Filed Pursuant to Rule 424(b)(4)
Registration Nos. 333-102206
and 333-102206-05
PROSPECTUS
40,000,000 SECURITIES
CITIGROUP CAPITAL IX
6.00% CAPITAL SECURITIES (TRUPS(R))
$25 Liquidation Amount
Guaranteed to the extent set forth herein by
Citigroup Inc.
[Citigroup Logo]
------------------------
A brief description of the 6.00% capital securities can be found under
"Summary Information -- Q&A" in this prospectus.
The 6.00% capital securities have been approved for listing on the New York
Stock Exchange under the symbol "CPrS", subject to official notice of issuance.
Citigroup expects the 6.00% capital securities will begin trading on the New
York Stock Exchange within 30 days after they are first issued.
YOU ARE URGED TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 6, WHERE SPECIFIC RISKS ASSOCIATED WITH THESE 6.00% CAPITAL SECURITIES ARE
DESCRIBED, ALONG WITH THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE YOU MAKE
YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission nor any state securities or
insurance commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
THESE SECURITIES ARE NOT DEPOSITS OR SAVINGS ACCOUNTS. THESE SECURITIES ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
------------------------
<Table>
<Caption>
PER CAPITAL
SECURITY TOTAL
----------- --------------
Public offering price....................................... $25 $1,000,000,000
Underwriting commissions to be paid by Citigroup Inc. ...... (1) (1)
Proceeds to Citigroup Capital IX............................ $25 $1,000,000,000
</Table>
- ---------------
(1) Underwriting commissions of $.7875 per capital security, or $31,500,000 for
all 6.00% capital securities, will be paid by Citigroup Inc.
The underwriters may also purchase up to an additional 6,000,000 capital
securities within 30 days from the date of this prospectus to cover
over-allotments.
Citigroup expects that the 6.00% capital securities will be ready for
delivery in book-entry form only through The Depository Trust Company,
Clearstream or the Euroclear system on or about February 13, 2003.
"TRUPS" is a registered service mark of Salomon Smith Barney Inc.
------------------------
SALOMON SMITH BARNEY
A.G. EDWARDS & SONS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY
PRUDENTIAL SECURITIES
UBS WARBURG
WACHOVIA SECURITIES
QUICK & REILLY, INC.
US BANCORP PIPER JAFFRAY INC.
WELLS FARGO INVESTMENT SERVICES,
LLC
February 5, 2003
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Summary Information -- Q&A.................................. 3
Ratio of Income to Fixed Charges and Ratio of Income to
Combined Fixed Charges Including Preferred Stock
Dividends................................................. 5
Risk Factors................................................ 6
Where You Can Find More Information......................... 9
Forward-Looking Statements.................................. 11
Citigroup Inc. ............................................. 11
Use of Proceeds............................................. 11
Accounting Treatment........................................ 12
Capitalization.............................................. 12
Description of the Capital Securities....................... 13
Description of the Junior Subordinated Debt Securities...... 27
Description of Guarantee.................................... 36
Effect of Obligations Under the Junior Subordinated Debt
Securities and the Guarantee.............................. 39
United States Federal Income Taxation....................... 41
ERISA Considerations........................................ 46
Underwriting................................................ 48
Legal Matters............................................... 51
Experts..................................................... 51
</Table>
2
SUMMARY INFORMATION -- Q&A
This summary provides a brief overview of the key aspects of Citigroup and
the 6.00% capital securities. You should carefully read this prospectus to
understand fully the terms of the capital securities as well as the tax and
other considerations that are important to you in making a decision about
whether to invest in the capital securities. You should pay special attention to
the "Risk Factors" section beginning on page 6 of this prospectus to determine
whether an investment in the capital securities is appropriate for you. Unless
otherwise indicated, the information provided in this prospectus assumes that
the underwriters do not exercise their over-allotment option.
WHAT ARE THE CAPITAL SECURITIES?
Each capital security represents an undivided beneficial interest in the
assets of Citigroup Capital IX. Each capital security will entitle the holder to
receive quarterly cash distributions as described in this prospectus. Citigroup
Capital is offering 40,000,000 capital securities at a price of $25 for each
capital security.
WHO IS CITIGROUP CAPITAL?
Citigroup Capital IX (referred to in this prospectus as "Citigroup
Capital") is a Delaware business trust. Its principal place of business is c/o
Citigroup Inc., 399 Park Avenue, New York, NY 10043, and its telephone number is
(212) 559-1000.
All of the common securities of Citigroup Capital will be owned by
Citigroup Inc. Citigroup Capital will use the proceeds from the sale of the
capital securities and the common securities to buy a series of 6.00% junior
subordinated deferrable interest debentures due February 14, 2033 from Citigroup
with the same financial terms as the capital securities.
WHO IS CITIGROUP INC.?
Citigroup is a diversified global financial services holding company whose
businesses provide a broad range of financial services to consumer and corporate
customers with 200 million customer accounts in over 100 countries and
territories. Citigroup's activities are conducted through Global Consumer,
Global Corporate and Investment Bank, Private Client Services, Global Investment
Management, and Proprietary Investment Activities.
The mailing address of Citigroup's principal executive office is 399 Park
Avenue, New York, NY 10043, and its telephone number is (212) 559-1000.
WHEN WILL YOU RECEIVE DISTRIBUTIONS ON THE CAPITAL SECURITIES?
Citigroup Capital's only source of cash to make payments on the capital
securities are payments on the junior subordinated debt securities it purchases
from Citigroup.
If you purchase the capital securities, you are entitled to receive
cumulative cash distributions at an annual rate of 6.00% of the liquidation
amount of $25 per capital security. Distributions will accumulate from the date
Citigroup Capital issues the capital securities and will be paid quarterly in
arrears on February 13, May 13, August 13 and November 13 of each year,
beginning May 13, 2003.
WHEN WILL PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
If Citigroup defers interest payments on the junior subordinated debt
securities, Citigroup Capital generally will defer distributions on the capital
securities. A deferral may be for up to 20 consecutive quarterly periods. A
deferral of distributions cannot extend, however, beyond February 14, 2033.
3
During any deferral period, except as described on page 30, Citigroup will
not be permitted to:
- pay a dividend or make any distributions on its capital stock or redeem,
purchase, acquire or make a liquidation payment on any of its capital
stock, or make any guarantee payments relating to the foregoing; or
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
junior subordinated debt securities.
WHEN CAN CITIGROUP CAPITAL REDEEM THE CAPITAL SECURITIES?
Citigroup Capital must redeem all of the outstanding capital securities on
February 14, 2033.
Some or all of the capital securities may be redeemed before February 14,
2033 on one or more occasions any time on or after February 13, 2008. Also the
capital securities may be redeemed, in whole or in part, at any time if certain
changes in tax, investment company or bank regulatory law or interpretations
occur and certain other conditions are satisfied. Citigroup may need regulatory
approval to redeem the capital securities. See "Description of the Capital
Securities -- Special Event Redemption" on page 16.
WHAT IS CITIGROUP'S GUARANTEE OF THE CAPITAL SECURITIES?
Citigroup's guarantee of the capital securities consists of:
- its obligations to make payments on the junior subordinated debt
securities;
- its obligations under the capital securities guarantee; and
- its obligations under the amended and restated declaration of trust of
Citigroup Capital, which sets forth the terms of Citigroup Capital.
Citigroup has irrevocably guaranteed that if a payment on the junior
subordinated debt securities is made to Citigroup Capital but, for any reason,
Citigroup Capital does not make the corresponding distribution or redemption
payment to the holders of the capital securities, then Citigroup will make the
payments directly to the holders of the capital securities. The guarantee does
not cover payments when Citigroup Capital does not have sufficient funds to make
payments on the capital securities.
Citigroup's obligations under the guarantee are subordinated as described
on page 39.
WHEN COULD THE JUNIOR SUBORDINATED DEBT SECURITIES BE DISTRIBUTED TO YOU?
Citigroup has the right to dissolve Citigroup Capital at any time. If
Citigroup terminates Citigroup Capital, Citigroup Capital will redeem the
capital securities by distributing the junior subordinated debt securities to
holders of the capital securities and the common securities on a ratable basis.
If the junior subordinated debt securities are distributed, Citigroup will use
its best efforts to list the junior subordinated debt securities on the New York
Stock Exchange or any other exchange on which the capital securities are then
listed.
WILL THE CAPITAL SECURITIES BE LISTED ON A STOCK EXCHANGE?
The capital securities have been approved for listing on the NYSE under the
symbol "CPrS", subject to official notice of issuance. Citigroup Capital expects
the capital securities will begin trading on the NYSE within 30 days after they
are first issued.
WILL HOLDERS OF THE CAPITAL SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the capital securities will not have any voting
rights. See "Description of the Capital Securities -- Voting Rights" on page 19.
4
IN WHAT FORM WILL THE CAPITAL SECURITIES BE ISSUED?
The capital securities will be represented by one or more global securities
that will be deposited with and registered in the name of The Depository Trust
Company or its nominee. This means that you will not receive a certificate for
your capital securities and that your broker will maintain your position in the
capital securities. Citigroup Capital expects that the capital securities will
be ready for delivery through DTC, Clearstream or the Euroclear system on or
about February 13, 2003.
RATIO OF INCOME TO FIXED CHARGES AND RATIO OF INCOME TO
COMBINED FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS
The following table shows (1) the consolidated ratio of income to fixed
charges and (2) the consolidated ratio of income to combined fixed charges
including preferred stock dividends of Citigroup for the nine months ended
September 30, 2002 and each of the five most recent fiscal years. Effective
August 20, 2002 Citigroup completed a distribution to its stockholders of a
majority of its ownership interest in Travelers Property Casualty Corp. ("TPC").
These ratios have been conformed to reflect the presentation of TPC as a
discontinued operation in Citigroup's financial statements.
<Table>
<Caption>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
2002 2001 2000 1999 1998 1997
------------- ---- ---- ---- ---- ----
Ratio of income to fixed charges (excluding
interest on deposits)........................ 2.70 2.00 1.82 1.90 1.48 1.59
Ratio of income to fixed charges (including
interest on deposits)........................ 2.01 1.64 1.52 1.56 1.30 1.38
Ratio of income to combined fixed charges
including preferred stock dividends
(excluding interest on deposits)............. 2.68 1.98 1.81 1.88 1.45 1.55
Ratio of income to combined fixed charges
including preferred stock dividends
(including interest on deposits)............. 2.00 1.63 1.52 1.55 1.29 1.36
</Table>
5
RISK FACTORS
Your investment in the capital securities will involve several risks. You
should carefully consider the following discussion of risks, and the other
information in this prospectus, before deciding whether an investment in the
capital securities is suitable for you.
CITIGROUP IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBT SECURITIES UNLESS IT FIRST MAKES OTHER REQUIRED PAYMENTS.
Citigroup's obligations under the junior subordinated debt securities will
rank junior to all of Citigroup's senior indebtedness as described on page 28.
This means that Citigroup cannot make any payments on the junior subordinated
debt securities if it defaults on a payment of senior indebtedness and does not
cure the default within the applicable grace period or if the senior
indebtedness becomes immediately due because of a default and has not yet been
paid in full. In addition, Citigroup's obligations under the junior subordinated
debt securities will be effectively subordinated to all existing and future
liabilities of Citigroup's subsidiaries.
Citigroup's obligations under the guarantee are subordinated to all of its
other liabilities as described on page 39.
This means that Citigroup cannot make any payments on the guarantee if it
defaults on a payment on any of its other liabilities. In addition, in the event
of the bankruptcy, liquidation or dissolution of Citigroup, its assets would be
available to pay obligations under the guarantee only after Citigroup made all
payments on its other liabilities.
Neither the capital securities, the junior subordinated debt securities nor
the guarantee limit the ability of Citigroup and its subsidiaries to incur
additional indebtedness, including indebtedness that ranks senior in priority of
payment to the junior subordinated debt securities and the guarantee. See
"Description of Guarantee -- Status of the Guarantee" and "Description of the
Junior Subordinated Debt Securities -- Subordination" on pages 38 and 28,
respectively.
CITIGROUP IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE IF CITIGROUP CAPITAL
DOES NOT HAVE CASH AVAILABLE.
The ability of Citigroup Capital to make payments on the capital securities
is solely dependent upon Citigroup making the related payments on the junior
subordinated debt securities when due.
If Citigroup defaults on its obligations to make payments on the junior
subordinated debt securities, Citigroup Capital will not have sufficient funds
to make payments on the capital securities. In those circumstances, you will not
be able to rely upon the guarantee for payment of these amounts. If this
happens, your options are discussed on page 13.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND MAY
ADVERSELY AFFECT THE TRADING PRICE OF THE CAPITAL SECURITIES.
If distributions on the capital securities are deferred, you will be
required to recognize interest income for United States federal income tax
purposes in respect of your ratable share of the interest on the junior
subordinated debt securities held by Citigroup Capital before you receive any
cash distributions relating to this interest. In addition, you will not receive
this cash if you sold the capital securities before the end of any deferral
period or before the record date relating to distributions which are paid.
Citigroup has no current intention of deferring interest payments on the
junior subordinated debt securities and believes that such deferral is a remote
possibility. However, if Citigroup exercises its right in the future, the
capital securities may trade at a price that does not fully reflect the value of
accrued but unpaid interest on the junior subordinated debt securities. If you
sell the capital securities during an interest deferral period, you may not
receive the same return on investment as someone else who continues to hold the
capital securities. In addition, the existence of Citigroup's right to defer
payments of interest
6
on the junior subordinated debt securities may mean that the market price for
the capital securities, which represent an undivided beneficial interest in the
junior subordinated debt securities, may be more volatile than other securities
that do not have these rights.
See "United States Federal Income Taxation" on page 41 for more information
regarding the tax consequences of purchasing, holding and selling the capital
securities.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE CAPITAL SECURITIES THROUGH
THEIR MATURITY DATE -- THEY MAY BE REDEEMED AT ANY TIME IF CERTAIN CHANGES IN
TAX, INVESTMENT COMPANY OR BANK REGULATORY LAW OCCUR.
If certain changes, which are more fully described below, in tax,
investment company or bank regulatory law or interpretations occur and are
continuing, and certain other conditions which are more fully described below
are satisfied, the capital securities could be redeemed by Citigroup Capital
within 90 days of the event at a redemption price equal to $25 per security plus
any accrued and unpaid distributions. See "Description of the Capital
Securities -- Distribution of the Junior Subordinated Debt Securities" and
"-- Special Event Redemption" on pages 17 and 16, respectively.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE CAPITAL SECURITIES THROUGH
THEIR MATURITY DATE -- THEY MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
The capital securities may be redeemed, in whole, at any time, or in part,
from time to time, on or after February 13, 2008 at a redemption price equal to
$25 per capital security plus any accrued and unpaid distributions to the
redemption date. You should assume that this redemption option will be exercised
if Citigroup is able to refinance at a lower interest rate or it is otherwise in
the interest of Citigroup to redeem the junior subordinated debt securities. If
the junior subordinated debt securities are redeemed, Citigroup Capital must
redeem the capital securities and the common securities having an aggregate
liquidation amount equal to the aggregate principal amount of junior
subordinated debt securities to be redeemed. See "Description of the Capital
Securities -- Redemption of Trust Securities" and "Description of the Junior
Subordinated Debt Securities -- Optional Redemption" on pages 15 and 29,
respectively.
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE CAPITAL SECURITIES OR
THE JUNIOR SUBORDINATED DEBT SECURITIES; THEREFORE, YOU MAY SUFFER A LOSS.
Citigroup Capital and Citigroup cannot give you any assurance as to the
market prices for the capital securities or the junior subordinated debt
securities that may be distributed in exchange for capital securities.
Accordingly, the capital securities that an investor may purchase, whether
pursuant to the offer made by this prospectus or in the secondary market, or the
junior subordinated debt securities that a holder of capital securities may
receive in exchange for capital securities, may trade at a discount to the price
that the investor paid to purchase the capital securities. As a result of the
right to defer payments on the capital securities, the market price of the
capital securities may be more volatile than the market prices of other
securities to which such optional deferrals do not apply.
THERE COULD BE AN ADVERSE TAX CONSEQUENCE TO YOU IF CITIGROUP TERMINATES
CITIGROUP CAPITAL AND DISTRIBUTES JUNIOR SUBORDINATED DEBT SECURITIES TO
HOLDERS, RESULTING IN POSSIBLE TAX CONSEQUENCES TO YOU.
Citigroup has the right to terminate Citigroup Capital at any time, so long
as it obtains any required regulatory approval. If Citigroup decides to exercise
its right to terminate Citigroup Capital, Citigroup Capital will redeem the
capital securities and common securities by distributing the junior subordinated
debt securities to holders of the capital securities and common securities on a
ratable basis.
Under current United States federal income tax law, a distribution of
junior subordinated debt securities to you on the dissolution of Citigroup
Capital should not be a taxable event to you. However, if Citigroup Capital is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time it is dissolved or if there is a change in
law, the distribution of junior subordinated debt securities may be a taxable
event to you.
7
THERE MAY BE NO TRADING MARKET FOR THE JUNIOR SUBORDINATED DEBT SECURITIES IF
CITIGROUP CAPITAL DISTRIBUTES THEM TO YOU.
Although Citigroup will use its best efforts to list the junior
subordinated debt securities on the NYSE, or any other exchange on which the
capital securities are then listed, if they are distributed, Citigroup cannot
assure you that the junior subordinated debt securities will be approved for
listing or that a trading market will exist for those securities.
SINCE YOU HAVE LIMITED VOTING RIGHTS, YOU CANNOT PREVENT THE CITIGROUP CAPITAL
TRUSTEES FROM TAKING ACTIONS YOU MAY NOT AGREE WITH.
You will have limited voting rights. In particular, except for the limited
exceptions described below, only Citigroup can elect or remove any of Citigroup
Capital trustees. See "Description of the Capital Securities -- Voting Rights"
on page 19.
8
WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, Citigroup and the subsidiary
trusts filed a registration statement (No. 333-102206) relating to the
securities offered by this prospectus with the Securities and Exchange
Commission. This prospectus is a part of that registration statement, which
includes additional information. Citigroup has filed the exhibits discussed in
this prospectus with the registration statement, and you should read the
exhibits carefully for provisions that may be important to you.
Citigroup files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document Citigroup
files at the SEC's public reference room in Washington, D.C. You can also
request copies of these documents, upon payment of a duplicating fee, by writing
to the Public Reference Section of the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. These SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov.
The SEC allows Citigroup to "incorporate by reference" the information it
files with the SEC, which means that it can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus. Information that
Citigroup files with the SEC will automatically update the information in this
prospectus. In all cases, you should rely on the later information over
different information included in this prospectus. Citigroup incorporates by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
(a) Annual Report on Form 10-K for the year ended December 31, 2001, as
amended;
(b) Current Report on Form 8-K filed on November 20, 2002 (including
exhibits thereto which contain updated historical audited financial
statements conformed to reflect a discontinued operation and updated
business segment disclosures);
(c) Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002,
June 30, 2002 and September 30, 2002; and
(d) Current Reports on Form 8-K filed on January 18, 2002, February 22,
2002, March 7, 2002, March 22, 2002, April 16, 2002, May 22, 2002, May
28, 2002, June 6, 2002, June 19, 2002, June 27, 2002, July 11, 2002,
July 18, 2002, July 25, 2002, July 26, 2002, August 1, 2002, August 7,
2002, August 8, 2002, August 14, 2002, August 16, 2002, August 21,
2002, August 26, 2002, September 9, 2002, October 16, 2002, October 22,
2002, October 31, 2002, November 7, 2002, November 14, 2002, December
4, 2002, December 23, 2002, January 22, 2003 and January 31, 2003.
All documents Citigroup files pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and before the later of
(1) the completion of the offering of the securities described in this
prospectus and (2) the date the broker-dealer subsidiaries of Citigroup stop
offering securities pursuant to this prospectus shall be incorporated by
reference in this prospectus from the date of filing of such documents.
You may request a copy of these filings, at no cost, by writing or
telephoning Citigroup at the following address:
Citigroup Document Services
140 58th Street, Suite 5I
Brooklyn, NY 11220
(877) 936-2737 (toll free)
(718) 765-6460 (outside the U.S.)
9
------------------------
You should only rely on the information provided or incorporated by
reference in this prospectus. Citigroup has not, and the underwriters have not,
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it.
Citigroup is not, and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information in this prospectus or any documents
incorporated by reference is accurate as of any date other than the date of the
applicable document. Citigroup's business, financial condition, results of
operations and prospects may have changed since that date.
10
FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in this
prospectus include forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. These forward-looking
statements are based on Citigroup's management's beliefs and assumptions and on
information currently available to Citigroup's management. Forward-looking
statements include information concerning Citigroup's possible or assumed future
results of operations and statements preceded by, followed by or that include
the words "believes," "expects," "anticipates," "intends," "plans," "estimates"
or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to, those discussed elsewhere in this prospectus and the documents incorporated
by reference in this prospectus. You should not put undue reliance on any
forward-looking statements. Citigroup does not have any intention or obligation
to update forward-looking statements after it distributes this prospectus.
CITIGROUP INC.
Citigroup is a diversified global financial services holding company whose
businesses provide a broad range of financial services to consumer and corporate
customers with 200 million customer accounts in over 100 countries and
territories. Citigroup's activities are conducted through Global Consumer,
Global Corporate and Investment Bank, Private Client Services, Global Investment
Management, and Proprietary Investment Activities.
Citigroup is a holding company and services its obligations primarily with
dividends and advances that it receives from subsidiaries. Citigroup's
subsidiaries that operate in the banking, insurance and securities business can
only pay dividends if they are in compliance with the applicable regulatory
requirements imposed on them by federal and state bank regulatory authorities,
state insurance departments, and securities regulators. Citigroup's subsidiaries
may be party to credit agreements that also may restrict their ability to pay
dividends. Citigroup currently believes that none of these regulatory or
contractual restrictions on the ability of its subsidiaries to pay dividends
will affect Citigroup's ability to service its own debt. Citigroup must also
maintain the required capital levels of a bank holding company before it may pay
dividends on its stock. Each of Citigroup's major operating subsidiaries
finances its operations on a stand-alone basis consistent with its
capitalization and ratings.
Under longstanding policy of The Board of Governors of the Federal Reserve
System, a bank holding company is expected to act as a source of financial
strength for its subsidiary banks and to commit resources to support such banks.
As a result of that policy, Citigroup may be required to commit resources to its
subsidiary banks.
Citigroup's principal office is located at 399 Park Avenue, New York, NY
10043, and its telephone number is (212) 559-1000.
USE OF PROCEEDS
All of the net proceeds from the sale of the capital securities will be
invested by Citigroup Capital in junior subordinated debt securities of
Citigroup. Citigroup will use the proceeds from the sale of the junior
subordinated debt securities to Citigroup Capital for general corporate
purposes, which may include:
- funding the business of its operating units;
- funding investments in, or extensions of credit or capital contributions
to, its subsidiaries;
- financing of possible acquisitions or business expansion, and
- lengthening the average maturity of liabilities, which means that it
could reduce its short-term liabilities or refund maturing indebtedness.
In order to fund its businesses, Citigroup expects to incur additional
indebtedness in the future. See "Capitalization."
11
ACCOUNTING TREATMENT
The financial statements of Citigroup Capital will be reflected in
Citigroup's consolidated financial statements with the capital securities
reflected in "Citigroup or subsidiary obligated mandatorily redeemable
securities of subsidiary trusts holding solely junior subordinated debt
securities of -- Parent."
CAPITALIZATION
The following table sets forth the consolidated capitalization of Citigroup
at September 30, 2002, and as adjusted to give effect to the issuance and sale
of the capital securities, and no other change in the consolidated
capitalization of Citigroup since September 30, 2002 is reflected in the table.
The information is only a summary and should be read together with the financial
information incorporated by reference in this prospectus and which can be
obtained free of charge. See "Where You Can Find More Information" on page 9.
The following table assumes no exercise of the underwriters' over-allotment
option.
As of the date of this prospectus, there has been no material change in the
consolidated capitalization of Citigroup since September 30, 2002 except as
described herein and in the footnotes to the table below. On November 7, 2002,
Citigroup consummated the acquisition of Golden State Bancorp in a transaction
valued at approximately $5.8 billion. The consideration paid to Golden State
Bancorp shareholders in the acquisition included approximately 79.5 million
shares of Citigroup common stock and approximately $2.3 billion of cash.
<Table>
<Caption>
AT SEPTEMBER 30, 2002
--------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
(DOLLARS IN MILLIONS)
Debt:
Investment banking and brokerage borrowings............... $ 19,951 $ 19,951
Short-term borrowings..................................... 27,991 27,991
Long-term debt............................................ 109,672 109,672
-------- --------
Total debt(1).......................................... 157,614 157,614
-------- --------
Citigroup or subsidiary obligated mandatorily redeemable
securities of subsidiary trusts holding solely junior
subordinated debt securities of --
Parent.................................................... 4,605 5,605
Subsidiaries.............................................. 1,483 1,483
Stockholders' equity:
Preferred stock at aggregate liquidation value............ 1,400 1,400
Common stock and additional paid-in capital (net of
treasury stock)(2)..................................... 2,487 2,487
Retained earnings......................................... 79,911 79,911
Accumulated other changes in equity from nonowner
sources................................................ (1,095) (1,095)
Unearned compensation..................................... (1,937) (1,937)
-------- --------
Total stockholders' equity............................. 80,766 80,766
-------- --------
Total capitalization........................................ $244,468 $245,468
======== ========
</Table>
- ---------------
(1) Does not reflect the issuance by Citigroup (a) on October 22, 2002 of
$1,500,000,000 of its floating rate senior notes, (b) on October 31, 2002 of
$500,000,000 of its 5.625% subordinated notes, (c) on November 14, 2002 of
E1,750,000,000 of its 4.625% senior notes, (d) on December 9, 2002 of
Y40,000,000,000 of its floating rate senior notes and an aggregate of
Y115,000,000,000 of its fixed rate senior notes, (e) on January 31, 2003 of
$2,000,000,000 of its 3.50% senior notes and (f) of $2,000,000,000 of its
floating rate senior notes, expected to be issued on February 7, 2003.
(2) Common stock, par value U.S. $0.01 per share, 15 billion shares authorized,
5,062,022,718 shares outstanding.
12
DESCRIPTION OF THE CAPITAL SECURITIES
The capital securities will be issued pursuant to the terms of the amended
and restated declaration of trust of Citigroup Capital. The declaration will be
qualified as an indenture under the Trust Indenture Act of 1939. The
institutional trustee, JPMorgan Chase Bank, will act as indenture trustee under
the declaration for purposes of compliance with the provisions of the Trust
Indenture Act. The terms of the capital securities will include those stated in
the declaration and those made part of the declaration by the Trust Indenture
Act. The following summary of the material terms and provisions of the capital
securities is not intended to be complete and is qualified by the declaration,
the Business Trust Act of the State of Delaware and the Trust Indenture Act. A
copy of the declaration is filed as an exhibit to the registration statement of
which this prospectus is a part.
GENERAL
The declaration authorizes the regular trustees to issue on behalf of
Citigroup Capital the common securities and the capital securities. These trust
securities represent undivided beneficial interests in the assets of Citigroup
Capital. All of the common securities will be owned, directly or indirectly, by
Citigroup. The common securities rank equally, and payments will be made on the
common securities on a ratable basis, with the capital securities. If an event
of default under the declaration occurs and continues, however, the rights of
the holders of the common securities to receive payment of periodic
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the capital securities. The
declaration does not permit the issuance by Citigroup Capital of any securities
other than the trust securities or the incurrence of any indebtedness by
Citigroup Capital.
Pursuant to the declaration, the institutional trustee will hold title to
the junior subordinated debt securities purchased by Citigroup Capital for the
benefit of the holders of the trust securities. The payment of distributions out
of money held by Citigroup Capital, and payments upon redemption of the capital
securities or liquidation of Citigroup Capital out of money held by Citigroup
Capital, are guaranteed by Citigroup to the extent described under "Description
of Guarantee." The guarantee will be held by JPMorgan Chase Bank, the guarantee
trustee, for the benefit of the holders of the capital securities. The guarantee
does not cover payment of distributions when Citigroup Capital does not have
sufficient available funds to pay such distributions. In such event, the remedy
of a holder of capital securities is to:
- vote to direct the institutional trustee to enforce the institutional
trustee's rights under the junior subordinated debt securities; or
- if the failure of Citigroup Capital to pay distributions is attributable
to the failure of Citigroup to pay interest or principal on the junior
subordinated debt securities, sue Citigroup for enforcement of payment to
such holder of the principal or interest on the junior subordinated debt
securities having a principal amount equal to the aggregate liquidation
amount of the capital securities of such holder on or after the
respective due date specified in the junior subordinated debt securities.
DISTRIBUTIONS
Distributions on the capital securities will be fixed at a rate per annum
of 6.00% of the stated liquidation amount of $25 per capital security.
Distributions not paid when due, or when they would be due if not for any
extension period or default by Citigroup on the junior subordinated debt
securities, will themselves accumulate additional interest at the annual rate of
6.00% thereof compounded quarterly. When this prospectus refers to any payment
of distributions, distributions include any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the capital securities will be cumulative, will accrue
from and including February 13, 2003, and will be payable quarterly in arrears
on February 13, May 13, August 13 and November 13 of each year, commencing May
13, 2003. When, as and if available for payment, distributions will be made by
the institutional trustee, except as otherwise described below.
13
The distribution rate and the distribution payment dates and other payment
dates for the capital securities will correspond to the interest rate and
interest payment dates and other payment dates on the junior subordinated debt
securities.
Deferral of Distributions. Citigroup has the right under the indenture to
defer interest payments on the junior subordinated debt securities for an
extension period not exceeding 20 consecutive quarterly interest periods during
which no interest shall be due and payable. A deferral of interest payments
cannot extend, however, beyond the maturity of the junior subordinated debt
securities. As a consequence of Citigroup's extension of the interest payment
period, quarterly distributions on the capital securities would be deferred
during any such extended interest payment period. During an extension period,
the amount of distributions due to you would continue to accumulate and such
deferred distributions will themselves accrue interest. In the event that
Citigroup exercises its right to extend an interest payment period, then:
(1) Citigroup shall not declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a
liquidation payment relating to, any of its capital stock or make any
guarantee payment relating thereto other than
- repurchases, redemptions or other acquisitions of shares of capital
stock of Citigroup in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of
employees, officers, directors or consultants;
- as a result of an exchange or conversion of any class or series of
Citigroup's capital stock for any other class or series of
Citigroup's capital stock; or
- the purchase of fractional interests in shares of Citigroup's
capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged; and
(2) Citigroup may not make any payment of interest, principal or premium
on, or repay, repurchase or redeem, any debt securities issued by
Citigroup which rank equally with or junior to the junior subordinated
debt securities.
These restrictions, however, will not apply to any stock dividends paid by
Citigroup where the dividend stock is the same stock as that on which the
dividend is being paid. Prior to the termination of any extension period,
Citigroup may further extend such extension period, so long as such extension
period, together with all such previous extension periods, do not exceed 20
consecutive quarterly interest periods. An extension period cannot extend,
however, beyond the maturity of the junior subordinated debt securities.
Upon the termination of any extension period and the payment of all amounts
then due, Citigroup may commence a new extension period which must comply with
the above requirements. Consequently, there could be up to 60 extension periods
of varying lengths throughout the term of the junior subordinated debt
securities. The regular trustees shall give the holders of the capital
securities notice of any extension period upon their receipt of notice thereof
from Citigroup. If distributions are deferred, the deferred distributions and
accrued interest on such distributions will be paid to holders of record of the
capital securities as they appear on the books and records of Citigroup Capital
on the record date next following the termination of the related extension
period. See "Description of the Junior Subordinated Debt Securities -- Interest"
and "-- Option to Extend Interest Payment Period."
Payment of Distributions. Distributions on the capital securities will be
payable to the extent that Citigroup Capital has funds available for the payment
of such distributions in its property account. Citigroup Capital's funds
available for distribution to the holders of the capital securities will be
limited to payments received from Citigroup on the junior subordinated debt
securities. The payment of distributions out of monies held by Citigroup Capital
is guaranteed by Citigroup to the extent set forth under "Description of
Guarantee." See "Description of the Junior Subordinated Debt Securities."
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Distributions on the capital securities will be payable to the holders
named on the securities register of Citigroup Capital at the close of business
on the relevant record dates. As long as the capital securities remain in
book-entry only form, the record date will be one business day before the
distribution dates. Such distributions will be paid through the institutional
trustee who will hold amounts received in respect of the junior subordinated
debt securities in the property account for the benefit of the holders of the
trust securities. Unless any applicable laws and regulations and the provisions
of the declaration state otherwise, each such payment will be made as described
under "-- Book-Entry Only Issuance" below.
In the event that the capital securities do not continue to remain in
book-entry only form, the relevant record dates will conform to the rules of any
securities exchange on which the capital securities are listed and, if none, the
regular trustees will have the right to select relevant record dates, which will
be more than 14 days but less than 60 days prior to the relevant payment dates.
In the event that any date on which distributions are to be made on the capital
securities is not a business day, then payment of the distributions payable on
such date will be made on the next succeeding day which is a business day, and
without any interest or other payment in respect of any such delay. However, if
such business day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding business day, in each case with the same force
and effect as if made on such record date. A "business day" means any day other
than Saturday, Sunday or any other day on which banking institutions in New York
City are permitted or required by any applicable law to close.
REDEMPTION OF TRUST SECURITIES
The capital securities have no stated maturity date but will be redeemed
upon the maturity of the junior subordinated debt securities. In addition, the
capital securities may be redeemed prior to maturity of the junior subordinated
debt securities on the dates and to the extent the junior subordinated debt
securities are redeemed. See "Description of the Junior Subordinated Debt
Securities -- Optional Redemption." The junior subordinated debt securities will
mature on February 14, 2033, and may be redeemed, in whole or in part, at any
time on or after February 13, 2008. The junior subordinated debt securities can
also be redeemed at any time, in whole or in part, in certain circumstances upon
the occurrence of a Tax Event, an Investment Company Event or a Regulatory
Capital Event.
If required under the Federal Reserve Capital Adequacy Rules, Citigroup
will obtain the prior approval of the Federal Reserve Bank of New York before
exercising its redemption rights described in the preceding paragraph.
Upon the maturity of the junior subordinated debt securities, the proceeds
of their repayment will simultaneously be applied to redeem all outstanding
trust securities at the redemption price. Upon the redemption of the junior
subordinated debt securities, whether in whole or in part, either at the option
of Citigroup or pursuant to a Tax Event, an Investment Company Event or a
Regulatory Capital Event, Citigroup Capital will use the cash it receives upon
the redemption to redeem trust securities having an aggregate liquidation amount
equal to the aggregate principal amount of the junior subordinated debt
securities so redeemed at the redemption price. Before such redemption, holders
of trust securities will be given not less than 30 nor more than 60 days'
notice. In the event that fewer than all of the outstanding capital securities
are to be redeemed, the capital securities will be redeemed on a ratable basis
as described under "-- Book-Entry Only Issuance" below. See "-- Special Event
Redemption" below and "Description of the Junior Subordinated Debt
Securities -- Optional Redemption." If a partial redemption of the capital
securities resulting from a partial redemption of the junior subordinated debt
securities would result in a delisting of the capital securities, Citigroup may
only redeem the junior subordinated debt securities in whole.
15
SPECIAL EVENT REDEMPTION
"Tax Event" means that the regular trustees will have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
which states that, as a result of any:
- amendment to, or change (including any announced prospective change) in,
the laws or associated regulations of the United States or any political
subdivision or taxing authority of the United States; or
- amendment to, or change in, an interpretation or application of such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority, including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or
after the date of this prospectus,
there is more than an insubstantial risk that:
- Citigroup Capital would be subject to United States federal income tax
relating to interest accrued or received on the junior subordinated debt
securities;
- interest payable to Citigroup Capital on the junior subordinated debt
securities would not be deductible, in whole or in part, by Citigroup for
United States federal income tax purposes; or
- Citigroup Capital would be subject to more than a minimal amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means that the regular trustees will have
received an opinion of a nationally recognized independent counsel experienced
in such matters which states that, as a result of the occurrence of a change in
law or regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that Citigroup Capital is or
will be considered an "investment company" which is required to be registered
under the Investment Company Act of 1940 (the "1940 Act").
"Regulatory Capital Event" means that if Citigroup determines, based on an
opinion of counsel experienced in such matters, who may be an employee of
Citigroup or any of its affiliates, that, as a result of
- any amendment to, clarification of or change (including any announced
prospective change) in applicable laws or regulations or official
interpretations thereof or policies with respect thereto or
- any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
there is more than an insubstantial risk that the capital securities will no
longer constitute Tier I Capital of Citigroup or any bank holding company of
which Citigroup is a subsidiary for purposes of the capital adequacy guidelines
or policies of the Board of Governors of the Federal Reserve System or its
successor as Citigroup's primary federal banking regulator.
This prospectus refers to a Tax Event, an Investment Company Event or a
Regulatory Capital Company Event as a "Special Event." Provided that Citigroup
obtains any required regulatory approval, if a Special Event occurs and
continues, Citigroup may, upon not less than 30 nor more than 60 days' notice,
redeem the junior subordinated debt securities, in whole or in part, for cash
within 90 days following the occurrence of such Special Event. Following such
redemption, trust securities with an aggregate liquidation amount equal to the
aggregate principal amount of the junior subordinated debt securities so
redeemed shall be redeemed by Citigroup Capital at the redemption price on a
ratable basis. If, however, at the time there is available to Citigroup or
Citigroup Capital the opportunity to eliminate, within such 90-day period, the
Special Event by taking some ministerial action, such as filing a form or making
an election or pursuing some other similar reasonable measure that will have no
adverse effect on Citigroup Capital, Citigroup or the holders of the trust
securities, then Citigroup or Citigroup Capital will pursue such measure instead
of redemption.
16
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Citigroup will have the right at any time to dissolve Citigroup Capital.
After satisfaction of the liabilities of creditors of Citigroup Capital as
provided by applicable law, Citigroup Capital may cause junior subordinated debt
securities to be distributed to the holders of the capital and common securities
in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of such securities then outstanding. Prior to any such
dissolution, Citigroup will obtain any required regulatory approvals.
If the junior subordinated debt securities are distributed to the holders
of the capital securities, Citigroup will use its best efforts to cause the
junior subordinated debt securities to be listed on the NYSE or on such other
exchange as the capital securities are then listed.
After the date for any distribution of junior subordinated debt securities
upon dissolution of Citigroup Capital:
- the capital securities will no longer be deemed to be outstanding;
- the securities depositary or its nominee, as the record holder of the
capital securities, will receive a registered global certificate or
certificates representing the junior subordinated debt securities to be
delivered upon such distribution; and
- any certificates representing capital securities not held by the
depositary or its nominee will be deemed to represent junior subordinated
debt securities having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical
to the distribution rate of, and with accrued and unpaid interest equal
to accrued and unpaid distributions on, such capital securities until
such certificates are presented to Citigroup or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for either the capital
securities or the junior subordinated debt securities that may be distributed in
exchange for the capital securities if a dissolution and liquidation of
Citigroup Capital were to occur. This means that the capital securities that an
investor may purchase, whether pursuant to the offer made by this prospectus or
in the secondary market, or the junior subordinated debt securities that an
investor may receive if a dissolution and liquidation of Citigroup Capital were
to occur, may trade at a discount to the price that the investor paid to
purchase the capital securities.
REDEMPTION PROCEDURES
Citigroup Capital may not redeem fewer than all of the outstanding capital
securities unless all accrued and unpaid distributions have been paid on all
capital securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If (1) Citigroup Capital gives an irrevocable notice of redemption of the
capital securities, and (2) if Citigroup has paid to the institutional trustee a
sufficient amount of cash in connection with the related redemption or maturity
of the junior subordinated debt securities, then, by 12:00 noon, New York City
time, on the redemption date, the institutional trustee will irrevocably deposit
with the depositary funds sufficient to pay the applicable redemption price.
Citigroup Capital will also give the depositary irrevocable instructions and
authority to pay the redemption price to the holders of the capital securities.
Once notice of redemption is given and redemption funds are deposited,
distributions will cease to accrue and all rights of holders of capital
securities called for redemption will cease, except the right of the holders to
receive the redemption price but without interest on such redemption price. If
any redemption date is not a business day, then payment of the redemption price
payable on such date will be made on the next succeeding day that is a business
day, without any interest or other payment in respect of any such delay.
However, if such business day falls in the next calendar year, such payment will
be made on the immediately preceding business day.
If payment of the redemption price for any capital securities is improperly
withheld or refused and not paid either by Citigroup Capital, or by Citigroup
pursuant to the guarantee, distributions on such capital
17
securities will continue to accrue at the then applicable rate from the original
redemption date to the date of payment. In this case, the actual payment date
will be the redemption date for purposes of calculating the redemption price.
See "-- Book-Entry Only Issuance" below.
In the event that fewer than all of the outstanding capital securities are
to be redeemed, the capital securities will be redeemed in accordance with the
depositary's standard procedures. See "-- Book-Entry Only Issuance" below.
Citigroup or its subsidiaries may, at any time, and from time to time,
purchase outstanding capital securities by tender, in the open market or by
private agreement, provided that they comply with United States federal
securities laws and any other applicable laws.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
This prospectus refers to any voluntary or involuntary liquidation,
dissolution, winding-up or termination of Citigroup Capital as a "liquidation."
If a liquidation occurs, the holders of the capital securities will be entitled
to receive out of the assets of Citigroup Capital, after satisfaction of
liabilities to creditors, distributions in an amount equal to the aggregate of
the stated liquidation amount of $25 per capital security plus accrued and
unpaid distributions thereon to the date of payment. However, such holders will
not receive such distribution if Citigroup instead distributes on a ratable
basis to the holders of the capital securities junior subordinated debt
securities in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution rate
of, and with accrued and unpaid interest equal to accrued and unpaid
distributions on, the capital securities outstanding at such time. See
"-- Distribution of the Junior Subordinated Debt Securities" above.
If this distribution can be paid only in part because Citigroup Capital has
insufficient assets available to pay in full the aggregate distribution, then
the amounts payable directly by Citigroup Capital on the capital securities
shall be paid on a ratable basis. The holders of the common securities will be
entitled to receive distributions upon any such liquidation on a ratable basis
with the holders of the capital securities. However, if a declaration event of
default has occurred and is continuing, the capital securities will have a
preference over the common securities with regard to such distributions.
Pursuant to the declaration, Citigroup Capital will terminate:
(1) on February 13, 2058, the expiration of the term of Citigroup Capital;
(2) upon the bankruptcy of Citigroup or the holder of the common
securities;
(3) upon (a) the filing of a certificate of dissolution or its equivalent
regarding the holder of the common securities or Citigroup, the filing
of a certificate of cancellation regarding Citigroup Capital, or the
revocation of the charter of the holder of the common securities or
Citigroup and (b) the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(4) upon the distribution of junior subordinated debt securities to holders
of capital securities;
(5) upon the entry of a decree of a judicial dissolution of the holder of
the common securities, Citigroup or Citigroup Capital; or
(6) upon the redemption of all the trust securities.
DECLARATION EVENTS OF DEFAULT
An "indenture event of default" is an event of default under the indenture
and also constitutes a "declaration event of default," which is an event of
default under the declaration relating to the trust securities. Pursuant to the
declaration, however, the holder of the common securities will be deemed to have
waived any declaration event of default relating to the common securities until
all declaration events of default relating to the capital securities have been
cured, waived or otherwise eliminated. Until such declaration events of default
relating to the capital securities have been so cured, waived, or otherwise
eliminated, the institutional trustee will be deemed to be acting solely on
behalf of the holders of the
18
capital securities. Only the holders of the capital securities will have the
right to direct the institutional trustee as to matters under the declaration,
and therefore the indenture. In the event that any declaration event of default
relating to the capital securities is waived by the holders of the capital
securities as provided in the declaration, the holders of common securities
pursuant to the declaration have agreed that such waiver also constitutes a
waiver of such declaration event of default relating to the common securities
for all purposes under the declaration without any further act, vote or consent
of the holders of common securities. See "-- Voting Rights" below.
If the institutional trustee fails to enforce its rights under the junior
subordinated debt securities, any holder of capital securities may directly
institute a legal proceeding against Citigroup to enforce these rights without
first suing the institutional trustee or any other person or entity. If a
declaration event of default has occurred and is continuing and such event is
attributable to the failure of Citigroup to pay interest or principal on the
junior subordinated debt securities on the date such interest or principal is
otherwise payable, or in the case of redemption, the redemption date, then a
holder of capital securities may also bring a direct action. This means that a
holder may directly sue for enforcement of payment to such holder of the
principal of or interest on the junior subordinated debt securities having a
principal amount equal to the aggregate liquidation amount of the capital
securities of such holder on or after the respective due date specified in the
junior subordinated debt securities. Such holder need not first (1) direct the
institutional trustee to enforce the terms of the junior subordinated debt
securities or (2) sue Citigroup to enforce the institutional trustee's rights
under the junior subordinated debt securities.
In connection with such direct action, Citigroup will be subrogated to the
rights of such holder of capital securities under the declaration to the extent
of any payment made by Citigroup to such holder of capital securities in such
direct action. This means that Citigroup will be entitled to payment of amounts
that a holder of capital securities receives in respect of an unpaid
distribution that resulted in the bringing of a direct action to the extent that
such holder receives or has already received full payment relating to such
unpaid distribution from Citigroup Capital. The holders of capital securities
will not be able to exercise directly any other remedy available to the holders
of the junior subordinated debt securities.
Upon the occurrence of an indenture event of default, the institutional
trustee as the sole holder of the junior subordinated debt securities will have
the right under the indenture to declare the principal of and interest on the
junior subordinated debt securities to be immediately due and payable. Citigroup
and Citigroup Capital are each required to file annually with the institutional
trustee an officers' certificate as to its compliance with all conditions and
covenants under the declaration.
VOTING RIGHTS
Except as described in this prospectus under "Description of
Guarantee -- Modification of Guarantee; Assignment," and except as provided
under the Business Trust Act, the Trust Indenture Act and as otherwise required
by law and the declaration, the holders of the capital securities will have no
voting rights.
The holders of a majority in aggregate liquidation amount of the capital
securities have the right to direct any proceeding for any remedy available to
the institutional trustee so long as the institutional trustee receives the tax
opinion discussed below. The holders also have the right to direct the
institutional trustee under the declaration to:
(1) direct any proceeding for any remedy available to the indenture
trustee, or exercising any trust or power conferred on the indenture
trustee;
(2) waive any past indenture event of default that is waivable under
Section 5.13 of the indenture;
(3) exercise any right to rescind or annul an acceleration of the maturity
of the junior subordinated debt securities; or
(4) consent to any amendment, modification or termination of the indenture
where such consent is required.
19
Where a consent or action under the indenture would require the consent or
act of holders of more than a majority in principal amount of the junior
subordinated debt securities, or a "super majority," then only a super majority
may direct the institutional trustee to give such consent or take such action.
If the institutional trustee fails to enforce its rights under the junior
subordinated debt securities, any record holder of capital securities may
directly sue Citigroup to enforce the institutional trustee's rights under the
junior subordinated debt securities. The record holder does not have to sue the
institutional trustee or any other person or entity before enforcing his rights.
The institutional trustee is required to notify all holders of the capital
securities of any notice of default received from the indenture trustee. The
notice is required to state that the event of default also constitutes a
declaration event of default. Except for directing the time, method and place of
conducting a proceeding for a remedy available to the institutional trustee, the
institutional trustee will not take any of the actions described in clauses (1),
(2), (3) or (4) above unless the institutional trustee receives an opinion of a
nationally recognized independent tax counsel. The opinion must be to the effect
that, as a result of such action, Citigroup Capital will not fail to be
classified as a grantor trust for United States federal income tax purposes.
If the consent of the institutional trustee is required under the indenture
for any amendment, modification or termination of the indenture, the
institutional trustee is required to request the written direction of the
holders of the trust securities. Then, the institutional trustee will vote as
directed by a majority in liquidation amount of the trust securities voting
together as a single class. Where any amendment, modification or termination
under the indenture would require the consent of a super majority, however, the
institutional trustee may only give such consent at the direction of the holders
of the same super majority of the holders of the trust securities. The
institutional trustee is not required to take any such action in accordance with
the directions of the holders of the trust securities unless the institutional
trustee has obtained a tax opinion to the effect described above.
A waiver of an indenture event of default by the institutional trustee at
the direction of the holders of the capital securities will constitute a waiver
of the corresponding declaration event of default.
Any required approval or direction of holders of capital securities may be
given at a separate meeting of holders of capital securities convened for such
purpose, at a meeting of all of the holders of trust securities or by written
consent. The regular trustees will mail to each holder of record of capital
securities a notice of any meeting at which such holders are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken. Each such notice will include a statement setting forth the following
information:
- the date of such meeting or the date by which such action is to be taken;
- a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which
written consent is sought; and
- instructions for the delivery of proxies or consents.
No vote or consent of the holders of capital securities will be required
for Citigroup Capital to redeem and cancel capital securities or distribute
junior subordinated debt securities in accordance with the declaration.
Despite the fact that holders of capital securities are entitled to vote or
consent under the circumstances described above, any capital securities that are
owned at the time by Citigroup or any entity directly or indirectly controlling
or controlled by, or under direct or indirect common control with, Citigroup,
will not be entitled to vote or consent. Instead, these capital securities will
be treated as if they were not outstanding.
The procedures by which holders of capital securities may exercise their
voting rights are described below. See "-- Book-Entry Only Issuance" below.
20
Holders of the capital securities generally will have no rights to appoint
or remove the regular trustees. Instead, these trustees may be appointed,
removed or replaced solely by Citigroup as the indirect or direct holder of all
of the common securities.
MODIFICATION OF THE DECLARATION
The declaration may be modified and amended if approved by the regular
trustees, and in certain circumstances, the institutional trustee and the
Delaware trustee. If, however, any proposed amendment provides for, or the
regular trustees otherwise propose to effect,
(1) any action that would adversely affect the powers, preferences or
special rights of the trust securities, whether by way of amendment to
the declaration or otherwise or
(2) the dissolution, winding-up or termination of Citigroup Capital other
than pursuant to the terms of the declaration,
then the holders of the trust securities voting together as a single class will
be entitled to vote on such amendment or proposal. Such amendment or proposal
shall not be effective except with the approval of holders of at least a
majority in liquidation amount of the trust securities affected thereby. If,
however, any amendment or proposal referred to in clause (1) above would
adversely affect only the capital securities or only the common securities, then
only holders of the affected class will be entitled to vote on such amendment or
proposal. Such amendment or proposal shall not be effective except with the
approval of holders of a majority in liquidation amount of such class of trust
securities.
Despite the foregoing, no amendment or modification may be made to the
declaration if such amendment or modification would
(1) cause Citigroup Capital to be classified for United States federal
income tax purposes as other than a grantor trust,
(2) reduce or otherwise adversely affect the powers of the institutional
trustee or
(3) cause Citigroup Capital to be deemed an "investment company" which is
required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Citigroup Capital may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body except as
described below. Citigroup Capital may, with the consent of the regular trustees
and without the consent of the holders of the trust securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State, provided that:
(1) such successor entity either
(a) expressly assumes all of the obligations of Citigroup Capital under
the trust securities or
(b) substitutes for the capital securities other successor securities
having substantially the same terms as the capital securities, so
long as the successor securities rank the same as the capital
securities rank regarding distributions and payments upon
liquidation, redemption and otherwise;
(2) Citigroup expressly acknowledges a trustee of such successor entity
possessing the same powers and duties as the institutional trustee, in
its capacity as the holder of the junior subordinated debt securities;
(3) the capital securities or any successor securities are listed, or any
successor securities will be listed upon notification of issuance, on
any national securities exchange or with another organization on which
the capital securities are then listed or quoted;
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(4) such merger, consolidation, amalgamation or replacement does not cause
the capital securities, including any successor securities, to be
downgraded by any nationally recognized statistical rating
organization;
(5) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the trust securities, including any successor securities, in any
material respect, other than in connection with any dilution of the
holders' interest in the new entity;
(6) such successor entity has a purpose identical to that of Citigroup
Capital;
(7) prior to such merger, consolidation, amalgamation or replacement,
Citigroup Capital has received an opinion of a nationally recognized
independent counsel to Citigroup Capital experienced in such matters to
the effect that
(a) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the
holders of the trust securities, including any successor securities,
in any material respect, other than in connection with any dilution
of the holders' interest in the new entity;
(b) following such merger, consolidation, amalgamation or replacement,
neither Citigroup Capital nor such successor entity will be required
to register as an "investment company" under the 1940 Act; and
(c) following such merger, consolidation, amalgamation or replacement,
Citigroup Capital or such successor entity will continue to be
classified as a grantor trust for United States federal income tax
purposes; and
(8) Citigroup guarantees the obligations of such successor entity under the
successor securities at least to the extent provided by the guarantee.
Despite the foregoing, Citigroup Capital will not, except with the consent
of holders of 100% in liquidation amount of the trust securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
in the opinion of a nationally recognized independent tax counsel experienced in
such matters, such consolidation, amalgamation, merger or replacement would
cause Citigroup Capital or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE
Book-Entry Capital Securities
The capital securities will be book-entry securities. Upon issuance, all
book-entry securities will be represented by one or more fully registered global
capital securities, without distribution coupons. Each global capital security
will be deposited with, or on behalf of, The Depository Trust Company, a
securities depositary, and will be registered in the name of DTC or a nominee of
DTC. DTC will thus be the only registered holder of these capital securities and
will be considered the sole owner of the capital securities for purposes of the
declaration.
Purchasers of capital securities may hold interests in the global capital
securities only through DTC, if they are a participant in the DTC system.
Purchasers may also hold interests through a securities intermediary -- banks,
brokerage houses and other institutions that maintain securities accounts for
customers -- that has an account with DTC or its nominee("participants").
Purchasers of capital securities can hold interests in the global capital
securities only through Clearstream International, or through Euroclear Bank
S.A./N.V., as operator of the Euroclear System, if they are participants in
these systems or indirectly through organizations that are participants in these
systems. Because DTC will be the only registered owner of the global capital
securities, Clearstream and Euroclear will hold positions through their
respective U.S. depositaries, which in turn will hold positions on
22
the books of DTC. Citibank, N.A. will act as U.S. depositary for Clearstream,
and JPMorgan Chase Bank will act as U.S. depositary for Euroclear.
DTC will maintain accounts showing the capital security holdings of its
participants, and these participants will in turn maintain accounts showing the
capital security holdings of their customers. Some of these customers may
themselves be securities intermediaries holding capital securities for their
customers. Thus, each beneficial owner of a book-entry capital security will
hold that capital security indirectly through a hierarchy of intermediaries,
with DTC at the "top" and the beneficial owner's own securities intermediary at
the "bottom."
The capital securities of each beneficial owner of a book-entry security
will be evidenced solely by entries on the books of the beneficial owner's
securities intermediary. The actual purchaser of the capital securities will
generally not be entitled to have the capital securities represented by the
global securities registered in its name and will not be considered the owner
under the declaration. In most cases, a beneficial owner will also not be able
to obtain a paper certificate evidencing the holder's ownership of capital
securities. The book-entry system for holding capital securities eliminates the
need for physical movement of certificates and is the system through which most
publicly traded common stock is held in the United States. However, the laws of
some jurisdictions require some purchasers of securities to take physical
delivery of their securities in definitive form. These laws may impair the
ability to transfer or pledge book-entry securities.
In this prospectus, for book-entry capital securities, references to
actions taken by capital security holders will mean actions taken by DTC upon
instructions from its participants, and references to payments and notices of
redemption to capital security holders will mean payments and notices of
redemption to DTC as the registered holder of the capital securities for
distribution to participants in accordance with DTC's procedures.
A beneficial owner of book-entry securities represented by a global capital
security may exchange the securities for definitive (paper) capital securities
only if:
(a) DTC is unwilling or unable to continue as depositary for such global
capital security and Citigroup is unable to find a qualified
replacement for DTC within 90 days;
(b) at any time DTC ceases to be a clearing agency registered under the
Exchange Act; or
(c) Citigroup in its sole discretion decides to allow some or all
book-entry securities to be exchangeable for definitive capital
securities in registered form.
Unless we indicate otherwise in the applicable prospectus supplement, any
global capital security that is exchangeable will be exchangeable in whole for
definitive notes in registered form, with the same terms and of an equal
aggregate principal amount, in denominations of $25 and whole multiples of $25.
Definitive capital securities will be registered in the name or names of the
person or persons specified by DTC in a written instruction to the registrar of
the securities. DTC may base its written instruction upon directions it receives
from its participants.
The Depository Trust Company
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
banking law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under Section 17A of the Exchange Act. The rules applicable
to DTC and its participants are on file with the SEC.
Clearstream
Clearstream International was incorporated as a limited liability company
under Luxembourg law.
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Clearstream holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Clearstream
customers through electronic book-entry changes in accounts of Clearstream
customers, thus eliminating the need for physical movement of certificates.
Clearstream provides to its customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream interfaces with
domestic markets in a number of countries. Clearstream has established an
electronic bridge with Euroclear Bank S.A./N.V., the operator of the Euroclear
System, to facilitate settlement of trades between Clearstream and Euroclear.
As a registered bank in Luxembourg, Clearstream is subject to regulation by
the Luxembourg Commission for the Supervision of the Financial Sector.
Clearstream customers are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. In the United States, Clearstream customers are
limited to securities brokers and dealers and banks. Clearstream customers may
include the underwriters. Other institutions that maintain a custodial
relationship with a Clearstream customer may obtain indirect access to
Clearstream. Clearstream is an indirect participant in DTC.
Distributions with respect to the capital securities held beneficially
through Clearstream will be credited to cash accounts of Clearstream customers
in accordance with its rules and procedures, to the extent received by
Clearstream.
The Euroclear System
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thus eliminating the need for physical movement of
certificates and risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in many currencies, including U.S. dollars
and Euros. The Euroclear System provides various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described below.
The Euroclear System is operated by Euroclear Bank S.A./N.V. (the
"Euroclear Operator"), under contract with Euroclear Clearance System, S.C., a
Belgian cooperative corporation (the "Cooperative"). The Euroclear Operator
conducts all operations, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may include the underwriters. Indirect access to
the Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly. Euroclear is an indirect participant in DTC.
The Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System and applicable Belgian law govern
securities clearance accounts and cash accounts with the Euroclear Operator.
Specifically, these terms and conditions govern:
- transfers of securities and cash within the Euroclear System;
- withdrawal of securities and cash from the Euroclear System and
- receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
securities through Euroclear participants.
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Distributions with respect to capital securities held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Euroclear Terms and Conditions, to the extent received by
the Euroclear Operator and by Euroclear.
The foregoing information about DTC, Clearstream and Euroclear has been
provided by each of them for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
Global Clearance and Settlement Procedures
Initial settlement for the capital securities will be made in immediately
available funds. Secondary market trading between DTC participants will occur in
the ordinary way, in accordance with DTC's rules, and will be settled in
immediately available funds using DTC's same-day funds settlement system.
Secondary market trading between Clearstream participants and/or Euroclear
participants will occur in the ordinary way, in accordance with the applicable
rules and operating procedures of Clearstream and Euroclear, and will be settled
using the procedures applicable to conventional eurobonds in immediate available
funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream or
Euroclear participants, on the other, will be effected through DTC, in
accordance with DTC's rules, on behalf of the relevant European international
clearing system by the U.S. depositaries. However, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in this system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S.
depositary to take action to effect final settlement on its behalf by delivering
or receiving capital securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to DTC.
Because of time-zone differences, credits of capital securities received in
Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited the business day following the DTC settlement date. These credits or
any transactions in such capital securities settled during such processing will
be reported to the relevant Euroclear or Clearstream participants on that
business day. Cash received in Clearstream or Euroclear as a result of sales of
capital securities by or through a Clearstream participant or a Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Clearstream or Euroclear
cash account only as of the business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of capital securities among
participants of DTC, Clearstream and Euroclear, they are under no obligation to
perform or continue to perform these procedures, and these procedures may be
discontinued at any time.
Distributions on Book-Entry Capital Securities
Citigroup will make all distributions on book-entry capital securities to
DTC. Upon receipt of any payment, DTC will immediately credit the accounts of
its participants on its book-entry registration and transfer system. DTC will
credit those accounts in proportion to the participants' respective beneficial
interests in the global capital securities as shown on the records of DTC.
Payments by participants to beneficial owners of book-entry capital securities
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of those
participants.
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Distributions on book-entry capital securities held beneficially through
Clearstream will be credited to Clearstream participants, in accordance with
Clearstream's rules and procedures, to the extent received by its U.S.
depositary.
Distributions on book-entry capital securities held beneficially through
Euroclear will be credited to Euroclear participants, in accordance with the
Euroclear Terms and Conditions, to the extent received by its U.S. depositary.
The information in this section concerning DTC, Clearstream and Euroclear
has been obtained from sources that Citigroup and Citigroup Capital believe to
be reliable, but neither Citigroup nor Citigroup Capital takes responsibility
for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
Prior to the occurrence of a default relating to the trust securities, the
institutional trustee undertakes to perform only such duties as are specifically
set forth in the declaration. After a default, the institutional trustee will
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. The institutional trustee is under no
obligation to exercise any of the powers vested in it by the declaration at the
request of any holder of capital securities unless offered reasonable indemnity
by such holder against the costs, expenses and liabilities which might be
incurred thereby. Despite the foregoing, the holders of capital securities will
not be required to offer such indemnity in the event such holders, by exercising
their voting rights, direct the institutional trustee to take any action
following a declaration event of default.
PAYING AGENT
In the event that the capital securities do not remain in book-entry only
form, the following provisions will apply:
- the institutional trustee will act as paying agent and may designate an
additional or substitute paying agent at any time;
- registration of transfers of capital securities will be effected without
charge by or on behalf of Citigroup Capital, but upon payment, with the
giving of such indemnity as Citigroup Capital or Citigroup may require,
in respect of any tax or other government charges that may be imposed in
relation to it; and
- Citigroup Capital will not be required to register or cause to be
registered the transfer of capital securities after such capital
securities have been called for redemption.
GOVERNING LAW
The declaration and the capital securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The regular trustees are authorized and directed to operate Citigroup
Capital in such a way so that Citigroup Capital will not be required to register
as an "investment company" under the 1940 Act or be characterized as other than
a grantor trust for United States federal income tax purposes. Citigroup is
authorized and directed to conduct its affairs so that the junior subordinated
debt securities will be treated as indebtedness of Citigroup for United States
federal income tax purposes. In this connection, Citigroup and the regular
trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of Citigroup Capital or the certificate of
incorporation of Citigroup, that each of Citigroup and the regular trustees
determine in their discretion to be necessary or desirable to achieve such ends,
as long as such action does not adversely affect the interests of the holders of
the capital securities or vary the terms of the capital securities in any
material way.
Holders of the capital securities have no preemptive rights.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the junior
subordinated debt securities in which Citigroup Capital will invest the proceeds
from the issuance and sale of the trust securities. The following description is
not intended to be complete and is qualified by the indenture, dated as of
October 7, 1996, as supplemented, between Citigroup and JPMorgan Chase Bank, as
the indenture trustee, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part, and by the Trust
Indenture Act. Several capitalized terms used herein are defined in the
indenture. Wherever particular sections or defined terms of the indenture are
referred to, such sections or defined terms are incorporated herein by reference
as part of the statement made, and the statement is qualified in its entirety by
such reference.
Under circumstances discussed more fully below involving the dissolution of
Citigroup Capital, provided that any required regulatory approval is obtained,
junior subordinated debt securities will be distributed to the holders of the
trust securities in liquidation of Citigroup Capital. See "Description of the
Capital Securities -- Distribution of the Junior Subordinated Debt Securities."
If the junior subordinated debt securities are distributed to the holders
of the capital securities, Citigroup will use its best efforts to have the
junior subordinated debt securities listed on the NYSE or on such other exchange
on which the capital securities are then listed.
GENERAL
The junior subordinated debt securities will be issued as unsecured debt
under the indenture and will be limited in aggregate principal amount to
approximately $1,030,927,850 ($1,185,567,025 if the over-allotment option is
exercised in full). This amount is the sum of the aggregate stated liquidation
amount of the capital securities and the capital contributed by Citigroup to
Citigroup Capital in exchange for the common securities. (Section 3.1)
The entire principal amount of the junior subordinated debt securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon including compound interest (as defined herein) and any additional
interest (as defined herein), on February 14, 2033.
If junior subordinated debt securities are distributed to holders of
capital securities in liquidation of such holders' interests in Citigroup
Capital, such junior subordinated debt securities will initially be issued in
the form of one or more global securities (as described below). As described in
this prospectus, under limited circumstances, junior subordinated debt
securities may be issued in certificated form in exchange for a global security.
In the event that junior subordinated debt securities are issued in certificated
form, such junior subordinated debt securities will be in denominations of $25
and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on junior subordinated debt securities issued
as a global security will be made to DTC, to a successor depositary or, in the
event that no depositary is used, to a paying agent for the junior subordinated
debt securities. In the event junior subordinated debt securities are issued in
certificated form, principal and interest will be payable, the transfer of the
junior subordinated debt securities will be registrable and junior subordinated
debt securities will be exchangeable for junior subordinated debt securities of
other denominations of a like aggregate principal amount at the corporate trust
office of the indenture trustee in New York, New York. Payment of interest may
be made at the option of Citigroup by check mailed to the address of the persons
entitled thereto. See "-- Book-Entry and Settlement" below.
Citigroup does not intend to issue the junior subordinated debt securities
to anyone other than Citigroup Capital.
There are no covenants or provisions in the indenture that would afford the
holders of the junior subordinated debt securities protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving Citigroup that may adversely affect such holders.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The indenture provides that Citigroup will not consolidate or merge with
another corporation or convey, transfer or lease its assets substantially as an
entirety unless:
- the successor is a corporation organized in the United States and
expressly assumes the due and punctual payment of the principal of, and
premium, if any, and interest on all junior subordinated debt securities
issued thereunder and the performance of every other covenant of the
indenture on the part of Citigroup; and
- immediately thereafter no event of default and no event which, after
notice or lapse of time, or both, would become an event of default, shall
have happened and be continuing.
Upon any such consolidation, merger, conveyance or transfer, the successor
corporation shall succeed to and be substituted for Citigroup under the
indenture. Thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the indenture and the junior subordinated debt
securities. (Sections 8.1 and 8.2)
SUBORDINATION
The indenture provides that the junior subordinated debt securities are
subordinated and junior in right of payment to all Senior Indebtedness (as
defined below) of Citigroup. This means that no payment of principal, including
redemption payments, premium, if any, or interest on the junior subordinated
debt securities may be made if:
- any Senior Indebtedness of Citigroup has not been paid when due and any
applicable grace period relating to such default has ended and such
default has not been cured or been waived or ceased to exist; or
- the maturity of any Senior Indebtedness of Citigroup has been accelerated
because of a default.
Upon any payment by Citigroup or distribution of assets of Citigroup to
creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal, premium, if any, and interest due or to become
due on all Senior Indebtedness of Citigroup must be paid in full before the
holders of junior subordinated debt securities are entitled to receive or retain
any payment. Upon satisfaction of all claims related to all Senior Indebtedness
of Citigroup then outstanding, the rights of the holders of the junior
subordinated debt securities will be subrogated to the rights of the holders of
Senior Indebtedness of Citigroup to receive payments or distributions applicable
to Senior Indebtedness until all amounts owing on the junior subordinated debt
securities are paid in full.
The term "Senior Indebtedness" means, with respect to Citigroup:
(1) the principal, premium, if any, and interest in respect of (a)
indebtedness for money borrowed and (b) indebtedness evidenced by securities,
notes, debentures, bonds or other similar instruments issued by Citigroup;
(2) all capital lease obligations of Citigroup;
(3) all obligations of Citigroup issued or assumed as the deferred purchase
price of property, all conditional sale obligations of Citigroup and all
obligations of Citigroup under any conditional sale or title retention
agreement, but excluding trade accounts payable arising in the ordinary course
of business;
(4) all obligations, contingent or otherwise, of Citigroup in respect of
any letters of credit, bankers acceptance, security purchase facilities or
similar credit transactions;
(5) all obligations of Citigroup in respect of interest rate swap, cap or
other agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar agreements;
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(6) all obligations of the type referred to in clauses (1) through (5)
above of other persons for the payment of which Citigroup is responsible or
liable as obligor, guarantor or otherwise; and
(7) all obligations of the type referred to in clauses (1) through (6)
above of other persons secured by any lien on any property or asset of
Citigroup, whether or not such obligation is assumed by Citigroup
except that Senior Indebtedness will not include
(A) any such indebtedness that is by its terms subordinated to, or ranks
equally with, the junior subordinated debt securities and
(B) any indebtedness between or among Citigroup or its affiliates,
including all other debt securities and guarantees in respect of
those debt securities, issued to (a) any other Citigroup trust or a
trustee of such trust and (b) any other trust, or a trustee of such
trust, partnership or other entity affiliated with Citigroup that is
a financing vehicle of Citigroup in connection with the issuance by
such financing vehicle of capital securities or other securities
guaranteed by Citigroup pursuant to an instrument that ranks equally
with, or junior to, the guarantee.
Such Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of these subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by Citigroup.
OPTIONAL REDEMPTION
Citigroup shall have the right to redeem the junior subordinated debt
securities, in whole or in part, from time to time, on or after February 13,
2008, or at any time upon the occurrence of a Tax Event, an Investment Company
Event or a Regulatory Capital Event, as described above, upon not less than 30
nor more than 60 days' notice. The redemption price will be equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest, including
any additional interest (as described below), to the redemption date. If a
partial redemption of the capital securities resulting from a partial redemption
of the junior subordinated debt securities would result in the delisting of the
capital securities, Citigroup may only redeem the junior subordinated debt
securities in whole. (Section 11.2) Citigroup may need regulatory approval to
redeem the junior subordinated debt securities. See "Description of the Capital
Securities -- Special Event Redemption."
INTEREST
The junior subordinated debt securities will bear interest at the annual
rate of 6.00%, from and including the original date of issuance, payable
quarterly in arrears on February 13, May 13, August 13 and November 13 of each
year, commencing May 13, 2003. Each date on which interest is payable is called
an "interest payment date." Interest will be paid to the person in whose name
such junior subordinated debt security is registered, with limited exceptions,
at the close of business on the business day preceding such interest payment
date. In the event the junior subordinated debt securities shall not continue to
remain in book-entry only form, Citigroup shall have the right to select record
dates, which shall be more than 14 days but less than 60 days prior to the
interest payment date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed per 30-day month. In the event that any date
on which interest is payable on the junior subordinated debt securities is not a
business day, then payment of the interest payable on such date will be made on
the next succeeding day that is a business day, and without any interest or
other payment in respect of any such delay. However, if such
29
business day is in the next succeeding calendar year, then such payment shall be
made on the immediately preceding business day, in each case with the same force
and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Citigroup can defer interest payments by extending the interest payment
period for a period not exceeding 20 consecutive quarterly periods. However, no
extension period may extend beyond the maturity of the junior subordinated debt
securities. At the end of such extension period, Citigroup will pay all interest
then accrued and unpaid, including any additional interest as described under
"-- Additional Interest" below, together with interest thereon compounded
quarterly at the rate specified for the junior subordinated debt securities to
the extent permitted by applicable law. During any such extension period:
- Citigroup will not declare or pay any dividend on, make any distributions
relating to, or redeem, purchase, acquire or make a liquidation payment
relating to, any of its capital stock or make any guarantee payment with
respect thereto other than
- repurchases, redemptions or other acquisitions of shares of capital
stock of Citigroup in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of
employees, officers, directors or consultants;
- as a result of an exchange or conversion of any class or series of
Citigroup's capital stock for any other class or series of Citigroup's
capital stock; or
- the purchase of fractional interests in shares of Citigroup's capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged; and
- Citigroup will not make any payment of interest, principal or premium on,
or repay, repurchase or redeem, any debt securities issued by Citigroup
which rank equally with or junior to the junior subordinated debt
securities.
The foregoing, however, will not apply to any stock dividends paid by Citigroup
where the dividend stock is the same stock as that on which the dividend is
being paid. (Section 13.3) Prior to the termination of any extension period,
Citigroup may further defer payments of interest by extending such extension
period. Such extension period, including all such previous and further
extensions, however, may not exceed 20 consecutive quarterly interest periods,
including the quarterly interest period in which notice of such extension period
is given. No extension period, however, may extend beyond the maturity of the
junior subordinated debt securities. Upon the termination of any extension
period and the payment of all amounts then due, Citigroup may commence a new
extension period, if consistent with the terms set forth in this section. No
interest during an extension period, except at the end of such period, shall be
due and payable. However, Citigroup has the right to prepay accrued interest
during an extension period.
Citigroup has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the junior
subordinated debt securities. If the institutional trustee is the sole holder of
the junior subordinated debt securities, Citigroup will give the regular
trustees and the institutional trustee notice of its selection of such extension
period one business day prior to the earlier of
(1) the date distributions on the capital securities would be payable, if
not for such extension period, or
(2) the date the regular trustees are required to give notice to the NYSE
or other applicable self-regulatory organization or to holders of the
capital securities of the record date or the date such distributions
would be payable, if not for such extension period, but in any event at
least one business day prior to such record date.
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The regular trustees will give notice of Citigroup's selection of such extension
period to the holders of the capital securities. If the institutional trustee is
not the sole holder of the junior subordinated debt securities, Citigroup will
give the holders of the junior subordinated debt securities notice of its
selection of such extension period ten business days prior to the earlier of
(1) the next succeeding interest payment date or
(2) the date upon which Citigroup is required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of the
junior subordinated debt securities of the record or payment date of
such related interest payment. (Sections 13.1 and 13.2)
ADDITIONAL INTEREST
If at any time Citigroup Capital is required to pay any taxes, duties,
assessments or governmental charges of whatever nature, other than withholding
taxes, imposed by the United States or any other taxing authority, then
Citigroup will be required to pay additional interest on the junior subordinated
debt securities. The amount of any additional interest will be an amount
sufficient so that the net amounts received and retained by Citigroup Capital
after paying any such taxes, duties, assessments or other governmental charges
will be not less than the amounts Citigroup Capital would have received had no
such taxes, duties, assessments or other governmental charges been imposed. This
means that Citigroup Capital will be in the same position it would have been if
it did not have to pay such taxes, duties, assessments or other charges.
(Section 3.10(c)).
INDENTURE EVENTS OF DEFAULT
The indenture provides that the following are events of default relating to
the junior subordinated debt securities:
(1) default in the payment of the principal of, or premium, if any, on, any
junior subordinated debt security at its maturity;
(2) default for 30 days in the payment of any installment of interest on
any junior subordinated debt security;
(3) default for 90 days after written notice in the performance of any
other covenant in respect of the junior subordinated debt securities;
(4) specified events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of Citigroup; and
(5) any other event of default provided in the applicable resolution of the
board of directors or supplemental indenture under which the junior
subordinated debt securities are issued.
Any deferral of interest on the junior subordinated debt securities made in
accordance with the provisions described above in "Option to Extend Interest
Payment Period" will not constitute an event of default under the indenture for
the junior subordinated debt securities. (Section 5.1)
The indenture trustee may withhold notice to the holders of the junior
subordinated debt securities of any default with respect thereto, except in the
payment of principal, premium or interest, if it considers such withholding to
be in the interests of such holders.
If any indenture event of default shall occur and be continuing, the
institutional trustee, as the holder of the junior subordinated debt securities,
will have the right to declare the principal of and the interest on the junior
subordinated debt securities, including any compound interest and any additional
interest, and any other amounts payable under the indenture to be immediately
due and payable. The institutional trustee may also enforce its other rights as
a creditor relating to the junior subordinated debt securities. (Section 5.2) An
indenture event of default also constitutes a declaration event of default. The
holders of capital securities in limited circumstances have the right to direct
the institutional trustee to exercise its
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rights as the holder of the junior subordinated debt securities. See
"Description of the Capital Securities -- Declaration Events of Default" and
"-- Voting Rights."
Despite the foregoing, if a declaration event of default has occurred and
is continuing and such event is attributable to the failure of Citigroup to pay
interest or principal on the junior subordinated debt securities when such
interest or principal is payable, Citigroup acknowledges that, in such event, a
holder of capital securities may sue for payment on or after the respective due
date specified in the junior subordinated debt securities. Citigroup may not
amend the indenture to remove this right to bring a direct action without the
prior written consent of all of the holders of capital securities of Citigroup
Capital. Despite any payment made to such holder of capital securities by
Citigroup in connection with a direct action, Citigroup shall remain obligated
to pay the principal of or interest on the junior subordinated debt securities
held by Citigroup Capital or the institutional trustee of Citigroup Capital.
Citigroup shall be subrogated to the rights of the holder of such capital
securities relating to payments on the capital securities to the extent of any
payments made by Citigroup to such holder in any direct action. The holders of
capital securities will not be able to exercise directly any other remedy
available to the holders of the junior subordinated debt securities. (Sections
5.7 and 5.8)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments to the indenture through a supplemental
indenture may be made by Citigroup and the indenture trustee with the consent of
the holders of a majority in principal amount of the junior subordinated debt
securities at the time outstanding. However, no such modification or amendment
may, without the consent of the holder of each junior subordinated debt security
affected thereby:
(1) modify the terms of payment of principal, premium, if any, or interest
on such junior subordinated debt securities; or
(2) reduce the percentage of holders of junior subordinated debt securities
necessary to modify or amend the indenture or waive compliance by
Citigroup with any covenant or past default.
If the junior subordinated debt securities are held by Citigroup Capital or a
trustee of Citigroup Capital, such supplemental indenture shall not be effective
until the holders of a majority in liquidation preference of trust securities of
Citigroup Capital shall have consented to such supplemental indenture. If the
consent of the holder of each outstanding junior subordinated debt security is
required, such supplemental indenture shall not be effective until each holder
of the trust securities of Citigroup Capital shall have consented to such
supplemental indenture. (Section 9.2)
DISCHARGE AND DEFEASANCE
Citigroup may discharge most of its obligations under the indenture to
holders of the junior subordinated debt securities if such junior subordinated
debt securities have not already been delivered to the indenture trustee for
cancellation and either have become due and payable or are by their terms due
and payable within one year, or are to be called for redemption within one year.
Citigroup discharges its obligations by depositing with the indenture trustee an
amount certified to be sufficient to pay when due the principal of and premium,
if any, and interest on all outstanding junior subordinated debt securities and
to make any mandatory scheduled installment payments thereon when due. (Section
4.1)
Unless otherwise specified in this prospectus relating to the junior
subordinated debt securities, Citigroup, at its option:
(1) will be released from any and all obligations in respect of the junior
subordinated debt securities, which is known as "defeasance and
discharge"; or
(2) need not comply with certain covenants specified herein regarding the
junior subordinated debt securities, which is known as "covenant
defeasance."
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If Citigroup exercises its covenant defeasance option, the failure to comply
with any defeased covenant and any event of default in the applicable resolution
of the board of directors or supplemental indenture will no longer be an event
of default under the indenture.
To exercise either its defeasance and discharge or covenant defeasance
option, Citigroup must
(1) deposit with the indenture trustee, in trust, cash or U.S. government
obligations in an amount sufficient to pay all the principal of and
premium, if any, and any interest on the junior subordinated debt
securities when such payments are due; and
(2) deliver an opinion of counsel, which, in the case of a defeasance and
discharge, must be based upon a ruling or administrative pronouncement
of the Internal Revenue Service (the "IRS"), to the effect that the
holders of the junior subordinated debt securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such deposit or defeasance and will be required to pay federal income
tax in the same manner as if such defeasance had not occurred.
(Sections 4.2, 4.3 and 4.4).
When there is a defeasance and discharge, the indenture will no longer
govern the junior subordinated debt securities, Citigroup will no longer be
liable for payment and the holders of such junior subordinated debt securities
will be entitled only to the deposited funds. When there is a covenant
defeasance, however, Citigroup will continue to be obligated for payments when
due if the deposited funds are not sufficient to pay the holders.
The obligations under the indenture to pay all expenses of Citigroup
Capital, to register the transfer or exchange of junior subordinated debt
securities, to replace mutilated, defaced, destroyed, lost or stolen junior
subordinated debt securities, and to maintain paying agents and hold monies for
payment in trust will continue even if Citigroup exercises its defeasance and
discharge or covenant defeasance option.
CONCERNING THE INDENTURE TRUSTEE
The indenture trustee has extended substantial credit facilities, the
borrowings under which constitute Senior Indebtedness, to Citigroup. Citigroup
and certain of its subsidiaries also maintain bank accounts, borrow money and
have other customary commercial banking or investment banking relationships with
the indenture trustee in the ordinary course of business.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of capital securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Citigroup
Capital as a result of the occurrence of a Special Event, the junior
subordinated debt securities will be issued in the form of one or more global
certificates registered in the name of the depositary or its nominee. Each
global certificate is referred to as a "global security." Except under the
limited circumstances described below under "-- Discontinuance of the
Depositary's Services", junior subordinated debt securities represented by a
global security will not be exchangeable for, and will not otherwise be issuable
as, junior subordinated debt securities in definitive form. The global
securities may not be transferred except by the depositary to a nominee of the
depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to transfer or pledge beneficial interests in a
global security.
Except as provided below, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of junior
subordinated debt securities in definitive form and will not be considered the
holders, as defined in the indenture, of the global security for any purpose
under the indenture. A global security representing junior subordinated debt
securities is only exchangeable for another global security of like denomination
and tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. This means that each beneficial owner must
rely on the procedures
33
of the depositary, or if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the indenture.
THE DEPOSITARY
If junior subordinated debt securities are distributed to holders of
capital securities in liquidation of such holders' interests in Citigroup
Capital, DTC will act as securities depositary for the junior subordinated debt
securities. As of the date of this prospectus, the description in this
prospectus of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments relating to the capital securities
apply in all material respects to any debt obligations represented by one or
more global securities held by DTC. Citigroup may appoint a successor to DTC or
any successor depositary in the event DTC or such successor depositary is unable
or unwilling to continue as a depositary for the global securities. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Capital Securities -- Book-Entry Only Issuance."
None of Citigroup, Citigroup Capital, the indenture trustee, any paying
agent and any other agent of Citigroup or the indenture trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global security
for such junior subordinated debt securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A global security shall be exchangeable for junior subordinated debt
securities registered in the names of persons other than the depositary or its
nominee only if:
- the depositary notifies Citigroup that it is unwilling or unable to
continue as a depositary for such global security and no successor
depositary shall have been appointed;
- the depositary, at any time, ceases to be a clearing agency registered
under the Exchange Act at which time the depositary is required to be so
registered to act as such depositary and no successor depositary shall
have been appointed; or
- Citigroup, in its sole discretion, determines that such global security
shall be so exchangeable.
Any global security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for junior subordinated debt securities registered in such
names as the depositary shall direct. It is expected that such instructions will
be based upon directions received by the depositary from its participants
relating to ownership of beneficial interests in such global security.
CERTAIN COVENANTS
If the junior subordinated debt securities are issued to Citigroup Capital
or a trustee of such trust in connection with the issuance of trust securities
by Citigroup Capital and
(1) there shall have occurred and be continuing an event of default under
the indenture;
(2) Citigroup shall be in default relating to its payment or other
obligations under the guarantee; or
(3) Citigroup shall have given notice of its election to defer payments of
interest on the junior subordinated debt securities by extending the
interest payment period and such period, or any extension of such
period, shall be continuing;
then
(a) Citigroup shall not declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a
liquidation payment relating to, any of its capital stock or make any
guarantee payment with respect thereto other than
34
- repurchases, redemptions or other acquisitions of shares of capital
stock of Citigroup in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of
employees, officers, directors or consultants;
- as a result of an exchange or conversion of any class or series of
Citigroup's capital stock for any other class or series of Citigroup's
capital stock; or
- the purchase of fractional interests in shares of Citigroup's capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged; and
(b) Citigroup shall not make any payment of interest, principal or premium
on, or repay, repurchase or redeem, any debt securities issued by
Citigroup which rank equally with or junior to the junior subordinated
debt securities.
These restrictions, however, will not apply to any stock dividends paid by
Citigroup where the dividend stock is the same stock as that on which the
dividend is being paid. (Section 13.3)
So long as the trust securities remain outstanding, Citigroup will covenant
to:
- directly or indirectly maintain 100% ownership of the common securities
of Citigroup Capital, unless a permitted successor of Citigroup succeeds
to its ownership of the common securities;
- not voluntarily dissolve, wind-up or terminate Citigroup Capital, except
in connection with
(a) a distribution of junior subordinated debt securities or
(b) mergers, consolidations or amalgamations permitted by the
declaration;
- timely perform its duties as sponsor of Citigroup Capital; and
- use its reasonable efforts to cause Citigroup Capital to
(a) remain a statutory business trust, except in connection with the
distribution of junior subordinated debt securities to the holders
of trust securities in liquidation of Citigroup Capital, the
redemption of all of the trust securities of Citigroup Capital, or
mergers, consolidations or amalgamations, each as permitted by the
declaration of Citigroup Capital, and
(b) otherwise continue to be classified as a grantor trust for United
States federal income tax purposes. (Section 10.5)
MISCELLANEOUS
The indenture provides that Citigroup will pay all fees and expenses
related to:
- the offering of the trust securities and the junior subordinated debt
securities;
- the organization, maintenance and dissolution of Citigroup Capital;
- the retention of the regular trustees; and
- the enforcement by the institutional trustee of the rights of the holders
of the capital securities.
35
DESCRIPTION OF GUARANTEE
Set forth below is a summary of information concerning the guarantee that
will be executed and delivered by Citigroup for the benefit of the holders of
capital securities. The guarantee will be qualified as an indenture under the
Trust Indenture Act. JPMorgan Chase Bank will act as the guarantee trustee. The
terms of the guarantee will be those set forth in the guarantee and those made
part of the guarantee by the Trust Indenture Act. The summary is not intended to
be complete and is qualified in all respects by the provisions of the form of
guarantee, which is filed as an exhibit to the registration statement of which
this prospectus forms a part, and the Trust Indenture Act. The guarantee will be
held by the guarantee trustee for the benefit of the holders of the capital
securities.
GENERAL
Pursuant to and to the extent set forth in the guarantee, Citigroup will
irrevocably and unconditionally agree to pay in full to the holders of the
capital securities, except to the extent paid by Citigroup Capital, as and when
due, regardless of any defense, right of set-off or counterclaim which Citigroup
Capital may have or assert, the following payments, which are referred to as
"guarantee payments," without duplication:
- any accrued and unpaid distributions that are required to be paid on the
capital securities, to the extent Citigroup Capital has funds available
for such distributions;
- the redemption price of $25 per capital security, plus all accrued and
unpaid distributions, to the extent Citigroup Capital has funds available
for such redemptions, relating to any capital securities called for
redemption by Citigroup Capital; and
- upon a voluntary or involuntary dissolution, winding-up or termination of
Citigroup Capital, other than in connection with the distribution of
junior subordinated debt securities to the holders of capital securities
or the redemption of all of the capital securities, the lesser of
- the aggregate of the liquidation amount and all accrued and unpaid
distributions on the capital securities to the date of payment, or
- the amount of assets of Citigroup Capital remaining for distribution
to holders of the capital securities in liquidation of Citigroup
Capital.
Citigroup's obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by Citigroup to the holders of capital
securities or by causing Citigroup Capital to pay such amounts to such holders.
The guarantee will be on a subordinated basis in relation to the capital
securities from the time of issuance of the capital securities but will not
apply to any payment of distributions or redemption price, or to payments upon
the dissolution, winding-up or termination of Citigroup Capital, except to the
extent Citigroup Capital has funds available for such payments. If Citigroup
does not make interest payments on the junior subordinated debt securities,
Citigroup Capital will not pay distributions on the capital securities and will
not have funds available for such payments. The guarantee, when taken together
with Citigroup's obligations under the junior subordinated debt securities, the
indenture and the declaration, including its obligations to pay costs, expenses,
debts and liabilities of Citigroup Capital, other than those relating to trust
securities, will provide a full and unconditional guarantee on a subordinated
basis by Citigroup of payments due on the capital securities. See "Description
of the Junior Subordinated Debt Securities."
36
IMPORTANT COVENANTS OF CITIGROUP
In the guarantee, Citigroup will covenant that, so long as any capital
securities remain outstanding, if there shall have occurred any event that would
constitute an event of default under such guarantee or the declaration, then:
- Citigroup shall not declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a
liquidation payment relating to, any of its capital stock or make any
guarantee payment with respect thereto other than
(1) repurchases, redemptions or other acquisitions of shares of capital
stock of Citigroup in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of
employees, officers, directors or consultants;
(2) as a result of an exchange or conversion of any class or series of
Citigroup's capital stock for any other class or series of
Citigroup's capital stock; or
(3) the purchase of fractional interests in shares of Citigroup's
capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged; and
- Citigroup shall not make any payment of interest, principal or premium
on, or repay, repurchase or redeem, any debt securities issued by
Citigroup which rank equally with or junior to the junior subordinated
debt securities.
The above restrictions, however, will not apply to any stock dividends paid by
Citigroup where the dividend stock is the same stock as that on which the
dividend is being paid.
MODIFICATION OF GUARANTEE; ASSIGNMENT
The guarantee may be amended only with the prior approval of the holders of
not less than a majority in aggregate liquidation amount of the outstanding
capital securities. No vote will be required, however, for any changes that do
not adversely affect the rights of holders of capital securities. All guarantees
and agreements contained in the guarantee shall bind the successors, assignees,
receivers, trustees and representatives of Citigroup and shall inure to the
benefit of the holders of the capital securities then outstanding.
EVENTS OF DEFAULT
An event of default under the guarantee will occur upon the failure of
Citigroup to perform any of its payment or other obligations required by the
guarantee. The holders of a majority in aggregate liquidation amount of the
capital securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of the guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce its rights under the guarantee,
any holder of related capital securities may directly sue Citigroup to enforce
the guarantee trustee's rights under the guarantee without first suing Citigroup
Capital, the guarantee trustee or any other person or entity. A holder of
capital securities may also directly sue Citigroup to enforce such holder's
right to receive payment under the guarantee without first (1) directing the
guarantee trustee to enforce the terms of the guarantee or (2) suing Citigroup
Capital or any other person or entity.
Citigroup will be required to provide to the guarantee trustee such
documents, reports and information as required by the Trust Indenture Act.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Prior to the occurrence of a default relating to the guarantee, the
guarantee trustee undertakes to perform only such duties as are specifically set
forth in the guarantee. After such default, the guarantee
37
trustee will exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Provided that the foregoing
requirements have been met, the guarantee trustee is under no obligation to
exercise any of the powers vested in it by the guarantee at the request of any
holder of capital securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The guarantee will terminate as to the capital securities upon full payment
of the redemption price of all capital securities, upon distribution of the
junior subordinated debt securities to the holders of the capital securities or
upon full payment of the amounts payable in accordance with the declaration upon
liquidation of Citigroup Capital. The guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of capital
securities must restore payment of any sums paid under the capital securities or
the guarantee.
STATUS OF THE GUARANTEE
The guarantee will constitute an unsecured obligation of Citigroup and will
rank:
- subordinate and junior in right of payment to all other liabilities of
Citigroup;
- equally with the most senior preferred or preference stock now or
hereafter issued by Citigroup and with any guarantee now or hereafter
entered into by Citigroup in respect of any preferred or preference stock
of any affiliate of Citigroup; and
- senior to Citigroup's common stock.
The terms of the capital securities provide that each holder of capital
securities by acceptance of such securities agrees to the subordination
provisions and other terms of the guarantee.
The guarantee will constitute a guarantee of payment and not of collection.
This means that the guaranteed party may directly sue the guarantor to enforce
its rights under the guarantee without suing any other person or entity.
GOVERNING LAW
The guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
38
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the declaration, the sole purpose of Citigroup Capital is
to issue the trust securities and to invest the proceeds from such issuance in
the junior subordinated debt securities.
As long as payments of interest and other payments are made when due on the
junior subordinated debt securities, such payments will be sufficient to cover
the distributions and payments due on the trust securities. This is due to the
following factors:
- the aggregate principal amount of junior subordinated debt securities
will be equal to the aggregate stated liquidation amount of the trust
securities;
- the interest rate and the interest and other payment dates on the junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the capital securities;
- under the indenture, Citigroup will pay, and Citigroup Capital will not
be obligated to pay, directly or indirectly, all costs, expenses, debts
and obligations of Citigroup Capital other than those relating to the
trust securities; and
- the declaration further provides that the regular trustees may not cause
or permit Citigroup Capital to engage in any activity that is not
consistent with the purposes of Citigroup Capital.
Payments of distributions, to the extent there are available funds, and
other payments due on the capital securities, to the extent there are available
funds, are guaranteed by Citigroup to the extent described in this prospectus.
If Citigroup does not make interest payments on the junior subordinated debt
securities, Citigroup Capital will not have sufficient funds to pay
distributions on the capital securities. The guarantee is a subordinated
guarantee in relation to the capital securities. The guarantee does not apply to
any payment of distributions unless and until Citigroup Capital has sufficient
funds for the payment of such distributions. See "Description of Guarantee."
The guarantee covers the payment of distributions and other payments on the
capital securities only if and to the extent that Citigroup has made a payment
of interest or principal or other payments on the junior subordinated debt
securities. The guarantee, when taken together with Citigroup's obligations
under the junior subordinated debt securities and the indenture and its
obligations under the declaration, will provide a full and unconditional
guarantee of distributions, redemption payments and liquidation payments on the
capital securities.
If Citigroup fails to make interest or other payments on the junior
subordinated debt securities when due, taking account of any extension period,
the declaration allows the holders of the capital securities to direct the
institutional trustee to enforce its rights under the junior subordinated debt
securities. If the institutional trustee fails to enforce these rights, any
holder of capital securities may directly sue Citigroup to enforce such rights
without first suing the institutional trustee or any other person or entity. See
"Description of the Capital Securities -- Declaration Events of Default" and
"-- Voting Rights."
A holder of capital securities may institute a direct action if a
declaration event of default has occurred and is continuing and such event is
attributable to the failure of Citigroup to pay interest or principal on the
junior subordinated debt securities on the date such interest or principal is
otherwise payable. A direct action may be brought without first (1) directing
the institutional trustee to enforce the terms of the junior subordinated debt
securities or (2) suing Citigroup to enforce the institutional trustee's rights
under the junior subordinated debt securities. In connection with such direct
action, Citigroup will be subrogated to the rights of such holder of capital
securities under the declaration to the extent of any payment made by Citigroup
to such holder of capital securities. Consequently, Citigroup will be entitled
to payment of amounts that a holder of capital securities receives in respect of
an unpaid distribution to the extent that such holder receives or has already
received full payment relating to such unpaid distribution from Citigroup
Capital.
39
Citigroup acknowledges that the guarantee trustee will enforce the
guarantee on behalf of the holders of the capital securities. If Citigroup fails
to make payments under the guarantee, the guarantee allows the holders of the
capital securities to direct the guarantee trustee to enforce its rights
thereunder. If the guarantee trustee fails to enforce the guarantee, any holder
of capital securities may directly sue Citigroup to enforce the guarantee
trustee's rights under the guarantee. Such holder need not first sue Citigroup
Capital, the guarantee trustee, or any other person or entity. A holder of
capital securities may also directly sue Citigroup to enforce such holder's
right to receive payment under the guarantee. Such holder need not first (1)
direct the guarantee trustee to enforce the terms of the guarantee or (2) sue
Citigroup Capital or any other person or entity.
Citigroup and Citigroup Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by Citigroup of payments due on the capital securities. See
"Description of Guarantee -- General."
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a general summary of United States federal income tax
consequences of the purchase, ownership and disposition of capital securities.
The summary is based on:
- laws;
- regulations;
- rulings; and
- decisions now in effect,
all of which may change, possibly with retroactive effect. This summary deals
only with a beneficial owner of capital securities that purchases the capital
securities upon original issuance and who will hold the capital securities as
capital assets. This summary does not address all of the United States federal
income tax considerations that may be relevant to a beneficial owner of notes.
For example, this summary does not address tax considerations applicable to
investors to whom special tax rules may apply, including:
- banks or other financial institutions;
- tax-exempt entities;
- insurance companies;
- regulated investment companies;
- common trust funds;
- entities that are treated as partnerships or other pass-through entities
for United States federal income tax purposes;
- controlled foreign corporations;
- dealers in securities or currencies;
- persons that will hold the capital securities as a hedge or hedged
against currency risk or as a part of an integrated investment, including
a straddle or conversion transaction, comprised of a capital security and
one or more other positions; or
- United States holders (as defined below) that have a functional currency
other than the U.S. dollar.
As used in this summary, a "United States holder" is a beneficial owner of
capital securities who is:
- a citizen or resident of the United States;
- a corporation or other entity treated as a corporation created or
organized in or under the laws of the United States or any political
subdivision thereof;
- an estate, if United States federal income taxation is applicable to the
income of such estate regardless of the income's source; or
- a trust if a United States court is able to exercise primary supervision
over the trust's administration and one or more United States persons
have the authority to control all of the trust's substantial decisions.
As used in this summary, the term "non-United States holder" means a beneficial
owner of capital securities who is not a United States holder and the term
"United States" means the United States of America, including the fifty states
and the District of Columbia, but excluding its territories and possessions.
Investors should consult their tax advisors in determining the tax
consequences to them of purchasing, holding and disposing of the capital
securities, including the application to their particular situation of the
United States federal income tax considerations discussed below, as well as the
application of state, local, foreign or other tax laws.
41
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the junior subordinated debt securities,
Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to Citigroup and Citigroup
Capital, will render its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the indenture and
other relevant documents, and based on the facts and assumptions contained in
such opinion, the junior subordinated debt securities held by Citigroup Capital
will be classified for United States federal income tax purposes as indebtedness
of Citigroup.
CLASSIFICATION OF CITIGROUP CAPITAL
In connection with the issuance of the capital securities, Skadden, Arps,
Slate, Meagher & Flom LLP will render its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the
declaration, the indenture and other relevant documents, and based on the facts
and assumptions contained in such opinion, Citigroup Capital will be classified
for United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of capital securities generally will be
considered the owner of an undivided interest in the junior subordinated debt
securities. Each holder will be required to include in its gross income all
interest or original issue discount ("OID") and any gain recognized relating to
its allocable share of those junior subordinated debt securities.
UNITED STATES HOLDERS
Interest Income and Original Issue Discount
Under applicable Treasury regulations, a "remote" contingency that stated
interest will not be timely paid will be ignored in determining whether a debt
instrument is issued with OID. Citigroup believes that the likelihood of its
exercising its option to defer payments is remote within the meaning of the
regulations. Based on the foregoing, Citigroup believes that, although the
matter is not free from doubt, the junior subordinated debt securities will not
be considered to be issued with OID at the time of their original issuance.
Accordingly, each holder of capital securities should include in gross income
such holder's allocable share of interest on the junior subordinated debt
securities in accordance with such holder's method of tax accounting.
Under the regulations, if the option to defer any payment of interest was
determined not to be "remote," or if Citigroup exercised such option, the junior
subordinated debt securities would be treated as issued with OID at the time of
issuance or at the time of such exercise, as the case may be. Then, all stated
interest on the junior subordinated debt securities would thereafter be treated
as OID as long as the junior subordinated debt securities remained outstanding.
In such event, all of a holder's taxable interest income relating to the junior
subordinated debt securities would constitute OID that would have to be included
in income on an economic accrual basis before the receipt of the cash
attributable to the interest, regardless of such United States holder's method
of tax accounting, and actual distributions of stated interest would not be
reported as taxable income. Consequently, a holder of capital securities would
be required to include in gross income OID even though Citigroup would not make
any actual cash payments during an extension period.
No rulings or other interpretations have been issued by the IRS which have
addressed the meaning of the term "remote" as used in the regulations, and it is
possible that the IRS could take a position contrary to the interpretation in
this prospectus.
Because income on the capital securities will constitute interest or OID,
corporate holders of capital securities will not be entitled to a
dividends-received deduction relating to any income recognized relating to the
capital securities.
42
Receipt of Junior Subordinated Debt Securities or Cash Upon Liquidation of
Citigroup Capital
Under the circumstances described in this prospectus, junior subordinated
debt securities may be distributed to holders in exchange for capital securities
upon the liquidation of Citigroup Capital. Under current law, such a
distribution, for United States federal income tax purposes, would be treated as
a non-taxable event to each United States holder, and each United States holder
would receive an aggregate tax basis in the junior subordinated debt securities
equal to such holder's aggregate tax basis in its capital securities. A United
States holder's holding period in the junior subordinated debt securities
received in liquidation of Citigroup Capital would include the period during
which the capital securities were held by such holder. See "Description of the
Capital Securities -- Special Event Redemption."
Under the circumstances described in this prospectus, the junior
subordinated debt securities may be redeemed by Citigroup for cash and the
proceeds of such redemption distributed by Citigroup Capital to holders in
redemption of their capital securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed capital securities. Accordingly, a United States
holder could recognize gain or loss as if it had sold such redeemed capital
securities for cash. See "Description of the Capital Securities" and "United
States Federal Income Taxation -- Sales of Capital Securities."
Sales of Capital Securities
A United States holder that sells capital securities will be considered to
have disposed of all or part of its ratable share of the junior subordinated
debt securities. Such United States holder will recognize gain or loss equal to
the difference between its adjusted tax basis in the capital securities and the
amount realized on the sale of such capital securities. Assuming that Citigroup
does not exercise its option to defer payment of interest on the junior
subordinated debt securities and that the junior subordinated debt securities
are not deemed to be issued with OID, a United States holder's adjusted tax
basis in the capital securities generally will be its initial purchase price. If
the junior subordinated debt securities are deemed to be issued with OID, a
United States holder's tax basis in the capital securities generally will be its
initial purchase price, increased by OID previously includible in such United
States holder's gross income to the date of disposition and decreased by
distributions or other payments received on the capital securities since and
including the date that the junior subordinated debt securities were deemed to
be issued with OID. Such gain or loss generally will be a capital gain or loss,
except to the extent of any accrued interest relating to such United States
holder's ratable share of the junior subordinated debt securities required to be
included in income, and generally will be a long-term capital gain or loss if
the capital securities have been held for more than one year.
Should Citigroup exercise its option to defer payment of interest on the
junior subordinated debt securities, the capital securities may trade at a price
that does not fully reflect the accrued but unpaid interest relating to the
underlying junior subordinated debt securities. In the event of such a deferral,
a United States holder who disposes of its capital securities between record
dates for payments of distributions will be required to include in income as
ordinary income accrued but unpaid interest on the junior subordinated debt
securities to the date of disposition and to add such amount to its adjusted tax
basis in its ratable share of the underlying junior subordinated debt securities
deemed disposed of. To the extent the selling price is less than the holder's
adjusted tax basis, such holder will recognize a capital loss. Capital losses
generally cannot be applied to offset ordinary income for United States federal
income tax purposes.
Information Reporting and Backup Withholding
Generally, income on the capital securities will be reported to the IRS and
to holders on Forms 1099-INT, which forms should be mailed to holders of capital
securities by January 31 following each calendar year of payment. In addition,
United States holders may be subject to a backup withholding tax on such
payments if they do not provide their taxpayer identification numbers to the
trustee in the manner required, fail to certify that they are not subject to
backup withholding tax, or otherwise fail to
43
comply with applicable backup withholding tax rules. United States holders may
also be subject to information reporting and backup withholding tax with respect
to the proceeds from a sale, exchange, retirement or other taxable disposition
(collectively, a "disposition") of the capital securities. Any amounts withheld
under the backup withholding rules will be allowed as a credit against the
United States holder's United States federal income tax liability provided the
required information is timely furnished to the IRS.
NON-UNITED STATES HOLDERS
Under current United States federal income tax law:
- withholding of United States federal income tax will not apply to a
payment on a capital security to a non-United States holder, provided
that;
(1) the holder does not actually or constructively own 10 percent or
more of the total combined voting power of all classes of stock of
Citigroup entitled to vote and is not a controlled foreign
corporation related to Citigroup through stock ownership and
(2) the beneficial owner provides a statement signed under penalties of
perjury that includes its name and address and certifies that it is
a non-United States holder in compliance with applicable
requirements; and
- withholding of United States federal income tax will generally not apply
to any gain realized on the disposition of a capital security.
Despite the above, if a non-United States holder is engaged in a trade or
business in the United States (or, if certain tax treaties apply, if the
non-United States holder maintains a permanent establishment within the United
States) and the interest on the capital securities is effectively connected with
the conduct of that trade or business (or, if certain tax treaties apply,
attributable to that permanent establishment), such non-United States holder
will be subject to United States federal income tax on the interest on a net
income basis in the same manner as if such non-United States holder were a
United States holder. In addition, a non-United States holder that is a foreign
corporation that is engaged in a trade or business in the United States may be
subject to a 30% (or, if certain tax treaties apply, such lower rates as
provided) branch profits tax.
Any gain realized on the disposition of a capital security generally will
not be subject to United States federal income tax unless:
- that gain is effectively connected with the non-United States holder's
conduct of a trade or business in the United States (or, if certain tax
treaties apply, is attributable to a permanent establishment maintained
by the non-United States holder within the United States); or
- the non-United States holder is an individual who is present in the
United States for 183 days or more in the taxable year of the disposition
and certain other conditions are met.
In general, backup withholding and information reporting will not apply to
a payment of interest on a capital security to a non-United States holder, or to
proceeds from the disposition of a capital security by a non-United States
holder, in each case, if the holder certifies under penalties of perjury that it
is a non-United States holder and neither Citigroup nor its paying agent has
actual knowledge to the contrary. Any amounts withheld under the backup
withholding rules will be allowed as a credit against the non-United States
holder's United States federal income tax liability provided the required
information is timely furnished to the IRS. In certain circumstances, if a
capital security is not held through a qualified intermediary, the amount of
payments made on such capital security, the name and address of the beneficial
owner and the amount, if any, of tax withheld may be reported to the IRS.
TEMPORARY TREASURY REGULATIONS ON REPORTABLE TRANSACTIONS
Temporary Treasury regulations were recently issued which generally would
require each taxpayer that has participated, directly or indirectly, in a
"reportable transaction" after January 1, 2003 to disclose its
44
participation on its tax return for each taxable year for which the taxpayer's
United States federal income tax liability is affected by the taxpayer's
participation in the transaction. Under the regulations, the ownership of
capital securities by a holder could be treated as a reportable transaction in
certain circumstances. Additionally, a list identifying the offering of capital
securities and the holders who purchase such capital securities could be
required to be maintained and furnished to the IRS upon request. The Treasury
Department published a notice stating that it intends to modify the regulations
sometime in February 2003 to clarify a number of provisions and narrow the scope
of what constitutes a "reportable transaction." It is unclear whether the
revised regulations will exclude transactions like the offering of capital
securities from the list of "reportable transactions." Holders should consult
their tax advisors concerning any possible disclosure obligations arising from
the ownership of capital securities.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS RELATING TO THE
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
45
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
governed by the Employee Retirement Income Security Act of 1974, should consider
the fiduciary standards of ERISA in the context of the ERISA plan's particular
circumstances before authorizing an investment in the capital securities of
Citigroup Capital. Among other factors, the fiduciary should consider whether
such an investment is in accordance with the documents governing the ERISA plan
and whether the investment is appropriate for the ERISA plan in view of its
overall investment policy and diversification of its portfolio.
Certain provisions of ERISA and the Code prohibit employee benefit plans as
defined in Section 3(3) of ERISA, that are subject to Title I of ERISA, plans
described in Section 4975(e)(1) of the Code (including, without limitation,
retirement accounts and Keogh Plans), and entities whose underlying assets
include plan assets by reason of a plan's investment in such entities
(including, without limitation, as applicable, insurance company general
accounts), from engaging in certain transactions involving "plan assets" with
parties that are "parties in interest" under ERISA or "disqualified persons"
under the Code with respect to the plan or entity. Governmental and other plans
that are not subject to ERISA or to the Code may be subject to similar
restrictions under state, federal or local law. Any employee benefit plan or
other entity, to which such provisions of ERISA, the Code or similar law apply,
proposing to acquire the offered securities should consult with its legal
counsel.
The U.S. Department of Labor has issued a regulation with regard to whether
the underlying assets of an entity in which employee benefit plans acquire
equity interests are deemed to be plan assets (the "Plan Asset Regulation").
Under such regulation, for purposes of ERISA and section 4975 of the Code, the
assets of Citigroup Capital would be deemed to be "plan assets" of a plan whose
assets were used to purchase capital securities of Citigroup Capital if the
capital securities of Citigroup Capital were considered to be equity interests
in Citigroup Capital and no exception to plan asset status were applicable under
such regulation.
The Plan Asset Regulation defines an "equity interest" as any interest in
an entity other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. Although it
is not free from doubt, capital securities of Citigroup Capital offered hereby
should be treated as "equity interests" for purposes of the Plan Asset
Regulation. One exception to plan asset status under the Plan Asset Regulation
applies to a class of "equity" interests that are (i) widely held (i.e., held by
100 or more investors who are independent of the issuer and each other), (ii)
freely transferable, and (iii) either (a) part of a class of securities
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
(the "34 Act"), or (b) sold as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act of 1933
and such class is registered under the 34 Act within 120 days after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred (the "Publicly Offered Securities Exception"). Although no
assurances can be given, the underwriters believe that the Publicly Offered
Securities Exception will be applicable to the capital securities of Citigroup
Capital offered hereby.
If, however, the assets of Citigroup Capital were deemed to be plan assets
of plans that are holders of the capital securities of Citigroup Capital, a
plan's investment in the capital securities of Citigroup Capital might be deemed
to constitute a delegation under ERISA of the duty to manage plan assets by a
fiduciary investing in capital securities of Citigroup Capital. Also, Citigroup
might be considered a "party in interest" or "disqualified person" relating to
plans whose assets were used to purchase capital securities of Citigroup
Capital. If this were the case, an investment in capital securities of Citigroup
Capital by a plan might constitute, or in the course of the operation of
Citigroup Capital give rise to, one or more prohibited transactions under ERISA
or the Code. In particular, it is likely that under such circumstances a
prohibited extension of credit to Citigroup would be considered to occur under
ERISA and the Code.
In addition, Citigroup might be considered a "party in interest" or
"disqualified person" for certain plans for reasons unrelated to the operation
of Citigroup Capital, e.g., because of the provision of services by Citigroup or
its affiliates to the plan. A purchase of capital securities of Citigroup
Capital by any such
46
plan would be likely to result in a prohibited extension of credit to Citigroup,
without regard to whether the assets of Citigroup Capital constituted plan
assets.
Accordingly, the capital securities of Citigroup Capital may be not
purchased, held or disposed of by any plan or any person investing "plan assets"
of any plan that is subject to the prohibited transaction rules of ERISA or
Section 4975 of the Code or other similar law, unless one of the following
Prohibited Transaction Class Exemptions ("PTCE") issued by the Department of
Labor (or similar exemption or exception) applies to such purchase, holding and
disposition:
- PTCE 96-23 for transactions determined by in-house asset managers,
- PTCE 95-60 for transactions involving insurance company general accounts,
- PTCE 91-38 for transactions involving bank collective investment funds,
- PTCE 90-1 for transactions involving insurance company separate accounts,
or
- PTCE 84-14 for transactions determined by independent qualified
professional asset managers.
Any purchaser of the capital securities of Citigroup Capital or any
interest therein will be deemed to have represented to Citigroup Capital that
either
(a) it is not a plan subject to Title I of ERISA or Section 4975 of the
Code and is not purchasing such securities or interest therein on
behalf of, or with "plan assets" of, any such plan;
(b) its purchase, holding and disposition of the capital securities are not
and will not be prohibited because they are exempted by one or more of
the following prohibited transaction exemptions: PTCE 96-23, 95-60,
91-38, 90-1 or 84-14; or
(c) it is a governmental (as defined in section 3 or ERISA) or other plan
that is not subject to the provisions of Title I or ERISA or Section
4975 of the Code and its purchase, holding and disposition of capital
securities are not otherwise prohibited.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person considering
the purchase of capital securities of Citigroup Capital with plan assets consult
with its counsel regarding the consequences under ERISA and the Code, or other
similar law, of the acquisition and ownership of capital securities of Citigroup
Capital and the availability of exemptive relief under the class exemptions
listed above.
47
UNDERWRITING
Pursuant to the terms and conditions of the underwriting agreement dated
February 5, 2003, each underwriter named below has severally agreed to purchase
from Citigroup Capital, and Citigroup Capital has agreed to sell to such
underwriter, the number of capital securities set forth opposite the name of
such underwriter below.
<Table>
<Caption>
NUMBER OF
CAPITAL
UNDERWRITERS SECURITIES
- ------------ ----------
Salomon Smith Barney Inc. ........... 4,635,000
A.G. Edwards & Sons, Inc. ........... 4,600,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............. 4,600,000
Morgan Stanley & Co. Incorporated.... 4,600,000
Prudential Securities Incorporated... 4,600,000
UBS Warburg LLC...................... 4,600,000
Wachovia Securities, Inc............. 4,600,000
Quick & Reilly, Inc. ................ 800,000
U.S. Bancorp Piper Jaffray Inc. ..... 800,000
Wells Fargo Investment Services,
LLC ............................... 800,000
Banc One Capital Markets, Inc. ...... 280,000
Bear, Stearns & Co. Inc. ............ 280,000
Goldman, Sachs & Co. ................ 280,000
J.P. Morgan Securities Inc. ......... 280,000
Lehman Brothers Inc. ................ 280,000
Banc of America Securities LLC....... 165,000
BNP Paribas Securities Corp. ........ 165,000
Charles Schwab & Co., Inc. .......... 165,000
CIBC World Markets Corp. ............ 165,000
Credit Suisse First Boston
Corporation........................ 165,000
Deutsche Bank Securities Inc. ....... 165,000
Fahnestock & Co. Inc. ............... 165,000
H&R BLOCK Financial Advisors,
Inc. .............................. 165,000
HSBC Securities (USA) Inc. .......... 165,000
McDonald Investments Inc., a KeyCorp
Company............................ 165,000
RBC Dain Rauscher Inc. .............. 165,000
SunTrust Capital Markets, Inc. ...... 165,000
TD Securities (USA) Inc. ............ 165,000
</Table>
<Table>
<Caption>
NUMBER OF
CAPITAL
UNDERWRITERS SECURITIES
- ------------ ----------
ABN AMRO Incorporated................ 65,000
Advest, Inc. ........................ 65,000
BB&T Capital Markets, a Division of
Scott & Stringfellow............... 65,000
Blaylock & Partners, L.P. ........... 65,000
C.L. King & Associates, Inc. ........ 65,000
Crowell, Weedon & Co. ............... 65,000
D.A. Davidson & Co. ................. 65,000
Davenport & Company LLC.............. 65,000
Doley Securities, Inc. .............. 65,000
Ferris, Baker Watts Incorporated .... 65,000
ING Financial Markets LLC............ 65,000
J.J.B. Hilliard, W.L. Lyons, Inc. ... 65,000
Janney Montgomery Scott Inc. ........ 65,000
Legg Mason Wood Walker,
Incorporated....................... 65,000
Mesirow Financial, Inc. ............. 65,000
Nat City Investments, Inc. .......... 65,000
Parker/Hunter Incorporated........... 65,000
Ramirez & Co. Inc.................... 65,000
Raymond James & Associates, Inc. .... 65,000
Robert W. Baird & Co. Incorporated... 65,000
Ryan Beck & Co. LLC.................. 65,000
Sandler O'Neill & Partners, L.P. .... 65,000
Southwest Securities, Inc. .......... 65,000
Stifel, Nicolaus & Company,
Incorporated....................... 65,000
Utendahl Capital Partners, L.P. ..... 65,000
Wedbush Morgan Securities, Inc. ..... 65,000
William Blair & Company L.L.C. ...... 65,000
The Williams Capital Group, L.P. .... 65,000
----------
Total.............................. 40,000,000
==========
</Table>
The underwriters are obligated to take and pay for all of the capital
securities if any are purchased. In the event of default by any underwriter, the
underwriting agreement provides that, in certain circumstances, purchase
commitments of the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
Underwriters, dealers and agents may be entitled, under agreements with
Citigroup Capital and Citigroup, to indemnification by Citigroup against
liabilities relating to material misstatements and omissions. Underwriters,
dealers and agents may be customers of, engage in transactions with, or perform
48
services for, Citigroup Capital and Citigroup and affiliates of Citigroup
Capital and Citigroup in the ordinary course of business.
Citigroup Capital and Citigroup have agreed, during the period beginning on
the date of the underwriting agreement and continuing to and including the date
that is 60 days after the closing date for the purchase of the capital
securities, not to offer, sell, contract to sell or otherwise dispose of any
preferred securities, any preferred stock or any other securities, including any
backup undertakings of such preferred stock or other securities, of Citigroup or
of Citigroup Capital, in each case that are substantially similar to the capital
securities, or any securities convertible into or exchangeable for the capital
securities or such substantially similar securities of either Citigroup Capital
or Citigroup, except securities in the offering or with the prior written
consent of Salomon Smith Barney Inc.
The following table summarizes the commissions to be paid by Citigroup to
the underwriters:
<Table>
<Caption>
PER CAPITAL
SECURITY TOTAL
----------- -----
Public offering price....................................... $25 $1,000,000,000
Underwriting commissions to be paid by Citigroup............ (1) (1)
Proceeds to Citigroup Capital IX............................ $25 $1,000,000,000
</Table>
- ---------------
(1) Underwriting commissions of $.7875 per capital security, or $31,500,000 for
all 6.00% capital securities, will be paid by Citigroup.
Citigroup estimates that its total expenses for the offering, excluding
underwriting commissions, will be approximately $300,000.
The underwriters propose to offer the capital securities, in part, directly
to the public at the initial public offering price set forth on the cover page
of this prospectus. The underwriters may also offer the capital securities to
dealers at a price that represents a concession not in excess of $.50. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $.45 per capital security to brokers and dealers. After the capital
securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives of the
underwriters.
Citigroup and Citigroup Capital have granted an option to the underwriters,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to an aggregate of 6,000,000 additional capital securities to cover
over-allotments, if any, at the offering price to the public set forth on the
cover page of this prospectus. If the underwriters exercise this option in whole
or in part, Citigroup will pay underwriting commissions of $.7875 per additional
capital security so purchased.
The capital securities have been approved for listing on the NYSE under the
symbol "CPrS", subject to official notice of issuance. Citigroup expects the
capital securities will begin trading on the NYSE within 30 days after they are
first issued.
This offering will be conducted pursuant to applicable provisions of Rule
2810 of the Conduct Rules of the NASD. The underwriters may not confirm sales to
any discretionary account without the prior specific written approval of a
customer.
In connection with this offering and in accordance with applicable law and
industry practice, the underwriters may over-allot or effect transactions that
stabilize, maintain or otherwise affect the market price of the capital
securities at levels above those that might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids, each of which is described below.
- A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of
a security.
- A syndicate covering transaction means the placing of any bid on behalf
of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering.
49
- A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection
with the offering when capital securities originally sold by the
syndicate member are purchased in syndicate covering transactions.
These transactions may be effected on the NYSE, in the over-the-counter
market, or otherwise. The underwriters are not required to engage in any of
these activities, or continue such activities if commenced.
This prospectus may also be used by any broker-dealer subsidiary of
Citigroup in connection with offers and sales of the capital securities in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale. Any of Citigroup's broker-dealer subsidiaries may
act as principal or agent in such transactions. None of Citigroup's
broker-dealer subsidiaries have any obligation to make a market in any of the
capital securities and may discontinue any market-making activities at any time
without notice, at their sole discretion.
We expect that delivery of the capital securities will be made against
payment therefor on or about February 13, 2003, which is the sixth business
after the date hereof. Under Rule 15c6-1 of the Securities Exchange Act, trades
in the secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade the capital securities on the date hereof or the
next following business day will be required, by virtue of the fact that the
capital securities initially will not settle in T+3, to specify an alternative
settlement cycle at the time of any such trade to prevent a failed settlement
and should consult their own advisor.
50
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP New York, New York, will act as
legal counsel to Citigroup. Cleary, Gottlieb, Steen and Hamilton, New York, New
York, will act as legal counsel to the underwriters. Cleary, Gottlieb, Steen and
Hamilton has from time to time acted as counsel for Citigroup and its
subsidiaries and may do so in the future.
EXPERTS
The consolidated financial statements of Citigroup Inc. as of December 31,
2001 and 2000, and for each of the years in the three-year period ended December
31, 2001, have been audited by KPMG LLP, independent certified public
accountants, as set forth in their report dated January 17, 2002 (except as to
notes 1, 3, 4, 15 and 21, which are as of November 20, 2002) on the consolidated
financial statements. The consolidated financial statements for the year ended
December 31, 2001 are included in Citigroup's Current Report on Form 8-K and are
incorporated by reference in this prospectus. The consolidated financial
statements included in the November 20, 2002 Current Report on Form 8-K have
been conformed to reflect Travelers Property Casualty Corp. as a discontinued
operation and also include updated business segment disclosures given changes in
the composition of Citigroup's business segments. The report of KPMG LLP
included in this Form 8-K also is incorporated by reference in this prospectus.
The audit report of KPMG LLP refers to changes, in 2001, in Citigroup's methods
of accounting for derivative instruments and hedging activities, accounting for
interest income and impairment on purchased and retained beneficial interests in
securitized financial assets, and accounting for goodwill and intangible assets
resulting from business combinations consummated after June 30, 2001 and, in
1999, in Citigroup's methods of accounting for insurance-related assessments,
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, and accounting for the costs of start-up activities. The
consolidated financial statements of Citigroup referred to above are
incorporated by reference in this prospectus in reliance upon such report and
upon the authority of that firm as experts in accounting and auditing. To the
extent that KPMG LLP audits and reports on consolidated financial statements of
Citigroup issued at future dates, and consents to the use of their report
thereon, such consolidated financial statements also will be incorporated by
reference in the registration statement in reliance upon their report and said
authority.
51
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- --------------------------------------------------------------------------------
40,000,000 SECURITIES
CITIGROUP CAPITAL IX
6.00% CAPITAL SECURITIES (TRUPS(R))
$25 Liquidation Amount
Guaranteed to the extent set forth herein by
Citigroup Inc.
[CITIGROUP LOGO]
------------------------
PROSPECTUS
FEBRUARY 5, 2003
------------------------
SALOMON SMITH BARNEY
A.G. EDWARDS & SONS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY
PRUDENTIAL SECURITIES
UBS WARBURG
WACHOVIA SECURITIES
QUICK & REILLY, INC.
US BANCORP PIPER JAFFRAY INC.
WELLS FARGO INVESTMENT SERVICES, LLC
- --------------------------------------------------------------------------------
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