along with other parties, including (i) an action brought in state
court by state pension plans for alleged violations of state securities law and
common law fraud and unjust enrichment; (ii) an action by banks that
participated in two Enron revolving credit facilities, alleging fraud, gross
negligence, and breach of implied duties in connection with defendants'
administration of a credit facility with Enron; (iii) an action brought by
several funds in connection with secondary market purchases of Enron Corp. debt
securities alleging violations of the federal securities law, including
Section 11 of the Securities Act of 1933, as amended, fraud and
misrepresentation; and (iv) a series of putative class actions by purchasers of
NewPower Holdings common stock alleging violations of the federal securities
law, including Section 11 of the Securities Act of 1933, as amended, and
Section 10(b) of the Securities Exchange Act of 1934, as amended.

Additionally, Citigroup and certain of its affiliates have received
inquiries and requests for information from various regulatory and governmental
agencies and Congressional committees regarding certain transactions and
business relationships with Enron and its affiliates. Citigroup is cooperating
fully with all such requests.

RESEARCH

Since May 2002, SSB and Jack Grubman have been named as defendants in a
number of putative class action complaints by purchasers of various
securities alleging they violated federal securities law, including Sections
10 and 20 of the Securities Exchange Act of 1934, as amended, by failing to
disclose conflicts of interest in connection with published investment
research, including Global Crossing and WorldCom, Inc. Actions concerning
Global Crossing securities filed in the United States District Court for the
Southern District of New York include ROLSETH, ET AL. V. SALOMON SMITH BARNEY
INC., ET AL.; ROBERTS, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.;
MUSACCHIO, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; OVETZKY-WEISS, ET AL.
V. SALOMON SMITH BARNEY INC., ET AL.; GLINDEMAN, JR., ET AL. V. SALOMON SMITH
BARNEY INC., ET AL.; TELESCA, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.;
KLEINKNECHT, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; SHUSTER, ET AL. V.
SALOMON SMITH BARNEY INC., ET AL. Actions concerning WorldCom securities
filed in the United States District Court for the Southern District of New
York include SINGLETON, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; BRAKL,
ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; BERGER, ET AL. V. SALOMON SMITH
BARNEY INC., ET AL.; EMERSON, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.;
GARNER, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; SPANGLER, ET AL. V.
SALOMON SMITH BARNEY INC., ET AL.; ACKERMAN, ET AL. V. SALOMON SMITH BARNEY
INC., ET AL.; MOWER, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; CRINER, ET
AL. V. SALOMON SMITH BARNEY INC., ET AL.; HALLISEY & JOHNSON PROFIT SHARING
PLAN, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; BALFUS, ET AL. V. SALOMON
SMITH BARNEY INC., ET AL.; KIM, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.;
MCCAULEY, ET AL. V. SALOMON SMITH BARNEY INC., ET AL.; HERMAN, ET AL. V.
SALOMON SMITH BARNEY INC., ET AL.; RIPPLE, ET AL. V. SALOMON SMITH BARNEY
INC., ET AL.

Since April 2002, SSB and several other broker dealers have received
subpoenas and/or requests for information from various governmental and
self-regulatory agencies and Congressional committees. SSB is cooperating fully
with all such requests.

70

WORLDCOM, INC.

Citigroup and SSB are involved in a number of lawsuits arising out of the
underwriting of debt securities of WorldCom, Inc. These include putative class
actions filed in July 2002 by purchasers of WorldCom debt securities in the
United States District Court for the Southern District of New York (ABOVE
PARADISE INVESTMENTS LTD. V. WORLDCOM, INC., ET AL.; MUNICIPAL POLICE EMPLOYEES
RETIREMENT SYSTEM OF LOUISIANA V. WORLDCOM, INC., ET AL.), and in the United
States District Court for the Southern District of Mississippi (LONGACRE MASTER
FUND V. WORLDCOM, INC., ET AL.). These complaints assert violations of federal
securities law, including Sections 11 and 12 of the Securities Act of 1933, as
amended, and seek unspecified damages from the underwriters.

Additional actions have been filed in various federal and state courts
against Citigroup and SSB, along with other parties, concerning WorldCom
securities including (i) individual state court actions brought by various
pension funds in connection with the underwriting of debt securities of WorldCom
alleging violations of Section 11 of the Securities Act of 1933, as amended,
and, in one case, violations of various state securities laws and common law
fraud and (ii) a putative class action on behalf of participants in WorldCom's
401(k) salary savings plan and those WorldCom benefit plans covered by ERISA
alleging violations of ERISA and common law fraud.

OTHER

In July 2002, Citigroup and members of its Board of Directors were named as
defendants in shareholder derivative complaints filed in New York Supreme Court,
New York County, alleging breach of fiduciary duty, negligent breach of
fiduciary duty, gross mismanagement and waste of corporate assets. In July and
August 2002, Citigroup and certain officers were also named as defendants in
putative class actions filed in the United States District Court for the
Southern District of New York brought on behalf of purchasers of Citigroup
common stock alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, as amended, and, in one of the actions, common law fraud.

Additional lawsuits containing similar claims to those described above may
be filed in the future.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

(c) In connection with its acquisition of Geneva Group, Inc., on April 5,
2002, the Company issued an additional 4,882 shares of the Company's common
stock to the former shareholders of Geneva pursuant to a post-closing adjustment
to the consideration provided by the Company in connection with the acquisition.
The shares were issued in reliance upon an exemption from the registration
requirements of the Securities Act of 1933 provided by Section 4(2) thereof.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Information concerning all matters voted on by stockholders at Citigroup's
Annual Meeting of Stockholders held on April 16, 2002 is incorporated herein by
reference to Item 4 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

See Exhibit Index.

(b) Reports on Form 8-K

On April 16, 2002, the Company filed a Current Report on Form 8-K, dated
April 15, 2002, reporting under Item 5 thereof the results of its operations for
the quarter ended March 31, 2002, and certain other selected financial data.

On May 22, 2002, the Company filed a Current Report on Form 8-K, dated
May 21, 2002, (a) reporting under Item 5 thereof that Citigroup announced that
it will acquire Golden State Bancorp Inc., and (b) filing as an exhibit under
Item 7 thereof a copy of the related press release dated May 21, 2002.

On May 28, 2002, the Company filed a Current Report on Form 8-K, dated
May 21, 2002, (a) reporting under Item 5 thereof that Citigroup announced that
it will acquire Golden State Bancorp Inc., and (b) filing as exhibits under Item
7 thereof (i) a copy of the related Merger Agreement and (ii) a copy of the
related Securityholders Agreement.

71

On June 6, 2002, the Company filed a Current Report on Form 8-K, dated
May 30, 2002, filing as exhibits under Item 7 thereof the Terms Agreement, dated
May 30, 2002, and the Form of Note relating to the offer and sale of the
Company's 6.625% Subordinated Notes due June 15, 2032.

On June 19, 2002, the Company filed a Current Report on Form 8-K, dated
June 12, 2002, filing as exhibits under Item 7 thereof the Terms Agreement,
dated June 12, 2002, and the Form of Note relating to the offer and sale of the
Company's 4.125% Notes due June 30, 2005.

On June 27, 2002, the Company filed a Current Report on Form 8-K, dated
June 26, 2002, reporting under Item 5 thereof Citigroup's exposure to WorldCom.

No other reports on Form 8-K were filed during the second quarter of 2002;
however,

On July 11, 2002, the Company filed a Current Report on Form 8-K, dated
July 10, 2002, (a) reporting under Item 5 thereof that Citigroup had revised its
financial reporting format in order to align Citigroup's public disclosure with
its recently-announced organizational changes, and (b) filing as an exhibit
under Item 7 thereof the 2002 First Quarter Financial Data Supplement.

On July 18, 2002, the Company filed a Current Report on Form 8-K, dated
July 17, 2002, reporting under Item 5 thereof the results of its operations for
the quarter ended June 30, 2002, and certain other selected financial data.

On July 25, 2002, the Company filed a Current Report on Form 8-K, dated
July 25, 2002, reporting under Item 5 thereof that it had accelerated its stock
buyback program in July.

On July 26, 2002, the Company filed a Current Report on Form 8-K, dated
July 18, 2002, filing as exhibits under Item 7 thereof the Terms Agreement,
dated July 18, 2002, and the Form of Note relating to the offer and sale of the
Company's Floating Rate Notes due July 26, 2004.

On August 1, 2002, the Company filed a Current Report on Form 8-K, dated
August 1, 2002, (a) reporting under Item 5 thereof that Citigroup declared a
distribution of shares of Travelers Property Casualty Corp. class A common
stock and class B common stock and set the record date and distribution date,
and (b) filing as an exhibit under Item 7 thereof a copy of the related press
release dated August 1, 2002.

72

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 7th of August, 2002.

CITIGROUP INC.
(Registrant)

By /s/ TODD S. THOMSON
------------------------------------------
Todd S. Thomson
CHIEF FINANCIAL OFFICER
PRINCIPAL FINANCIAL OFFICER

By /s/ WILLIAM P. HANNON
------------------------------------------
William P. Hannon
CONTROLLER
PRINCIPAL ACCOUNTING OFFICER

73

EXHIBIT INDEX

The total amount of securities authorized pursuant to any instrument
defining rights of holders of long-term debt of the Company does not exceed 10%
of the total assets of the Company and its consolidated subsidiaries. The
Company will furnish copies of any such instrument to the Securities and
Exchange Commission upon request.

- ------------------------

+ Filed herewith

74